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:    Ms. Andrea Melia
   Aberdeen Asset Management Inc.
   1735 Market Street 32nd Floor
   Philadelphia, PA 19103
Registrant’s telephone number, including area code:    800-522-5465
Date of fiscal year end:    October 31
Date of reporting period:    October 31, 2018


Item 1 – Reports to Stockholders – The Report to Shareholders is attached herewith.


LOGO


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.

The distributions for the fiscal year ended October 31, 2018 consisted of 59% net investment income and 41% return of capital.

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 Annual Report which covers the activities of Aberdeen Asia-Pacific Income Fund, Inc. (the “Fund”) for the fiscal year ended October 31, 2018. The Fund’s principal investment objective is to seek current income. The Fund may also achieve incidental capital appreciation.

Total Investment Return

For the fiscal year ended October 31, 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:

 

      1 Year  

NAV*

     -7.3%  

Market Price*

     -14.3%  

 

*   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. For more information on Fund performance, please see page 4, Report of the Investment Manager and Total Investment Returns (page 5).

NAV, Market Price and Discount

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

 

      NAV      Closing
Market Price
     Discount  

10/31/2018

   $ 4.59      $ 3.93        14.4%  

10/31/2017

   $ 5.43      $ 5.03        7.4%  

Throughout the fiscal year ended October 31, 2018, the Fund’s NAV was within a range of $4.59 to $5.55 and the Fund’s market price traded within a range $3.93 to $5.07. Throughout the fiscal year ended October 31, 2018, the Fund’s shares traded within a range of a discount of 6.6% to 14.8%.

Portfolio Allocation

As of October 31, 2018, the Fund held 57.5% of its total investments in Asian debt securities, 35.0% in Australian debt securities, 4.8% in European debt securities, 2.3% in U.S. debt securities and 0.4% in developed Middle East debt securities.

Of the Fund’s total investments, excluding hedges, 39.0% were held in U.S. Dollar denominated bonds issued by foreign issuers as of October 31, 2018. The rest of the Fund’s currency exposure as of October 31, 2018 was 37.1% in the Australian Dollar and 23.9% in various Asian currencies.

Of the Fund’s total investments, including hedges, 45.8% were held in U.S. Dollar denominated bonds issued by foreign issuers as of October 31, 2018. The rest of the Fund’s currency exposure as of October 31, 2018 was 29.1% in the Australian Dollar and 25.1% in various Asian currencies.

Portfolio Management

The Fund is managed by Aberdeen’s Asia-Pacific fixed income team. The Asia-Pacific fixed income team works in a 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 October 31, 2018 totaled $0.42 per share. Based on the market price of $3.93 on October 31, 2018, the distribution rate over the twelve-month period ended October 31, 2018 was 10.7%. Since all distributions are paid after deducting applicable withholding taxes, the effective distribution rate may be higher for those U.S. investors who are able to claim a tax credit.

On November 9, 2018 and December 11, 2018, the Fund announced that it will pay on November 28, 2018 and January 10, 2019, respectively, a distribution of U.S. $0.035 per share to all shareholders of record as of November 19, 2018 and December 31, 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.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

1


Letter to Shareholders (unaudited) (continued)

 

 

 

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

  $ 55       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 Ratings*** 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 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 fiscal year ended October 31, 2018 and fiscal year ended October 31, 2017, the Fund repurchased 3,150,212 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., 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.

Brexit

The ongoing negotiations surrounding the UK’s exit from the EU (“Brexit”) have yet to provide clarity on what the outcome will be for the UK or Europe. The UK remains a member of the EU until the legally established departure date of March 29, 2019 and, until such date, all existing EU-derived laws and regulations continue to apply in the UK. Those laws may continue to apply for a transitional period, depending on whether a deal is struck and, if so, what that deal is. In any event, the UK’s on-shoring of EU legislation currently envisages no policy changes to EU law. However, the EU has not yet provided any material cushion from the effects of Brexit for financial services as a matter of EU law. Whether or not a Fund invests in securities of issuers located in Europe (whether the EU, Eurozone or UK) or with significant exposure to European, EU, Eurozone or UK issuers or countries, the unavoidable uncertainties and events related to Brexit could negatively affect the value and liquidity of the Fund’s

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

2


Letter to Shareholders (unaudited) (concluded)

 

 

 

investments, increase taxes and costs of business and cause volatility in currency exchange rates and interest rates. Brexit could adversely affect the performance of contracts in existence at the date of Brexit and European, UK or worldwide political, regulatory, economic or market conditions and could contribute to instability in political institutions, regulatory agencies and financial markets. Brexit could also lead to legal uncertainty and politically divergent national laws and regulations as a new relationship between the UK and EU is defined and the UK determines which EU laws to replace or replicate. Any of these effects of Brexit, and others that cannot be anticipated, could adversely affect the Fund’s business, results of operations and financial condition. In addition, the risk that Standard Life Aberdeen plc, the parent of the companies that provide investment advisory and administration services to the Fund and which is headquartered in the UK, fails to adequately prepare for Brexit could have significant customer, reputation and capital impacts for Standard Life Aberdeen plc and its subsidiaries, including those providing services to the Fund; however, we have detailed contingency planning in place to seek to manage the consequences of Brexit on the Fund and to avoid any disruption on the Fund and to the services we provide. Given the fluidity and complexity of the situation, however, we cannot assure that the Fund will not be adversely impacted despite our preparations.

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

 

 

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

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

3


Report of the Investment Manager (unaudited)

 

 

 

Market Review

Asia-Pacific bonds endured significant bouts of volatility during the 12-month reporting period ended October 31, 2018, as capital outflows from emerging markets quickened due to the U.S. Federal Reserve’s ongoing rate-hike cycle and rising U.S. Treasury yields. As monetary policy normalization accelerated in the West, the easing cycle also came to an end in most parts of Asia. Indonesia’s central bank led the charge, raising its benchmark interest rate five times over the reporting period in a bid to stem the falling rupiah as most emerging-market currencies succumbed to broad U.S.-dollar strength. Central banks in the Philippines and India also hiked interest rates, but more in response to rising inflation, given the threat posed by higher global oil prices after U.S. President Donald Trump reimposed economic sanctions on Iran. Weakness in the Indonesian rupiah, Philippine peso and Indian rupee weighed on total returns in their respective local-currency government bond markets, although Indian bonds recouped losses after oil prices stabilized, inflationary pressures moderated, and the central bank announced more bond-buying through open-market operations. In Sri Lanka, bond markets were hampered by volatile foreign-exchange movements, concerns over the country’s large borrowing needs, and a constitutional crisis after Prime Minister Ranil Wickremesinghe was ousted.

The Chinese yuan languished over the reporting period as the central bank infused the banking system with liquidity and China-U.S. trade tensions ratcheted higher. However, mainland China bonds rallied on the back of their highly anticipated inclusion in the Bloomberg Barclays Global Aggregate Bond Index.1 Unlike most of its regional peers, the Chinese central bank also continued with targeted policy easing measures in an effort to cushion the economy against the impact of the trade war, which generally benefited local markets. Despite the won’s weakness, Korean bonds strengthened as domestic growth forecasts were downgraded. Elsewhere, the Malaysian ringgit bucked the regional currency sell-off and this aided the Malaysian bond market’s performance despite concerns over the country’s fiscal deficit. Australian bond yields were mixed over the reporting

period, with the long end of the yield curve falling and the front end rising; the market remained relatively defensive, outperforming comparable-duration2 U.S. Treasuries, as benign domestic inflation diminished the prospect of policy interest-rate increases. Nonetheless, the Australian dollar’s depreciation weighed on the market’s performance for the period.

Asian credit markets also declined on a total-return basis over the reporting period due to wider spreads and higher U.S. Treasury yields. High-yield credits underperformed their investment-grade3 counterparts as risk-aversion spiked and liquidity tightened amid worsening global trade tensions. Investor sentiment was further dampened by looming Chinese debt maturities due for refinancing, as well as alleged fraud and rare defaults in the Indian banking sector. All this overshadowed a generally buoyant primary bond market, which saw regional borrowers step up debt sales to avoid higher funding costs expected in a rising-rate environment.

Performance review

The Fund returned -7.3% on a net asset value basis for the 12-month period ended October 31, 2018, and underperformed the -4.1% return of its blended benchmark,4 mainly because of the Fund’s overweight allocation to Asian local-currency markets as the sector weathered volatility over the reporting period. Conversely, the underweight positions in Asian U.S.-dollar credit and Australian bonds bolstered the Fund’s relative performance.

While the Fund’s underweight allocation to Australian bonds had a positive impact on the relative performance, weakness in the Australian dollar against the U.S. dollar over the reporting period was a detractor.

The Fund’s holdings in Asian U.S.-dollar credit enhanced relative performance for the reporting period mainly because of the underweight to investment-grade sovereign bonds and security selection in high-yield industrial bonds.

In Asian local-currency bonds, including the high-yield segment, notable detractors from the Fund’s relative performance for the

 

 

1  

The Bloomberg Barclays Global Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.

2  

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.

3  

Companies whose bonds are rated as “investment grade” are considered by credit rating agencies to 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-.

4  

The Fund’s blended benchmark comprises 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) (continued)

 

 

 

reporting period included the overweight positions in Indonesian bonds and the rupiah, both of which underperformed their regional peers. The underweight to Korean bonds also weighed on relative performance as the Korean market strengthened and outperformed its regional counterparts. The overweight allocations to the Indian and Sri Lankan rupees also hampered the Fund’s relative performance as both currencies weakened against the U.S. dollar during the period, although the losses were mitigated by the positive impact of the positioning in high-yielding Indian and Sri Lankan bonds.

The Fund’s use of derivatives had an overall positive impact on performance for the period, adding about 113 basis points to its return, primarily attributable to the hedging of Australian dollar risks and the use of interest rates swaps that hedge out the increasing cost of leverage as US interest rates increases.

The Fund’s investment objective is to seek current income. The Fund may also achieve incidental capital appreciation. The Fund will seek to achieve its investment objective through investment in debt securities of companies domiciled in the Asia-Pacific region (including Australia). Over the 12-month period, the Fund issued total distributions of $0.42 per share.

Outlook

Global events continue to unfold. We now see the possibility of the U.S. Federal Reserve taking a breather in its policy normalization cycle in the second half of 2019. In China, we are mindful of the slowdown in the domestic economy but are encouraged that the authorities appear committed to providing support for the private sector, which may not halt the slowdown but should diminish its magnitude Furthermore, we would not rule out the possibility of the U.S. and China finding ways to temper the ongoing trade dispute. This could occur in 2019 when the Democratic Party, which secured the takes control of the U.S. House of Representatives, in which it secured a majority in the midterm elections held in early November 2018.

In Australia, we believe that the central bank likely will keep interest rates steady well into 2019 as good gross domestic product (GDP) growth, supported by consumer spending, is being offset by housing-sector weakness and tightening credit conditions. We think that employment growth will add a positive countervailing force to housing weakness, but we do not expect labor conditions to tighten before the end of 2018.

While we think that we may see further pressure on emerging-market currencies and capital flows, we believe that investors have priced in the risks to a large degree, with trade friction and higher oil prices dominating discussions. The overall market’s positioning has

also shifted from a short-U.S. dollar stance to one that is long U.S. dollar. At this stage, what investors are not positioned for is a de-escalation of risks, in our view. Some investors already have been forced to unwind their long speculative positions in oil as the demand outlook softens, inventories increase and countries negotiate waivers to the U.S. sanctions on Iran. The resultant sharp correction in the oil price has reduced one of the key risks for many Asian economies, while providing support for oil-importing nations such as India and Indonesia. This backdrop, along with the prospect of a high-level meeting between U.S. President Trump and his Chinese counterpart Xi Jinping, have allowed regional currencies to stabilize somewhat.

Asia-Pacific economies generally have healthy external trade balances and solid foreign-currency reserves, while institutional frameworks are noticeably more robust than a decade ago. We believe that volatility will persist, but we intend to take advantage of opportunities to add exposure to the Fund where we think that valuations look compelling, particularly issuers which we feel will cope well in a lower-growth environment.

Financing Facilities and the Use of Leverage

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

The Fund employed leverage obtained via bank borrowing and other forms of leverage during the reporting period. On 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,

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

5


Report of the Investment Manager (unaudited) (continued)

 

 

 

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 October 31, 2017 was $125 million on the Revolving Credit Facility. On May 31, 2018 and August 16, 2018, the Fund paid down $10 million and $35 million, respectively. The Fund’s outstanding balance as of October 31, 2018 was $55 million and the total amount of outstanding leverage was $550 million.

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). If there exists an event of default under the Securities Purchase Agreement that has not been cured, the holders of the Series A MRPS have the right to cause the Fund’s outstanding borrowings to be immediately due and payable and proceed to protect and enforce their rights by an action at law, suit in equity or other appropriate proceeding.

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 October 31, 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 efficiently gain interest rate exposure and hedge interest rate risk. On May 23, 2018, the Fund terminated a swap agreement with a notional value of $10 million maturing on October 24, 2027. On August 8, 2018, The Fund terminated swap agreements with a notional of $6 million maturing on October 25, 2027, $4 million maturing on October 28, 2026 and $25 million maturing on July 7, 2026. As of October 31, 2018, the Fund held interest rate swap agreements with an aggregate notional amount of $55 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

October 31, 2018

   Amount
(in millions)
     Fixed Rate
Payable (%)
 

96 months

   $ 55.0        1.57  

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

Aberdeen Standard Investments (Asia) Limited (formerly known as Aberdeen Asset Management Asia Limited)

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

6


Report of the Investment Manager (unaudited) (concluded)

 

 

 

Risk Considerations

Past performance is not an indication of future results.

International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks, and differences in accounting methods; these risks are generally heightened for emerging market investments. Concentrating investments in the Asia-Pacific region subjects the Fund to more volatility and greater risk of loss than geographically diverse funds.

Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

7


Total Investment Return (unaudited)

 

 

 

The following table summarizes the average annual Fund performance for the 1-year, 3-year, 5-year and 10-year periods as of October 31, 2018.

 

        1 Year        3 Years        5 Years        10 Years  

Net Asset Value (NAV)

       -7.3%          2.3%          0.1%          7.0%  

Market Value

       -14.3%          2.5%          -1.6%          7.1%  

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 October 31, 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 net operating expense ratio based on the fiscal year ended October 31, 2018 was 2.67%. The net operating expense ratio, excluding interest expense and distributions to Series A Mandatory Redeemable Preferred Shares, based on the fiscal year ended October 31, 2018 was 1.17%.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

8


Portfolio Composition (unaudited)

 

 

 

Quality of Investments(1)

As of October 31, 2018, 44.5% 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 October 31, 2018, compared to April 30, 2018 and October 31, 2017:

 

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

October 31, 2018

       27.9          9.4          7.2          22.7          5.8          3.4          0.0          23.6  

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  

 

**   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 Standard Investments (Asia) Limited (formerly known as Aberdeen Asset Management Asia Limited 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 October 31, 2018, compared to April 30, 2018 and October 31, 2017:

 

Date      Asia
(including NZ)
%
       Australia
%
       Europe
%
       United
States
%
       Developed
Middle East
%
       Africa
%
 

October 31, 2018

       57.5          35.0          4.8          2.3          0.4          0.0  

April 30, 2018

       59.6          32.9          5.0          2.2          0.3          0.0  

October 31, 2017

       61.0          31.4          4.6          2.6          0.0          0.4  

Currency Exposure

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

 

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

October 31, 2018

       45.8          29.1          25.1  

April 30, 2018

       36.8          30.8          32.4  

October 31, 2017

       43.7          27.6          28.7  

 

**   Includes U.S. Dollar-denominated bonds issued by foreign issuers: 39.0% of the Fund’s total investments on October 31, 2018, 36.9% of the Fund’s total investments on April 30, 2018, and 42.2% of the Fund’s total investments on October 31, 2017.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

9


Portfolio Composition (unaudited) (concluded)

 

 

 

Maturity Composition

As of October 31, 2018, the average maturity of the Fund’s total investments was 8.3 years, compared with 9.3 years at April 30, 2018 and compared with 8.1 years at October 31, 2017. The following table shows the maturity composition of the Fund’s investments as of October 31, 2018, compared to April 30, 2018 and October 31, 2017:

 

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

October 31, 2018

       27.7          24.2          26.6          21.5  

April 30, 2018

       20.9          25.2          29.3          24.6  

October 31, 2017

       25.2          21.2          34.6          19.0  

Modified Duration

As of October 31, 2018, the modified duration* of the Fund was 4.92 years. This calculation excludes the interest rate swaps that are used to manage the leverage of the Fund. Excluding swaps will increase portfolio duration.

 

 

 

 

*   Modified duration is a measure of the sensitivity of the price of a bond to the fluctuations in interest rates.

 

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 October 31, 2018 compared to April 30, 2018 and October 31, 2017:

 

        Oct-18        Apr-18        Oct-17  

Australia

              

90 day Bank Bills

       1.91%          2.03%          1.69%  

10 yr bond

       2.17%          2.43%          2.28%  

currency USD per 1 AUD

       $0.71          $0.75          $0.77  

South Korea

              

90 day commercial paper

       1.70%          1.65%          1.40%  

10 yr bond

       2.25%          2.72%          2.58%  

currency local per 1USD

       W1,139.55          W1,068.05          W1,120.35  

Thailand

              

3 months deposit rate

       1.00%          1.00%          1.00%  

10 yr bond

       2.84%          2.44%          2.32%  

currency local per 1USD

       B33.15          B31.56          B33.22  

Philippines

              

90 day T-Bills

       4.64%          3.48%          2.12%  

10 yr bond

       7.67%          6.20%          4.80%  

currency local per 1USD

       P53.51          P51.75          P51.63  

Malaysia

              

3-month T-Bills

       3.28%          3.24%          3.00%  

10 yr bond

       4.08%          4.13%          3.90%  

currency local per 1USD

       RM4.18          RM3.92          RM4.23  

Singapore

              

3-month T-Bills

       1.92%          1.52%          1.23%  

10 yr bond

       2.51%          2.53%          2.15%  

currency local per 1USD

       S$1.38          S$1.32          S$1.36  

India

              

3-month T-Bills

       6.11%          6.11%          6.10%  

10 yr bond

       7.85%          7.75%          6.86%  

currency local per 1USD

       73.95          66.74          64.77  

Indonesia

              

3 months deposit rate

       6.25%          5.76%          5.93%  

10 yr bond

       8.50%          6.88%          6.77%  

currency local per 1USD

       Rp15,202.50          Rp13,912.50          Rp13,562.50  

China Onshore

              

3-month Bill Yield

       2.63%          2.63%          2.63%  

10 yr bond

       3.52%          3.63%          3.88%  

currency local per 1USD

       Y6.97          Y6.34          Y6.63  

Sri Lanka

              

3-month Generic Govt Yield

       9.54%          8.21%          8.93%  

10 yr bond

       11.65%          10.33%          10.35%  

currency local per 1USD

       Rs175.60          Rs157.70          Rs153.63  

Yankee Bonds

              

Indonesia

       4.88%          4.18%          3.22%  

Sri Lanka

       8.65%          6.78%          n/a  

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

11


Portfolio of Investments

As of October 31, 2018

 

 

     Principal
Amount
(000)
or Shares
     Description   Value
(US$)
 

BANK LOANS—0.7%

 

AUSTRALIA—0.7%

 
AUD     11,000     

Brickworks Ltd. Term Loan C, 4.11%, 02/20/2026 (a)(b)

  $ 7,793,577  
      

Total Bank Loans—0.7% (cost $8,716,952)

    7,793,577  

CORPORATE BONDS—71.8%

 

AUSTRALIA—2.4%

 

AUD

    2,500     

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

    1,908,943  

USD

    6,000     

Australia and New Zealand Banking Group Ltd., 6.75%, 12/29/2049 (d)(g)(h)

    6,157,500  

AUD

    6,191     

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

    4,759,924  

AUD

    7,421     

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

    5,366,795  

AUD

    4,310     

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

    3,126,873  

AUD

    7,300     

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

    5,716,852  
      27,036,887  

CHINA—20.9%

 

USD

    3,950     

Agile Group Holdings Ltd., 9.00%, 11/30/2018 (c)(g)

    4,064,321  

USD

    6,500     

Agile Group Holdings Ltd., (fixed rate to 01/18/2019, variable rate thereafter),
10.22%, 01/18/2019 (c)(g)(h)

    6,467,500  

CNH

    10,000     

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

    1,443,948  

USD

    4,500     

Central China Real Estate Ltd., 8.00%, 11/30/2018 (c)(g)

    4,447,471  

USD

    6,600     

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

    6,454,708  

CNH

    11,250     

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

    1,612,232  

CNY

    160,000     

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

    24,173,488  

CNH

    8,000     

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

    1,117,933  

USD

    3,400     

China Evergrande Group, 8.25%, 03/23/2020 (c)(g)

    2,992,109  

USD

    7,000     

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

    7,265,076  

USD

    4,955     

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

    4,997,742  

USD

    4,000     

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

    3,817,644  

USD

    3,300     

CIFI Holdings Group Co. Ltd., 6.38%, 05/02/2020 (c)

    3,207,461  

USD

    8,300     

CNAC HK Finbridge Co. Ltd., 4.88%, 03/14/2025 (c)

    8,234,430  

USD

    7,500     

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

    7,615,740  

USD

    8,000     

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

    8,021,976  

USD

    6,810     

Country Garden Holdings Co. Ltd., 7.25%, 11/30/2018 (c)(g)

    6,668,726  

CNH

    40,000     

Franshion Brilliant Ltd., 5.20%, 03/08/2021

    5,725,691  

USD

    3,200     

Fufeng Group Ltd., 5.88%, 08/28/2021 (c)

    3,200,678  

USD

    4,086     

Health and Happiness H&H International Holdings Ltd., 7.25%, 12/03/2018 (c)(g)

    4,147,131  

USD

    4,000     

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

    3,911,768  

USD

    4,300     

Industrial & Commercial Bank of China Ltd., (fixed rate to 12/19/2019, variable rate thereafter), 6.00% (c)(g)(h)

    4,337,621  

USD

    6,500     

Logan Property Holdings Co. Ltd., 6.88%, 04/24/2020 (c)(g)

    6,110,253  

USD

    7,100     

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

    6,052,452  

USD

    5,500     

Poly Real Estate Finance Ltd., 3.95%, 02/05/2023 (c)

    5,226,001  

USD

    7,000     

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

    6,527,500  

USD

    7,100     

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

    6,576,659  

USD

    8,434     

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

    8,414,789  

USD

    2,800     

SF Holding Investment Ltd., 4.13%, 07/26/2023 (c)

    2,778,684  

USD

    7,600     

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

    7,705,579  

USD

    8,200     

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

    7,845,093  

USD

    5,900     

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

    5,951,743  

USD

    14,738     

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

    13,806,174  

USD

    3,400     

Sunny Optical Technology Group Co. Ltd., 3.75%, 01/23/2023 (c)

    3,247,238  

USD

    7,500     

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

    7,221,360  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

12


Portfolio of Investments (continued)

As of October 31, 2018

 

 

     Principal
Amount
(000)
or Shares
     Description   Value
(US$)
 

CORPORATE BONDS (continued)

 

CHINA (continued)

 

USD

    3,700     

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

  $ 3,165,331  

USD

    7,400     

Times China Holdings Ltd., 6.60%, 11/30/2020 (c)(g)

    6,234,396  

USD

    7,200     

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

    6,360,394  

USD

    5,400     

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

    5,115,431  

USD

    3,500     

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

    3,393,152  

USD

    2,882     

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

    2,692,937  
      238,350,560  

GERMANY—3.4%

 

AUD

    5,000     

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

    3,771,958  

AUD

    20,500     

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

    15,148,875  

AUD

    15,000     

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

    11,638,482  

AUD

    10,000     

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

    7,796,506  
      38,355,821  

HONG KONG—4.1%

 

USD

    2,594     

CK Hutchison Capital Securities 17 Ltd., (fixed rate to 05/12/2022, variable rate thereafter), 4.00% (c)(g)(h)

    2,478,505  

USD

    4,840     

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

    4,692,024  

USD

    3,900     

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

    3,742,046  

USD

    5,326     

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

    5,235,618  

USD

    8,000     

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

    7,261,416  

USD

    15,500     

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

    18,966,188  

USD

    980     

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

    1,275,648  

USD

    2,871     

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

    2,816,712  
      46,468,157  

INDIA—10.2%

 

USD

    9,480     

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

    8,455,193  

INR

    350,000     

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

    4,862,906  

INR

    500,000     

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

    6,797,221  

USD

    3,840     

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

    3,560,970  

USD

    4,000     

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

    3,879,936  

INR

    350,000     

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

    4,479,796  

INR

    100,000     

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

    1,351,753  

INR

    250,000     

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

    3,374,660  

USD

    10,700     

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

    9,903,182  

INR

    400,000     

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

    5,225,846  

INR

    250,000     

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

    3,417,067  

INR

    200,000     

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

    2,651,338  

INR

    100,000     

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

    1,339,098  

INR

    250,000     

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

    3,395,341  

USD

    3,780     

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

    3,549,314  

USD

    3,400     

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

    3,431,015  

INR

    200,000     

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

    2,708,548  

INR

    100,000     

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

    1,370,866  

INR

    100,000     

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

    1,368,773  

INR

    250,000     

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

    3,297,282  

INR

    400,000     

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

    5,505,130  

INR

    200,000     

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

    2,763,381  

USD

    7,000     

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

    6,728,358  

INR

    250,000     

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

    3,410,947  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

13


Portfolio of Investments (continued)

As of October 31, 2018

 

 

     Principal
Amount
(000)
or Shares
     Description   Value
(US$)
 

CORPORATE BONDS (continued)

 

INDIA (continued)

 

INR

    200,000     

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

  $ 2,710,287  

INR

    150,000     

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

    2,106,530  

INR

    70,000     

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

    966,549  

INR

    100,000     

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

    1,358,046  

USD

    6,883     

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

    6,073,174  

USD

    6,800     

Yes Bank Ifsc Banking Unit Branch, 3.75%, 02/06/2023 (c)

    6,288,518  
      116,331,025  

INDONESIA—1.6%

 

USD

    6,250     

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

    5,469,537  

USD

    4,200     

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

    3,362,201  

IDR

    30,000,000     

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

    2,000,987  

USD

    3,600     

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

    3,284,352  

USD

    9     

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

    7,957  

USD

    4,164     

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

    4,057,327  
      18,182,361  

ISRAEL—0.5%

 

USD

    6,238     

Teva Pharmaceutical Finance Netherlands III BV, 6.00%, 01/15/2024 (g)

    6,193,387  

MACAU—0.5%

 

USD

    6,600     

Sands China Ltd., 5.40%, 05/08/2028 (c)(g)

    6,307,200  

MALAYSIA—3.2%

 

MYR

    10,000     

Cagamas Bhd, 4.05%, 09/07/2021

    2,391,352  

MYR

    1,500     

Cagamas Bhd, 4.45%, 11/25/2020

    361,801  

MYR

    5,000     

CIMB Group Holdings Bhd, 4.95%, 03/29/2023 (g)

    1,191,857  

MYR

    10,000     

GENM Capital Bhd, 4.98%, 07/11/2023

    2,417,892  

USD

    14,000     

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

    13,091,092  

MYR

    4,800     

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

    1,153,320  

USD

    3,600     

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

    3,381,746  

MYR

    5,000     

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

    1,202,012  

USD

    3,736     

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

    3,588,271  

USD

    7,000     

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

    6,362,783  

MYR

    5,000     

United Overseas Bank Malaysia Bhd, 4.80%, 07/25/2023 (g)

    1,202,043  
      36,344,169  

NETHERLANDS—0.5%

 

USD

    6,050     

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

    6,019,327  

NORWAY—0.3%

 

AUD

    4,988     

Kommunalbanken AS, 6.50%, 04/12/2021

    3,876,329  

PHILIPPINES—2.6%

 

USD

    7,000     

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

    7,195,874  

USD

    3,446     

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

    3,587,107  

USD

    13,086     

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

    12,863,773  

USD

    7,000     

Royal Capital BV, (fixed rate to 05/05/2024, variable rate thereafter), 4.88% (c)(g)(h)

    6,504,365  
      30,151,119  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

14


Portfolio of Investments (continued)

As of October 31, 2018

 

 

     Principal
Amount
(000)
or Shares
     Description   Value
(US$)
 

CORPORATE BONDS (continued)

 

QATAR—0.1%

 

CNH

    10,000     

QNB Finance Ltd., 5.10%, 03/08/2021

  $ 1,438,239  

SINGAPORE—2.2%

 

USD

    4,000     

DBS Group Holdings Ltd., (fixed rate to 09/07/2021, variable rate thereafter), 3.60% (c)(g)(h)

    3,836,000  

USD

    2,400     

DBS Group Holdings Ltd., (fixed rate to 12/11/2023, variable rate thereafter), 4.52% (c)(g)

    2,426,184  

USD

    7,289     

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

    7,058,493  

USD

    3,800     

Parkway Pantai Ltd., (fixed rate to 07/27/2022, variable rate thereafter), 4.25% (c)(g)(h)

    3,587,200  

USD

    9,000     

United Overseas Bank Ltd., (fixed rate to 09/16/2021, variable rate thereafter), 3.50% (c)(g)(j)

    8,856,990  
      25,764,867  

SOUTH KOREA—6.3%

 

USD

    11,400     

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

    10,356,421  

USD

    7,000     

Doosan Power Systems SA, (fixed rate to 10/25/2021, variable rate thereafter), 3.75% (c)(g)

    6,967,114  

USD

    6,000     

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

    5,856,132  

USD

    11,111     

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

    10,745,050  

USD

    10,658     

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

    10,345,401  

USD

    13,652     

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

    12,280,321  

USD

    7,760     

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

    7,518,692  

USD

    3,000     

Shinhan Financial Group Co. Ltd., (fixed rate to 08/13/2023, variable rate thereafter), 5.88% (c)(g)(h)

    2,977,527  

USD

    4,733     

Woori Bank, 5.13%, 08/06/2028 (c)

    4,712,989  
      71,759,647  

SUPRANATIONAL—5.8%

 

AUD

    14,000     

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

    10,724,083  

AUD

    6,800     

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

    5,069,242  

AUD

    4,000     

EUROFIMA, 5.50%, 06/30/2020

    2,976,482  

AUD

    6,685     

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

    4,763,789  

AUD

    9,610     

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

    6,848,169  

AUD

    15,000     

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

    11,497,419  

AUD

    11,200     

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

    8,202,912  

AUD

    6,900     

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

    5,052,612  

AUD

    15,600     

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

    11,704,888  
      66,839,596  

THAILAND—3.4%

 

USD

    1,200     

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

    1,557,856  

USD

    10,000     

GC Treasury Center Co. Ltd., 4.25%, 09/19/2022 (c)

    9,991,450  

USD

    17,170     

Krung Thai Bank PCL, (fixed rate to 12/26/2019, variable rate thereafter), 5.20% (c)(g)(j)

    17,312,786  

USD

    4,331     

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

    4,510,484  

USD

    5,386     

PTTEP Treasury Center Co. Ltd., (fixed rate to 07/17/2022, variable rate thereafter), 4.60% (c)(g)(h)

    5,166,547  
      38,539,123  

UNITED ARAB EMIRATES—1.4%

 

USD

    6,105     

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

    6,058,114  

USD

    6,191     

Emirates Airline, 4.50%, 02/06/2025 (c)(f)

    6,082,068  

USD

    3,700     

MAF Global Securities Ltd., (fixed rate to 09/07/2022, variable rate thereafter), 5.50% (c)(g)(h)

    3,511,522  
      15,651,704  

UNITED KINGDOM—2.4%

 

USD

    12,962     

HSBC Holdings PLC, (fixed rate to 01/18/2019, variable rate thereafter), 6.38% (g)(h)(j)

    12,589,342  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

15


Portfolio of Investments (continued)

As of October 31, 2018

 

 

     Principal
Amount
(000)
or Shares
     Description   Value
(US$)
 

CORPORATE BONDS (continued)

 

UNITED KINGDOM (continued)

 

USD

    6,999     

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

  $ 6,866,656  

USD

    5,000     

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

    4,768,115  

USD

    2,759     

Standard Chartered PLC, (fixed rate to 04/02/2023, variable rate thereafter), 7.75% (c)(g)(h)

    2,786,590  
      27,010,703  
      

Total Corporate Bonds—71.8% (cost $898,907,311)

    820,620,221  

GOVERNMENT BONDS—69.2%

 

AUSTRALIA—39.4%

 

AUD

    46,300     

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

    33,108,010  

AUD

    12,400     

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

    9,217,849  

AUD

    23,200     

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

    16,986,587  

AUD

    51,000     

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

    40,121,929  

AUD

    17,700     

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

    15,067,931  

AUD

    91,700     

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

    65,762,458  

AUD

    81,700     

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

    66,021,061  

AUD

    6,000     

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

    4,203,722  

AUD

    13,500     

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

    9,396,330  

AUD

    7,500     

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

    5,749,405  

AUD

    25,000     

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

    18,730,358  

AUD

    15,000     

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

    11,891,472  

AUD

    22,000     

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

    16,773,596  

AUD

    51,400     

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

    39,412,527  

AUD

    4,690     

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

    3,647,468  

AUD

    47,100     

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

    34,252,756  

AUD

    16,200     

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

    12,082,802  

AUD

    20,000     

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

    16,121,037  

AUD

    5,000     

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

    3,498,446  

AUD

    22,000     

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

    15,750,410  

AUD

    15,000     

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

    11,934,206  
      449,730,360  

CHINA—0.9%

 

CNY

    20,000     

Agricultural Development Bank of China, 4.37%, 05/25/2023

    2,920,440  

CNY

    4,000     

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

    548,116  

CNY

    3,000     

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

    432,512  

CNY

    2,000     

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

    289,286  

CNY

    20,000     

China Government Bond, 3.69%, 05/17/2028

    2,901,596  

CNY

    20,000     

Export-Import Bank of China, 4.37%, 06/19/2023

    2,913,896  
      10,005,846  

INDIA—7.7%

 

INR

    150,000     

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

    1,931,321  

INR

    750,000     

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

    10,091,960  

INR

    1,000,000     

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

    13,435,662  

INR

    1,275,000     

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

    16,552,843  

INR

    1,041,880     

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

    14,270,283  

INR

    1,739,000     

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

    23,686,100  

INR

    110,440     

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

    1,528,043  

INR

    9,590     

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

    140,031  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

16


Portfolio of Investments (continued)

As of October 31, 2018

 

 

     Principal
Amount
(000)
or Shares
     Description   Value
(US$)
 

GOVERNMENT BONDS (continued)

 

INDIA (continued)

 

INR

    50,000     

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

  $ 629,336  

INR

    500,000     

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

    6,245,304  
      88,510,883  

INDONESIA—13.6%

 

USD

    591     

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

    567,345  

IDR

    290,400,000     

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

    17,134,603  

IDR

    312,570,000     

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

    17,270,765  

IDR

    104,635,000     

Indonesia Treasury Bond, 6.63%, 05/15/2033

    5,671,386  

IDR

    13,800,000     

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

    817,879  

IDR

    683,000,000     

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

    38,637,066  

IDR

    288,224,000     

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

    18,679,285  

IDR

    300,000,000     

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

    19,622,871  

IDR

    100,000,000     

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

    6,148,331  

IDR

    30,000,000     

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

    2,013,314  

IDR

    21,000,000     

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

    1,449,865  

USD

    6,129     

Perusahaan Listrik Negara PT, 6.15%, 05/21/2048 (c)

    5,963,478  

USD

    4,970     

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

    4,843,265  

USD

    4,970     

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

    4,665,588  

USD

    10,981     

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

    10,816,285  

USD

    1,500     

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

    1,453,125  
      155,754,451  

MALAYSIA—2.4%

 

MYR

    11,600     

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

    2,763,106  

MYR

    13,000     

Malaysia Government Bond, 3.62%, 11/30/2021

    3,101,267  

MYR

    19,900     

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

    4,805,675  

MYR

    10,300     

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

    2,372,591  

MYR

    51,600     

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

    12,202,115  

MYR

    10,000     

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

    2,370,565  
      27,615,319  

MONGOLIA—0.4%

 

USD

    2,216     

Development Bank of Mongolia LLC, 7.25%, 10/23/2023 (c)

    2,163,370  

USD

    2,200     

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

    2,094,424  
      4,257,794  

NORWAY—0.5%

 

AUD

    7,000     

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

    5,334,664  

OMAN—0.4%

 

USD

    4,100     

Oman Sovereign Sukuk SAOC, 5.93%, 10/31/2025 (c)

    4,086,863  

PAPUA N.GUINEA—0.2%

 

USD

    2,612     

Papua New Guinea Government International Bond, 8.38%, 10/04/2028 (c)

    2,589,145  

PHILIPPINES—0.9%

 

PHP

    251,000     

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

    2,925,706  

PHP

    200,000     

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

    2,238,568  

PHP

    543     

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

    9,924  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

17


Portfolio of Investments (continued)

As of October 31, 2018

 

 

     Principal
Amount
(000)
or Shares
     Description   Value
(US$)
 

GOVERNMENT BONDS (continued)

 

PHILIPPINES (continued)

 

PHP

    300,000     

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

  $ 5,668,007  
      10,842,205  

SRI LANKA—0.9%

 

LKR

    80,000     

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

    453,895  

LKR

    90,000     

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

    501,657  

LKR

    150,000     

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

    851,687  

LKR

    240,000     

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

    1,381,738  

USD

    3,547     

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

    3,188,143  

LKR

    830,000     

Sri Lanka Treasury Bills, Zero Coupon, 07/26/2019 (l)

    4,404,218  
      10,781,338  

SUPRANATIONAL—1.3%

 

AUD

    10,000     

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

    7,682,317  

AUD

    9,000     

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

    6,590,370  
      14,272,687  

THAILAND—0.6%

 
THB     203,400     

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

    6,456,904  
      

Total Government Bonds—69.2% (cost $909,021,199)

    790,238,459  

SHORT-TERM INVESTMENT—3.1%

 

UNITED STATES—3.1%

 
USD     35,666,720     

State Street Institutional U.S. Government Money Market Fund, Premier Class, 2.09% (m)

    35,666,720  
            

Total Short-Term Investment—3.1% (cost $35,666,720)

    35,666,720  
             Total Investments—144.8% (cost $1,852,312,182) (n)     1,654,318,977  
    

Long Term Debt Securities

    (505,000,000
    

Mandatory Redeemable Preferred Stock at Liquidation Value

    (50,000,000
            

Other Assets in Excess of Liabilities—6.9%

    43,284,904  
             Net Assets—100.0%     $1,142,603,881  

 

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

 

(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 rate instrument. The rate shown is based on the latest available information as of October 31, 2018. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description.
(e)   For this security the annuity payments increase by 3.25% every year, until the asset amortizes to zero.
(f)   Sinkable security.

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

18


Portfolio of Investments (continued)

As of October 31, 2018

 

 

(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)   Issued with a zero coupon.
(m)   Registered investment company advised by State Street Global Advisors. The rate shown is the 7-day yield as of October 31, 2018.
(n)   See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities.

At October 31, 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        12/31/2018      $ 105,900,052      $ 105,538,781      $ (361,271

United States Treasury Note 6%—Ultra Long

     310        12/19/2018        49,246,819        46,257,813        (2,989,006
                                         $ (3,350,277

 

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

Short Contract Positions

 

United States Treasury Note 6%—10 year

     (419      12/19/2018      $ (50,442,675    $ (49,625,312    $ 817,363  

United States Treasury Note 6%—5 year

     (190      12/31/2018        (21,555,643      (21,352,735      202,908  
                                         $ 1,020,271  
                                         $ (2,330,006

At October 31, 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

 
11/30/2018   

UBS

     INR1,677,543,620        USD22,700,000      $ 22,584,055      $ (115,945

Philippine Peso/United States Dollar

 
01/31/2019   

HSBC Bank USA

     PHP301,974,400        USD5,600,000        5,627,804        27,804  

Singapore Dollar/United States Dollar

 
11/02/2018   

UBS

     SGD38,710,081        USD28,411,986        27,946,490        (465,496
12/03/2018   

UBS

     SGD40,400,000        USD29,173,362        29,185,480        12,118  

South Korean Won/United States Dollar

 
12/07/2018   

HSBC Bank USA

     KRW52,775,173,000        USD47,000,000        46,300,781        (699,219

Thai Baht/United States Dollar

 
12/21/2018   

Goldman Sachs & Co.

     THB825,000,000        USD25,514,149        24,941,878        (572,271
       $ 156,586,488      $ (1,813,009

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

19


Portfolio of Investments (concluded)

As of October 31, 2018

 

 

 

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

United States Dollar/Australian Dollar

          
11/29/2018   

Royal Bank of Canada

     USD143,002,607        AUD194,652,738      $ 137,880,663      $ 5,121,944  

United States Dollar/Chinese Yuan Renminbi Offshore

          
01/11/2019   

UBS

     USD9,892,422        CNH68,957,459        9,854,419        38,003  

United States Dollar/Indian Rupee

          
11/30/2018   

Goldman Sachs

     USD59,700,000        INR4,428,247,500        59,615,610        84,390  
11/30/2018   

UBS

     USD22,800,000        INR1,684,933,680        22,683,544        116,456  

United States Dollar/Malaysian Ringgit

          
11/30/2018   

HSBC Bank USA

     USD4,200,000        MYR17,351,760        4,144,162        55,838  
12/14/2018   

BNP Paribas S.A.

     USD11,100,000        MYR46,019,800        10,990,135        109,865  

United States Dollar/Singapore Dollar

          
11/02/2018   

UBS

     USD27,937,876        SGD38,710,081        27,946,490        (8,614

United States Dollar/South Korean Won

          
12/07/2018   

HSBC Bank USA

     USD1,300,000        KRW1,482,780,000        1,300,874        (874
12/07/2018   

UBS

     USD1,600,000        KRW1,780,083,200        1,561,705        38,295  
       $ 275,977,602      $ 5,555,303  
       $ 432,564,090      $ 3,742,294  

Total unrealized appreciation on open forward foreign currency exchange contracts

        $ 5,604,713  

Total unrealized depreciation on open forward foreign currency exchange contracts

                (1,862,419

 

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

At October 31, 2018, the Fund held the following centrally cleared interest rate swap:

 

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

USD

    55,000,000       10/28/2026      Citibank     Receive     3-month LIBOR Index      1.57%     $     $ 6,300,036  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

20


Statement of Assets and Liabilities

For the Year Ended October 31, 2018

 

 

Assets

        

Investments, at value (cost $1,816,645,462)

   $ 1,618,652,257  

Short-term investments, at value (cost $35,666,720)

     35,666,720  

Foreign currency, at value (cost $35,628,723)

     35,563,605  

Cash

     4,351,889  

Cash at broker for futures contracts

     3,038,854  

Cash at broker for interest rate swap

     1,745,977  

Cash at broker for forward foreign currency contracts

     670,000  

Cash at broker for China A shares

     13,461  

Due from broker

     226,951  

Interest receivable

     22,968,659  

Unrealized appreciation on forward foreign currency exchange contracts

     5,604,713  

Variation margin receivable for futures contracts

     1,020,271  

Variation margin receivable for centrally cleared swap

     174,512  

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

     2,376,130  

Prepaid expenses and other assets

     178,596  

Total assets

     1,732,252,595  

Liabilities

  

Senior secured notes payable (Note 8)

     350,000,000  

4-year term loan payable (Note 9)

     100,000,000  

Revolving credit facility payable (Note 9)

     55,000,000  

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

     50,000,000  

Payable for investments purchased

     23,597,986  

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

     4,152,637  

Variation margin payable for futures contracts

     3,350,277  

Unrealized depreciation on forward foreign currency exchange contracts

     1,862,419  

Investment management fees payable (Note 3)

     846,087  

Dividend payable on Series A Mandatory Redeemable Preferred Shares

     213,630  

Administration fees payable (Note 3)

     177,354  

Investor relations fees payable (Note 3)

     30,301  

Deferred foreign capital gains tax

     3,205  

Other accrued expenses

     414,818  

Total liabilities

     589,648,714  
          

Net Assets Applicable to Common Shareholders

   $ 1,142,603,881  

Composition of Net Assets:

  

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

   $ 2,489,806  

Paid-in capital in excess of par

     1,334,883,133  

Distributable accumulated loss

     (194,769,058

Net Assets Applicable to Common Shareholders

   $ 1,142,603,881  

Net asset value per share based on 248,980,612 shares issued and outstanding

   $ 4.59  

See Notes to Financial Statements.

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

21


Statement of Operations

For the Year Ended October 31, 2018

 

 

Net Investment Income

        

Income

  

Interest and amortization of discount and premium and other income (net of foreign withholding taxes of $2,213,884)

   $ 87,944,716  

Total Investment Income

     87,944,716  

Expenses

  

Investment management fee (Note 3)

     10,129,478  

Administration fee (Note 3)

     2,129,250  

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

     667,768  

Custodian’s fees and expenses

     547,753  

Insurance expense

     331,714  

Reports to shareholders and proxy solicitation

     276,415  

Investor relations fees and expenses (Note 3)

     257,860  

Directors’ fees and expenses

     222,003  

Legal fees and expenses

     200,786  

Transfer agent’s fees and expenses

     132,118  

Independent auditors’ fees and expenses

     90,409  

Miscellaneous

     163,148  

Total operating expenses, excluding interest expense

     15,148,702  

Interest expense (Notes 8 & 9)

     17,268,035  

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

     2,091,147  

Net operating expenses

     34,507,884  
          

Net investment income applicable to common shareholders

     53,436,832  

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

  

Net realized gain/(loss) from:

  

Investment transactions (including $1,035,217 capital gains tax)

     3,047,546  

Futures contracts

     3,970,435  

Interest rate swaps

     2,566,939  

Forward foreign currency exchange contracts

     9,320,025  

Foreign currency transactions

     (17,556,611
       1,348,334  

Net change in unrealized appreciation/(depreciation) on:

  

Investments (including $(498,034) change in deferred capital gains tax)

     (73,837,848

Interest rate swaps

     2,897,964  

Futures contracts

     (3,088,198

Forward foreign currency exchange rate contracts

     (1,134,817

Foreign currency translation

     (86,800,446
       (161,963,345

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

     (160,615,011

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

   $ (107,178,179

See Notes to Financial Statements.

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

22


Statement of Changes in Net Assets

 

      

 

 

      For the
Year Ended
October 31, 2018
     For the
Year Ended
October 31, 2017
 

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

     

Operations:

     

Net investment income

   $ 53,436,832      $ 57,653,853  

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

     9,584,920        25,469,128  

Net realized loss from foreign currency transactions

     (8,236,586      (73,119,445

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

     (74,028,082      (38,643,224

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

     (87,935,263      68,804,295  

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

     (107,178,179      40,164,607  

Distributions to Common Shareholders from(a):

     

Distributable earnings

     (61,878,247      (66,636,882

Tax return of capital

     (43,546,107      (39,328,863

Net decrease in net assets applicable to common shareholders from distributions

     (105,424,354      (105,965,745

Repurchase of common stock resulting in the reduction of 3,150,212 and 1,135,695 shares of common stock, respectively (Note 6)

     (13,897,161      (5,446,710

Change in net assets from common stock transactions

     (13,897,161      (5,446,710

Change in net assets applicable to common shareholders resulting from operations

     (226,499,694      (71,247,848

Net Assets Applicable to Common Shareholders:

     

Beginning of year

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

End of year

   $ 1,142,603,881      $ 1,369,103,575  

 

(a)   Per the Securities and Exchange Commission release #33-10532 “Disclosure Update and Simplification”; the Fund is no longer required to differentiate distributions from earnings as either from net investment income or net realized capital gains. For the year ended October 31, 2017, all distributions from distributable earnings were from net investment income.

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

For the Year Ended October 31, 2018

 

 

Cash Flows from Operating Activities

        

Net decrease in net assets resulting from operations

   $ (107,178,179

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:

  

Investments purchased

     (937,638,775

Investments sold and principal repayments

     1,043,070,704  

Increase in short-term investments, excluding foreign government securities

     14,380,110  

Net amortization/accretion of premium (discount)

     9,531,795  

Decrease in cash at broker

     6,551,359  

Decrease in interest receivable

     1,452,069  

Net unrealized (appreciation) depreciation on forward foreign exchange contracts

     1,134,817  

Decrease in bank loan payable

     (45,000,000

Decrease in prepaid expenses

     544,055  

Increase in interest payable on bank loan

     3,953  

Decrease in accrued investment management fee

     (81,771

Increase in accrued expenses

     124,398  

Increase in deferred foreign capital gains tax

     26,025  

Increase in variation margin payable for futures contracts

     3,088,198  

Net change in unrealized appreciation from investments

     73,837,848  

Net change in unrealized appreciation from foreign currency translations

     86,800,446  

Net realized gain on investments in securities

     (3,047,546

Net cash provided by operating activities

     147,599,506  

Cash Flows from Financing Activities

  

Decrease in payable due to custodian

     (5,559,669

Distributions paid to shareholders

     (105,424,354

Net cash paid (received) for swap contracts

     (162,174

Repurchase of common stock

     (13,897,161

Net cash used in financing activities

   $ (125,043,358

Effect of exchange rate on cash

     (14,187

Net change in cash

     22,541,961  

Cash at beginning of year

     17,373,533  

Cash at end of year

   $ 39,915,494  

Supplemental disclosure of cash flow information:

  

Cash paid for interest and fees on borrowings:

   $ 17,268,035  

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

24


 

 

[THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

 


Financial Highlights

 

 

 

     For the Fiscal Years Ended October 31,  
      2018     2017     2016     2015     2014  
Per Share Operating Performance(a):           
Net asset value per common share, beginning of year      $5.43       $5.69       $5.57       $6.58       $6.89  
Net investment income      0.21       0.23       0.24       0.28       0.28  
Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions      (0.64     (0.07     0.29       (0.88     (0.18
Total from investment operations applicable to common shareholders      (0.43     0.16       0.53       (0.60     0.10  
Distributions to Series A Mandatory Redeemable Preferred Shares:           
Net investment income                               
Distributions to common shareholders from:           
Net investment income      (0.25     (0.26     (0.24     (0.40     (0.42
Tax return of capital      (0.17     (0.16     (0.18     (0.02      
Total distributions to shareholders      (0.42     (0.42     (0.42     (0.42     (0.42
Capital Share Transactions:           
Impact due to open market repurchase policy (Note 7)      0.01             0.01       0.01       0.01  
Total capital share transactions      0.01             0.01       0.01       0.01  
Net asset value per common share, end of year      $4.59       $5.43       $5.69       $5.57       $6.58  
Market value, end of year      $3.93       $5.03       $4.92       $4.75       $5.88  
Total Investment Return Based on(b):           
Market value      (14.29%     11.19%       12.90%       (12.38%     (2.17%
Net asset value      (7.27%     3.79%       11.35%       (8.19%     2.33%  
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data(c):           
Net assets applicable to common shareholders, end of year (000 omitted)      $1,142,604       $1,369,104       $1,440,351       $1,427,649       $1,718,944  
Average net assets applicable to common shareholders (000 omitted)      $1,290,606       $1,382,050       $1,433,905       $1,549,308       $1,771,852  
Net operating expenses      2.67%       2.42%       2.23%       2.15%       1.97% (d)  
Net operating expenses without reimbursement      2.67%       2.42%       2.23%       2.15%       1.97%  
Net operating expenses, excluding interest expense and distributions to Series A Mandatory Redeemable Preferred Shares      1.17%       1.15%       1.14%       1.14%       1.09% (d)  
Net investment income      4.14%       4.17%       4.30%       4.65%       4.14%  
Portfolio turnover      44%       57%       52%       45%       49%  
Leverage (senior securities) outstanding (000 omitted)      $505,000       $550,000       $525,000       $525,000       $550,000  
Leverage (preferred stock) outstanding (000 omitted)      $50,000       $50,000       $50,000       $50,000       $50,000  
Asset coverage ratio on long-term debt obligations at year end(e)      336%       358%       384%       381%       422%  
Asset coverage per $1,000 on long-term debt obligations at year end      $3,362       $3,580       $3,839       $3,815       $4,216  
Asset coverage ratio on total leverage at year end(f)      306%       328%       350%       348%       386%  
Asset coverage per share on total leverage at year end      $3,059       $3,282       $3,505       $3,483       $3,862  

 

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)   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 fiscal years ended October 31, 2018, 2017, 2016, 2015 and 2014, the ratios of net investment income before preferred stock dividends to average net assets of common shareholders were 4.30%, 4.32%, 4.16%, 4.79%, and 4.26%, respectively.
(d)   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.
(e)   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.
(f)   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

October 31, 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 Standard Investments Asia Limited (formerly known as Aberdeen Asset Management (Asia) Limited), the Fund’s investment manager (“ASIAL” 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. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including a pricing model and/or the risk inherent in the inputs

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

28


Notes to Financial Statements (continued)

October 31, 2018

 

 

to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement.

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 1940 Act, which has an objective, which is not guaranteed, to maintain a $1.00 per share 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 and centrally cleared 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 (for reasons other than because the foreign exchange on which they trade closed before the (“Valuation Time”)), 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. Under normal circumstances, the Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). 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 (continued)

October 31, 2018

 

 

The following is a summary of the inputs used as of October 31, 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:

 

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

Investments in Securities

         

Fixed Income Investments

         

Bank Loans

   $     $     $ 7,793,577      $ 7,793,577  

Corporate Bonds

           820,620,221              820,620,221  

Government Bonds

           790,238,459              790,238,459  

Total Fixed Income Investments

           1,610,858,680       7,793,577        1,618,652,257  

Short-Term Investment

     35,666,720                    35,666,720  

Total Investments

   $ 35,666,720     $ 1,610,858,680     $ 7,793,577      $ 1,654,318,977  

Other Financial Instruments

         

Centrally Cleared Interest Rate Swap Agreements

   $     $ 6,300,036     $      $ 6,300,036  

Forward Foreign Currency Exchange Contracts

           5,604,713              5,604,713  

Futures Contracts

     1,020,271                    1,020,271  

Total Other Financial Instruments

   $ 1,020,271     $ 11,904,749     $      $ 12,925,020  

Total Assets

   $ 36,686,991     $ 1,622,763,429     $ 7,793,577      $ 1,667,243,997  

Liabilities

         

Other Financial Instruments

         

Forward Foreign Currency Exchange Contracts

   $     $ (1,862,419   $      $ (1,862,419

Futures Contracts

     (3,350,277                  (3,350,277

Total Liabilities – Other Financial Instruments

   $ (3,350,277   $ (1,862,419   $      $ (5,212,696

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

 

For the fiscal year ended October 31, 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 fiscal year in relation to net assets were not significant (less than 0.69% of total net assets) and accordingly, a reconciliation of Level 3 assets for the fiscal year ended October 31, 2018 is not presented. The valuation technique used at October 31, 2018 was a single unadjusted broker quote. 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, as amended. Rule 144A securities may be freely traded among certain qualified institutional investors, such as the Fund, but resale of such securities in the U.S. is permitted only in limited circumstances.

c. Foreign Currency Translation:

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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

30


Notes to Financial Statements (continued)

October 31, 2018

 

 

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 foreign 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 fiscal year ended October 31, 2018, the Fund used forward contracts to hedge and efficiently manage a portion of Australian and certain Asian currency exposure.

While the Fund may enter into forward contracts to seek to reduce currency exchange rate risks or enhance return, 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, when used for hedging, there may be imperfect correlation between the Fund’s portfolio holdings or securities quoted or denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving a complete hedge, which will expose the Fund to the risk of foreign exchange loss.

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

Futures Contracts:

The Fund may invest in financial futures contracts (“futures contracts”) for the purpose of hedging its existing portfolio securities,

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

31


Notes to Financial Statements (continued)

October 31, 2018

 

 

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 fiscal year ended October 31, 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 is presented in the Statements of Operations as a net realized gain or loss on swap contracts. As of March 2017, the Fund is required to provide variation and/or initial margin for OTC Swaps pursuant to further rules and regulations related to Dodd Frank and EMIR under certain circumstances. 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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

32


Notes to Financial Statements (continued)

October 31, 2018

 

 

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 fiscal year ended October 31, 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 October 31, 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)

   Unrealized appreciation on receivable for centrally cleared interest rate swaps    $ 6,300,036      Unrealized depreciation payable for centrally cleared interest rate swaps    $  

Forward foreign exchange contracts (foreign exchange risk)

   Unrealized appreciation on forward currency exchange contracts    $ 5,604,713      Unrealized depreciation on forward currency exchange contracts    $ 1,862,419  

Futures contracts (interest rate risk)

   Variation margin receivable for futures contracts    $ 1,020,271      Variation margin payable for futures contracts    $ 3,350,277  

Total

        $ 12,925,020           $ 5,212,696  

 

*   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 (continued)

October 31, 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 October 31, 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)

 

             

BNP Paribas S.A.

  $ 109,865     $     $     $ 109,865     $     $     $     $  

Goldman Sachs

    84,390                   84,390                          

Goldman Sachs & Co.

                            572,271                   572,271  

HSBC Bank USA

    83,642       (83,642                 700,093       (83,642     (616,451      

Royal Bank of Canada

    5,121,944                   5,121,944                          

UBS

    204,872       (204,872                 590,055       (204,872           385,183  

 

1.   In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization.
2.   Includes financial instrument which are not subject to a master netting arrangement across funds, or another similar arrangement.
3.   Net amounts represent the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from financial derivative instruments can only be netted across transactions governed under the same master netting agreement with the same legal entity.

The effect of derivative instruments on the Statement of Operations for the fiscal year ended October 31, 2018:

 

Derivatives Not Accounted for as
Hedging Instruments
     Location of Gain or (Loss)
on Derivatives
     Realized
Gain or
(Loss) on
Derivatives
       Change in
Unrealized
Appreciation/
(Depreciation)
on Derivatives
 

Interest rate swaps (interest rate risk)

     Realized/Unrealized Gain/(Loss) from Investments, Interest Rate Swaps, Futures Contracts and Foreign Currencies      $ 2,566,939        $ 2,897,964  

Forward foreign exchange contracts (foreign exchange risk)

     $ 9,320,025        $ (1,134,817

Futures contracts (interest rate risk)

     $ 3,970,435        $ (3,088,198

Total

            $ 15,857,399        $ (1,325,051

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

34


Notes to Financial Statements (continued)

October 31, 2018

 

 

Information about derivatives reflected as of the date of this report is generally indicative of the type of activity during the fiscal year ended October 31, 2018. The table below summarizes the weighted average values of derivatives holdings for the Fund during the fiscal year ended October 31, 2018.

 

Derivative     

Average

Notional Value

 

Purchase Forward Foreign Currency Contracts

     $ 186,143,223  

Sale Forward Foreign Currency Contracts

       206,398,903  

Long Futures Contracts

       158,993,961  

Short Futures Contracts

       146,245,435  

Interest Rate Swaps

       86,250,000  

e. Bank Loans:

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

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

funding loans and revolving credit facilities usually provide for floating or variable rates of interest.

See “Bank Loan Risk” under “Portfolio Investment Risks” for information regarding the risks associated with an investment in bank loans.

f. Security Transactions, Investment Income and Expenses:

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

g. Distributions:

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

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

Distributions to Series A Mandatory Redeemable Preferred Shares (the “Series A MRPS”) shareholders are accrued daily and paid quarterly based on an annual rate of 4.125%. The Fund may not pay distributions to its preferred shareholders unless (i) the pro forma asset coverage ratios for the Series A MRPS, as calculated in accordance with the Fitch Ratings total and net overcollateralization tests per the ‘AA’ rating guidelines outlined in Fitch Rating’s closed-end fund criteria, is in excess of 100%, and (ii) the Fund’s asset coverage ratios for the Series A MRPS, as calculated in accordance with the 1940 Act, is in excess of 225%. The character of distributions to Series A MRPS shareholders made during the fiscal year may differ from their ultimate characterization for federal income tax purposes. For tax purposes, the Fund’s distributions to Series A MRPS shareholders for the fiscal year ended October 31, 2018 were 100% net investment income.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

35


Notes to Financial Statements (continued)

October 31, 2018

 

 

h. Federal Income Taxes:

For U.S. federal income purposes, the Fund includes a separately identifiable unit called a Qualified Business Unit (“QBU”) (see Internal Revenue Code of 1986, as amended (“IRC”) section 987). The Fund has operated with a QBU for U.S. federal income purposes since 1990. The home office of the Fund is designated as the United States and of the QBU is Australia with a functional currency of Australian dollar. The securities held within the Fund reside within either the QBU or the home office. Australian dollar denominated securities within the Australian QBU generate capital gain/loss (which are translated for U.S. federal income tax purposes into U.S. Dollars based on the weighted average exchange rate for the period) but not currency gain/loss. If a non AUD denominated security were to sit in the AUD QBU and was sold, the sale would generate capital gain/loss as well as currency gain/loss based on the currency exchange between the currency the security is denominated in and the Australian dollar.

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

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

i. Foreign Withholding Tax:

Dividend and interest income from non-U.S. sources received by the Fund are generally subject to non-U.S. withholding taxes. In addition,

the Fund may be subject to capital gains tax in certain countries in which it invests. The above taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties with some of these countries. The Fund accrues such taxes when the related income is earned.

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

j. Cash Flow Information:

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

3. Agreements and Transactions with Affiliates

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

ASIAL serves as investment manager to the Fund, pursuant to a management agreement. Aberdeen Standard Investments Australia Limited, formerly known as Aberdeen Asset Management Limited (the “Investment Adviser”), serves as the investment adviser and Aberdeen Asset Managers Limited (“AAML” or the “Sub-Adviser”) serves as the sub-adviser, pursuant to an advisory agreement and a sub-advisory agreement, respectively, with the Investment Manager.

The Investment Manager manages the Fund’s investments and makes investment decisions on behalf of the Fund including the selection of and the placement of orders with brokers and dealers to execute portfolio transactions on behalf of the Fund. The Investment Adviser makes recommendations of securities to be purchased or sold within the Fund’s portfolio to the Investment Manager and may provide research or statistical data. The Sub-Adviser manages the portion of the Fund’s assets that the Investment Manager allocates to it. The Investment Adviser and Sub-Adviser are paid by the Investment Manager, not the Fund.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

36


Notes to Financial Statements (continued)

October 31, 2018

 

 

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

For the fiscal year ended October 31, 2018, ASIAL earned $10,129,478 from the Fund for investment management fees.

b. Fund Administration:

Aberdeen Asset Management Inc. (“AAMI”), an affiliate of the Investment Manager, Investment Adviser and Sub-Adviser, is the Fund’s Administrator pursuant to an agreement under which AAMI receives a fee, payable monthly by the Fund, at an annual fee rate of 0.125% of the Fund’s average weekly Managed Assets up to $1 billion, 0.10% of the Fund’s average weekly Managed Assets between $1 billion and $2 billion, and 0.075% of the Fund’s average weekly Managed Assets in excess of $2 billion. For the fiscal year ended October 31, 2018, AAMI earned $2,129,250 from the Fund for administration fees.

c. Investor Relations:

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

Pursuant to the terms of the Investor Relations Services Agreement, AAMI (or third parties hired by AAMI), among other things, provides

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

During the fiscal year ended October 31, 2018, the Fund incurred investor relations fees of approximately $257,860. For the fiscal year ended October 31, 2018, AAMI did not bear any portion of to the investor relations fees for the Fund because the Fund’s contribution was below 0.05% of the Fund’s average weekly net assets on an annual basis.

4. Investment Transactions

Purchases and sales of investment securities (excluding short-term securities) for the fiscal year ended October 31, 2018, were $760,127,664 and $869,150,833, respectively.

5. Capital

The authorized capital of the Fund is 400 million shares of $0.01 par value per share of common stock. During the fiscal year ended October 31, 2018, the Fund repurchased 3,150,212 shares pursuant to its Open Market Repurchase Program, see Note 6 for further information. As of October 31, 2018, there were 248,980,612 shares of common stock issued and outstanding.

6. Open Market Repurchase Program

On March 1, 2001, the Board approved a stock repurchase program. The Board amended the program on December 12, 2007. The stock repurchase program allows the Fund to repurchase up to 10% of its outstanding common stock in the open market during any 12-month period. The Fund reports repurchase activity on the Fund’s website on a monthly basis.

For the fiscal year ended October 31, 2018 and fiscal year ended October 31, 2017, the Fund repurchased 3,150,212 and 1,135,695 shares, respectively, through this program.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

37


Notes to Financial Statements (continued)

October 31, 2018

 

 

7. Preferred Shares

At October 31, 2018, the Fund had 2,000,000 shares of Series A MRPS outstanding with an aggregate liquidation preference of $50,000,000 ($25 per share). The following table shows the mandatory redemption date, annual fixed rate, aggregate liquidation preference and estimated fair value of the Series A MRPS at October 31, 2018.

 

Mandatory
Redemption Date
   Annual
Fixed
Rate
     Aggregate
Liquidation
Preference
     Estimated
Fair Value
 

June 27, 2023

     4.125%      $ 50,000,000      $ 48,359,399  

Holders of the Series A MRPS are entitled to receive quarterly cumulative cash dividend payments on the first business day following each calendar quarter at an annual fixed rate of 4.125% until maturity. The Series A MRPS were issued in private placement offerings to institutional investors and are not listed on any exchange or automated quotation system. Distributions are accrued daily and paid quarterly and are presented in the Statement of Assets and Liabilities as a dividend payable to preferred shareholders. For the fiscal year ended October 31, 2018, the Fund paid $2,091,147 in distributions to preferred shareholders.

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

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

The Series A MRPS are redeemable in certain circumstances at the option of the Fund. The Series A MRPS are also subject to mandatory redemption, unless otherwise prohibited by the 1940 Act, if the Fund fails to maintain (1) asset coverage, as determined in accordance with Section 18(h) of the 1940 Act, of at least 225%, with respect to all outstanding preferred stock, as of the last day of any month or (2) eligible assets with an aggregate agency discounted value at least equal to the basic maintenance amount as provided in the Fund’s rating agency guidelines. As of October 31, 2018, the Fund was in compliance with the asset coverage and basic maintenance requirements of the Series A MRPS.

 

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

8. Senior Secured Notes

At October 31, 2018, the Fund had $350,000,000 in aggregate principal amount of senior secured notes rated ‘AAA’ by Fitch Ratings outstanding ($100,000,000 in 3.05% Series A Senior Secured Notes due June 12, 2020, $100,000,000 in 3.69% Series B Senior Secured Notes due June 12, 2023, $50,000,000 in 3.87% Series C Senior Secured Notes due February 8, 2032 and $100,000,000 in 3.70% Series D Senior Secured Notes due August 10, 2032) (collectively, the “Notes”). The Notes are secured obligations of the Fund and, upon liquidation, dissolution or winding up of the Fund, will rank senior to all unsecured and unsubordinated indebtedness and senior to any common or preferred stock pari passu in priority and security with all other secured indebtedness. Holders of the Notes are entitled to receive cash interest payments semi-annually until maturity. The Series A Notes, the Series B Notes, the Series C Notes and the Series D Notes accrue interest at annual fixed rates of 3.05%, 3.69%, 3.87% and 3.70%, respectively.

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

The Notes may be prepaid in certain limited circumstances at the option of the Fund. The Notes are also subject to optional prepayment to the extent needed to satisfy certain requirements if the Fund fails to meet an asset coverage ratio required by the terms of the Notes and is not able to cure the coverage deficiency by the applicable deadline.

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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

38


Notes to Financial Statements (continued)

October 31, 2018

 

 

maturity date, interest rate, notional/carrying amount and estimated fair value for each series of Notes outstanding at October 31, 2018.

 

Series    

Maturity

Date

    Interest
Rate
   

Notional/

Carrying
Amount

   

Estimated

Fair Value

 
  Series A       June 12, 2020       3.05   $ 100,000,000     $ 98,299,035  
  Series B       June 12, 2023       3.69   $ 100,000,000     $ 97,569,806  
  Series C       February 8, 2032       3.87   $ 50,000,000     $ 46,980,142  
  Series D       August 10, 2032       3.70   $ 100,000,000     $ 92,059,561  

9. Credit Facility

On April 7, 2017, the Fund renewed its credit agreement providing for a $100,000,000 senior secured 3-year revolving credit loan facility (the “Revolving Credit Facility”) with a syndicate of banks with Bank of America Merrill Lynch, N.A., acting as administrative agent. On June 12, 2013 the Fund entered into a term loan agreement (the “Term Loan Agreement”) providing for $200,000,000 of senior secured term loans (the “Term Loan Facility”) from Bank of America, N.A. On August 10, 2017 proceeds from the Series D Notes were used to pay down $100,000,000 of the Term Loan Facility. At October 31, 2018, the Fund had $55,000,000 outstanding under the Revolving Credit Facility and $100,000,000 outstanding under the Term Loan Facility. Under the terms of the Revolving Credit Facility and the Term Loan Agreement and applicable regulations, the Fund is required to maintain certain asset coverage ratios for the amount of its outstanding borrowings.

For the fiscal year ended October 31, 2018, the average interest rate on the Revolving Credit Facility was 2.84% and the average balance of the Revolving Credit Facility was $88,424,658. At the fiscal year ended October 31, 2018, pursuant to the Term Loan Agreement, the Term Loan Facility consists of a $100,000,000 term loan facility which accrues interest at 2.38% per annum.

For the fiscal year ended October 31, 2018, the average interest rate on the Term Loan Facility was 2.38% and the average balance of the Term Loan Facility was $100,000,000. The interest expense is accrued on a daily basis and is payable on a monthly basis or on the last date of the respective LIBOR period, as applicable, for the Revolving Credit Facility, and payable on the last business day of each of March, June, September and December and the maturity date for the Term Loan Facility.

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

date, interest rate, notional/carrying amount and estimated fair value for the Term Loan Facility outstanding as of October 31, 2018.

 

Series  

Maturity

Date

    Interest
Rate
   

Notional/

Carrying

Amount

    Estimated
Fair Value
 
Term Loan

Facility

    December 14, 2019       2.38   $ 100,000,000     $ 98,289,899  

The Revolving Credit Facility has a term of 3-years and is not a perpetual form of leverage; there can be no assurance that the Revolving Credit Facility will be available for renewal on acceptable terms, if at all. The Term Loan Facility, which initially had a 3-year term, was recently extended to December 14, 2019. Bank loan fees and expenses included in the Statement of Operations include fees for the renewal of the Revolving Credit Facility as well as commitment fees for any portion of the loan facility not drawn upon at any time during the period.

The estimated fair value of the Revolving Credit Facility was calculated, for disclosure purposes, by discounting future cash flows by a rate equal to the current U.S. Treasury rate with an equivalent maturity date, the spread between the U.S. insurance and financial debt rate and the U.S. Treasury rate. The following table shows the maturity date, interest rate, notional/carrying amount and estimated fair value outstanding as of October 31, 2018.

 

Maturity Date    Interest Rate      Notional/
Carrying
Amount
     Estimated
Fair Value
 

April 7, 2020

     3.32%      $ 55,000,000      $ 54,480,304  

10. Risks of Leveraged Capital Structure

The Fund may use leverage to the maximum extent permitted by the 1940 Act, which permits leverage to exceed 33 1/3% of the Fund’s total assets (including the amount obtained through leverage) in certain market conditions.

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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

39


Notes to Financial Statements (continued)

October 31, 2018

 

 

magnified in the Fund because of the additional assets purchased with the proceeds of the leverage.

The Fund’s leveraged capital structure creates special risks not associated with unleveraged funds having similar investment objectives and policies. The funds borrowed pursuant to the Revolving Credit Facility, the Term Loan Facility and the Notes may constitute a substantial lien and burden by reason of their prior claim against the income of the Fund and against the net assets of the Fund in liquidation. The Fund is limited in its ability to declare dividends or other distributions under the terms of the various forms of leverage. In the event of an event of default under either the Revolving Credit Facility or Term Loan Facility, the lenders have the right to cause a liquidation of the collateral (i.e., sell portfolio securities and other assets of the Fund) and, if any such default is not cured, the lenders may be able to control the liquidation as well. In the event of an event of default under the Note Purchase Agreement, the holders of the Notes have the right to cause a liquidation of the collateral (i.e., sell portfolio securities and other assets of the Fund). If there exists an event of default under the Securities Purchase Agreement that has not been cured, the holders of the Series A MRPS have the right to cause the Fund’s outstanding borrowings to be immediately due and payable and proceed to protect and enforce their rights by an action at law, suit in equity or other appropriate proceeding.

Each of the Revolving Credit Facility Agreement, the Term Loan Agreement, the Note Purchase Agreement or the Securities Purchase Agreement relating to the Series A MRPS includes usual and customary covenants for the applicable type of transaction. These covenants impose on the Fund asset coverage requirements, Fund composition requirements and limits on certain investments, such as illiquid investments, which are more stringent than those imposed on the Fund by the 1940 Act. The covenants or guidelines could impede the Investment Manager, Investment Adviser, or Sub-Adviser from fully managing the Fund’s portfolio in accordance with the Fund’s investment objective and policies. Furthermore, non-compliance with such covenants or the occurrence of other events could lead to the cancellation of any and/or all of the forms of leverage. As of October 31, 2018, the Fund was in compliance with all covenants under the agreements relating to the various forms of leverage.

During the fiscal year ended October 31, 2018, the Fund incurred fees of approximately $568,256 for the Revolving Credit Facility, Term Loan Facility and Notes.

11. Portfolio Investment Risks

a. Credit and Market Risk

A debt instrument’s price depends, in part, on the credit quality of the issuer, borrower, counterparty, or underlying collateral and can decline in response to changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral, or changes in specific or general market, economic, industry, political, regulatory, geopolitical, or other conditions. Funds that invest in high yield and emerging market instruments are subject to certain additional credit and market risks. The yields of high yield and emerging market debt obligations reflect, among other things, perceived credit risk. The Fund’s investments in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk of not receiving timely and/or ultimate payment of interest and principal, greater market price volatility, and less liquid secondary market trading.

b. Interest Rate Risk

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

The Fund may be subject to a greater risk of rising interest rates due to current period of historically low rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives.

c. Risks Associated with Foreign Securities and Currencies

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

Certain countries also may impose substantial restrictions on investments in their capital markets by foreign entities, including restrictions on investments in issuers of industries deemed sensitive to relevant national interests. These factors may limit the investment

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

40


Notes to Financial Statements (continued)

October 31, 2018

 

 

opportunities available and result in a lack of liquidity and high price volatility with respect to securities of issuers from developing countries.

The value of foreign currencies relative to the U.S. Dollar fluctuates in response to market, economic, political, regulatory, geopolitical or other conditions. A decline in the value of a foreign currency versus the U.S. Dollar reduces the value in U.S. Dollars of investments denominated in that foreign currency. This risk may impact the Fund more greatly to the extent the Fund does not hedge its currency risk, or hedging techniques used by the Investment Manager are unsuccessful.

d. Focus Risk

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

e. Risks Associated with Mortgage-backed Securities

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

f. High-Yield Bonds and Other Lower-Rated Securities Risk

The Fund’s investments in high-yield bonds (commonly referred to as “junk bonds”) and other lower-rated securities will subject the Fund to substantial risk of loss. Investments in high-yield bonds are speculative and issuers of these securities are generally considered to be less financially secure and less able to repay interest and principal than issuers of investment-grade securities. Prices of high-yield bonds tend

to be very volatile. These securities are less liquid than investment- grade debt securities and may be difficult to price or sell, particularly in times of negative sentiment toward high-yield securities.

g. Bank Loan Risk

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

12. Contingencies

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

13. Tax Information

The U.S. federal income tax basis of the Fund’s investments and the net unrealized appreciation as of October 31, 2018 were as follows:

 

Tax Basis of
Investments
    Appreciation     Depreciation    

Net

Unrealized

Appreciation/
(Depreciation)

 
  $1,717,506,103     $ 9,791,017     $ (72,978,143   $ (63,187,126
 

 

The tax character of distributions paid during the fiscal years ended October 31, 2018 and October 31, 2017 was as follows:

 

        October 31, 2018        October 31, 2017  

Distributions paid from:

         

Ordinary Income

     $ 61,878,247        $ 66,636,882  

Net long-term capital gains

                 

Tax return of capital

       43,546,107          39,328,863  

Total tax character of distributions

     $ 105,424,354        $ 105,965,745  

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

41


Notes to Financial Statements (continued)

October 31, 2018

 

 

As of October 31, 2018, the components of accumulated earnings on a tax basis were as follows:

 

Undistributed ordinary income – net

     $  

Undistributed long-term capital gains – net

        

Total undistributed earnings

     $  

Capital loss carryforward

       (25,376,165 )* 

Other currency gains

       44,134,320  

Other temporary differences

       (774,738

Unrealized appreciation/(depreciation) – securities

       (58,217,444 )** 

Unrealized appreciation/(depreciation) – currency

       (154,535,031 )** 

Total accumulated earnings/(losses) – net

     $ (194,769,058

 

*   On October 31, 2018, the Fund had a net capital loss carryforward of $(25,376,165) which will be available to offset like amounts of any future taxable gains. Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short term as under previous law. Pre-enactment capital loss carryforwards expire as follows:

 

Amounts      Expires  

$21,193,794

       2019 (Short-Term)  

    4,182,371

       Unlimited (Long-Term)  

 

**   The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable to the difference between book and tax amortization methods for premiums and discounts on fixed income securities, differing treatments for foreign currencies, the tax deferral of wash sales and straddles, the realization of unrealized gains on certain futures and forward contracts, and other timing differences.

 

GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, the table below details the necessary reclassifications, which are a result of permanent differences primarily attributable to foreign currency gains and losses, capital gains tax, return of capital distributions, premium amortization and swap reclasses. These reclassifications have no effect on net assets or NAVs per share.

 

Paid-in
Capital
    

Distributable
Accumulated Loss

 

$(2,567,689)

     $ 2,567,689  

14. Recent Accounting Pronouncements

On August 17, 2018, the SEC voted to adopt amendments to certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. The SEC will also be referring certain SEC disclosure requirements that overlap with, but require information incremental to, U.S. GAAP to the Financial Accounting Standards Board (FASB) for potential incorporation into U.S. GAAP. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments became effective November 5, 2018.

On August 28, 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. Accounting Standards Update (ASU) 2018-13 includes removals, additions and modifications to the disclosure requirements for fair value measurements that are intended to improve the effectiveness of disclosures in the notes to financial

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

42


Notes to Financial Statements (concluded)

October 31, 2018

 

 

statements. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. Aberdeen has evaluated ASU 2018-13 and determined that there is no significant impact on the Fund’s financial statements. Aberdeen has early adopted the following ASU 2018-13 guidance in the Fund’s financial statements pertaining to the removal of (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and (ii) the policy for timing of transfers between levels.

15. Subsequent Events

Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the

financial statements were issued. Based on this evaluation, no disclosures or adjustments were required to the financial statements as of October 31, 2018, other than those listed below.

On November 9, 2018 and December 11, 2018, the Fund announced that it will pay on November 28, 2018 and January 10, 2019, a distribution of US $0.035 per share to all shareholders of record as of November, 19, 2018 and December 31, 2018, respectively.

On December 12, 2018, Moritz Sell was appointed as a Class I Director. Following his appointment, the size of the Board was increased to six Directors.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

43


Report of Independent Registered Public Accounting Firm

 

 

 

To the Shareholders and Board of Directors of

Aberdeen Asia-Pacific Income Fund, Inc.:

 

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Aberdeen Asia-Pacific Income Fund, Inc. (the Fund), including the portfolio of investments, as of October 31, 2018, the related statement of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with the custodian, brokers, or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.

 

LOGO

We have served as the auditor of one or more Aberdeen investment companies since 2009.

Philadelphia, Pennsylvania

December 27, 2018

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

44


Federal Tax Information: Dividends and Distributions (unaudited)

 

 

 

The following information is provided with respect to the distributions paid by the Aberdeen Asia-Pacific Income Fund, Inc. during the fiscal year ended October 31, 2018:

Common Shareholders

 

Payable Date