28/07/2014 20:35:10 Free Membership Login

Certified Annual Shareholder Report for Management Investment Companies (n-csr)

Date : 01/04/2013 @ 3:59PM
Source : Edgar (US Regulatory)
Stock : Aberdeen Asia-Pacific Income Fund (FAX)
Quote : 6.28  0.0 (0.00%) @ 8:00PM
Aberdeen Asia Pacific share price Chart

Certified Annual Shareholder Report for Management Investment Companies (n-csr)

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, 32 nd Floor

Philadelphia, PA 19103

Name and address of agent for service:

  

Ms. Andrea Melia

Aberdeen Asset Management Inc.

1735 Market Street 32 nd 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, 2012


Item 1 – Reports to Stockholders


LOGO


Managed Distribution Policy (unaudited)

 

 

 

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

Distribution Disclosure Classification  (unaudited)

 

 

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

The Fund is subject to U.S. corporate, tax and securities laws. Under U.S. tax accounting rules, the amount 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 the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund is required to indicate the sources of certain distributions to shareholders. The estimated distribution composition may vary from month to month because it may be materially impacted by future 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, 2012, consisted of 100% net investment income.

In January 2013, 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 2012 calendar year.

Dividend Reinvestment and Direct Stock Purchase Plan (unaudited)

 

 

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

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

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

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


Letter to Shareholders (unaudited)

December 5, 2012

 

 

Dear Shareholder,

We present this Annual Report which covers the activities of Aberdeen Asia-Pacific Income Fund, Inc. (the “Fund”) for the year ended October 31, 2012. The Fund’s principal investment objective is to seek current income. The Fund may also achieve incidental capital appreciation.

Total Return Performance

The Fund’s total return, based on net asset value (“NAV”), was 9.8% for the year ended October 31, 2012 and 9.6% per annum since inception, assuming the reinvestment of dividends and distributions. The Fund’s annual total return is based on the reported NAV on October 31, 2012.

Share Price and NAV

The Fund’s share price increased by 14% over the year, from $6.93 on October 31, 2011 to $7.90 on October 31, 2012. The Fund’s share price on October 31, 2012 represented a premium of 1.5% to the NAV per share of $7.78 on that date, compared with a discount of 7.4% to the NAV per share of $7.48 on October 31, 2011.

Portfolio Allocation

As of October 31, 2012, the Fund held 41.6% of its total investments in Australian debt securities, 54.2% in Asian debt securities, 2.2% in European debt securities, 1.9% in U.S. debt securities and 0.1% in Canadian debt securities.

Of the Fund’s total investments, 36.0% were held in U.S. Dollar-denominated bonds issued by foreign issuers, bringing the Fund’s U.S. Dollar exposure to 36.4%. The rest of the Fund’s currency exposure was 43.9% in the Australian Dollar and 19.7% in various Asian currencies.

Credit Quality

As of October 31, 2012, 70.5% of the Fund’s portfolio was invested in securities where either the issue or the issuer was rated A or better by Standard & Poor’s or Moody’s Investors Services, Inc., or, if unrated, judged by Aberdeen Asset Management Asia Limited (the “Investment Manager”) to be of equivalent quality.

Managed Distribution Policy

Distributions to common shareholders for the twelve months ended October 31, 2012 totaled $0.42 per share. Based on the share price of $7.90 on October 31, 2012, the distribution rate over the twelve-month period ended October 31, 2012 was 5.3%. 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, 2012 and December 11, 2012, the Fund announced that it will pay on December 14, 2012 and January 11, 2013, a distribution of US $0.035 per share to all shareholders of record as of November 30, 2012 and December 31, 2012, respectively.

The Fund’s policy is to provide investors with a stable monthly distribution out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital, which is a non-taxable return of capital. It is the Board’s intention that a monthly distribution of $0.035 per share be maintained for twelve months, beginning with the July 13, 2012 distribution payment. This policy is subject to regular review at the Board’s quarterly meetings, unless market conditions require an earlier evaluation. The next annual review is scheduled to take place in June 2013.

Open Market Repurchase Program

The Fund’s policy is generally to buy back Fund shares on the open market when the Fund trades at certain discounts to NAV. During the fiscal year ended October 31, 2012 and fiscal year ended October 31, 2011, the Fund did not repurchase any shares.

Revolving Credit Facility and Leverage

The Fund has entered into a $600,000,000 revolving credit loan facility with a syndicate led by The Bank of Nova Scotia, which was renewed for a 364-day term on April 11, 2012. The outstanding balance on the loan as of October 31, 2012 was $600,000,000. Under the terms of the loan facility and applicable regulations, the Fund is required to maintain certain asset coverage ratios for the amount of its outstanding borrowings. The Board regularly reviews the use of leverage by the Fund. The Fund is also authorized to use reverse repurchase agreements as another form of leverage.

Portfolio Holdings Disclosure

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

Proxy Voting

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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

1


Letter to Shareholders (unaudited) (concluded)

 

 

 

June 30 is available by August 30 of the relevant year: (i) upon request and without charge by calling Investor Relations toll-free at 1-800-522-5465; and (ii) on the SEC’s website at http://www.sec.gov.

Investor Relations Information

As part of our ongoing commitment to provide additional, timely information to investors, including Fund performance and investment strategy, we would like to highlight the monthly fact sheets including fund manager commentary, which are posted to the Fund’s website at www.aberdeenfax.com. Also, there are daily updates of share price, NAV and details of distributions. If you have any questions in relation to this information or suggestions on how to improve it further, we would be delighted to hear from you.

Please contact Aberdeen Asset Management Inc. by:

 

 

Calling toll free at 1-800-522-5465 in the United States;

 

Emailing InvestorRelations@aberdeen-asset.com;

 

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

 

Visiting www.aberdeenfax.com.

For additional information on Aberdeen’s family of closed-end funds, we invite you to visit our Closed-End Investor Center at www.aberdeen-asset.us/cef.

From the site you will also be able to review Fund performance, download literature and sign up for email services. The site houses

topical information about the funds, including fact sheets from Morningstar ® that are updated daily, tools that permit you to conduct performance charting and timely information from our fund managers, among other data. When you enroll in our online email services, we can ensure that you are among the first to know about Aberdeen’s latest closed-end fund news and receive alerts regarding upcoming fund manager web casts, films and other information.

Included within this report is a reply card with postage paid envelope. Please complete and mail the card if you would like to be added to our enhanced email service and receive future communication from Aberdeen.

Yours sincerely,

 

LOGO

Christian Pittard

President

 

 

 

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

2


Report of the Investment Manager (unaudited)

 

 

 

Economic Review

Asian fixed income markets strengthened during the year ended October 31, 2012. Initially, the European debt crisis sparked fears of escalating systemic risk, but this was eased by massive liquidity injections and Greece’s bailout. Elsewhere, the U.S. Federal Reserve pledged to keep interest rates near zero until the end of 2014. Subsequently, risk aversion spiked on uncertainty over Greece’s potential exit from the Eurozone and stress in Spain’s banking system. There was a flight to quality which benefited safe-haven assets, particularly in developed countries. Towards the period end, major central banks announced stimulus measures against a rapidly deteriorating global economic backdrop. In particular, the U.S. Federal Reserve launched a third round of quantitative easing, while the European Central Bank proposed fresh measures to tackle the debt crisis. Risk sentiment remained weak, however, with the looming U.S. fiscal cliff adding to the uncertainty.

Growth slowed across most of Asia, amid sluggish consumption and waning demand from developed markets. Exports were sluggish and while the year-on-year numbers had possibly begun to stabilize, import growth deteriorated. This would improve external balances but was less positive for the broader domestic economy, as it indicated that external weakness had led to lower domestic demand for imports of capital goods or intermediate inputs for re-export elsewhere. Gross Domestic Product contracted in Singapore and decelerated in Korea, two of the more open economies. China’s third-quarter growth eased to 7.4% from 7.6%, but improvements in industrial production, fixed asset investment and retail sales appear to indicate that the economy may be reaching a bottom. Bucking the trend were Indonesia and the Philippines, where consumption remained resilient.

Inflation was stable generally, although price pressures persisted in India. Central banks in Australia, China, Korea, Thailand and the Philippines cut interest rates to support growth.

Solid inflows and well-subscribed new issues bolstered the Asian dollar credit market, as the JP Morgan Asia Credit Index returned almost 13%. High-yield names, in particular corporates, outperformed their investment-grade peers, while industrials led gains at the sector level. Significantly, new issues in Asia ex-Japan exceeded US$100 billion for the first time ever during the period.

The Australian bond market also did well, as weakness in European banks and sovereigns drove demand for high-quality, low-risk sovereigns. The shorter end of the curve was supported by three interest rate cuts, while slowing domestic growth pushed yields significantly lower at the longer end.

Asian local currency government bonds also posted decent returns, led by India, Indonesia and the Philippines. Foreign inflows bolstered

the Indian market, as investors responded favorably to a slew of reforms that included liberalizing the key retail and aviation sectors. Indonesian bonds benefited from interest rate cuts and sovereign credit rating upgrades, while fiscal discipline and stable economic growth underpinned the Philippine market. Other regional markets posted more modest gains.

Most Asian currencies appreciated against the U.S. Dollar. The Philippine Peso and Malaysian Ringgit led the gains, underpinned by the supportive domestic fundamentals. The Korean Won also outperformed, given the central bank’s easing bias. In contrast, the Indonesian Rupiah fared poorly as continued export weakness deepened concerns over the current account deficit. The other laggard was the Indian Rupee, which was hurt by inflation and deficit worries as well as an S&P downgrade of the country’s long-term debt outlook.

The Fund uses currency forwards as part of the currency overlay process, in order to position the currency exposure according to our strategy. These forwards detracted 0.67% from value in the Fund over the review period, due primarily to the hedging positions in the Indian Rupee and Indonesian Rupiah.

The Fund can also use interest rate swaps to hedge interest rate or otherwise obtain exposure to a particular interest rate market, but it is not deploying this strategy currently. In addition, the Fund uses credit-linked notes to reduce the impact of withholding taxes in Indonesia.

The use of bond futures contracts was primarily to hedge and manage the interest rate exposure of the Australian bond and U.S. dollar-denominated Asian credit portfolios. During the review period, the Fund held net short U.S. Treasury futures positions, which subtracted 0.23% from performance of the Asian credit portfolio. The value of these positions fell as the underlying U.S. Treasuries rose because of subdued economic growth. The exposure to Australian bond futures also detracted 0.13% from performance in the Australian portfolio.

During the period, bond futures were used as a component of overall duration positioning. To the extent that duration positioning was a modest negative for overall performance, futures at times contributed towards that impact. However, we would emphasise that this impact was not a direct result of derivatives usage per se; rather, it was the overall duration positioning that was detrimental to performance, to which the bond futures at times contributed.

Loan Facility and the Use of Leverage

The Fund utilizes leverage to seek to increase the yield for its shareholders. The amounts borrowed from the loan facility may be

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

3


Report of the Investment Manager (unaudited) (concluded)

 

 

 

invested to return higher rates than the rates in the Fund’s portfolio. 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. Non-recurring expenses in connection with the implementation of the loan facility will reduce the Fund’s performance.

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 loan facility 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 not permitted to declare dividends or other distributions in the event of default under the loan facility. In the event of default under the credit agreement, 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. The loan facility has a term of 364 days and is not a perpetual form of leverage; there can be no assurance that the loan facility will be available for renewal on acceptable terms, if at all.

The credit agreement governing the loan facility includes usual and customary covenants for this 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, Aberdeen Asset Management Limited (the “Investment Adviser”) or Aberdeen Asset Managers Limited (the “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 the loan facility. The covenants also include a requirement that the Fund maintain a NAV of no less than $1,000,000,000.

Prices and availability of leverage are extremely volatile in the current market environment. The Board regularly reviews the use of leverage by the Fund and may explore other forms of leverage. The Fund may implement a reverse repurchase agreement program as another form of leverage if the Board determines it would be advantageous for the Fund and shareholders to do so. A reverse

repurchase agreement involves the sale of a security, with an agreement to repurchase the same or substantially similar securities at an agreed upon price and date. Whether such a transaction produces a gain for the Fund depends upon the costs of the agreements and the income and gains of the securities purchased with the proceeds received from the sale of the security. If the income and gains on the securities purchased fail to exceed the costs, the Fund’s NAV will decline faster than otherwise would be the case. Reverse repurchase agreements, as with any leveraging techniques, may increase the Fund’s return; however, such transactions also increase the Fund’s risks in down markets.

Interest Rate Swaps

The Fund may enter into interest rate swaps to efficiently gain or hedge interest rate or currency risk. On October 31, 2012, the Fund unwound $66,000,000 of the previously held $240,000,000 interest rate swap agreement that matures on October 31, 2016. Also on that date, the Fund entered into a new interest rate swap with a notional amount $66,000,000 with a maturity date of November 1, 2017. As of October 31, 2012, the Fund held interest rate swap agreements with an aggregate notional amount of $600,000,000, which represented 100% of the Fund’s total borrowings. Under the terms of the agreements currently in effect, the Fund receives a floating rate of interest (three month USD-LIBOR BBA rate) and pays fixed rates of interest for the terms and based upon the notional amounts set forth below:

 

Remaining
Term as of
October 31, 2012
   Amount
(in millions)
     Fixed Rate
Payable (%)
 

60 months

   $ 66.0         0.84   

48 months

   $ 174.0         1.42   

46 months

   $ 60.0         1.20   

24 months

   $ 300.0         0.82   

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

Aberdeen Asset Management Asia Limited

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

4


Average Annual Returns (unaudited)

October 31, 2012

 

 

The following table summarizes Fund performance compared to the Fund’s blended benchmark consisting of 45% of the UBS Composite Index, 35.75% of the JP Morgan Asian Credit Index, and 19.25% of the IBOXX Asia ex Japan Government Bond Index for the 1-year, 3-year, 5-year and 10-year periods as of October 31, 2012.

 

         1 Year        3 Years        5 Years        10 Years  

Net Asset Value (NAV)

       9.8        12.5        9.4        11.9

Market Value

       20.5        16.1        12.1        14.0

Benchmark

       9.4        11.4        9.2        10.7

Returns represent past performance. Total investment return at net asset value is based on changes in the net asset value of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the Fund’s dividend reinvestment program. Total investment return at market value is based on changes in the market price at which the Fund’s shares traded on the NYSE MKT during the period and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the Fund’s dividend reinvestment program. The Fund’s annual total return is based on the reported NAV on October 31, 2012. 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 by calling 800-522-5465.

The net operating expense ratio is 1.38%. The net operating expense ratio, excluding interest expense, is 1.01%.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

5


Portfolio Composition (unaudited)

 

 

 

Quality of Investments

As of October 31, 2012, 70.5% 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 Investors Service, Inc., or, if unrated, judged to be of equivalent quality by the Investment Manager. The table below shows the asset quality of the Fund’s portfolio as of October 31, 2012, compared with the previous six and twelve months:

 

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

October 31, 2012

       36.2           11.5           22.8           12.6           15.1           1.3           0.5   

April 30, 2012

       36.0           8.3           22.7           14.8           16.9           1.3           0.0   

October 31, 2011

       33.7           12.1           22.3           12.4           18.5           1.0           0.0   

 

*   Below investment grade
**   Not Rated

Geographic Composition

The table below shows the geographical composition (with U.S. Dollar-denominated bonds issued by foreign issuers allocated into country of issuance) of the Fund’s total investments as of October 31, 2012, compared with the previous six and twelve months:

 

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

October 31, 2012

     41.6         54.2         2.2         1.9         0.1   

April 30, 2012

     42.5         54.0         2.8         0.6         0.1   

October 31, 2011

     41.2         52.1         3.3         3.3         0.1   

Currency Composition

The table below shows the currency composition of the Fund’s total investments as of October 31, 2012, compared with the previous six and twelve months:

 

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

October 31, 2012

       43.9           19.7           36.4   

April 30, 2012

       45.3           19.8           34.9   

October 31, 2011

       44.6           19.4           36.0   

 

*   Includes U.S. Dollar-denominated bonds issued by foreign issuers: 36% of the Fund's total investments on October 31, 2012, 34.6% of the Fund's total investments on April 30, 2012, 35.9% of the Fund's total investments on October 31, 2011.

Maturity Composition

As of October 31, 2012, the average maturity of the Fund’s total investments was 7.2 years, compared with 7.3 years at April 30, 2012, and 6.9 years at October 31, 2011. The following table shows the maturity composition of the Fund’s investments as of October 31, 2012, compared with the previous six and twelve months:

 

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

October 31, 2012

       20.4           23.7           42.3           13.6   

April 30, 2012

       20.0           27.7           35.3           17.0   

October 31, 2011

       24.8           21.5           36.6           17.1   

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

6


Summary of Key Rates (unaudited)

 

 

 

The following table summarizes the movements of key interest rates and currencies from October 31, 2012 and the previous six and twelve month periods.

 

         October 31, 2012        April 30, 2012        October 31, 2011  

Australia

              

90 day bank bills

       3.14%           4.05%           4.71%   

10 yr bond

       3.13%           3.67%           4.51%   

Australian Dollar

       $1.04           $1.04           $1.06   

Malaysia

              

3-month T-bills

       3.05%           3.06%           2.98%   

10 yr bond

       3.46%           3.57%           3.75%   

Malaysian Ringgit*

       R 3.05           R 3.06           R 3.07   

New Zealand

              

90 day bank bills

       2.69%           2.71%           2.71%   

10 yr bond

       3.48%           3.99%           4.50%   

New Zealand Dollar

       $0.82           $0.82           $0.81   

Philippines

              

90 day T-bills

       0.73%           2.47%           1.41%   

10 yr bond

       5.11%           5.79%           5.92%   

Philippines Peso*

       P 41.20           P 42.94           P 42.64   

Singapore

              

3-month T-bills

       0.24%           0.25%           0.29%   

10 yr bond

       1.34%           1.55%           1.75%   

Singapore Dollar*

       S $1.22           S $1.26           S $1.25   

South Korea

              

90 day commercial paper

       2.85%           3.40%           3.43%   

10 yr bond

       3.02%           3.81%           3.87%   

South Korean Won*

       W 1,090.60           W 1,133.05           W 1,108.20   

Thailand

              

3 months deposit rate

       1.88%           2.00%           2.00%   

10 yr bond

       3.30%           3.82%           3.39%   

Thai Baht*

       B 30.65           B 30.85           B 30.75   

US$ Bonds**

              

South Korea

       1.11%           2.34%           2.77%   

Malaysia

       2.74%           3.37%           3.61%   

Philippines

       2.10%           3.04%           3.84%   

Hong Kong

       1.16%           1.40%           1.72%   

 

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

7


Portfolio of Investments

As of October 31, 2012

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 
      

COMMERCIAL MORTGAGE BACKED SECURITY—0.3%

  

AUSTRALIA—0.3%

  

AUD

    6,600      

ALE Finance Co. Pty Ltd., 5.81%, 5/20/2020 (a)

  $ 6,786,385   
            

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

    6,786,385   

CORPORATE BONDS—50.4%

  

AUSTRALIA—10.5%

  

AUD

    1,800      

AMP Group Finance Services Ltd., 7.00%, 3/02/2015

    1,971,264   

AUD

    2,500      

APT Pipelines Ltd., 7.75%, 7/22/2020

    2,907,422   

AUD

    5,300      

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

    5,857,181   

AUD

    4,200      

Barclays Bank PLC, 6.75%, 2/24/2014

    4,498,669   

AUD

    4,000      

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

    4,320,903   

AUD

    4,300      

CFS Retail Property Trust, 7.25%, 5/02/2016

    4,857,885   

AUD

    5,300      

DnB NOR Boligkreditt, 6.25%, 6/08/2016

    5,840,291   

AUD

    1,400      

General Electric Capital Australia Funding Pty Ltd., 6.00%, 5/15/2013

    1,472,743   

AUD

    3,500      

GPT RE Ltd., 6.50%, 8/22/2013

    3,700,896   

AUD

    1,300      

ING Bank Australia Ltd., 5.75%, 8/28/2013 (b)

    1,378,154   

AUD

    12,400      

ING Bank Australia Ltd., 5.75%, 3/03/2015 (b)

    13,590,193   

AUD

    10,600      

KfW, 6.25%, 2/23/2018 (b)

    12,333,959   

AUD

    10,500      

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

    12,443,221   

AUD

    3,300      

Kommunalbanken AS, 6.00%, 10/21/2014

    3,589,614   

AUD

    4,800      

Kommunalbanken AS, 6.50%, 4/12/2021

    5,781,405   

AUD

    15,500      

National Australia Bank Ltd., 6.25%, 4/01/2013

    16,278,664   

AUD

    6,600      

National Australia Bank Ltd., 6.75%, 9/16/2014

    7,257,743   

AUD

    2,900      

National Capital Trust III, 4.24%, 9/30/2016 (a)(c)(d)

    2,796,399   

AUD

    2,500      

National Wealth Management Holdings Ltd., 6.75%, 6/16/2016 (a)(c)

    2,630,781   

AUD

    4,800      

New Zealand Milk Australia Pty Ltd., 6.25%, 7/11/2016

    5,361,419   

AUD

    4,600      

QIC Finance Shopping Center Fund Pty Ltd., 6.75%, 7/07/2014

    4,948,553   

AUD

    4,000      

Rabobank Capital Funding Trust V, 4.04%, 12/31/2014 (a)(c)(d)(e)

    3,963,814   

AUD

    4,800      

Royal Womens Hospital Finance Pty Ltd., 6.20%, 3/26/2017 (a)

    5,103,019   

AUD

    6,000      

SPI Australia Assets Pty Ltd., 7.00%, 8/12/2015

    6,684,646   

AUD

    29,720      

St. George Bank Ltd., 10.00%, 5/09/2013 (a)(c)

    31,838,990   

AUD

    2,000      

Telstra Corp. Ltd., 8.75%, 1/20/2015

    2,268,145   

AUD

    3,000      

Transurban Finance Co. Pty Ltd., 7.25%, 3/24/2014

    3,227,847   

AUD

    5,000      

Vero Insurance Ltd., 6.75%, 9/23/2014 (a)(c)

    5,241,009   

AUD

    3,000      

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

    3,021,223   

AUD

    7,000      

Vodafone Group PLC, 6.75%, 1/10/2013

    7,305,441   

AUD

    3,500      

Volkswagen Financial Services Australia Pty Ltd., 7.25%, 11/26/2012

    3,641,094   

AUD

    8,900      

Wesfarmers Ltd., 8.25%, 9/11/2014

    9,956,670   

AUD

    4,000      

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

    4,660,677   

AUD

    3,600      

Woolworths Ltd., 6.75%, 3/22/2016

    4,079,286   
                   214,809,220   

CHINA—5.9%

  

USD

    7,000      

Agile Property Holdings Ltd., 8.88%, 4/28/2014 (c)(e)

    7,306,600   

USD

    4,550      

Central China Real Estate Ltd., 12.25%, 10/20/2013 (c)(e)

    4,993,625   

USD

    8,450      

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

    9,444,616   

CNY

    16,721      

China Petroleum & Chemical Corp., 0.80%, 2/20/2014

    2,562,893   

USD

    4,250      

China Resources Gas Group Ltd., 4.50%, 4/05/2022 (e)

    4,664,864   

USD

    8,800      

China Shanshui Cement Group Ltd., 10.50%, 4/27/2015 (c)(e)

    9,570,000   

USD

    8,800      

CNOOC Finance 2012 Ltd., 3.88%, 5/02/2022 (e)

    9,447,715   

USD

    7,100      

COSL Finance BVI Ltd., 3.25%, 9/06/2022 (e)

    7,054,837   

USD

    5,100      

Country Garden Holdings Co., 11.13%, 2/23/2015 (c)(e)

    5,729,510   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

8


Portfolio of Investments (continued)

As of October 31, 2012

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 
      

CORPORATE BONDS (continued)

  

CHINA (continued)

  

USD

    4,300      

Country Garden Holdings Co., 11.75%, 9/10/2014 (c)(e)

  $ 4,730,000   

USD

    7,750      

ENN Energy Holdings Ltd., 6.00%, 5/13/2021 (c)(e)

    9,020,496   

USD

    800      

KWG Property Holding Ltd., 12.75%, 3/30/2014 (c)(e)

    875,982   

USD

    3,944      

KWG Property Holding Ltd., 13.25%, 3/22/2017 (e)

    4,414,405   

USD

    6,100      

Longfor Properties Co. Ltd., 9.50%, 4/07/2014 (c)(e)

    6,725,250   

CNH

    18,000      

Sinochem Offshore Capital Co. Ltd., 1.80%, 1/18/2014

    2,822,319   

USD

    1,600      

Sinopec Group Overseas Development 2012 Ltd., 3.90%, 5/17/2022 (e)

    1,734,362   

USD

    6,100      

Sinopec Group Overseas Development 2012 Ltd., 4.88%, 5/17/2042 (e)

    7,003,764   

USD

    6,750      

Talent Yield Investments Ltd., 4.50%, 4/25/2022 (e)

    7,354,935   

USD

    6,600      

Yancoal International Resources Development Co. Ltd., 5.73%, 5/16/2022 (e)

    6,792,165   

USD

    7,949      

Yanlord Land Group Ltd., 10.63%, 3/29/2015 (c)(e)

    8,505,430   
                   120,753,768   

HONG KONG—6.0%

  

USD

    17,350      

Henson Finance Ltd., 5.50%, 9/17/2019 (c)

    19,052,469   

USD

    11,400      

HLP Finance Ltd., 4.75%, 6/25/2022 (e)

    12,143,747   

USD

    17,550      

Hongkong Land Finance (Cayman Island) Co. Ltd., 4.50%, 10/07/2025

    18,721,621   

USD

    1,600      

Hutchison Whampoa International Ltd., 4.63%, 9/11/2015 (e)

    1,739,661   

USD

    1,900      

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

    2,797,305   

USD

    22,550      

Hutchison Whampoa International Ltd., 7.63%, 4/09/2019 (e)

    29,007,260   

USD

    5,300      

Swire Pacific MTN Financing Ltd., 5.50%, 8/19/2019

    6,195,981   

USD

    3,800      

Swire Pacific MTN Financing Ltd., 6.25%, 4/18/2018

    4,526,716   

USD

    9,600      

Swire Properties MTN Financing Ltd., 4.38%, 6/18/2022 (e)

    10,516,454   

USD

    18,100      

Wing Hang Bank Ltd., 6.00%, 4/20/2017 (a)(c)(d)

    18,175,278   
                   122,876,492   

INDIA—3.6%

  

USD

    11,300      

Axis Bank Ltd., 5.25%, 9/30/2015

    11,901,138   

USD

    5,150      

Bank of Baroda, 5.00%, 8/24/2016 (e)

    5,403,246   

USD

    4,500      

ICICI Bank Ltd., 4.75%, 11/25/2016 (c)(e)

    4,708,269   

USD

    15,700      

ICICI Bank Ltd., 6.38%, 4/30/2017 (a)(c)(e)

    15,857,000   

USD

    6,800      

Indian Railway Finance Corp. Ltd., 4.41%, 3/30/2016

    7,107,999   

USD

    12,500      

NTPC Ltd., 5.63%, 7/14/2021 (e)

    13,593,750   

USD

    4,950      

NTPC Ltd., 5.88%, 3/02/2016

    5,355,628   

INR

    150,000      

Power Finance Corp. Ltd., 9.03%, 2/15/2013

    2,784,607   

INR

    270,000      

Rural Electrification Corp. Ltd., 9.35%, 6/15/2022

    5,140,500   

INR

    67,000      

Rural Electrification Corp. Ltd., 10.90%, 8/14/2013

    1,256,769   
                   73,108,906   

INDONESIA—2.6%

  

USD

    8,650      

Adaro Indonesia PT, 7.63%, 10/22/2014 (c)(e)

    9,558,250   

USD

    3,650      

Indosat Palapa Co. BV, 7.38%, 7/29/2015 (c)(e)

    4,142,750   

USD

    2,850      

Majapahit Holding BV, 7.88%, 6/29/2037 (e)

    3,904,500   

USD

    8,900      

Majapahit Holding BV, 8.00%, 8/07/2019 (e)

    11,303,000   

USD

    4,500      

Pertamina Persero PT, 4.88%, 5/03/2022 (e)

    4,893,750   

USD

    8,350      

Pertamina Persero PT, 5.25%, 5/23/2021 (e)

    9,268,500   

USD

    4,500      

Pertamina Persero PT, 6.00%, 5/03/2042 (e)

    5,085,000   

USD

    4,600      

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

    4,697,520   
                   52,853,270   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

9


Portfolio of Investments (continued)

As of October 31, 2012

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 
      

CORPORATE BONDS (continued)

  

MALAYSIA—3.2%

  

USD

    11,700      

AMBB Capital (L) Ltd., 6.77%, 1/27/2016 (a)(c)(d)

  $ 11,712,390   

CNH

    10,000      

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

    1,582,257   

USD

    7,750      

PETRONAS Capital Ltd., 5.25%, 8/12/2019 (e)

    9,279,517   

USD

    20,050      

PETRONAS Global Sukuk Ltd., 4.25%, 8/12/2014 (e)

    21,104,490   

USD

    2,650      

Public Bank Bhd, 6.84%, 8/22/2016 (a)(c)

    2,774,733   

USD

    11,550      

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

    11,714,772   

USD

    6,300      

TNB Capital (L) Ltd., 5.25%, 5/05/2015 (e)

    6,775,285   
                   64,943,444   

PHILIPPINES—1.5%

  

USD

    12,550      

Alliance Global Group Inc., 6.50%, 8/18/2017

    13,773,110   

USD

    6,100      

Philippine Long Distance Telephone Co., 8.35%, 3/06/2017

    7,350,500   

USD

    7,400      

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

    8,750,500   
                   29,874,110   

REPUBLIC OF SOUTH KOREA—7.8%

  

USD

    3,750      

Export-Import Bank of Korea, 4.00%, 1/11/2017

    4,102,350   

USD

    4,300      

Export-Import Bank of Korea, 5.00%, 4/11/2022

    5,065,370   

USD

    3,000      

Export-Import Bank of Korea, 5.13%, 3/16/2015

    3,263,661   

USD

    4,300      

Export-Import Bank of Korea, 5.88%, 1/14/2015

    4,720,179   

USD

    3,200      

Export-Import Bank of Korea, 8.13%, 1/21/2014

    3,462,099   

USD

    3,000      

Hana Funding Ltd., 8.75%, 12/17/2012 (a)(c)(d)

    3,020,688   

USD

    1,950      

Hana Funding Ltd., 8.75%, 12/17/2012 (a)(c)(d)

    1,963,447   

USD

    1,850      

Hyundai Capital Services, Inc., 4.38%, 7/27/2016 (e)

    2,005,986   

USD

    7,500      

Hyundai Capital Services, Inc., 6.00%, 5/05/2015 (e)

    8,273,603   

USD

    17,200      

Korea Development Bank (The), 3.50%, 8/22/2017

    18,443,526   

USD

    11,450      

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

    11,321,119   

USD

    12,750      

Korea Expressway Corp., 4.50%, 3/23/2015 (e)

    13,646,707   

USD

    1,350      

Korea Expressway Corp., 5.13%, 5/20/2015 (e)

    1,468,229   

USD

    9,100      

Korea Finance Corp., 3.25%, 9/20/2016

    9,603,876   

USD

    10,350      

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

    11,683,991   

USD

    4,200      

Korea Hydro & Nuclear Power Co. Ltd., 3.00%, 9/19/2022 (e)

    4,204,906   

USD

    3,000      

Korea South-East Power Co. Ltd., 3.63%, 1/29/2017 (e)

    3,187,179   

USD

    12,470      

Korea South-East Power Co. Ltd., 6.00%, 5/25/2016 (e)

    14,075,076   

USD

    14,500      

National Agricultural Cooperative Federation, 4.25%, 1/28/2016 (e)

    15,531,820   

USD

    5,880      

Shinhan Bank, 5.66%, 3/02/2015 (a)(c)(e)

    6,018,068   

USD

    2,600      

Shinhan Bank, 6.82%, 9/20/2016 (a)(c)

    2,767,333   

USD

    7,100      

Standard Chartered Bank Korea Ltd., 7.27%, 3/03/2014 (a)(c)(e)

    7,401,750   

USD

    3,950      

Standard Chartered First Bank Korea Ltd., 7.27%, 3/03/2014 (a)(c)(e)

    4,117,875   
                   159,348,838   

SINGAPORE—3.0%

  

SGD

    2,750      

CapitaMalls Asia Treasury Ltd., 3.95%, 8/24/2017

    2,338,458   

SGD

    3,000      

CMT MTN Pte. Ltd., 2.85%, 9/01/2014

    2,496,016   

USD

    8,600      

CMT MTN Pte. Ltd., 4.32%, 4/08/2015

    9,075,623   

USD

    8,900      

Oversea-Chinese Banking Corp. Ltd., 3.15%, 3/11/2018 (a)(c)(e)

    8,958,731   

USD

    7,450      

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

    7,730,023   

USD

    8,440      

STATS ChipPAC Ltd., 7.50%, 8/12/2015 (c)(e)

    8,967,500   

USD

    18,450      

Temasek Financial (I) Ltd., 4.30%, 10/25/2019 (c)(e)

    21,062,022   
                   60,628,373   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

10


Portfolio of Investments (continued)

As of October 31, 2012

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 
      

CORPORATE BONDS (continued)

  

SUPRANATIONAL—4.4%

  

AUD

    13,800      

Asian Development Bank, 5.50%, 2/15/2016

  $ 15,363,483   

AUD

    16,800      

Asian Development Bank, 6.25%, 3/05/2020

    20,272,588   

AUD

    13,000      

European Investment Bank, 6.13%, 1/23/2017

    14,702,012   

AUD

    11,200      

Inter-American Development Bank, 6.50%, 8/20/2019

    13,596,058   

AUD

    8,900      

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

    10,411,007   

AUD

    10,300      

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

    11,780,135   

AUD

    2,600      

International Finance Corp., 5.75%, 7/28/2020

    3,052,273   
                   89,177,556   

THAILAND—1.9%

  

USD

    5,000      

Bangkok Bank PCL, 3.88%, 9/27/2022 (c)(e)

    5,077,610   

USD

    4,800      

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

    5,269,666   

USD

    7,400      

Bangkok Bank PCL, 9.03%, 3/15/2029 (e)

    9,842,000   

USD

    2,730      

PTT Global Chemical PCL, 4.25%, 9/19/2022 (c)(e)

    2,808,728   

USD

    50      

PTTEP Australia International Finance Pty Ltd., 4.15%, 7/19/2015 (e)

    52,803   

USD

    5,050      

PTTEP Canada International Finance Ltd., 5.69%, 4/05/2021 (e)

    5,876,417   

USD

    8,400      

PTTEP Canada International Finance Ltd., 6.35%, 6/12/2042 (e)

    10,628,461   
                   39,555,685   
            

Total Corporate Bonds—50.4% (cost $940,138,612)

    1,027,929,662   

GOVERNMENT BONDS—74.6%

  

AUSTRALIA—40.2%

  

AUD

    99,900      

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

    107,515,295   

AUD

    62,100      

Australia Government Bond, 4.75%, 11/15/2012

    64,501,565   

AUD

    101,400      

Australia Government Bond, 5.50%, 1/21/2018

    119,411,264   

AUD

    44,550      

Australia Government Bond, 5.50%, 4/21/2023

    55,944,103   

AUD

    74,600      

Australia Government Bond, 5.75%, 7/15/2022

    94,777,765   

AUD

    25,000      

Australia Government Bond, 6.00%, 2/15/2017

    29,519,279   

AUD

    5,950      

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

    6,691,693   

AUD

    27,100      

Queensland Treasury Corp., 6.00%, 4/21/2016 (b)

    30,598,811   

AUD

    22,850      

Queensland Treasury Corp., 6.00%, 2/21/2018 (b)

    26,410,335   

AUD

    31,190      

Queensland Treasury Corp., 6.00%, 6/14/2021 (b)

    37,926,149   

AUD

    27,100      

Queensland Treasury Corp., 6.25%, 6/14/2019 (b)

    32,724,401   

AUD

    24,330      

Queensland Treasury Corp., 6.25%, 2/21/2020 (b)

    29,009,006   

AUD

    131,500      

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

    149,786,696   

AUD

    14,250      

Treasury Corp. of Victoria, 6.00%, 6/15/2020 (b)

    17,163,991   

AUD

    15,350      

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

    18,861,947   
                   820,842,300   

CHINA—3.2%

  

CNH

    32,500      

China Government Bond, 1.40%, 8/18/2016 (e)

    4,962,489   

CNH

    10,000      

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

    1,561,942   

CNH

    18,000      

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

    2,752,623   

CNY

    41,000      

China Government Bond, 3.26%, 6/02/2014

    6,599,487   

CNY

    50,000      

China Government Bond, 3.28%, 8/05/2020

    7,886,207   

CNY

    50,000      

China Government Bond, 3.36%, 5/24/2022

    7,879,409   

CNY

    70,000      

China Government Bond, 3.41%, 6/24/2020

    11,141,865   

CNY

    18,000      

China Government Bond, 3.55%, 10/20/2016

    2,928,400   

CNY

    2,000      

China Government Bond, 3.57%, 11/17/2021

    320,949   

CNY

    40,000      

China Government Bond, 3.60%, 2/17/2016

    6,511,614   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

11


Portfolio of Investments (continued)

As of October 31, 2012

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 
      

GOVERNMENT BONDS (continued)

  

CHINA (continued)

  

CNY

    20,000      

China Government Bond, 3.83%, 1/27/2018

  $ 3,293,054   

CNY

    30,000      

China Government Bond, 4.10%, 9/27/2032

    4,915,523   

USD

    1,350      

Export-Import Bank of China, 4.88%, 7/21/2015 (e)

    1,480,598   

USD

    2,750      

Export-Import Bank of China, 5.25%, 7/29/2014 (e)

    2,938,716   
                   65,172,876   

HONG KONG—0.4%

  

HKD

    51,200      

Hong Kong Government Bond, 3.52%, 12/05/2017

    7,663,877   

INDIA—2.0%

  

INR

    1,338,700      

India Government Bond, 7.02%, 8/17/2016

    24,060,865   

INR

    600,000      

India Government Bond, 7.49%, 4/16/2017

    10,871,193   

INR

    125,000      

India Government Bond, 8.30%, 7/02/2040

    2,311,562   

INR

    16,000      

India Government Bond, 8.33%, 6/07/2036

    297,328   

INR

    150,000      

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

    2,928,690   
                   40,469,638   

INDONESIA—4.9%

  

IDR

    167,000,000      

Barclays Indonesia Government Bond Credit Linked Note, 9.50%, 6/17/2015

    19,116,762   

USD

    3,500      

Indonesia Government International Bond, 5.25%, 1/17/2042 (e)

    4,033,750   

USD

    7,400      

Indonesia Government International Bond, 5.88%, 3/13/2020 (e)

    8,889,250   

USD

    6,900      

Indonesia Government International Bond, 6.63%, 2/17/2037 (e)

    9,246,000   

USD

    10,150      

Indonesia Government International Bond, 11.63%, 3/04/2019 (e)

    15,428,000   

IDR

    73,700,000      

Indonesia Treasury Bond, 5.63%, 5/15/2023

    7,659,314   

IDR

    47,000,000      

Indonesia Treasury Bond, 8.25%, 6/15/2032

    5,832,835   

IDR

    21,000,000      

Indonesia Treasury Bond, 9.50%, 7/15/2031

    2,894,403   

USD

    9,050      

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

    9,559,063   

USD

    15,050      

Perusahaan Penerbit SBSN, 8.80%, 4/23/2014 (e)

    16,621,957   
                   99,281,334   

MALAYSIA—5.8%

  

MYR

    25,000      

Malaysia Government Bond, 3.20%, 10/15/2015

    8,241,489   

MYR

    19,500      

Malaysia Government Bond, 3.21%, 5/31/2013

    6,407,683   

MYR

    34,500      

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

    11,360,965   

MYR

    12,000      

Malaysia Government Bond, 3.42%, 8/15/2022

    3,922,286   

MYR

    98,400      

Malaysia Government Bond, 3.58%, 9/28/2018

    32,771,949   

MYR

    1,798      

Malaysia Government Bond, 3.89%, 3/15/2027

    604,935   

MYR

    29,500      

Malaysia Government Bond, 4.01%, 9/15/2017

    10,021,313   

MYR

    51,300      

Malaysia Government Bond, 4.16%, 7/15/2021

    17,641,912   

MYR

    14,163      

Malaysia Government Bond, 4.26%, 9/15/2016

    4,839,050   

MYR

    13,900      

Malaysia Government Bond, 4.38%, 11/29/2019

    4,846,176   

MYR

    11,685      

Malaysia Government Bond, 4.39%, 4/15/2026

    4,145,923   

USD

    12,700      

Wakala Global Sukuk Bhd, 2.99%, 7/06/2016 (e)

    13,277,215   
                   118,080,896   

NEW ZEALAND—0.1%

  

NZD

    2,150      

New Zealand Government Bond, 6.00%, 4/15/2015

    1,916,421   

NZD

    1,500      

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

    1,349,671   
                   3,266,092   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

12


Portfolio of Investments (continued)

As of October 31, 2012

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 
      

GOVERNMENT BONDS (continued)

  

PHILIPPINES—6.7%

  

PHP

    715,000      

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

  $ 18,761,135   

PHP

    405,544      

Philippine Government Bond, 6.38%, 1/19/2022

    11,100,301   

PHP

    94,000      

Philippine Government Bond, 8.75%, 5/27/2030

    3,120,633   

PHP

    517,000      

Philippine Government Bond, 9.13%, 9/04/2016

    14,788,145   

USD

    7,950      

Philippine Government International Bond, 5.00%, 1/13/2037

    9,470,438   

USD

    2,800      

Philippine Government International Bond, 6.50%, 1/20/2020

    3,580,500   

USD

    20,250      

Philippine Government International Bond, 7.75%, 1/14/2031

    31,286,250   

USD

    4,900      

Philippine Government International Bond, 8.88%, 3/17/2015

    5,767,300   

USD

    100      

Philippine Government International Bond, 9.38%, 1/18/2017 (c)

    132,000   

USD

    7,970      

Philippine Government International Bond, 9.88%, 1/15/2019

    11,556,500   

USD

    15,979      

Philippine Government International Bond, 10.63%, 3/16/2025

    28,083,092   
                   137,646,294   

REPUBLIC OF SOUTH KOREA—6.2%

  

KRW

    20,000,000      

Korea Monetary Stabilization Bond, 3.76%, 6/02/2013

    18,442,160   

KRW

    14,138,674      

Korea Treasury Bond, 1.50%, 6/10/2021 (f)

    14,034,637   

KRW

    54,780,000      

Korea Treasury Bond, 3.50%, 3/10/2017

    51,558,649   

KRW

    6,500,000      

Korea Treasury Bond, 3.75%, 6/10/2022

    6,350,398   

KRW

    13,400,000      

Korea Treasury Bond, 4.25%, 6/10/2021

    13,485,000   

USD

    1,350      

Republic of Korea, 5.13%, 12/07/2016

    1,557,002   

USD

    15,950      

Republic of Korea, 7.13%, 4/16/2019

    20,797,093   
                   126,224,939   

SINGAPORE—1.0%

  

SGD

    3,000      

Housing & Development Board, 1.01%, 9/19/2016

    2,466,508   

SGD

    3,000      

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

    2,521,921   

SGD

    2,000      

Housing & Development Board, 3.14%, 3/18/2021

    1,798,915   

SGD

    5,120      

Singapore Government Bond, 3.00%, 9/01/2024

    4,806,957   

SGD

    9,310      

Singapore Government Bond, 3.13%, 9/01/2022

    8,895,919   
                   20,490,220   

SRI LANKA—0.2%

  

USD

    4,450      

Sri Lanka Government International Bond, 6.25%, 7/27/2021 (e)

    4,975,990   

THAILAND—3.9%

  

THB

    11,074      

Bank of Thailand, 3.33%, 5/12/2014

    363,741   

THB

    230,000      

Bank of Thailand, 3.42%, 8/18/2013

    7,538,920   

THB

    218,289      

Thailand Government Bond, 1.20%, 7/14/2021 (f)

    7,274,707   

THB

    407,000      

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

    13,076,558   

THB

    407,200      

Thailand Government Bond, 3.25%, 6/16/2017

    13,362,418   

THB

    482,000      

Thailand Government Bond, 3.45%, 3/08/2019

    15,933,552   

THB

    42,100      

Thailand Government Bond, 3.63%, 5/22/2015

    1,395,653   

THB

    84,800      

Thailand Government Bond, 3.63%, 6/16/2023

    2,804,144   

THB

    444,800      

Thailand Government Bond, 3.65%, 12/17/2021

    14,899,987   

THB

    76,100      

Thailand Government Bond, 3.88%, 6/13/2019

    2,588,331   
                   79,238,011   
            

Total Government Bonds—74.6% (cost $1,406,463,364)

    1,523,352,467   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

13


Portfolio of Investments (continued)

As of October 31, 2012

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 
      

RESIDENTIAL MORTGAGE BACKED SECURITIES—0.4%

  

AUSTRALIA—0.4%

  

AUD

    3,284      

Progress Trust, 3.61%, 8/25/2036 (a)(c)(e)

  $ 3,385,903   

AUD

    1,955      

Puma Finance Ltd., 3.87%, 1/24/2013 (a)(c)(e)

    2,028,257   

AUD

    2,763      

Westpac Securitisation Trust, 3.74%, 5/21/2014 (a)(c)(e)

    2,831,213   
                   8,245,373   
            

Total Residential Mortgage Backed Securities—0.4% (cost $6,575,059)

    8,245,373   

SHORT-TERM INVESTMENT—1.8%

  

UNITED STATES—1.8%

  

USD

    37,014      

Repurchase Agreement, State Street Bank & Trust Co., 0.15% dated 10/31/2012, due 11/01/2012 in the amount of $37,014,154, (collateralized by $35,110,000 U.S. Treasury Notes, 1.50%-2.38% due 5/31/2018-8/31/2018; value of $37,766,488)

    37,014,000   
            

Total Short-Term Investment—1.8% (cost $37,014,000)

    37,014,000   
            

Total Investments—127.5% (cost $2,397,281,748)

    2,603,327,887   
            

Liabilities in Excess of Other Assets—(27.5)%

    (560,991,379
            

Net Assets—100.0%

  $ 2,042,336,508   

 

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

 

(a)   Indicates a variable rate security. The maturity date presented for these instruments is the later of the next date on which the security can be redeemed at par or the next date on which the rate of interest is adjusted. The interest rate shown reflects the rate in effect at October 31, 2012.
(b)   This security is government guaranteed.
(c)   The maturity date presented for these instruments represents the next call/put date.
(d)   Perpetual bond. This is a bond that has no maturity date, is redeemable and pays a steady stream of interest indefinitely.
(e)   Denotes a restricted security, see Note 2(c).
(f)   Inflation linked security.

At October 31, 2012, the Fund held the following futures contracts:

 

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

Korea Treasury Bond 6%-3 year

       UBS           75           12/18/2012         $ (8,556

United States Treasury Note 6%-2 year

       UBS           233           12/31/2012           (8,797

United States Treasury Note 6%-5 year

       UBS           (72        12/31/2012           (4,500

United States Treasury Note 6%-10 year

       UBS           (190        12/19/2012           (87,651

United States Treasury Bond 6%-30 year

       UBS           244           12/19/2012           59,465   
                                        $ (50,039

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

14


Portfolio of Investments (continued)

As of October 31, 2012

 

 

At October 31, 2012, the Fund’s open forward foreign currency exchange contracts were as follows:

 

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

Chinese Yuan Renminbi/United States Dollar

  

1/30/2013   

Royal Bank of Canada

     CNY38,210,600         USD6,000,000       $ 6,069,466       $ 69,466   

Chinese Yuan Renminbi Offshore/United States Dollar

  

1/30/2013   

Deutsche Bank

     CNH37,879,800         USD6,000,000         6,024,983         24,983   
1/30/2013   

HSBC

     CNH369,520,606         USD57,470,000         58,774,214         1,304,214   
10/30/2013   

Standard Chartered Bank

     CNH102,352,000         USD16,000,000         16,279,629         279,629   

Indian Rupee/United States Dollar

  

11/09/2012   

Credit Suisse

     INR209,919,600         USD3,800,000         3,897,061         97,061   
11/09/2012   

Deutsche Bank

     INR243,165,000         USD4,300,000         4,514,247         214,247   
11/09/2012   

HSBC

     INR322,221,000         USD5,700,000         5,981,885         281,885   

Indonesian Rupiah/United States Dollar

  

3/01/2013   

UBS

     IDR261,415,000,000         USD27,500,000         26,844,676         (655,324

Malaysian Ringgit/United States Dollar

  

3/27/2013   

Credit Suisse

     MYR49,228,800         USD16,000,000         16,036,322         36,322   

Philippine Peso/United States Dollar

  

11/23/2012   

Goldman Sachs

     PHP202,909,000         USD4,899,999         4,929,981         29,982   

Singapore Dollar/United States Dollar

  

12/05/2012   

Goldman Sachs

     SGD10,570,260         USD8,600,000         8,665,360         65,360   
12/05/2012   

Royal Bank of Canada

     SGD25,552,340         USD20,900,000         20,947,471         47,471   
12/05/2012   

Standard Chartered Bank

     SGD2,367,971         USD1,930,000         1,941,231         11,231   
12/05/2012   

State Street

     SGD11,758,368         USD9,600,000         9,639,355         39,355   

South Korean Won/United States Dollar

  

3/20/2013   

Goldman Sachs

     KRW6,944,340,000         USD6,140,000         6,329,008         189,008   
                            $ 196,874,889       $ 2,034,890   
Sale Contracts
Settlement Date*
   Counterparty    Amount
Purchased
     Amount Sold      Fair Value      Unrealized
Appreciation/
(Depreciation)
 

United States Dollar/Chinese Yuan Renminbi

  

1/30/2013   

Goldman Sachs

     USD6,000,000         CNY37,848,000       $ 6,011,870       $ (11,870

United States Dollar/Hong Kong Dollar

  

12/05/2012   

Royal Bank of Canada

     USD900,001         HKD6,979,005         900,573         (572

United States Dollar/Indian Rupee

  

11/09/2012   

Standard Chartered Bank

     USD27,370,000         INR1,557,038,245         28,905,701         (1,535,701

United States Dollar/Indonesian Rupiah

  

3/01/2013   

HSBC

     USD12,000,000         IDR117,960,000,000         12,113,299         (113,299

United States Dollar/Malaysian Ringgit

  

3/27/2013   

Deutsche Bank

     USD8,330,000         MYR25,706,380         8,373,875         (43,875
3/27/2013   

Goldman Sachs

     USD39,140,001         MYR121,126,558         39,457,077         (317,076
3/27/2013   

HSBC

     USD5,700,000         MYR17,647,200         5,748,590         (48,590

United States Dollar/Philippine Peso

  

11/23/2012   

Royal Bank of Canada

     USD3,500,000         PHP144,865,000         3,519,715         (19,715
11/23/2012   

Standard Chartered Bank

     USD28,220,000         PHP1,197,261,720         29,089,287         (869,287

United States Dollar/South Korean Won

  

3/20/2013   

Standard Chartered Bank

     USD39,880,000         KRW45,012,556,000         41,024,030         (1,144,030

United States Dollar/Thai Baht

  

12/13/2012   

HSBC

     USD6,300,000         THB193,347,000         6,289,582         10,418   
12/13/2012   

UBS

     USD25,700,000         THB807,725,300         26,275,322         (575,322
                            $ 207,708,921       $ (4,668,919

 

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

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

15


Portfolio of Investments (concluded)

As of October 31, 2012

 

 

At October 31, 2012, the Fund’s interest rate swaps were as follows:

 

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

USD

     300,000,000         10/31/2014      

Deutsche Bank

   Receive   

3-month LIBOR Index

     0.82%       $ (2,593,398

USD

     60,000,000         8/19/2016      

UBS

   Receive   

3-month LIBOR Index

     1.20%         (1,439,245

USD

     174,000,000         10/31/2016      

Barclays Bank

   Receive   

3-month LIBOR Index

     1.42%         (5,448,221

USD

     66,000,000         11/01/2017      

Barclays Bank

   Receive   

3-month LIBOR Index

     0.84%         (23,826
                                               $ (9,504,690

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

16


Statement of Assets and Liabilities

As of October 31, 2012

 

 

Assets

        

Investments, at value (cost $2,360,267,748)

   $ 2,566,313,887   

Repurchase agreement, at value (cost $37,014,000)

     37,014,000   

Foreign currency, at value (cost $26,337,753)

     26,520,630   

Cash

     13,304,293   

Cash at broker for futures contracts

     1,400,681   

Cash at broker for interest rate swaps

     4,320,058   

Interest receivable

     31,872,790   

Unrealized appreciation on forward foreign currency exchange contracts

     2,700,632   

Variation margin receivable for futures contracts

     59,465   

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

     235,399   

Prepaid expenses

     446,662   

Total assets

     2,684,188,497   

Liabilities

  

Bank loan payable (Note 6)

     600,000,000   

Payable for investments purchased

     12,983,525   

Unrealized depreciation on interest rate swaps

     9,504,690   

Dividends payable to common shareholders

     9,194,512   

Unrealized depreciation on forward foreign currency exchange contracts

     5,334,661   

Payable for interest rate swaps closed

     1,938,640   

Investment management fees payable (Note 3)

     1,218,120   

Interest payable on bank loan

     410,666   

Deferred foreign capital gains tax

     346,975   

Administration fees payable (Note 3)

     245,472   

Variation margin payable for futures contracts

     109,504   

Director fees payable

     45,339   

Investor relations fees payable (Note 3)

     44,367   

Accrued expenses

     475,518   

Total liabilities

     641,851,989   
          

Net Assets

   $ 2,042,336,508   

Composition of Net Assets:

  

Common stock (par value $.01 per share)

   $ 2,626,173   

Paid-in capital in excess of par

     1,649,626,801   

Distributions in excess of net investment income

     (5,423,924

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

     (175,367,115

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

     154,788,717   

Accumulated net realized foreign exchange gains

     377,011,635   

Net unrealized foreign exchange and forward foreign currency contract gains

     39,074,221   

Net Assets

   $ 2,042,336,508   

Net asset value per common share based on 262,617,345 shares issued and outstanding

   $ 7.78 (a) 

 

(a)   The NAV shown above differs from the reported NAV on October 31, 2012 due to financial statement rounding.

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

17


Statement of Operations

For the Year Ended October 31, 2012

 

 

Net Investment Income

        

Income

  

Interest and amortization of discount and premium (net of foreign withholding taxes of $1,883,484)

   $ 122,465,656   
       122,465,656   

Expenses

  

Investment management fee (Note 3)

     13,217,671   

Administration fee (Note 3)

     2,673,779   

Custodian’s fees and expenses

     938,577   

Bank loan fees and expenses

     671,931   

Investor relations fees and expenses (Note 3)

     535,948   

Insurance expense

     460,917   

Directors’ fees and expenses

     379,405   

Reports to shareholders and proxy solicitation

     365,380   

Transfer agent’s fees and expenses

     143,501   

Legal fees and expenses

     140,539   

Independent auditors’ fees and expenses

     107,300   

Miscellaneous

     248,822   

Total operating expenses, excluding interest expense

     19,883,770   

Interest expense (Note 6)

     7,304,000   

Total operating expenses

     27,187,770   
          

Net Investment Income

     95,277,886   

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

  

Net realized gain/(loss) from:

  

Investment transactions (including $703,032 capital gains tax)

     27,863,541   

Interest rate swaps

     (5,668,606

Futures contracts

     (4,883,684

Forward and spot foreign currency exchange contracts

     (1,237,605

Foreign currency transactions

     22,777,707   
       38,851,353   

Net change in unrealized appreciation/(depreciation) on:

  

Investments

     100,827,483   

Interest rate swaps

     (6,924,541

Futures contracts

     199,635   

Forward foreign currency exchange contracts

     (1,778,772

Foreign currency translation

     (38,948,621
       53,375,184   

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

     92,226,537   

Net Increase in Net Assets Resulting from Operations

   $ 187,504,423   

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

18


Statements of Changes in Net Assets

 

 

 

       For the
Year Ended
October 31, 2012
     For the
Year Ended
October 31, 2011
 

Increase/(Decrease) in Net Assets

     

Operations:

     

Net investment income

   $ 95,277,886       $ 102,760,020   

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

     17,311,251         (28,369,246

Net realized gain from foreign currency transactions

     21,540,102         196,830,805   

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

     94,102,577         (2,966,732

Net change in unrealized appreciation/depreciation on foreign currency translation

     (40,727,393      (104,086,979

Net increase in net assets resulting from operations

     187,504,423         164,167,868   

Distributions to Shareholders from:

     

Net investment income

     (109,721,108      (109,609,812

Net decrease in net assets from distributions

     (109,721,108      (109,609,812

Common Stock Transactions:

     

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

     12,830,315           

Expenses in connection with the at-the-market stock offering

     (16,197        

Change in net assets from common stock transactions

     12,814,118           

Change in net assets resulting from operations

     90,597,433         54,558,056   

Net Assets:

     

Beginning of year

     1,951,739,075         1,897,181,019   

End of year (including distributions in excess of net investment income of $(5,423,924) and accumulated net investment income of $228,950,543, respectively)

   $ 2,042,336,508       $ 1,951,739,075   

See Notes to Financial Statements.

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

19


Statement of Cash Flows

For the Year Ended October 31, 2012

 

 

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

  

Cash flows provided from (used for) operating activities:

  

Interest received (excluding discount and premium amortization of $9,423,979)

   $ 135,529,631   

Operating expenses paid

     (27,142,989

Payments received from broker for collateral on interest rate swaps

     7,730,000   

Purchases and sales of short-term portfolio investments, net

     45,826,326   

Purchases of long-term portfolio investments

     (1,044,893,981

Proceeds from sales of long-term portfolio investments

     971,585,823   

Realized losses on forward foreign currency exchange contracts closed

     (1,245,965

Realized losses on interest rate swap transactions

     (3,729,966

Payments paid to broker for futures contracts

     (3,795,384

Decrease in prepaid expenses and other assets

     120,801   

Net cash provided from operating activities

     79,984,296   

Cash flows provided from (used for) financing activities

  

Issuance of common stock

     12,578,719   

Dividends paid to common shareholders

     (109,660,884

Net cash used for financing activities

     (97,082,165

Effect of exchange rate on cash

     5,548,209   

Net decrease in cash

     (11,549,660

Cash at beginning of year

     51,374,583   

Cash at end of year

   $ 39,824,923   

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

  

Net increase in total net assets resulting from operations

   $ 187,504,423   

Decrease in investments

     16,867,589   

Net realized gain on investment transactions

     (27,863,541

Net realized loss on interest rate swap transactions

     5,668,606   

Net realized loss on futures contracts

     4,883,684   

Net realized foreign exchange gains

     (21,540,102

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

     (94,102,577

Net change in unrealized foreign exchange gains/losses

     40,727,393   

Decrease in interest receivable

     3,639,996   

Decrease in interest payable on bank loan

     (6,000

Net change in margin variation on future contracts

     (199,635

Net decrease in other assets

     120,801   

Decrease in payable for investments purchased

     (44,785,057

Payments received from broker for interest rate swaps

     7,730,000   

Payments received from broker for futures contracts

     1,287,935   

Increase in accrued expenses and other liabilities

     50,781   

Total adjustments

     (107,520,127

Net cash provided from operating activities

   $ 79,984,296   

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

20


 

[THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

 


Financial Highlights

 

 

 

     For the Year Ended October 31,  
     2012      2011      2010      2009      2008  

Per Share Operating Performance (a) :

                                            
Net asset value per common share, beginning of year      $7.48         $7.27         $6.53         $4.91         $6.99   
Net investment income      0.36         0.39         0.37         0.35         0.42   
Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions      0.36         0.24         0.79         1.73         (2.03
Dividends to preferred shareholders from net investment income                                      (0.06
Total from investment operations applicable to common shareholders      0.72         0.63         1.16         2.08         (1.67
Distributions to common shareholders from:               
Net investment income      (0.42      (0.42      (0.42      (0.38      (0.42
Tax return of capital                              (0.09        
Total distributions      (0.42      (0.42      (0.42      (0.47      (0.42
Offering cost on common stock                                        
Impact of shelf offering                                        
Effect of Fund shares repurchased                              0.01         0.01   
Net asset value per common share, end of year      $7.78         $7.48         $7.27         $6.53         $4.91   
Market value, end of year      $7.90         $6.93         $6.90         $6.04         $4.18   
Total Investment Return Based on (b) :               
Market value      20.47%         6.59%         21.73%         58.26%         (28.40%
Net asset value      9.92% (g)        9.20%         18.63%         45.66%         (24.32%
Ratio to Average Net Assets Applicable to
Common Shareholders/Supplementary Data (c) :
              
Net assets applicable to common shareholders, end of year (000 omitted)      $2,042,337         $1,951,739         $1,897,181         $1,703,352         $1,284,318   
Average net assets applicable to common shareholders (000 omitted)      $1,965,038         $1,937,986         $1,753,665         $1,457,521         $1,741,105   
Net operating expenses      1.38%         1.49%         1.89%         2.20%         1.85% (d)  
Net operating expenses without reimbursement      1.38%         1.49%         1.89%         2.22% (e)          
Net operating expenses, excluding interest expense      1.01%         1.05%         1.19%         1.37%         1.22%   
Net investment income      4.85%         5.30%         5.44%         6.40%         5.51%   
Portfolio turnover      38%         72%         67%         68%         58%   
Senior securities (loan facility) outstanding (000 omitted)      $600,000         $600,000         $600,000         $600,000         $520,000   
Asset coverage ratio on revolving credit facility at
year end(f)
     440%         425%         416%         384%         347%   
Asset coverage per $1,000 on revolving credit facility at year end      $4,404         $4,253         $4,162         $3,839         $3,470   

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

22


Financial Highlights (concluded)

 

 

 

 

(a)   Based on average shares outstanding.
(b)   Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions.
(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 each of the years ended October 31, 2012, 2011, 2010, 2009, and 2008 the ratios of net investment income before preferred stock dividends to average net assets of common shareholders were 4.85%, 5.30%, 5.44%, 6.40% and 6.44%, respectively.
(d)   Includes expenses of both preferred and common stock.
(e)   In 2009, the Fund filed a non-routine proxy to consider approval of a new sub-advisory agreement among the Fund, Investment Manager, and Sub-Adviser. The Fund and the Investment Manager agreed to each bear equal responsibility with respect to the costs of soliciting proxies associated with the non-routine item.
(f)   Asset coverage ratio is calculated by dividing net assets plus the amount of any borrowings, including Auction Market Preferred Stock, for investment purposes by the amount of any borrowings.
(g)   The total return shown above includes the impact of financial statement rounding of the NAV per share.

See Notes to Financial Statements.

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

23


Notes to Financial Statements

October 31, 2012

 

 

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 day’s prior written notice to shareholders. There can be no assurance that the Fund will achieve its investment objectives. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry, country or region.

2. Summary of Significant Accounting Policies

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

(a) Security Valuation:

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

Equity securities that are traded on an exchange are valued at the last quoted sale price on the principal exchange on which the security is traded at the “Valuation Time.” The Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). In the absence of a sale price, the security is valued at the mean of the bid/ask quoted at the close on the principal exchange on which the security is traded. Securities traded on NASDAQ are valued at the NASDAQ official closing price. A security using any of these pricing methodologies is determined as a Level 1 investment.

Foreign equity securities that are traded on foreign exchanges that close prior to the Valuation Time are valued by applying fair

valuation factors to the last sale price. Fair valuation factors are provided by an independent pricing service provider. If the pricing service is unable to provide a valuation factor, or if the valuation factor falls below a predetermined threshold, the security is valued at the last sale price and classified as a Level 1 investment. A security that applies a fair valuation factor is generally a Level 2 investment.

Long-term debt and other fixed-income securities are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service provider. If there are no current day bids, the security is valued at the previously applied bid. Short-term debt securities (such as commercial paper, and US treasury bills) having a remaining maturity of 60 days or less are valued at amortized cost, which approximates fair value. Debt and other fixed-income securities are determined as Level 2 investments.

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

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

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

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

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

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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

24


Notes to Financial Statements (continued)

October 31, 2012

 

 

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.

A summary of standard inputs is listed below:

 

Security Type    Standard Inputs
   

Foreign equities utilizing a fair valuation factor

   Fair value of market and/or sector indices, futures, depositary receipts, ETFs, exchange rates, and historical opening and closing prices of each security
   

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
   

Bank loans

   Reported trade data and broker-dealer price quotations
   

Forward foreign currency contracts

   Forward exchange rate quotations
   

Swap agreements

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

The following is a summary of the inputs used as of October 31, 2012 in valuing the Fund’s investments carried 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:

 

Assets      Level 1        Level 2        Level 3  

Fixed Income Investments

                

Commercial Mortgage Backed Security

     $         $ 6,786,385         $   

Corporate Bonds

                 1,027,929,662             

Government Bonds

                 1,523,352,467             

Residential Mortgage Backed Securities

                 8,245,373             

Total Fixed Income Investments

                 2,566,313,887             

Short-Term Investment

                 37,014,000             

Total Investments

     $         $ 2,603,327,887         $   

Other Financial Instruments

                

Futures Contracts

     $ 59,465         $         $   

Forward Foreign Currency Exchange Contracts

                 2,700,632             

Total Other Financial Instruments

     $ 59,465         $ 2,700,632         $   

Total Assets

     $ 59,465         $ 2,606,028,519         $   

Liabilities

                

Other Financial Instruments

                

Futures Contracts

     $ (109,504      $         $   

Forward Foreign Currency Exchange Contracts

                 (5,334,661          

Interest Rate Swap Agreements

                 (9,504,690          

Total Liabilities – Other Financial Instruments

     $ (109,504      $ (14,839,351      $   

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

25


Notes to Financial Statements (continued)

October 31, 2012

 

 

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing transfers at the end of each period. During the year ended October 31, 2012, there were no transfers between fair value measurement levels. For the year ended October 31, 2012, there have been no significant changes to the fair valuation methodologies.

(b) Repurchase Agreements:

The Fund may enter into repurchase agreements. It is the Fund’s policy that its custodian/counterparty segregate the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. The repurchase price generally equals the price paid by the Fund plus interest negotiated on the basis of current short-term rates. To the extent that any repurchase transaction exceeds one business day, the collateral is valued on a daily basis to determine its adequacy. If the counterparty defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the counterparty of the security, realization of the collateral by the Fund may be delayed or limited. The Fund held a repurchase agreement of $37,014,000 as of October 31, 2012.

(c) Restricted Securities:

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

(d) Foreign Currency Translation:

Foreign securities, currencies, and other assets and liabilities denominated in foreign currencies are translated into U.S. Dollars at the exchange rate of said currencies against the U.S. Dollar, as of the Valuation Time, as provided by an independent pricing service approved by the Board.

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

 

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

 

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

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

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

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

(e) Derivative Financial Instruments:

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

Forward Foreign Currency Exchange Contracts:

A forward foreign currency exchange contract (“forward contract”) involves an obligation to purchase and sell a specific currency at a future date at a price set at the time of the contract. Forward contracts are used to manage the Fund’s currency exposure in an efficient manner. They are used to sell unwanted currency exposure that comes with holding securities in a market, or to buy currency exposure where the exposure from holding securities is insufficient to give the desired currency exposure either in absolute terms or relative to the benchmark. The use of forward contracts allows the separation of decision-making between markets and their currencies. The forward contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized appreciation or depreciation. Forward contracts’ prices are received daily from an

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

26


Notes to Financial Statements (continued)

October 31, 2012

 

 

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 and from unanticipated movements in exchange rates. During the year ended October 31, 2012, the Fund’s used forward contracts to hedge positions in the Indian Rupee and Indonesian Rupiah.

Futures Contracts:

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

Should market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. The use of futures transactions for hedging purposes involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the value/market value of the underlying hedged assets. During the year ended October 31, 2012, the use of bond futures contracts was primarily to hedge and

manage the interest rate exposure of the Australian bond and U.S. Dollar-denominated Asian credit portfolios. Bond futures were also used as a component of overall duration positioning. During the review period, the Fund held net short U.S. Treasury futures positions, which subtracted from performance of the Fund. The value of these positions fell as the underlying U.S. Treasuries rose because of subdued economic growth. The exposure to Australian bond futures also detracted from performance in the Fund.

Swaps:

A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset or notional principal amount. The Fund will enter into swaps only on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the difference between the two payments. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the net interest payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying reference asset or index. The Fund records unrealized gains/(losses) on a daily basis representing the value and the current net receivable or payable relating to open swap contracts. Net amounts received or paid on the swap contract are recorded as realized gains/(losses). Fluctuations in the value of swap contracts are recorded for financial statement purposes as unrealized appreciation or depreciation of swap contracts. Realized gains/(losses) from terminated swaps are included in net realized gains/(losses) on swap contracts transactions. During the year ended October 31, 2012, the Fund used interest rate swaps as a tool to hedge the leverage of the Fund.

The Fund is a party to International Swap Dealers Association, Inc. Master Agreements (“ISDA Master Agreements”). These agreements are with select counterparties and they govern transactions, including certain over-the-counter derivative and foreign exchange contracts, entered into by the Fund and the counterparty. The ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral, and events of default or termination. The occurrence of a specified event of termination may give a counterparty the right to terminate all of its contracts and affect settlement of all outstanding transactions under the applicable ISDA Master Agreement.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

27


Notes to Financial Statements (continued)

October 31, 2012

 

 

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, 2012:

 

     Asset Derivatives      Liability Derivatives  
       Year Ended October 31, 2012      Year Ended October 31, 2012  
       Statement of Assets
and Liabilities Location
   Fair Value      Statement of Assets
and Liabilities Location
   Fair Value  

Derivatives not accounted for
as hedging instruments
and risk exposure

           

Interest rate swaps (interest rate risk)

   Unrealized appreciation on interest rate swaps    $       Unrealized depreciation on interest rate swaps    $ 9,504,690   

Forward foreign exchange contracts (foreign exchange risk)

   Unrealized appreciation on forward currency exchange contracts    $ 2,700,632       Unrealized depreciation on forward currency exchange contracts    $ 5,334,661   

Futures contracts (interest rate risk)*

   Unrealized appreciation on futures contracts    $ 59,465       Unrealized depreciation on futures contracts    $ 109,504   

Total

        $ 2,760,097            $ 14,948,855   

 

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

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

The Effect of Derivative Instruments on the Statement of Operations

for the Year Ended October 31, 2012

 

Derivatives Not Accounted for as
Hedging Instruments Under
Statement 133 (a)
     Location of Gain or (Loss)
on Derivatives
     Realized
Gain or
(Loss) on
Derivatives
       Change in
Unrealized
Appreciation/
(Depreciation)
on Derivatives
 
     Realized/Unrealized Gain/(Loss) from Investments, Interest Rate Swaps, Futures Contracts and Foreign Currencies          

Interest rate swaps (interest rate risk)

          $ (5,668,606      $ (6,924,541

Forward foreign exchange contracts
(foreign exchange risk)

          $ (1,245,965      $ (1,778,772

Futures contracts (interest rate risk)

            $ (4,883,684      $ 199,635   

Total

            $ (11,798,255      $ (8,503,678

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

28


Notes to Financial Statements (continued)

October 31, 2012

 

 

The type of activity and volume of futures contracts varied throughout the year ended October 31, 2012. For the first six months of the year, the Fund consistently held futures contracts in 3Yr and 10Yr Australian TBonds, 2Yr, 5Yr and 10Yr U.S. Treasury Notes, and 30Yr U.S. Treasury Bonds. In May 2012, the Fund sold out of all 3Yr and 10Yr Australian TBond futures contracts and in July 2012, purchased 3Yr Korea Treasury Bond futures contracts. The quarterly weighted average of contracts and notional values for the Fund’s future positions were as follows:

 

Quarter   

Weighted Average

Contracts

    

Weighted Average

Notional Value

 

1 st Quarter

     1,528       $ 156,704,571   

2 nd Quarter

     134       $ 63,786,643   

3 rd Quarter

     (249    $ 13,982,071   

4 th Quarter

     (18    $ 15,500,566   

Information about forward currency contracts reflected as of the date of this report is generally indicative of the type of activity for the year ended October 31, 2012. In February and March 2012, the Fund bought into and then sold out of all Australian Dollar positions. The volume of forward contracts varied throughout the year with an average notional value of $642,721,544. The quarterly average notional values for the Fund’s forward contracts were as follows:

 

Quarter     

Average

Notional Value

 

1 st Quarter

     $ 1,001,163,808   

2 nd Quarter

     $ 652,965,702   

3 rd Quarter

     $ 505,710,000   

4 th Quarter

     $ 411,046,667   

Information about interest rate swaps reflected as of the date of this reports is generally indicative of the type and volume of activity for the months ended October, 31, 2012. At the end of October 2012, the Fund unwound $66,000,000 of the previously held $240,000,000 interest rate swap agreement and entered into a new interest rate swaps with a notional amount $66,000,000. The total overall notional value and volume of interest rate swap positions was unvaried for the period.

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

(f) Credit-Linked Notes:

The Fund invests in credit-linked securities, which are unstructured, unleveraged pass-through vehicles to an underlying security

denominated in a local currency, used for the purposes of efficiently managing access to the market and interest rate risk. For instance, the Fund may invest in credit-linked securities as a cash management tool in order to gain exposure to a certain market and/or to remain fully invested when more traditional income producing securities are not available. Like an investment in a bond, investments in credit-linked securities represent the right to receive periodic income payments (in the form of distributions) and payment of principal at the end of the term of the security. However, these payments are conditioned on the issuer’s receipt of payments from, and the issuer’s potential obligations to, the counterparties to the derivative instruments and other securities in which the issuer invests. For instance, the issuer may sell one or more credit default swaps, under which the issuer would receive a stream of payments over the term of the swap agreements provided that no event of default has occurred with respect to the referenced debt obligation upon which the swap is based. If a default occurs, the stream of payments may stop and the issuer would be obligated to pay the counterparty the par value (or other agreed upon value) of the referenced debt obligation. This, in turn, would reduce the amount of income and principal that the Fund would receive. The Fund’s investments in these instruments are indirectly subject to the risks associated with derivative instruments, including, among others, credit risk, default or similar event risk, counterparty risk, interest rate risk, leverage risk and management risk. It is also expected that the securities will be exempt from registration under the 1933 Act. Accordingly, there may be no established trading market for the securities and they may constitute illiquid investments.

(g) Security Transactions, Investment Income and Expenses:

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

(h) Distributions:

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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

29


Notes to Financial Statements (continued)

October 31, 2012

 

 

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.

(i) Federal Income Taxes:

For federal income and excise tax purposes, substantially all of the Fund’s transactions are accounted for using the Australian Dollar as the functional currency. Accordingly, only realized currency gains/(losses) resulting from the repatriation of Australian Dollars into U.S. Dollars are recognized for U.S. federal tax purposes.

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

(j) Earnings Credits:

The Fund’s custodial arrangements include a provision to reduce its custodial fees by the amount of earnings credits recognized on cash deposits in demand deposit accounts.

(k) Cash Flow Information:

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

3. Agreements and Transactions with Affiliates

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

Aberdeen Asset Management Asia Limited (the “Investment Manager”) serves as investment manager to the Fund, pursuant to a management agreement. Aberdeen Asset Management Limited (the “Investment Adviser”) serves as the investment adviser and Aberdeen

Asset Managers Limited (“AAML” or the “Sub-Adviser”) serves as the sub-adviser, pursuant to an advisory agreement and a sub-advisory agreement, respectively. On March 1, 2012, Aberdeen Asset Management Investment Services Limited (“AAMISL”), the previous sub-adviser to the Fund, merged into AAML. AAML assumed the sub-adviser responsibilities of the Fund for which AAMISL was sub-adviser. There was no change to the portfolio management team or the level or nature of the services provided to the Fund for which AAMISL served as sub-adviser as a result of the merger and the same resources available to AAMISL for the management and compliance oversight of the Fund are available to AAML. The Investment Manager, the Investment Adviser and the Sub-Adviser are wholly-owned subsidiaries of Aberdeen Asset Management PLC.

The Investment Manager makes investment decisions on behalf of the Fund on the basis of recommendations and information furnished to it by the Investment Adviser, including the selection of and the placement of orders with brokers and dealers to execute portfolio transactions on behalf of the Fund. The Sub-Adviser manages the portion of the Fund’s assets that the Investment Manager allocates to it.

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

The Investment Manager pays fees to the Investment Adviser for its services rendered. The Investment Manager informed the Fund that it paid $2,567,643 to the Investment Adviser, with respect to the Fund, during the fiscal year ended October 31, 2012. As compensation for its services under the Sub-Advisory Agreement, the Sub-Adviser receives an annual fee paid by the Investment Manager in the amount of $100,000, to be paid in monthly increments.

 

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

30


Notes to Financial Statements (continued)

October 31, 2012

 

 

(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 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.

(c) Investor Relations:

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

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

For the fiscal year ended October 31, 2012, the Fund paid fees of approximately $511,982 for investor relations services. Investor relations fees and expenses in the Statement of Operations include certain out-of-pocket expenses.

4. Investment Transactions

Purchases and sales of investment securities (excluding short-term securities) for the fiscal year ended October 31, 2012, were $1,000,108,924 and $927,689,091 respectively.

5. Capital

There are 400 million shares of $0.01 par value common stock authorized. At October 31, 2012, there were 262,617,345 shares of common stock issued and outstanding.

The Fund has filed a “shelf” registration statement with the SEC, which became effective on August 17, 2012 and permits the Fund to issue up to $375,000,000 in shares of common stock through one or

more public offerings. In accordance with the terms of a sales agreement, the Fund may offer and sell up to 25,000,000 of its shares, par value $0.01 per share, from time to time through JonesTrading Institutional LLC as its agent for the offer and sale of the shares. Under the shelf registration statement, the Fund may sell the Fund’s common shares in one or more at-the-market offerings (“ATM” offerings) when market conditions are considered favorable. Such shares would only be issued when the premium to net asset value is greater than the costs associated with the transaction. Any proceeds raised would be used for investment purposes. Through October 31, 2012, there were 1,641,601 shares sold through the ATM offering. Offering costs are capitalized as a prepaid expense. When shares are sold, a portion of the cost attributable to those shares will be charged to paid-in capital. For the year ended October 31, 2012, these costs were $16,197. These costs are noted on the Statements of Changes in Net Assets.

On March 1, 2001, the Board approved a stock repurchase program. The Board amended the program on December 12, 2007. The stock repurchase program allows the Fund to repurchase up to 10% of its outstanding common stock in the open market during any 12-month period, if and when the discount to NAV is at least 8%. For the fiscal year ended October 31, 2012 and fiscal year ended October 31, 2011, the Fund did not repurchase any shares through this program.

6. Revolving Credit Facility

On April 11, 2012, the Fund renewed a $600,000,000 loan facility with a 364-day term with a syndicate of major financial institutions led by The Bank of Nova Scotia. For the fiscal year ended October 31, 2012, the balance of the loan outstanding was $600,000,000, and the average interest rate on the loan facility was 1.20%. The average balance for the fiscal year was $600,000,000. The interest expense is accrued on a daily basis and is payable to The Bank of Nova Scotia on a monthly basis.

The amounts borrowed from the loan facility may be invested to return higher rates than the rates in the Fund’s portfolio. 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. Non-recurring expenses in connection with the implementation of the loan facility will reduce the Fund’s performance.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

31


Notes to Financial Statements (continued)

October 31, 2012

 

 

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 loan facility 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 not permitted to declare dividends or other distributions in the event of default under the loan facility. In the event of a default under the credit agreement, 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. The loan facility has a term of 364 days and is not a perpetual form of leverage; there can be no assurance that the loan facility will be available for renewal on acceptable terms, if at all. Bank loan fees and expenses included in the Statement of Operations include fees for the renewal of the loan facility as well as commitment fees for any portion of the loan facility not drawn upon at any time during the period. During the year ended October 31, 2012, the Fund incurred fees of approximately $671,931.

The credit agreement governing the loan facility includes usual and customary covenants for this 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 the loan facility. The covenants also include a requirement that the Fund maintain a net asset value of no less than $1,000,000,000.

7. Portfolio Investment Risks

(a) Credit and Market Risk:

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. The consequences of political, social,

economic, or diplomatic changes may have disruptive effects on the market prices of emerging markets investments held by the Fund.

(b) Interest Rate Risk:

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

(c) Risks Associated with Foreign Securities and Currencies:

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

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

(d) Concentration Risk:

The Fund may have elements of risk not typically associated with investments in the United States of America due to concentrated investments in a limited number of countries or regions subject to foreign securities or currencies risks. Such concentrations 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 European Markets:

A number of countries in Europe have experienced severe economic and financial difficulties. Many non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts; many other issuers have faced difficulties obtaining credit or refinancing existing obligations; financial institutions have in many cases required government or central bank support, have needed to raise capital, and/or have been impaired in

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

32


Notes to Financial Statements (continued)

October 31, 2012

 

 

their ability to extend credit; and financial markets in Europe and elsewhere have experienced extreme volatility and declines in asset values and liquidity. These difficulties may continue, worsen or spread within and outside of Europe. Whether or not the Fund invests in securities of issuers located in Europe or with significant exposure to European issuers or countries, these events could negatively affect the value and liquidity of the Fund’s investments.

(f) 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.

8. 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.

 

 

9. Tax Information

The U.S. federal income tax basis of the Fund’s investments and the net unrealized appreciation as of October 31, 2012 were as follows:

 

Tax Basis of
Investments
     Appreciation      Depreciation    

Net

Unrealized

Appreciation

 
  $2,454,021,748       $ 152,187,680       $ (2,881,541   $ 149,306,139   

The tax character of distributions paid during the fiscal years ended October 31, 2012 and October 31, 2011 was as follows:

 

         October 31, 2012        October 31, 2011  

Distributions paid from:

         

Ordinary Income

     $ 109,721,108         $ 109,609,812   

Net long-term capital gains

                   

Total tax character of distributions

     $ 109,721,108         $ 109,609,812   

As of October 31, 2012, the components of accumulated earnings on a tax basis were as follows:

 

Undistributed ordinary income – net

     $ 4,267,438   

Undistributed long-term capital gains – net

         

Total undistributed earnings

     $ 4,267,438   

Capital loss carryforward

       (155,701,887 )* 

Other currency gains

       377,011,635   

Other Temporary Differences

       (26,155,509

Unrealized appreciation/(depreciation) – securities

       149,306,139 ** 

Unrealized appreciation/(depreciation) – currency

       41,355,718 ** 

Total accumulated earnings/(losses) – net

     $ 390,083,534   

 

*   On October 31, 2012, the Fund had a net capital loss carryforward of $155,701,887 which will be available to offset like amounts of any future taxable gains. Under the Regulated Investment Company Modernization Act of 2010, the Fund will be 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.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

33


Notes to Financial Statements (concluded)

October 31, 2012

 

 

Capital loss carryforwards expire as follows:

 

2013      2014      2015      2016      2017      2019      Unlimited
(Short-Term)
     Unlimited
(Long-Term)
 
  $4,985,477       $ 11,980,826       $ 18,942,725       $ 38,887,790       $ 17,991,164       $ 60,657,380       $       $ 2,256,525   

 

**   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, during the current year, 169,251,206 has been reclassified from distributions in excess of net investment income to accumulated net realized gain from investments, interest rate swaps and futures contracts and 50,680,039 has been reclassified from distributions in excess of net investment income to accumulated net realized foreign exchange gains. These reclassifications have no effect on net assets or net asset values per share.

Additionally included in the amounts above, in order to segregate accumulated realized foreign currency gains/losses, the Fund reclassified certain prior and current year amounts between the components of net assets from a GAAP to tax basis as of October 31, 2012. Accumulated net realized foreign exchange gains/losses will be recognized for Federal income tax purposes upon repatriation of Australian Dollars to U.S. Dollars.

10. Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”),

Disclosures about Offsetting Assets and Liabilities . The amendments in this update require an entity to disclose both gross and net information for derivatives and other financial instruments that are either offset in the statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The ASU is effective during interim or annual reporting periods beginning on or after January 1, 2013. Management is currently evaluating the implications of this ASU and its impact on the financial statements has not been determined.

11. 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, 2012.

On November 9, 2012 and December 11, 2012, the Fund announced that it will pay on December 14, 2012 and January 11, 2013, a distribution of US $0.035 per share to all shareholders of record as of November 30, 2012 and December 31, 2012, respectively.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

34


Report of Independent Registered Public Accounting Firm

 

 

 

Board of Directors and Shareholders of

Aberdeen Asia-Pacific Income Fund, Inc.

 

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Aberdeen Asia-Pacific Income Fund, Inc. (the “Fund”), as of October 31, 2012, and the related statements of operations and cash flows for the year then ended, and the statements of changes in 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 four-year period then ended. 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 audit. The financial highlights for the year ended October 31, 2008, were audited by other auditors. Those auditors expressed an unqualified opinion on the statement of changes in net assets and financial highlights in their report dated December 23, 2008.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. An audit

includes examining, on a test basis, evidence supporting the amounts

and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2012, by correspondence with custodians and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights of the Aberdeen Asia-Pacific Income Fund, Inc. present fairly, in all material respects, the financial position of the Fund as of October 31, 2012, and the results of its operations and cash flows for the year then ended, and its changes in 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 four-year period then ended, in conformity with U.S. generally accepted accounting principles.

 

LOGO

Philadelphia, Pennsylvania

December 21, 2012

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

35


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, 2012:

Common Shareholders

 

Payable Date    Foreign Taxes Paid†*      Foreign Source Income**  

November 14, 2011-July 13, 2012

     2.257%         66.63%   

August 17, 2012

     2.251%         66.56%   

September 14, 2012

     2.249%         66.57%   

October 12, 2012

     2.243%         66.64%   

 

  Expressed as a percentage of the distributions paid.
*   The foreign taxes paid represent taxes incurred by the Fund on interest received from foreign sources. Foreign taxes paid may be included in taxable income with an offsetting deduction from gross income or may be taken as a credit for taxes paid to foreign governments. You should consult your tax advisor regarding the appropriate treatment of foreign taxes paid.
**   Expressed as a percentage of ordinary distributions paid grossed-up for foreign taxes paid.

Supplemental Information (unaudited)

 

 

 

Considerations in Approving Renewal of Management Agreement, Investment Advisory Agreement, and Investment Sub-Advisory Agreement (FAX)

At an in-person meeting of the Board of Directors (the “Board”) of the Aberdeen Asia-Pacific Income Fund, Inc. (the “Fund”) held on September 4, 2012, the Board, including all of the Directors who are not considered to be “interested persons” as such term is defined under the Investment Company Act of 1940, as amended, of the Fund (the “Independent Directors”), considered and approved for an additional twelve-month term the continuation of the Fund’s management agreement with Aberdeen Asset Management Asia Limited (the “Investment Manager”), the investment advisory agreement among the Fund, the Investment Manager and Aberdeen Asset Management Limited (the “Investment Adviser”), and the investment sub-advisory agreement among the Fund, the Investment Manager and Aberdeen Asset Managers Limited (the “Investment Sub-Adviser”) (collectively, the “Agreements”). The Investment Adviser and Investment Sub-Adviser are affiliates of the Investment Manager. The Investment Manager, Investment Adviser and Investment Sub-Adviser are sometimes each referred to as an “Adviser” and, collectively, as the “Advisers.”

The Independent Directors were advised by separate independent legal counsel throughout the process. In advance of the meeting, the Independent Directors received a memorandum from their

independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements. At the meeting, the Directors reviewed a report prepared by the Advisers in response to a request submitted by the Independent Directors’ independent legal counsel on behalf of such Directors, and discussed this report with representatives of the Advisers. The Independent Directors also consulted in executive sessions with counsel to the Independent Directors regarding the renewal of the Agreements. The Directors also considered the recommendation of the Contract Review Committee of the Board (the “Committee”), consisting solely of Independent Directors, that the Agreements be renewed, noting that the Committee also had discussed, with representatives of management and separately in executive sessions with independent counsel at which no representatives of management were present, among other factors, the nature, extent and quality of the management, advisory and sub-advisory services provided to the Fund by the Advisers, the level of the management, advisory and sub-advisory fees, the costs of the services provided and the profits realized by the Advisers and their affiliates, the Fund’s expense ratio, Fund performance, the Fund’s and the Advisers’ compliance programs, any economies of scale with respect to the management of the Fund, and any ancillary benefits received by the Advisers and their affiliates as a result of their relationship with the Fund, and various other matters included within the report of the Advisers.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

36


Supplemental Information (unaudited) (continued)

 

 

 

In considering whether to approve the renewal of the Agreements, the Directors received and considered a variety of information provided by the Advisers relating to the Fund, the Agreements and the Advisers, including comparative performance, fee and expense information of a peer group of funds selected by an independent third-party provider of investment company data, performance information for relevant benchmark indices and other information regarding the nature, extent and quality of services provided by the Advisers under their respective Agreements. The Board’s materials also contained information as to the profitability of the Advisers and their affiliates from their relationship with the Fund. The Committee and the Board of Directors, including the Independent Directors, also considered other matters such as (i) the Advisers’ financial results and financial condition, (ii) the Fund’s investment objective and strategies, (iii) the Advisers’ investment personnel and operations, (iv) the procedures employed to determine the value of the Fund’s assets, (v) the allocation of the Fund’s brokerage, if any, including, if applicable, allocations to brokers affiliated with the Advisers and the use, if any, of “soft” commission dollars to pay Fund expenses and to pay for research and other similar services, (vi) the resources devoted to, and the record of compliance with, the Fund’s investment policies and restrictions, policies on personal securities transactions and other compliance policies, and (vii) possible conflicts of interest. Throughout the process, the Directors were afforded the opportunity to ask questions of and request additional information from management.

In addition to the materials requested by the Directors in connection with their consideration of the renewal of the Agreements, the Directors receive materials in advance of each regular quarterly meeting that provide information relating to the services provided by the Advisers. In this regard, the Board reviews reports of the Advisers which include, among other things, a portfolio review and Fund performance reports.

In approving (or, in the case of the Committee, recommending) the renewal of the Agreements, the Committee and the Board of Directors reached, among others, the following conclusions:

 

 

Nature, Extent and Quality of Services. The Committee and the Board were satisfied with the nature, quality and extent of services provided by the Advisers. In reaching this conclusion, the Committee and the Board reviewed, among other things, the Advisers’ investment experience, including the growth and development of their Far East operations as well as the Aberdeen Group’s global investment management activities, including in emerging markets, and the Aberdeen Group’s growth in Australia. The Board (and the Committee) received information regarding the Advisers’ compliance with applicable laws and SEC and other

   

regulatory inquiries or audits of the Fund and the Advisers. The Committee and the Board also considered the background and experience of the Advisers’ senior management personnel and the qualifications, background and responsibilities of the portfolio managers primarily responsible for the day-to-day portfolio management services for the Fund. The Committee and the Board also considered the allocation of responsibilities among the Advisers. In addition, the Committee and the Board considered the financial condition of the Advisers and whether they had the financial wherewithal to provide a high level and quality of service to the Fund. The Committee and the Board also considered information received from the Fund’s Chief Compliance Officer regarding the Advisers’ compliance policies and procedures. The Committee and the Board also took into account the Advisers’ risk management processes. The Committee and the Board also considered the Advisers’ brokerage polices and practices. Management also reported to the Committee and the Board on, among other things, its business plans and organizational changes. The Committee and the Board also noted that the Board reviewed and assessed the quality of the services the Fund receives from the Advisers throughout the year, and received detailed portfolio review and performance reports on a regular basis. The Committee and the Board determined that the advisory services provided were extensive in nature and of high quality.

 

 

Fees and Expenses. The effective annual management fee rate paid by the Fund to the Investment Manager for investment management services was within a reasonable range relative to the effective advisory fee rates of a peer group consisting of closed-end funds in the World Bond and Emerging Markets Bond Morningstar categories as compiled by Strategic Insight (“SI”), an independent third-party provider of mutual fund data (the “Peer Group”), including Aberdeen Global Income Fund, Inc., another U.S.-registered closed-end fund managed by the Investment Manager and First Trust/Aberdeen Global Opportunity Income Fund, a U.S.-registered closed-end fund sub-advised by Aberdeen Asset Management Inc., an affiliate of the Advisers and administrator to the Fund (“AAMI”). The SI data indicated that the Fund’s effective management fee rate (computed based on average managed assets for the six months ended April 30, 2012, and which reflects both the advisory fee and the administration fee) was the lowest in the Peer Group and below the Peer Group’s median and average fee rates, respectively. The Committee and the Board noted that, among other information, the SI data also indicated that the Fund’s annualized expense ratio based on average managed assets, which includes the Fund’s assets attributable to its common stock plus borrowings

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

37


Supplemental Information (unaudited) (continued)

 

 

 

   

for investment purposes, including leverage, for the six months ended April 30, 2012 was the lowest in the Peer Group and below the average and median expense ratios, respectively, of the Peer Group. The data also indicated that the Fund’s annualized expense ratio based on average net assets, excluding the principal amount of borrowings, for the six months ended April 30, 2012 was below the average and median expense ratios of its Peer Group. The Committee and the Board took into account the impact of leverage on Fund expenses. The Committee and the Board also took into account the management fee structure, including that management fees for the Fund were based on the Fund’s total Managed Assets, whether attributable to common stock, preferred stock or bank borrowings, if any. The Committee and the Board also considered that the compensation paid to the Investment Adviser and Investment Sub-Adviser is paid by the Investment Manager and not the Fund, and, accordingly that the retention of the Investment Adviser and Investment Sub-Adviser does not increase the fees or expenses otherwise incurred by the Fund’s shareholders. The Board also considered information about the Investment Adviser’s and Investment Sub-Adviser’s fees, including the amount of the management fees retained by the Investment Manager after payment of the advisory and sub-advisory fees. The Committee and the Board also took into account management’s discussion of the Fund’s expen