UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
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Investment Company Act file number: | | 811-06342 |
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Exact name of registrant as specified in charter: | | Aberdeen Global Income Fund, Inc. |
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Address of principal executive offices: | | 1735 Market Street, 32nd Floor |
| | Philadelphia, PA 19103 |
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Name and address of agent for service: | | Ms. Andrea Melia |
| | Aberdeen Asset Management Inc. |
| | 1735 Market Street 32nd Floor |
| | Philadelphia, PA 19103 |
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Registrant’s telephone number, including area code: | | 866-839-5233 |
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Date of fiscal year end: | | October 31 |
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Date of reporting period: | | October 31, 2013 |
Item 1 – Reports to Stockholders
Managed Distribution Policy (unaudited)
The Board of Directors of the Fund has authorized a managed distribution policy (“MDP”) of paying monthly distributions at an annual rate set once a year. It is the Board’s intention that a monthly distribution of $0.07 per share be maintained for 12 months beginning with the July 12, 2013 distribution payment. With each distribution, the Fund will issue a notice to shareholders and an accompanying press release which will provide detailed information regarding the amount and composition of the distribution and other information required by the Fund’s MDP exemptive order. The Fund’s Board of Directors may amend or terminate the MDP at any time without prior notice to shareholders; however, at this time, there are no reasonably foreseeable circumstances that might cause the termination of the MDP. You should not draw any conclusions about the Fund’s investment performance from the amount of distributions or from the terms of the Fund’s MDP.
Distribution Disclosure Classification (unaudited)
The Fund’s policy is to provide investors with a stable monthly distribution out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital.
The Fund is subject to U.S. corporate, tax and securities laws. Under U.S. tax rules, the amount applicable to the Fund and character of distributable income for each fiscal period depends on the actual exchange rates during the entire year between the U.S. Dollar and the currencies in which Fund assets are denominated and on the aggregate gains and losses realized by the Fund during the entire year.
Therefore, the exact amount of distributable income for each fiscal year can only be determined as of the end of the Fund’s fiscal year, October 31. Under Section 19 of the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund is required to indicate the sources of certain distributions to shareholders. The estimated distribution composition may vary from month to month because it may be materially impacted by future income, expenses and realized gains and losses on securities and fluctuations in the value of the currencies in which the Fund’s assets are denominated.
Distributions for the fiscal year ended October 31, 2013 consisted of 100% net investment income.
In January 2014, 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 2013 calendar year.
Dividend Reinvestment and Direct Stock Purchase Plan (unaudited)
Computershare Trust Company, N.A., the Fund’s transfer agent, sponsors and administers a Dividend Reinvestment and Direct Stock Purchase Plan (the “Plan”), which is available to shareholders.
The Plan allows registered stockholders and first time investors to buy and sell shares and automatically reinvest dividends and capital gains through the transfer agent. This is a cost-effective way to invest in the Fund.
Please note that for both purchases and reinvestment purposes, shares will be purchased in the open market at the current share price and cannot be issued directly by the Fund.
For more information about the Plan and a brochure that includes the terms and conditions of the Plan, please call Computershare at 1-800-647-0584 or visit www.computershare.com/buyaberdeen.
Letter to Shareholders (unaudited)
Dear Shareholder,
We present this Annual Report which covers the activities of Aberdeen Global Income Fund, Inc. (the “Fund”) for the year ended October 31, 2013. The Fund’s principal investment objective is to provide high current income by investing primarily in fixed income securities. As a secondary investment objective, the Fund seeks capital appreciation, but only when consistent with its principal investment objective.
Total Return Performance
The Fund’s total return, based on net asset value (“NAV”) net of fees, was (5.3%) for the year ended October 31, 2013 and 7.9% per annum since inception, assuming the reinvestment of dividends and distributions. The Fund’s total return for the year ended October 31, 2013 and per annum since inception is based on the reported NAV on each annual period end.
Share Price and NAV
For the year ended October 31, 2013, based on market price, the Fund’s total return was (15.1%) assuming reinvestment of dividends and distributions. The Fund’s share price decreased by 20.7% over the year, from $14.06 on October 31, 2012 to $11.15 on October 31, 2013. The Fund’s share price on October 31, 2013 represented a discount of 9.0% to the NAV per share of $12.25 on that date, compared with a premium of 1.3% to the NAV per share of $13.88 on October 31, 2012.
Credit Quality
As of October 31, 2013, 67.0% 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, 2013 totaled $0.84 per share. Based on the share price of $11.15 on October 31, 2013, the distribution rate over the 12-month period ended October 31, 2013 was 7.5%. 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 12, 2013 and December 10, 2013, the Fund announced that it will pay, on December 13, 2013 and January 17, 2014, a distribution of US $0.07 per share to all shareholders of record as of November 29, 2013 and December 31, 2013, 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 $0.07 per share be maintained for twelve months, beginning with the July 12, 2013 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 2014.
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, 2013 and fiscal year ended October 31, 2012, the Fund did not repurchase any shares.
Revolving Credit Facility and Leverage
The Fund’s revolving credit loan facility with The Bank of Nova Scotia was renewed for a 364-day term on March 1, 2013. The outstanding balance on the loan as of October 31, 2013 was $40,000,000. 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 1-866-839-5233.
Proxy Voting
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve months ended June 30 is available by August 30 of the relevant year: (i) upon request and without charge by calling Investor Relations toll-free at 1-866-839-5233; and (ii) on the SEC’s website at http://www.sec.gov.
Aberdeen Global Income Fund, Inc.
1
Letter to Shareholders (unaudited) (concluded)
Investor Relations Information
As part of our ongoing commitment to provide information to our shareholders, I invite you to visit the Fund on the web at www.aberdeenfco.com. From this page, you can view monthly fact sheets, portfolio manager commentary, distribution and performance information, updated daily fact sheets courtesy of Morningstar®, conduct portfolio charting and other timely data.
Please take a look at Aberdeen’s award-winning Closed-End Fund Talk Channel, where you can watch fund manager web casts and view our latest short films. For replays of recent broadcasts or to register for upcoming events, please visit Aberdeen’s Closed-End Fund Talk Channel at www.aberdeen-asset.us/aam.nsf/usClosed/aberdeentv.
Please ensure that you are enrolled in our email services, which feature timely news from Aberdeen portfolio managers located around the world. Enroll today at www.aberdeen-asset.us/aam.nsf/usclosed/email and be among the first to receive the latest closed-end fund news, announcements of upcoming fund manager web casts, films and other information.
Please contact Aberdeen Asset Management Inc. by:
• | | calling toll free at 1-866-839-5233 in the United States, or |
• | | emailing InvestorRelations@aberdeen-asset.com |
• | | Visiting Aberdeen Closed-End Fund Center at http://www.aberdeen-asset.us/aam.nsf/usClosed/home; |
• | | visiting www.aberdeenfco.com |
Yours sincerely,
Christian Pittard
President
All amounts are U.S. Dollars unless otherwise stated.
Aberdeen Global Income Fund, Inc.
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Report of the Investment Manager (unaudited)
Market Review
Most global core government fixed income markets weakened in volatile trading over the year ended October 31, 2013 (reporting period), lagging global equity market gains by a wide margin. Fixed income markets were well supported through May 2013 by central bank asset purchases in Japan and the West, signs of a stalling global economic recovery and receding inflation. Subsequently, however, U.S. monetary policy dynamics came to the fore in driving market sentiment. Fears that the U.S. Federal Reserve (Fed) was about to reduce its stimulus program led to a spike in U.S. Treasury yields and consequently a sharp sell-off across other markets. Volatility was most pronounced in certain emerging economies with structural weaknesses that were deemed to be more susceptible to capital outflows, such as India and Indonesia. However, the end of the reporting period brought a welcome respite, as the Fed unexpectedly left its monetary policy unchanged. The U.S. Congress also reached an eleventh-hour deal to resolve the fiscal impasse and end the U.S. government shutdown.
Longer-dated bonds trailed their short-dated counterparts in Australia, Canada, New Zealand, the UK and the U.S. Yields on 10-year U.S. Treasuries rose by more than 80 basis points during the reporting period to close at 2.55%. Emerging market debt posted modest losses, with local currency debt declining by less than hard-currency bonds. Meanwhile, the U.S. Dollar closed mixed against its G-101 peers. The Japanese Yen suffered heavy selling, following aggressive stimulus measures by the Bank of Japan, followed by the Australian and Canadian Dollars. Conversely, the Danish Krone, Euro and Swiss franc appreciated against the U.S. Dollar.
In Australia, monetary policymakers cut the cash rate2 to a record low of 2.5% in an effort to help companies cope with the challenging operating environment, amid benign inflation. Economic data were mixed. Building approvals accelerated, foreshadowing improving residential investment. The labor market, however, remained weak. While confidence rose among corporations, business conditions improved marginally from depressed levels. The business sector was, in our view, most likely buoyed by the federal election result, which saw the country move away from a gridlocked parliament. Canadian data were more mixed because of disruptions from the floods in Alberta and the construction workers’ strike in Quebec, although the impact was expected to be transitory. The jobs market improved, while price pressures remained under control. Under new governor
Stephen Poloz, the Bank of Canada (BOC) signalled that interest rates would remain unchanged in the near term but normalization would be required in future. Towards the end of the period, the BOC downgraded the economy’s outlook, as it expected weaker U.S. economic growth to hurt exports, and acknowledged that downside inflation risks had increased.
Among key emerging markets, Mexico’s economy contracted unexpectedly in the second quarter, weighed down by cooling exports and weak construction and services at home. Conversely, Brazil’s gross domestic product (GDP) grew by more than expected, thanks to its agricultural sector, while robust consumption buoyed Turkey. Meanwhile, policymakers in Mexico and Turkey cut interest rates in a bid to support growth, but Brazil’s central bank raised rates for the first time in two years in an effort to curb inflation. Turkey was promoted to investment grade by Fitch and Moody’s3 because of its positive economic and fiscal outlook.
Fund Performance Review
The Fund’s emerging market debt (EMD) and developed markets holdings enhanced performance for the reporting period. In the EMD segment, the holdings in Turkey, South Africa and Uruguay contributed significantly to performance, although the gains were pared by negative currency effects. Within the developed markets portfolio, credit strategies in Australia and New Zealand bolstered the relative return, along with term structure and yield contributions in Canada. However, there was a drag from the Fund’s duration positioning in the UK.
The Fund uses currency forwards as part of the currency overlay process in an effort to position the currency exposure according to the Fund’s ongoing strategy. During the period, the Fund held long New Zealand Dollar positions against short Australian Dollar positions seeking to reduce the risk of Australian Dollar weakness on the Fund’s returns over the period. The Fund also held, and continues to hold, interest rate swaps to hedge the floating rate leverage in the portfolio in order to move its leverage duration closer to the underlying assets of the Fund.
Outlook
We see continued improvements in U.S. labor and housing markets against the backdrop of ample spare capacity in the U.S. economy, particularly relating to the longer-term unemployed part of the workforce. Inflation is also constrained by ongoing
1 | | The G-10 is a group of the 10 major industrialized countries whose mission is to create a more stable world economic trading environment through monetary and fiscal policies: Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the UK and the U.S. |
2 | | The official cash rate is the rate of interest which the Reserve Bank of Australia charges on overnight loans to commercial banks. |
3 | | Fitch is an international credit rating agency. Fitch ratings range from “AAA” (reliable and stable) to “D” (high risk). Moody’s is an independent, unaffiliated research company that rates fixed income securities. Moody’s assigns ratings on the basis of risk and the borrower’s ability to make interest payments. Typically securities are assigned a rating from “Aaa” to “C,” with “Aaa” being the highest quality and “C” the lowest quality. |
Aberdeen Global Income Fund, Inc.
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Report of the Investment Manager (unaudited) (continued)
deleveraging and slack in the economy, and will remain so for a considerable period, in our opinion. We anticipate that the Fed’s monetary policy will also remain a factor in determining the level and shape of yield curves in the year ahead. Concerns about the peripheral economies4 in the Eurozone5 have eased, but signs of deflation in Europe will keep monetary policy accommodative for an extended period.
In Australia, we believe that for conditions in the business sector to continue improving, the household sector will need to start growing more quickly. Evidence of this happening is still lacking, with retail sales growth remaining subdued even as consumer confidence and house prices continue to rise. Ultimately, though, we believe that the household sector will grow more quickly in the coming months, with the response to easier financial conditions likely to manifest, even if on a delayed basis relative to historical monetary easing cycles. Therefore, we believe the central bank most likely will remain on hold in the coming months.
As for emerging market debt, we think that market sentiment will remain data-dependent in the short term, with much of the focus on U.S. growth indicators. We believe that fund flows, which often lag market movements, may remain a negative driver until the market feels that an appropriate equilibrium level has been found. From a medium- to long-term perspective, the fundamentals of emerging markets remain constructive, in our opinion. We feel that balance sheets at the country, company and individual levels remain in good shape, but may deteriorate on the margin as growth slows. In our view, debt sustainability also may remain intact amid rising borrowing costs, with debt levels averaging about one-third of those in developed markets.
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 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 $75,000,000.
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 is also authorized to use reverse repurchase agreements as another form of leverage. 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
4 | | The peripheral Eurozone countries include Greece, Portugal, Ireland, Spain and Italy. |
5 | | The Eurozone includes the 17 European Union countries which have adopted the euro as their currency: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. |
Aberdeen Global Income Fund, Inc.
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Report of the Investment Manager (unaudited) (concluded)
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. As of October 31, 2013, the Fund held interest rate swap agreements with an aggregate notional amount of $40,000,000, which represented 100% of the Fund’s total borrowings. On October 22, 2013, the Fund closed out a swap agreement with a notional amount of $20,000,000 with a maturity date of November 1, 2013. Also on that date, the Fund entered into a new interest rate swap with a notional amount of $20,000,000 that matures on October 24, 2020. Under the terms of the agreements currently in effect, the Fund either receives a floating rate of interest (three month USD-LIBOR BBA rate) and pays fixed rates of interest for the terms or pays a floating rate of interest and
receives a fixed rate of interest for the terms, and based upon the notional amounts set forth below:
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Remaining Term as of October 31, 2013 | | Receive/(Pay) Floating Rate | | | Amount (in $ millions) | | | Fixed Rate Payable (%) | |
85 months | | | (Pay | ) | | | 20.0 | | | | 2.15 | |
48 months | | | Receive | | | | 20.0 | | | | 0.84 | |
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 Global Income Fund, Inc.
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Total Investment Return (unaudited)
October 31, 2013
The following table summarizes Fund performance compared to the Fund’s blended benchmark consisting of 20% of the Bank of America Merrill Lynch (“B of A ML”) Australian Gov Bonds Index, 20% of the B of A ML UK Gov Bonds Index, 15% of the B of A ML Canadian Gov Bonds Index, 15% of the B of A ML New Zealand Gov Bonds Index and 30% of the B of A ML Global Emerging Markets Index for the 1-year, 3-year, 5-year and 10-year periods annualized as of October 31, 2013.
| | | | | | | | | | | | | | | | |
| | 1 Year | | | 3 Years | | | 5 Years | | | 10 Years | |
Net Asset Value (NAV) | | | (5.3% | ) | | | 5.0% | | | | 14.4% | | | | 7.9% | |
Market Value | | | (15.1% | ) | | | 2.7% | | | | 15.9% | | | | 5.9% | |
Benchmark | | | (3.3% | ) | | | 5.5% | | | | 11.8% | | | | 8.0% | |
Returns represent past performance. Total investment return at net asset value (NAV) is based on changes in the NAV of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Fund’s transfer agent. Total investment return at market value is based on changes in the market price at which the Fund’s shares traded on the NYSE MKT during the period and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Fund’s transfer agent. The Fund’s total return is based on the reported NAV on each annual period end. Because the Fund’s shares trade in the stock market based on investor demand, the Fund may trade at a price higher or lower than its NAV. Therefore, returns are calculated based on both market price and NAV. Past performance is no guarantee of future results. The performance information provided does not reflect the deduction of taxes that a shareholder would pay on distributions received from the Fund. The current performance of the Fund may be lower or higher than the figures shown. The Fund’s yield, return, market price and NAV will fluctuate. Performance information current to the most recent month-end is available by calling 866-839-5233.
The net operating expense ratio is 2.04%. The net operating expense ratio, excluding interest expense, is 1.68%.
Aberdeen Global Income Fund, Inc.
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Portfolio Composition (unaudited)
Quality of Investments
As of October 31, 2013, 67.0% 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, 2013, compared with the previous six and twelve months:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Date | | AAA/Aaa % | | | AA/Aa % | | | A % | | | BBB/Baa % | | | BB/Ba* % | | | B* % | | | CCC* % | | | NR** % | |
October 31, 2013 | | | 32.7 | | | | 27.9 | | | | 6.4 | | | | 16.6 | | | | 10.6 | | | | 5.1 | | | | 0.2 | | | | 0.5 | |
April 30, 2013 | | | 33.3 | | | | 28.1 | | | | 6.8 | | | | 14.9 | | | | 11.0 | | | | 5.3 | | | | 0.6 | | | | 0.0 | |
October 31, 2012 | | | 43.3 | | | | 18.8 | | | | 6.6 | | | | 16.2 | | | | 8.2 | | | | 6.6 | | | | 0.3 | | | | 0.0 | |
Geographic Composition
The Fund’s investments are divided into three categories: Developed Markets, Investment Grade Developing Markets and Sub-Investment Grade Developing Markets. 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, 2013, compared with the previous six and twelve months:
| | | | | | | | | | | | |
Date | | Developed Markets % | | | Investment Grade Developing Markets % | | | Sub-Investment Grade Developing Markets % | |
October 31, 2013 | | | 71.6 | | | | 16.4 | | | | 12.0 | |
April 30, 2013 | | | 71.1 | | | | 16.2 | | | | 12.7 | |
October 31, 2012 | | | 73.6 | | | | 13.0 | | | | 13.4 | |
Currency Composition
The table below shows the currency composition of the Fund’s total investments as of October 31, 2013, compared with the previous six and twelve months:
| | | | | | | | | | | | |
Date | | Developed Markets % | | | Investment Grade Developing Markets % | | | Sub-Investment Grade Developing Markets % | |
October 31, 2013 | | | 91.7 | | | | 5.6 | | | | 2.7 | |
April 30, 2013 | | | 90.2 | | | | 5.9 | | | | 3.9 | |
October 31, 2012 | | | 92.5 | | | | 4.4 | | | | 3.1 | |
Maturity Composition
As of October 31, 2013, the average maturity of the Fund’s total investments was 7.7 years, compared with 8.9 years at April 30, 2013 and 9.9 years at October 31, 2012. The table below shows the maturity composition of the Fund’s investments as of October 31, 2013, 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, 2013 | | | 28.8 | | | | 10.6 | | | | 42.2 | | | | 18.4 | |
April 30, 2013 | | | 25.9 | | | | 13.9 | | | | 42.2 | | | | 18.0 | |
October 31, 2012 | | | 18.9 | | | �� | 17.2 | | | | 36.2 | | | | 27.7 | |
Aberdeen Global Income Fund, Inc.
7
Summary of Key Rates (unaudited)
The following table summarizes the movements of key interest rates and currencies from October 31, 2013 and the previous six and twelve month periods.
| | | | | | | | | | | | |
| | October 31, 2013 | | | April 30, 2013 | | | October 31, 2012 | |
Australia | | | | | | | | | | | | |
90 day bank bills | | | 2.60% | | | | 2.91% | | | | 3.14% | |
10 yr bond | | | 3.94% | | | | 3.09% | | | | 3.13% | |
Australian Dollar | | | $0.95 | | | | $1.04 | | | | $1.04 | |
Canada | | | | | | | | | | | | |
90 day bank bills | | | 0.92% | | | | 0.99% | | | | 1.00% | |
10 yr bond | | | 2.42% | | | | 1.70% | | | | 1.79% | |
Canadian Dollar | | | $0.96 | | | | $0.99 | | | | $1.00 | |
Malaysia | | | | | | | | | | | | |
3-month T-bills | | | 2.95% | | | | 3.00% | | | | 3.05% | |
10 yr bond | | | 3.59% | | | | 3.36% | | | | 3.46% | |
Malaysian Ringgit* | | | R3.16 | | | | R3.04 | | | | R3.05 | |
New Zealand | | | | | | | | | | | | |
90 day bank bills | | | 2.70% | | | | 2.67% | | | | 2.69% | |
10 yr bond | | | 4.51% | | | | 3.17% | | | | 3.48% | |
New Zealand Dollar | | | $0.83 | | | | $0.86 | | | | $0.82 | |
Philippines | | | | | | | | | | | | |
90 day T-bills | | | 0.25% | | | | 0.37% | | | | 0.73% | |
10 yr bond | | | 3.63% | | | | 3.48% | | | | 5.11% | |
Philippines Peso* | | | P43.21 | | | | P41.16 | | | | P41.20 | |
Singapore | | | | | | | | | | | | |
3-month T-bills | | | 0.29% | | | | 0.24% | | | | 0.24% | |
10 yr bond | | | 2.15% | | | | 1.37% | | | | 1.34% | |
Singapore Dollar* | | | S$1.24 | | | | S$1.23 | | | | S$1.22 | |
South Korea | | | | | | | | | | | | |
90 day commercial paper | | | 2.65% | | | | 2.81% | | | | 2.85% | |
10 yr bond | | | 3.40% | | | | 2.77% | | | | 2.96% | |
South Korean Won* | | | W1,060.75 | | | | W1,101.30 | | | | W1,090.60 | |
Thailand | | | | | | | | | | | | |
3 months deposit rate | | | 1.63% | | | | 1.63% | | | | 1.88% | |
10 yr bond | | | 3.90% | | | | 3.39% | | | | 3.30% | |
Thai Baht* | | | B31.13 | | | | B29.35 | | | | B30.65 | |
United Kingdom | | | | | | | | | | | | |
90 day bank bills | | | 0.51% | | | | 0.50% | | | | 0.53% | |
10 yr bond | | | 2.62% | | | | 1.69% | | | | 1.85% | |
British Pound | | | £1.61 | | | | £1.56 | | | | £1.61 | |
U.S.$ Bonds** | | | | | | | | | | | | |
South Korea | | | 1.53% | | | | 1.21% | | | | 1.11% | |
Malaysia | | | 3.60% | | | | 2.80% | | | | 2.74% | |
Philippines | | | 2.66% | | | | 2.10% | | | | 2.10% | |
Hong Kong | | | 0.86% | | | | 0.93% | | | | 1.16% | |
* | | These currencies are quoted Asian currency per U.S. Dollar. The Australian, Canadian and New Zealand Dollars and British Pound are quoted U.S. Dollars per currency. |
Aberdeen Global Income Fund, Inc.
8
Portfolio of Investments
As of October 31, 2013
| | | | | | | | | | |
Principal Amount (000) | | | Description | | Value (US$) | |
CORPORATE BONDS—25.5% | |
AUSTRALIA—4.3% | |
AUD | | | 500 | | | CFS Retail Property Trust, 6.25%, 12/22/2014 | | $ | 487,178 | |
AUD | | | 500 | | | DnB NOR Boligkreditt, 6.25%, 06/08/2016 | | | 500,547 | |
AUD | | | 600 | | | Kommunalbanken AS, 6.00%, 10/21/2014 | | | 584,188 | |
AUD | | | 500 | | | National Capital Trust III, 3.55%, 09/30/2016 (a)(b)(c) | | | 442,259 | |
AUD | | | 3,000 | | | Wesfarmers Ltd., 8.25%, 09/11/2014 | | | 2,955,957 | |
| | | | | | | | | 4,970,129 | |
BRAZIL—1.3% | |
USD | | | 200 | | | Banco do Estado do Rio Grande do Sul, 7.38%, 02/02/2022 (d) | | | 206,500 | |
USD | | | 450 | | | Caixa Economica Federal, 4.50%, 10/03/2018 (d) | | | 452,250 | |
USD | | | 250 | | | JBS Investments GmbH, 7.75%, 10/28/2017 (b)(d) | | | 257,812 | |
USD | | | 420 | | | OAS Financial Ltd., 8.88%, 04/25/2018 (a)(b)(c)(d) | | | 387,450 | |
USD | | | 200 | | | Odebrecht Offshore Drilling Finance Ltd., 6.75%, 12/01/2021 (b)(d) | | | 208,500 | |
| | | | | | | | | 1,512,512 | |
CHILE—0.2% | |
USD | | | 200 | | | SACI Falabella, 3.75%, 04/30/2023 (d) | | | 184,000 | |
CHINA—0.5% | |
USD | | | 300 | | | China Overseas Finance Cayman Island II Ltd., 5.50%, 11/10/2020 (d) | | | 317,072 | |
USD | | | 220 | | | Longfor Properties Co. Ltd., 6.88%, 10/18/2016 (b)(d) | | | 222,200 | |
| | | | | | | | | 539,272 | |
COLOMBIA—0.2% | |
USD | | | 200 | | | Ecopetrol SA, 5.88%, 09/18/2023 | | | 217,100 | |
DOMINICAN REPUBLIC—0.2% | |
USD | | | 250 | | | AES Andres Dominicana Ltd., 9.50%, 11/12/2015 (b)(d) | | | 266,250 | |
EGYPT—0.4% | |
USD | | | 500 | | | African Export-Import Bank, 5.75%, 07/27/2016 (d) | | | 526,250 | |
EL SALVADOR—0.3% | |
USD | | | 300 | | | Telemovil Finance Co. Ltd., 8.00%, 10/01/2014 (b)(d) | | | 319,500 | |
GEORGIA—0.2% | |
USD | | | 250 | | | Georgian Oil and Gas Corp., 6.88%, 05/16/2017 (d) | | | 260,625 | |
GUATEMALA—0.5% | |
USD | | | 200 | | | Cementos Progreso Trust, 7.13%, 05/06/2018 (b)(d) | | | 201,125 | |
USD | | | 300 | | | Industrial Subordinated Trust, 8.25%, 07/27/2021 (d) | | | 322,050 | |
| | | | | | | | | 523,175 | |
INDIA—0.2% | |
USD | | | 250 | | | Bharti Airtel International Netherlands BV, 5.13%, 03/11/2023 (d) | | | 234,375 | |
INDONESIA—1.0% | |
USD | | | 100 | | | Adaro Indonesia PT, 7.63%, 10/22/2014 (b)(d) | | | 105,750 | |
USD | | | 200 | | | Indosat Palapa Co. BV, 7.38%, 07/29/2015 (b)(d) | | | 215,250 | |
USD | | | 370 | | | Pertamina Persero PT, 4.30%, 05/20/2023 (d) | | | 337,625 | |
USD | | | 560 | | | Pertamina Persero PT, 5.63%, 05/20/2043 (d) | | | 470,400 | |
| | | | | | | | | 1,129,025 | |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
9
Portfolio of Investments (continued)
As of October 31, 2013
| | | | | | | | | | |
Principal Amount (000) | | | Description | | Value (US$) | |
CORPORATE BONDS (continued) | |
KAZAKHSTAN—0.5% | |
USD | | | 200 | | | Kazakhstan Temir Zholy Finance BV, 6.95%, 07/10/2042 (d) | | $ | 209,250 | |
USD | | | 310 | | | Zhaikmunai LP Via Zhaikmunai International BV, 7.13%, 11/13/2016 (b)(d) | | | 330,150 | |
| | | | | | | | | 539,400 | |
MALAYSIA—0.1% | |
USD | | | 110 | | | PETRONAS Capital Ltd., 7.88%, 05/22/2022 (d) | | | 142,326 | |
MEXICO—2.2% | |
USD | | | 250 | | | BBVA Bancomer SA, 6.75%, 09/30/2022 (d) | | | 271,250 | |
USD | | | 200 | | | Cemex Finance LLC, 9.38%, 10/12/2017 (b)(d) | | | 224,500 | |
USD | | | 500 | | | Offshore Drilling Holding SA, 8.38%, 09/20/2017 (b)(d) | | | 531,250 | |
USD | | | 230 | | | Pemex Project Funding Master Trust, 5.75%, 03/01/2018 | | | 256,450 | |
USD | | | 40 | | | Pemex Project Funding Master Trust, 6.63%, 06/15/2035 | | | 43,400 | |
USD | | | 240 | | | Pemex Project Funding Master Trust, 6.63%, 06/15/2038 | | | 259,200 | |
USD | | | 640 | | | Petroleos Mexicanos, 6.50%, 06/02/2041 (b) | | | 681,600 | |
USD | | | 270 | | | Tenedora Nemak SA de CV, 5.50%, 02/28/2018 (b)(d) | | | 267,975 | |
| | | | | | | | | 2,535,625 | |
NEW ZEALAND—2.2% | |
NZD | | | 2,000 | | | Deutsche Bank AG, 3.57%, 12/16/2013 (a)(b) | | | 1,640,485 | |
NZD | | | 1,000 | | | General Electric Capital Corp., 6.75%, 09/26/2016 | | | 870,075 | |
| | | | | | | | | 2,510,560 | |
NIGERIA—0.2% | |
USD | | | 250 | | | GTB Finance BV, 7.50%, 05/19/2016 (d) | | | 264,375 | |
PERU—0.6% | |
USD | | | 330 | | | Banco de Credito del Peru, 4.75%, 03/16/2016 (b)(d) | | | 349,800 | |
USD | | | 350 | | | Corp. Azucarera del Peru SA, 6.38%, 08/02/2017 (b)(d) | | | 341,250 | |
| | | | | | | | | 691,050 | |
REPUBLIC OF SOUTH KOREA—0.4% | |
INR | | | 33,000 | | | Export-Import Bank of Korea, 6.00%, 02/27/2014 (d) | | | 529,246 | |
RUSSIA—3.2% | |
USD | | | 200 | | | Alfa Bank OJSC Via Alfa Bond Issuance PLC, 7.75%, 04/28/2021 (d) | | | 217,500 | |
USD | | | 350 | | | Alfa Bank OJSC Via Alfa Bond Issuance PLC, 7.88%, 09/25/2017 (d) | | | 392,434 | |
USD | | | 300 | | | EuroChem Mineral & Chemical Co. OJSC via EuroChem GI Ltd., 5.13%, 12/12/2017 (d) | | | 302,625 | |
USD | | | 220 | | | Evraz Group SA, 6.50%, 04/22/2020 (d) | | | 209,000 | |
USD | | | 200 | | | Gazprom Neft OAO Via GPN Capital SA, 4.38%, 09/19/2022 (d) | | | 188,250 | |
USD | | | 200 | | | Gazprom OAO Via Gaz Capital SA, 4.95%, 07/19/2022 (d) | | | 198,250 | |
USD | | | 200 | | | Metalloinvest Finance Ltd., 5.63%, 04/17/2020 (d) | | | 199,000 | |
USD | | | 200 | | | OJSC Novolipetsk Steel via Steel Funding Ltd., 4.95%, 09/26/2019 (d) | | | 199,250 | |
USD | | | 107 | | | RZD Capital Ltd., 5.74%, 04/03/2017 (d) | | | 115,159 | |
RUB | | | 38,300 | | | RZD Capital Ltd., 8.30%, 04/02/2019 (d) | | | 1,207,371 | |
USD | | | 300 | | | VimpelCom Holdings BV, 5.95%, 02/13/2023 (d) | | | 288,750 | |
USD | | | 180 | | | VTB Bank OJSC Via VTB Capital SA, 6.55%, 10/13/2020 (d) | | | 194,175 | |
| | | | | | | | | 3,711,764 | |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
10
Portfolio of Investments (continued)
As of October 31, 2013
| | | | | | | | | | |
Principal Amount (000) | | | Description | | Value (US$) | |
CORPORATE BONDS (continued) | |
SOUTH AFRICA—0.4% | |
USD | | | 180 | | | Myriad International Holdings BV, 6.00%, 07/18/2020 (d) | | $ | 191,700 | |
USD | | | 250 | | | Transnet SOC Ltd., 4.00%, 07/26/2022 (d) | | | 223,750 | |
| | | | | | | | | 415,450 | |
SUPRANATIONAL—4.7% | |
INR | | | 58,500 | | | European Bank for Reconstruction & Development, 5.25%, 02/07/2014 | | | 941,159 | |
NZD | | | 1,500 | | | International Bank for Reconstruction & Development, 7.50%, 07/30/2014 | | | 1,279,255 | |
NZD | | | 3,800 | | | International Finance Corp., 4.63%, 05/25/2016 | | | 3,194,199 | |
| | | | | | | | | 5,414,613 | |
TURKEY—0.6% | |
USD | | | 200 | | | Arcelik, 5.00%, 04/03/2023 (d) | | | 181,250 | |
USD | | | 200 | | | Turkiye Sise ve Cam Fabrikalari, 4.25%, 05/09/2020 (d) | | | 179,500 | |
USD | | | 300 | | | Yasar Holdings SA Via Willow No. 2, 9.63%, 12/02/2013 (b)(d) | | | 297,600 | |
| | | | | | | | | 658,350 | |
UKRAINE—0.6% | |
USD | | | 300 | | | Metinvest BV, 8.75%, 02/14/2018 (d) | | | 270,750 | |
USD | | | 280 | | | MHP SA, 8.25%, 04/02/2020 (d) | | | 240,100 | |
USD | | | 280 | | | Mriya Agro Holding PLC, 9.45%, 04/19/2018 (d) | | | 240,800 | |
| | | | | | | | | 751,650 | |
UNITED ARAB EMIRATES—0.5% | |
USD | | | 480 | | | Jafz Sukuk Ltd., 7.00%, 06/19/2019 (d) | | | 534,600 | |
| | | | | | Total Corporate Bonds—25.5% (cost $28,896,955) | | | 29,381,222 | |
GOVERNMENT BONDS—94.8% | |
ARMENIA—0.5% | |
USD | | | 600 | | | Republic of Armenia, 6.00%, 09/30/2020 (d) | | | 590,100 | |
AUSTRALIA—22.5% | |
AUD | | | 2,000 | | | Australia Government Bond, 3.25%, 04/21/2029 (d) | | | 1,641,423 | |
AUD | | | 2,300 | | | Australia Government Bond, 4.75%, 04/21/2027 (d) | | | 2,276,820 | |
AUD | | | 2,910 | | | Australia Government Bond, 5.50%, 04/21/2023 | | | 3,085,659 | |
AUD | | | 3,900 | | | Australia Government Bond, 5.75%, 05/15/2021 | | | 4,161,812 | |
AUD | | | 4,770 | | | Australia Government Bond, 5.75%, 07/15/2022 | | | 5,125,065 | |
AUD | | | 2,000 | | | New South Wales Treasury Corp., 6.00%, 04/01/2015 | | | 1,974,322 | |
AUD | | | 1,600 | | | Queensland Treasury Corp., 6.00%, 06/14/2021 (e) | | | 1,689,142 | |
AUD | | | 1,300 | | | Queensland Treasury Corp., 6.00%, 07/21/2022 | | | 1,348,739 | |
AUD | | | 3,400 | | | Treasury Corp. of Victoria, 5.75%, 11/15/2016 | | | 3,448,354 | |
AUD | | | 1,115 | | | Treasury Corp. of Victoria, 6.00%, 06/15/2020 | | | 1,170,345 | |
| | | | | | | | | 25,921,681 | |
BAHRAIN—0.2% | |
USD | | | 200 | | | Bahrain Government International Bond, 6.13%, 08/01/2023 (d) | | | 207,500 | |
BRAZIL—4.7% | |
USD | | | 500 | | | Banco Nacional de Desenvolvimento Economico e Social, 5.75%, 09/26/2023 (d) | | | 518,750 | |
BRL | | | 7,451 | | | Brazil Notas do Tesouro Nacional Series F, 10.00%, 01/01/2017 | | | 3,203,219 | |
USD | | | 1,300 | | | Brazilian Government International Bond, 7.13%, 01/20/2037 | | | 1,560,000 | |
BRL | | | 350 | | | Brazilian Government International Bond, 8.50%, 01/05/2024 | | | 142,565 | |
| | | | | | | | | 5,424,534 | |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
11
Portfolio of Investments (continued)
As of October 31, 2013
| | | | | | | | | | |
Principal Amount (000) | | | Description | | Value (US$) | |
GOVERNMENT BONDS (continued) | |
CANADA—12.5% | |
CAD | | | 2,000 | | | Canadian Government Bond, 8.00%, 06/01/2023 | | $ | 2,840,896 | |
CAD | | | 2,000 | | | Canadian Government Bond, 9.00%, 06/01/2025 | | | 3,162,538 | |
CAD | | | 3,000 | | | Canadian Government Bond, 10.25%, 03/15/2014 | | | 2,973,701 | |
CAD | | | 2,000 | | | Hydro Quebec, 9.63%, 07/15/2022 | | | 2,833,232 | |
CAD | | | 500 | | | Ontario Electricity Financial Corp., 8.50%, 05/26/2025 | | | 701,290 | |
CAD | | | 2,000 | | | Province of New Brunswick, 7.75%, 01/13/2014 | | | 1,941,016 | |
| | | | | | | | | 14,452,673 | |
COLOMBIA—0.3% | |
USD | | | 240 | | | Colombia Government International Bond, 7.38%, 03/18/2019 | | | 293,400 | |
COP | | | 125,000 | | | Colombia Government International Bond, 7.75%, 04/14/2021 | | | 75,548 | |
| | | | | | | | | 368,948 | |
COSTA RICA—0.2% | |
USD | | | 250 | | | Costa Rica Government International Bond, 4.25%, 01/26/2023 (d) | | | 237,500 | |
CROATIA—0.8% | |
USD | | | 500 | | | Croatia Government International Bond, 6.25%, 04/27/2017 (d) | | | 533,460 | |
USD | | | 320 | | | Croatia Government International Bond, 6.63%, 07/14/2020 (d) | | | 345,600 | |
| | | | | | | | | 879,060 | |
DOMINICAN REPUBLIC—0.2% | |
USD | | | 160 | | | Dominican Republic International Bond, 7.50%, 05/06/2021 (d) | | | 177,040 | |
HONDURAS—0.6% | |
USD | | | 730 | | | Honduras Government International Bond, 7.50%, 03/15/2024 (d) | | | 649,700 | |
HUNGARY—1.3% | |
HUF | | | 132,000 | | | Hungary Government Bond, 7.00%, 06/24/2022 | | | 669,396 | |
HUF | | | 83,000 | | | Hungary Government Bond, 8.00%, 02/12/2015 | | | 401,747 | |
USD | | | 380 | | | Hungary Government International Bond, 4.13%, 02/19/2018 | | | 383,800 | |
| | | | | | | | | 1,454,943 | |
IRAQ—0.2% | |
USD | | | 250 | | | Republic of Iraq, 5.80%, 12/15/2013 (b)(d) | | | 217,500 | |
LATVIA—0.5% | |
USD | | | 600 | | | Republic of Latvia, 2.75%, 01/12/2020 (d) | | | 573,750 | |
MEXICO—1.7% | |
MXN | | | 3,000 | | | Mexico Fixed Rate Bonds, 7.25%, 12/15/2016 | | | 248,455 | |
MXN | | | 2,910 | | | Mexico Fixed Rate Bonds, 7.75%, 11/13/2042 | | | 233,675 | |
MXN | | | 1,400 | | | Mexico Fixed Rate Bonds, 8.00%, 12/17/2015 | | | 116,004 | |
MXN | | | 2,000 | | | Mexico Fixed Rate Bonds, 8.00%, 06/11/2020 | | | 174,772 | |
MXN | | | 3,350 | | | Mexico Fixed Rate Bonds, 8.00%, 12/07/2023 | | | 293,280 | |
MXN | | | 2,600 | | | Mexico Fixed Rate Bonds, 8.50%, 11/18/2038 | | | 225,326 | |
USD | | | 550 | | | Mexico Government International Bond, 6.05%, 01/11/2040 | | | 622,875 | |
| | | | | | | | | 1,914,387 | |
MONGOLIA—0.4% | |
USD | | | 290 | | | Development Bank of Mongolia LLC, 5.75%, 03/21/2017 (d) | | | 279,850 | |
USD | | | 200 | | | Mongolia Government International Bond, 5.13%, 12/05/2022 (d) | | | 176,600 | |
| | | | | | | | | 456,450 | |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
12
Portfolio of Investments (continued)
As of October 31, 2013
| | | | | | | | | | |
Principal Amount (000) | | | Description | | Value (US$) | |
GOVERNMENT BONDS (continued) | |
MOZAMBIQUE—0.4% | |
USD | | | 550 | | | Mozambique EMATUM Finance 2020 BV, 6.31%, 09/11/2020 (d) | | $ | 518,375 | |
NEW ZEALAND—16.1% | |
NZD | | | 3,100 | | | New Zealand Government Bond, 3.00%, 04/15/2020 | | | 2,373,957 | |
NZD | | | 900 | | | New Zealand Government Bond, 5.00%, 03/15/2019 | | | 775,151 | |
NZD | | | 6,860 | | | New Zealand Government Bond, 5.50%, 04/15/2023 | | | 6,069,407 | |
NZD | | | 1,200 | | | New Zealand Government Bond, 6.00%, 04/15/2015 | | | 1,032,374 | |
NZD | | | 1,700 | | | New Zealand Government Bond, 6.00%, 12/15/2017 | | | 1,517,659 | |
NZD | | | 6,555 | | | New Zealand Government Bond, 6.00%, 05/15/2021 | | | 5,966,971 | |
NZD | | | 1,000 | | | Province of Manitoba, 6.38%, 09/01/2015 | | | 862,881 | |
| | | | | | | | | 18,598,400 | |
NIGERIA—1.6% | |
NGN | | | 229,000 | | | Nigeria Government Bond, 15.10%, 04/27/2017 | | | 1,550,941 | |
USD | | | 260 | | | Nigeria Government International Bond, 5.13%, 07/12/2018 (d) | | | 268,775 | |
| | | | | | | | | 1,819,716 | |
PERU—1.1% | |
PEN | | | 1,370 | | | Peru Government Bond, 7.84%, 08/12/2020 | | | 574,768 | |
PEN | | | 455 | | | Peruvian Government International Bond, 5.20%, 09/12/2023 (d) | | | 163,820 | |
PEN | | | 1,370 | | | Peruvian Government International Bond, 6.95%, 08/12/2031 (d) | | | 532,437 | |
| | | | | | | | | 1,271,025 | |
PHILIPPINES—0.0% | |
USD | | | 40 | | | Philippine Government International Bond, 8.38%, 06/17/2019 | | | 51,600 | |
ROMANIA—0.9% | |
USD | | | 850 | | | Romanian Government International Bond, 6.75%, 02/07/2022 (d) | | | 981,750 | |
RUSSIA—1.6% | |
RUB | | | 35,500 | | | Russian Federal Bond—OFZ, 7.50%, 02/27/2019 | | | 1,146,777 | |
USD | | | 500 | | | Russian Foreign Bond—Eurobond, 5.00%, 04/29/2020 (d) | | | 545,000 | |
USD | | | 100 | | | Vnesheconombank Via VEB Finance PLC, 6.80%, 11/22/2025 (d) | | | 108,750 | |
| | | | | | | | | 1,800,527 | |
RWANDA—0.2% | |
USD | | | 200 | | | Rwanda International Government Bond, 6.63%, 05/02/2023 (d) | | | 183,500 | |
SERBIA—1.1% | |
USD | | | 400 | | | Republic of Serbia, 5.25%, 11/21/2017 (d) | | | 398,000 | |
USD | | | 880 | | | Republic of Serbia, 7.25%, 09/28/2021 (d) | | | 915,200 | |
| | | | | | | | | 1,313,200 | |
SOUTH AFRICA—3.6% | |
USD | | | 710 | | | Eskom Holdings Ltd., 5.75%, 01/26/2021 (d) | | | 717,100 | |
USD | | | 200 | | | Eskom Holdings Ltd., 6.75%, 08/06/2023 (d) | | | 206,790 | |
ZAR | | | 1,100 | | | South Africa Government Bond, 7.00%, 02/28/2031 | | | 93,446 | |
ZAR | | | 2,700 | | | South Africa Government Bond, 10.50%, 12/21/2026 | | | 322,784 | |
ZAR | | | 19,800 | | | South Africa Government Bond, 13.50%, 09/15/2015 | | | 2,233,714 | |
USD | | | 160 | | | South Africa Government International Bond, 5.50%, 03/09/2020 | | | 173,600 | |
USD | | | 250 | | | South Africa Government International Bond, 5.88%, 09/16/2025 | | | 266,613 | |
USD | | | 100 | | | South Africa Government International Bond, 6.25%, 03/08/2041 | | | 106,250 | |
| | | | | | | | | 4,120,297 | |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
13
Portfolio of Investments (continued)
As of October 31, 2013
| | | | | | | | | | |
Principal Amount (000) | | | Description | | Value (US$) | |
GOVERNMENT BONDS (continued) | |
TANZANIA—0.5% | |
USD | | | 530 | | | Tanzania Government International Bond, 6.39%, 03/09/2020 (a)(d) | | $ | 553,850 | |
TURKEY—3.3% | |
TRY | | | 570 | | | Turkey Government Bond, 6.30%, 02/14/2018 | | | 267,975 | |
TRY | | | 5,200 | | | Turkey Government Bond, 9.00%, 01/27/2016 | | | 2,668,704 | |
USD | | | 200 | | | Turkey Government International Bond, 5.63%, 03/30/2021 | | | 213,500 | |
USD | | | 320 | | | Turkey Government International Bond, 6.25%, 09/26/2022 | | | 352,800 | |
USD | | | 300 | | | Turkey Government International Bond, 7.50%, 11/07/2019 | | | 353,250 | |
| | | | | | | | | 3,856,229 | |
UNITED KINGDOM—16.2% | |
GBP | | | 1,300 | | | United Kingdom Gilt, 4.00%, 03/07/2022 (d) | | | 2,349,995 | |
GBP | | | 1,700 | | | United Kingdom Gilt, 4.25%, 06/07/2032 (d) | | | 3,107,497 | |
GBP | | | 3,100 | | | United Kingdom Gilt, 8.00%, 12/07/2015 (d) | | | 5,757,026 | |
GBP | | | 4,000 | | | United Kingdom Treasury Gilt, 4.25%, 12/07/2049 (d) | | | 7,451,252 | |
| | | | | | | | | 18,665,770 | |
URUGUAY—0.6% | |
UYU | | | 2,150 | | | Uruguay Government International Bond, 4.25%, 04/05/2027 (f) | | | 176,200 | |
UYU | | | 6,080 | | | Uruguay Government International Bond, 5.00%, 09/14/2018 (f) | | | 533,113 | |
| | | | | | | | | 709,313 | |
VENEZUELA—0.8% | |
USD | | | 1,080 | | | Venezuela Government International Bond, 5.75%, 02/26/2016 (d) | | | 961,200 | |
VIETNAM—0.2% | |
USD | | | 220 | | | Vietnam Government International Bond, 6.88%, 01/15/2016 (d) | | | 237,600 | |
| | | | | | Total Government Bonds—94.8% (cost $103,984,791) | | | 109,168,118 | |
SHORT-TERM INVESTMENT—4.6% | |
UNITED STATES—4.6% | |
| | | 5,319 | | | Repurchase Agreement, State Street Bank and Trust Co., 0.00% dated 10/31/2013, due 11/01/2013 in the amount of $5,319,000 collateralized by $5,635,000 U.S. Treasury Notes, 1.63%-2.00% maturing 11/15/2021-11/15/2022; value $5,437,884 | | | 5,319,000 | |
| | | | | | Total Short-Term Investment—4.6% (cost $5,319,000) | | | 5,319,000 | |
| | | | | | Total Investments—124.9% (cost $138,200,746) | | | 143,868,340 | |
| | | |
| | | | | | Liabilities in Excess of Other Assets—(24.9)% | | | (28,659,213 | ) |
| | | | | | Net Assets—100.0% | | $ | 115,209,127 | |
| | | | | | |
AUD—Australian Dollar | | GBP—British Pound Sterling | | NGN—Nigerian Naira | | TRY—Turkish Lira |
BRL—Brazilian Real | | HUF—Hungarian Forint | | NZD—New Zealand Dollar | | USD—U.S. Dollar |
CAD—Canadian Dollar | | INR—Indian Rupee | | PEN—Peruvian Nuevo Sol | | UYU—Uruguayan Peso |
COP—Colombian Peso | | MXN—Mexican Peso | | RUB—New Russian Ruble | | ZAR—South African Rand |
(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, 2013. |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
14
Portfolio of Investments (concluded)
As of October 31, 2013
(b) | | The maturity date presented for these instruments represents the next call/put date. |
(c) | | Perpetual bond. This is a bond that has no maturity date, is redeemable and pays a steady stream of interest indefinitely. |
(d) | | Denotes a restricted security, see Note 2(c). |
(e) | | This security is government guaranteed. |
(f) | | Inflation linked security. |
At October 31, 2013, the Fund’s open forward foreign currency exchange contracts were as follows:
| | | | | | | | | | | | | | | | | | |
Purchase Contracts Settlement Date* | | Counterparty | | Amount Purchased | | | Amount Sold | | | Fair Value | | | Unrealized Depreciation | |
Turkish Lira/United States Dollar | | | | | | | | | |
11/21/2013 | | Citibank | | | TRY234,000 | | | | USD117,777 | | | $ | 116,832 | | | $ | (945 | ) |
| | | | | | | | | | | | $ | 116,832 | | | $ | (945 | ) |
Sale Contracts Settlement Date* | | Counterparty | | Amount Purchased | | | Amount Sold | | | Fair Value | | | Unrealized Appreciation/ (Depreciation) | |
United States Dollar/Brazilian Real | | | | | |
12/05/2013 | | Citibank | | | USD1,222,199 | | | | BRL2,940,000 | | | $ | 1,302,924 | | | $ | (80,725 | ) |
United States Dollar/Hungarian Forint | | | | | |
01/16/2014 | | Citibank | | | USD518,822 | | | | HUF114,161,000 | | | | 522,032 | | | | (3,210 | ) |
United States Dollar/New Russian Ruble | | | | | |
12/05/2013 | | JPMorgan Chase | | | USD334,380 | | | | RUB11,288,000 | | | | 350,143 | | | | (15,763 | ) |
United States Dollar/Peruvian Nouveau Sol | | | | | |
12/05/2013 | | Citibank | | | USD929,825 | | | | PEN2,650,000 | | | | 952,210 | | | | (22,385 | ) |
United States Dollar/South African Rand | | | | | |
01/16/2014 | | Citibank | | | USD771,443 | | | | ZAR7,784,000 | | | | 767,051 | | | | 4,392 | |
United States Dollar/Turkish Lira | | | | | |
01/16/2014 | | Citibank | | | USD1,470,122 | | | | TRY2,967,000 | | | | 1,467,734 | | | | 2,388 | |
| | | | | | | | | | | | $ | 5,362,094 | | | $ | (115,303 | ) |
* | | Certain contracts with different trade dates and like characteristics have been shown net. |
At October 31, 2013, the Fund’s interest rate swaps were as follows:
| | | | | | | | | | | | | | | | | | | | | | |
Currency | | Notional Amount | | | Expiration Date | | | Counterparty | | Receive (Pay) Floating Rate | | Floating Rate Index | | Fixed Rate | | | Unrealized Appreciation/ (Depreciation) | |
Over-the-counter swap agreements: | |
USD | | | 20,000,000 | | | | 11/01/2017 | | | Barclays Bank | | Receive | | 3-month LIBOR Index | | | 0.84% | | | $ | 103,622 | |
Exchange-traded swap agreements: | |
USD | | | 20,000,000 | | | | 10/24/2020 | | | Citibank | | (Pay) | | 3-month LIBOR Index | | | 2.15% | | | | (112,473 | ) |
| | | | | | | | | | | | | | | | | | | | $ | (8,851 | ) |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
15
Statement of Assets and Liabilities
As of October 31, 2013
| | | | |
Assets | | | | |
Investments, at value (cost $132,881,746) | | $ | 138,549,340 | |
Repurchase agreement, at value (cost $5,319,000) | | | 5,319,000 | |
Foreign currency, at value (cost $8,896,621) | | | 8,981,350 | |
Cash at broker for interest rate swaps | | | 792,487 | |
Cash | | | 101,705 | |
Cash at broker for futures contracts | | | 443 | |
Interest receivable | | | 2,216,201 | |
Prepaid expenses in connection with the at-the-market stock offering | | | 232,894 | |
Receivable for investments sold | | | 205,844 | |
Unrealized appreciation on over-the-counter interest rate swaps | | | 103,622 | |
Variation margin receivable for exchange-traded swaps | | | 12,031 | |
Unrealized appreciation on forward foreign currency exchange contracts | | | 6,780 | |
Prepaid expenses | | | 34,114 | |
Total assets | | | 156,555,811 | |
| |
Liabilities | | | | |
Bank loan payable (Note 7) | | | 40,000,000 | |
Dividends payable to common shareholders | | | 658,290 | |
Payable for investments purchased | | | 196,506 | |
Unrealized depreciation on forward foreign currency exchange contracts | | | 123,028 | |
Collateral from broker | | | 120,000 | |
Investment management fees payable (Note 3) | | | 94,354 | |
Investor relations fees payable (Note 3) | | | 33,050 | |
Administration fees payable (Note 3) | | | 18,145 | |
Interest payable on bank loan | | | 4,467 | |
Director fees payable | | | 2,286 | |
Accrued expenses | | | 96,558 | |
Total liabilities | | | 41,346,684 | |
| | | | |
Net Assets | | $ | 115,209,127 | |
| |
Composition of Net Assets: | | | | |
Common stock (par value $.001 per share) | | $ | 9,404 | |
Paid-in capital in excess of par | | | 109,387,740 | |
Distributions in excess of net investment income | | | (1,301,448 | ) |
Accumulated net realized loss from investments, interest rate swaps and futures contracts | | | (7,564,925 | ) |
Net unrealized appreciation on investments, futures contracts and interest rate swaps | | | 3,336,631 | |
Accumulated net realized foreign exchange gains | | | 9,039,504 | |
Net unrealized foreign exchange and forward foreign currency contract gains | | | 2,302,221 | |
Net Assets | | $ | 115,209,127 | |
Net asset value per common share based on 9,404,150 shares issued and outstanding | | $ | 12.25 | |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
16
Statement of Operations
For the Year Ended October 31, 2013
| | | | |
Net Investment Income | | | | |
| |
Income | | | | |
Interest and amortization of discount and premium (net of foreign withholding taxes of $11,881) | | $ | 7,510,104 | |
Other income | | | 95 | |
| | | 7,510,199 | |
| |
Expenses | | | | |
Investment management fee (Note 3) | | | 1,055,517 | |
Administration fee (Note 3) | | | 202,984 | |
Directors’ fees and expenses | | | 222,671 | |
Independent auditors’ fees and expenses | | | 117,685 | |
Investor relations fees and expenses (Note 3) | | | 116,153 | |
Reports to shareholders and proxy solicitation | | | 104,714 | |
Insurance expense | | | 66,943 | |
Custodian’s fees and expenses | | | 54,078 | |
Legal fees and expenses | | | 52,475 | |
Transfer agent’s fees and expenses | | | 28,514 | |
Bank loan fees and expenses | | | 6,228 | |
Miscellaneous | | | 33,499 | |
Total operating expenses, excluding interest expense | | | 2,061,461 | |
Interest expense (Note 7) | | | 431,590 | |
Total operating expenses | | | 2,493,051 | |
| | | | |
Net Investment Income | | | 5,017,148 | |
| |
Realized and Unrealized Gains/(Losses) on Investments, Interest Rate Swaps, Futures Contracts and Foreign Currencies | | | | |
| |
Net realized gain/(loss) from: | | | | |
Investment transactions | | | 3,742,307 | |
Interest rate swaps | | | (42,203 | ) |
Forward and spot foreign currency exchange contracts | | | 749,923 | |
Foreign currency transactions | | | (653,343 | ) |
| | | 3,796,684 | |
| |
Net change in unrealized appreciation/(depreciation) on: | | | | |
Investments | | | (10,865,951 | ) |
Interest rate swaps | | | (171 | ) |
Forward and spot foreign currency exchange contracts | | | (114,792 | ) |
Foreign currency translation | | | (5,254,826 | ) |
| | | (16,235,740 | ) |
Net loss from investments, interest rate swaps, futures contracts and foreign currencies | | | (12,439,056 | ) |
Net Decrease in Net Assets Resulting from Operations | | $ | (7,421,908 | ) |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
17
Statements of Changes in Net Assets
| | | | | | | | |
| | For the Year Ended October 31, 2013 | | | For the Year Ended October 31, 2012 | |
| | |
Increase/(Decrease) in Net Assets | | | | | | | | |
| | |
Operations: | | | | | | | | |
Net investment income | | $ | 5,017,148 | | | $ | 5,569,999 | |
Net realized gain from investments, interest rate swaps and futures contracts | | | 3,700,104 | | | | 655,449 | |
Net realized gain from foreign currency transactions | | | 96,580 | | | | 546,725 | |
Net change in unrealized appreciation/depreciation on investments, interest rate swaps and futures contracts | | | (10,866,122 | ) | | | 7,093,905 | |
Net change in unrealized appreciation/depreciation on foreign currency translation | | | (5,369,618 | ) | | | (1,517,851 | ) |
Net increase/(decrease) in net assets resulting from operations | | | (7,421,908 | ) | | | 12,348,227 | |
| | |
Distributions to Shareholders from: | | | | | | | | |
Net investment income | | | (7,861,643 | ) | | | (8,406,823 | ) |
Net decrease in net assets from distributions | | | (7,861,643 | ) | | | (8,406,823 | ) |
| | |
Common Stock Transactions: | | | | | | | | |
Proceeds from the at-the-market stock offering (Note 5) | | | 2,416,751 | | | | 2,555,698 | |
Expenses in connection with the at-the-market stock offering (Note 5) | | | (35,818 | ) | | | (37,715 | ) |
Change in net assets from common stock transactions | | | 2,380,933 | | | | 2,517,983 | |
Change in net assets resulting from operations | | | (12,902,618 | ) | | | 6,459,387 | |
| | |
Net Assets: | | | | | | | | |
Beginning of year | | | 128,111,745 | | | | 121,652,358 | |
End of year (including distributions in excess of net investment income of ($1,301,448) and ($2,512,632), respectively) | | $ | 115,209,127 | | | $ | 128,111,745 | |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
18
Statement of Cash Flows
For the Year Ended October 31, 2013
| | | | |
Increase/(Decrease) in Cash (Including Foreign Currency) | | | | |
Cash flows provided from (used for) operating activities: | | | | |
Interest received (excluding discount and premium amortization of $1,575,526) | | $ | 9,385,273 | |
Operating expenses paid | | | (2,486,430 | ) |
Payments received from broker for collateral on interest rate swaps | | | 248,692 | |
Purchases and sales of short-term portfolio investments, net | | | (4,361,000 | ) |
Purchases of long-term portfolio investments | | | (65,421,160 | ) |
Proceeds from sales of long-term portfolio investments | | | 73,080,554 | |
Realized gains on forward foreign currency exchange contracts closed | | | 764,016 | |
Realized losses on interest rate swap transactions | | | (42,203 | ) |
Purchases and sales of interest rate swaps, net | | | (881,360 | ) |
Unrealized appreciation (depreciation) on exchange-traded swap | | | (112,473 | ) |
Increase in prepaid expenses and other assets | | | (1 | ) |
Net cash provided from operating activities | | | 10,173,908 | |
Cash flows provided from (used for) financing activities | | | | |
Issuance of common stock | | | 2,416,750 | |
Dividends paid to common shareholders | | | (7,849,370 | ) |
Net cash used for financing activities | | | (5,432,620 | ) |
Effect of exchange rate on cash | | | (491,664 | ) |
Net increase in cash | | | 4,249,624 | |
Cash at beginning of year | | | 4,833,431 | |
Cash at end of year | | $ | 9,083,055 | |
| |
Reconciliation of Net Increase in Net Assets from Operations to Net Cash (Including Foreign Currency) Provided from (Used for) Operating Activities | | | | |
Net decrease in total net assets resulting from operations | | $ | (7,421,908 | ) |
Decrease in investments | | | 5,385,517 | |
Net realized gain on investment transactions | | | (3,742,307 | ) |
Net realized loss on interest rate swap transactions | | | 42,203 | |
Net realized foreign exchange gains | | | (96,580 | ) |
Net change in unrealized appreciation/depreciation on investments, futures contracts and interest rate swaps | | | 10,866,122 | |
Net change in unrealized foreign exchange gains/losses | | | 5,369,618 | |
Decrease in interest receivable | | | 299,548 | |
Decrease in receivable for investments sold | | | 213,710 | |
Increase in interest payable on bank loan, senior secured notes and term loans | | | 834 | |
Net increase in other assets | | | (1 | ) |
Decrease in payable for investments purchased | | | (3,494 | ) |
Change in interest receivable/payable for closed interest rate swaps | | | (6,790 | ) |
Payments received from broker for interest rate swaps | | | 255,482 | |
Net change in unrealized appreciation/depreciation on exchange-traded swap | | | (112,473 | ) |
Change in payable/receivable for interest rate swap transactions | | | (881,360 | ) |
Increase in accrued expenses and other liabilities | | | 5,787 | |
Total adjustments | | | 17,595,816 | |
Net cash provided from operating activities | | $ | 10,173,908 | |
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
19
Financial Highlights
| | | | | | | | | | | | | | | | | | | | |
| | For the Year Ended October 31, | |
| | 2013 | | | 2012 | | | 2011 | | | 2010 | | | 2009 | |
Per Share Operating Performance(a): | | | | | | | | | | | | | | | | | | | | |
Net asset value per common share, beginning of year | | | $13.88 | | | | $13.45 | | | | $12.92 | | | | $11.67 | | | | $9.61 | |
Net investment income | | | 0.54 | | | | 0.61 | | | | 0.72 | | | | 0.72 | | | | 0.62 | |
Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions | | | (1.33 | ) | | | 0.73 | | | | 0.65 | | | | 1.37 | | | | 3.02 | |
Total from investment operations applicable to common shareholders | | | (0.79 | ) | | | 1.34 | | | | 1.37 | | | | 2.09 | | | | 3.64 | |
Distributions to common shareholders from: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (0.84 | ) | | | (0.92 | ) | | | (0.84 | ) | | | (0.84 | ) | | | (0.92 | ) |
Tax return of capital | | | – | | | | – | | | | – | | | | – | | | | (0.67 | ) |
Total distributions | | | (0.84 | ) | | | (0.92 | ) | | | (0.84 | ) | | | (0.84 | ) | | | (1.59 | ) |
Offering cost on common stock | | | – | | | | – | | | | – | | | | – | | | | – | |
Impact of shelf offering | | | – | | | | 0.01 | | | | – | | | | – | | | | – | |
Effect of Fund shares repurchased | | | – | | | | – | | | | – | | | | – | | | | 0.01 | |
Net asset value per common share, end of year | | | $12.25 | | | | $13.88 | | | | $13.45 | | | | $12.92 | | | | $11.67 | |
Market value, end of year | | | $11.15 | | | | $14.06 | | | | $13.11 | | | | $12.53 | | | | $11.70 | |
| | | | | |
Total Investment Return Based on(b): | | | | | | | | | | | | | | | | | | | | |
Market value | | | (15.08% | ) | | | 14.54% | | | | 11.48% | | | | 14.84% | | | | 68.04% | |
Net asset value | | | (5.49% | )(c) | | | 10.21% | (c) | | | 11.00% | | | | 18.72% | | | | 43.04% | |
| | | | | |
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data: | | | | | | | | | | | | | | | | | | | | |
Net assets applicable to common shareholders, end of year (000 omitted) | | | $115,209 | | | | $128,112 | | | | $121,652 | | | | $116,817 | | | | $105,075 | |
Average net assets applicable to common shareholders (000 omitted) | | | $122,387 | | | | $123,780 | | | | $118,560 | | | | $108,068 | | | | $92,052 | |
Net operating expenses | | | 2.04% | | | | 2.07% | | | | 2.13% | | | | 2.49% | | | | 3.30% | |
Net operating expenses without reimbursement | | | 2.04% | | | | 2.07% | | | | 2.13% | | | | 2.49% | | | | 3.33% | (d) |
Net operating expenses, excluding interest expense | | | 1.68% | | | | 1.68% | | | | 1.68% | | | | 1.88% | | | | 2.52% | |
Net investment income | | | 4.10% | | | | 4.50% | | | | 5.47% | | | | 6.02% | | | | 6.02% | |
Portfolio turnover | | | 43% | | | | 34% | | | | 76% | | | | 44% | | | | 63% | |
Revolving credit facility outstanding (000 omitted) | | | $40,000 | | | | $40,000 | | | | $40,000 | | | | $40,000 | | | | $30,000 | |
Asset coverage ratio on revolving credit facility at year end(e) | | | 388% | | | | 420% | | | | 404% | | | | 392% | | | | 450% | |
Asset coverage per $1,000 on revolving credit facility at year end | | | $3,880 | | | | $4,196 | | | | $4,041 | | | | $3,920 | | | | $4,502 | |
(a) | | Based on average shares outstanding. |
(b) | | Total investment return based on market value is calculated assuming that shares of the Fund’s common stock were purchased at the closing market price as of the beginning of the period, dividends, capital gains and other distributions were reinvested as provided for in the Fund’s dividend reinvestment plan and then sold at the closing market price per share on the last day of the period. The computation does not reflect any sales commission investors may incur in purchasing or selling shares of the Fund. The total investment return based on the net asset value is similarly computed except that the Fund’s net asset value is substituted for the closing market value. |
(c) | | The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
(d) | | In 2009, the Fund filed a non-routine proxy to consider the approval of a new sub-advisory agreement among the Fund, Investment Manager, and Sub-Adviser. The Fund and the Investment Manager agreed to each bear equal responsibility with respect to the costs of soliciting proxies associated with the non-routine item. |
(e) | | Asset coverage ratio is calculated by dividing net assets plus the amount of any borrowings, including Series A Mandatory Redeemable Preferred Shares, for investment purposes by the amount of any long-term debt obligations, which includes the senior secured notes, revolving credit facility and term loans. |
Amounts listed as “–” are $0 or round to $0.
See Notes to Financial Statements.
Aberdeen Global Income Fund, Inc.
20
Notes to Financial Statements
October 31, 2013
1. Organization
Aberdeen Global Income Fund, Inc. (the “Fund”) was incorporated in Maryland on June 28, 1991, as a closed-end, non-diversified management investment company. The Fund’s principal investment objective is to provide high current income by investing primarily in fixed income securities. As a secondary investment objective, the Fund seeks capital appreciation, but only when consistent with its principal investment objective. As a non-fundamental policy, under normal market conditions, the Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in debt securities. This 80% investment policy is a non-fundamental policy of the Fund and may be changed by the Fund’s Board of Directors (the “Board”) upon 60 days’ prior written notice to shareholders. The Fund’s investments are divided into three categories: Developed Markets, Investment Grade Developing Markets and Sub-Investment Grade Developing Markets. “Developed Markets” are those countries contained in the Citigroup World Government Bond Index, New Zealand, Luxembourg and the Hong Kong Special Administrative Region. As of October 31, 2013, securities of the following countries comprised the Citigroup World Government Bond Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Malaysia, Mexico, Netherlands, Norway, Poland, Singapore, South Africa, Spain, Sweden, Switzerland, United Kingdom, and the United States. “Investment Grade Developing Markets” are those countries whose sovereign debt is rated not less than Baa3 by Moody’s Investors Services Inc. (“Moody’s”) or BBB- by Standard & Poor’s (“S&P”) or comparably rated by another appropriate nationally or internationally recognized ratings agency. “Sub-Investment Grade Developing Markets” are those countries that are not Developed Markets or Investment Grade Developing Markets. Under normal circumstances, at least 60% of the Fund’s total assets are invested in fixed income securities of issuers in Developed Markets or Investment Grade Developing Markets, whether or not denominated in the currency of such country; provided, however, that the Fund invests at least 40% of its total assets in fixed income securities of issuers in Developed Markets. The Fund may invest up to 40% of its total assets in fixed income securities of issuers in Sub-Investment Grade Developing Markets, whether or not denominated in the currency of such country. There can be no assurance that the Fund will achieve its investment objectives. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry, country or region.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to accounting principles generally accepted in
the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The accounting records of the Fund are maintained in U.S. Dollars and the U.S. Dollar is used as both the functional and reporting currency. However, the Australian Dollar, Canadian Dollar and British Pound are the functional currencies for U.S. federal tax purposes.
(a) Security Valuation:
The Fund is required to value its securities at fair market value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Long-term debt and other fixed-income securities are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service provider. If there are no current day bids, the security is valued at the previously applied bid. Short-term debt securities (such as commercial paper, and U.S. treasury bills) having a remaining maturity of 60 days or less are valued at amortized cost, which approximates fair value. Debt and other fixed-income securities are generally considered to be Level 2 investments.
Exchange traded derivatives are generally considered to be Level 1 investments and over-the-counter derivatives are generally considered to be Level 2 investments.
In the event that a security’s market quotations are not readily available or are deemed unreliable, the security is valued at fair value as determined by the Fund’s Pricing Committee, taking into account the relevant factors and surrounding circumstances using valuation policies and procedures approved by the Board. A security that has been fair valued by the Pricing Committee may be classified as Level 2 or 3 depending on the nature of the inputs.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Fund discloses the fair value of its investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1 measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for identical assets, and Level 3 measurements to valuations based upon unobservable inputs that are significant to the
Aberdeen Global Income Fund, Inc.
21
Notes to Financial Statements (continued)
October 31, 2013
valuation. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value
measurement. The three-tier hierarchy of inputs is summarized below:
Level 1 – quoted prices in active markets for identical investments;
Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
A summary of standard inputs is listed below:
| | |
Security Type | | Standard Inputs |
| |
Debt and other fixed-income securities | | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, credit quality, yield, and maturity |
| |
Forward foreign currency contracts | | Forward exchange rate quotations |
| |
Swap agreements | | Market information pertaining to the underlying reference assets, i.e., credit spreads, credit event probabilities, fair values, forward rates, and volatility measures |
The following is a summary of the inputs used as of October 31, 2013 in valuing the Fund’s investments at fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Please refer to the Portfolio of Investments for a detailed breakout of the security types:
| | | | | | | | | | | | |
Assets | | Level 1 | | | Level 2 | | | Level 3 | |
Fixed Income Investments | | | | | | | | | | | | |
Corporate Bonds | | $ | – | | | $ | 29,381,222 | | | $ | – | |
Government Bonds | | | – | | | | 109,168,118 | | | | – | |
Total Fixed Income Investments | | | – | | | | 138,549,340 | | | | – | |
Short-Term Investment | | | – | | | | 5,319,000 | | | | – | |
Total Investments | | $ | – | | | $ | 143,868,340 | | | $ | – | |
Other Financial Instruments | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts | | $ | – | | | $ | 6,780 | | | $ | – | |
Interest Rate Swap Agreements | | | – | | | | 103,622 | | | | – | |
Total Other Financial Instruments | | $ | – | | | $ | 110,402 | | | $ | – | |
Total Assets | | $ | – | | | $ | 143,978,742 | | | $ | – | |
Liabilities | | | | | | | | | | | | |
Other Financial Instruments | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts | | $ | – | | | $ | (123,028 | ) | | $ | – | |
Interest Rate Swap Agreements | | | – | | | | (112,473 | ) | | | – | |
Total Liabilities – Other Financial Instruments | | $ | – | | | $ | (235,501 | ) | | $ | – | |
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, 2013, there were no
transfers between Levels. For the year ended October 31, 2013, there have been no significant changes to the fair valuation methodologies.
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Notes to Financial Statements (continued)
October 31, 2013
(b) Repurchase Agreements:
The Fund may enter into repurchase agreements under the terms of a Master Repurchase Agreement. It is the Fund’s policy that its custodian/counterparty segregate the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. The repurchase price generally equals the price paid by the Fund plus interest negotiated on the basis of current short-term rates. To the extent that any repurchase transaction exceeds one business day, the collateral is valued on a daily basis to determine its adequacy. Under the Master Repurchase Agreement, if the counterparty defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the counterparty of the security, realization of the collateral by the Fund may be delayed or limited. The Fund held a repurchase agreement of $5,319,000 as of October 31, 2013. The value of the related collateral exceeded the value of the repurchase agreement at period end.
(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. The Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time).
Foreign currency amounts are translated into U.S. Dollars on the following basis:
(i) | | market value of investment securities, other assets and liabilities – at the exchange rates at the current daily rates of exchange; and |
(ii) | | purchases and sales of investment securities, income and expenses – at the rate of exchange prevailing on the respective dates of such transactions. |
The Fund isolates that portion of the results of operations arising from changes in the foreign exchange rates due to the fluctuations in the market prices of the securities held at the end of the reporting period. Similarly, the Fund isolates the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of portfolio securities sold during the reporting period.
Net exchange gain/(loss) is realized from sales and maturities of portfolio securities, sales of foreign currencies, settlement of securities transactions, dividends, interest and foreign withholding taxes recorded on the Fund’s books. Net unrealized foreign exchange appreciation/(depreciation) includes changes in the value of portfolio securities and other assets and liabilities arising as a result of changes in the exchange rate. The net realized and unrealized foreign exchange gain/(loss) shown in the composition of net assets represents foreign exchange gain/(loss) for book purposes that may not have been recognized for tax purposes.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. Dollar. Generally, when the U.S. Dollar rises in value against foreign currency, the Fund’s investments denominated in that currency will lose value because its currency is worth fewer U.S. Dollars; the opposite effect occurs if the U.S. Dollar falls in relative value.
(e) Derivative Financial Instruments:
The Fund is authorized to use derivatives to manage currency risk, credit risk and interest rate risk and to replicate or 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
Aberdeen Global Income Fund, Inc.
23
Notes to Financial Statements (continued)
October 31, 2013
market value is recorded by the Fund as unrealized appreciation or depreciation. Forward contracts’ prices are received daily from an independent pricing provider. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. These realized and unrealized gains and losses are reported on the Statement of Operations. During the year ended October 31, 2013, the Fund used forward contracts as part of the currency overlay process in an effort to position the currency exposure according to the Fund’s ongoing strategy. During the period, the Fund held long New Zealand Dollar positions against short Australian Dollars positions seeking to reduce the risk of Australian Dollar weakness on the Fund’s returns over the period.
While the Fund may enter into forward contracts to seek to reduce currency exchange rate risks, transactions in such contracts involve certain risks. The Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in exchange rates. Thus, while the Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for the Fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between the Fund’s portfolio holdings or securities quoted or denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving a complete hedge, which will expose the Fund to the risk of foreign exchange loss.
Forward contracts are subject to the risks that the counterparts to such contract will default on its obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearing house, a default on the contract would deprive the Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force the Fund to cover its purchase or sale commitments, if any, at the current market price.
Futures Contracts:
The Fund may invest in financial futures contracts (“futures contracts”) for the purpose of hedging its existing portfolio securities, or securities that the Fund intends to purchase, against fluctuations in value caused by changes in prevailing market interest rates or prices. Futures contracts may also be entered into for non-hedging purposes; however, in those instances, the aggregate initial margin and premiums required to establish the Fund’s positions may not exceed 5% of the Fund’s net asset value after taking into account unrealized profits and unrealized losses on any such contract it has entered.
Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount. This payment is known as “initial margin”. Subsequent payments, known as “variation margin,” are calculated each day, depending on the daily fluctuations in the fair value/market value of the underlying assets. An unrealized gain/(loss) equal to the variation margin is recognized on a daily basis. When the contract expires or is closed, the gain/(loss) is realized and is presented in the Statement of Operations as a net realized gain/(loss) on futures contracts. Futures contracts are valued daily at their last quoted sale price on the exchange on which they are traded.
A “sale” of a futures contract means a contractual obligation to deliver the securities or foreign currency called for by the contract at a fixed price at a specified time in the future. A “purchase” of a futures contract means a contractual obligation to acquire the securities or foreign currency at a fixed price at a specified time in the future.
During the year ended October 31, 2013, the Fund did not hold any futures contracts.
There are significant risks associated with the Fund’s use of futures contracts, including the following: (1) the success of a hedging strategy may depend on the ability of a Fund’s investment adviser and/or sub-adviser to predict movements in the prices of individual securities, fluctuations in markets and movements in interest rates; (2) there may be an imperfect or no correlation between the movement in the price of futures contracts, interest rates and the value/market value of the securities held by the Fund; (3) there may not be a liquid secondary market for a futures contract; (4) trading restrictions or limitations may be imposed by an exchange; and (5) government regulations may restrict trading in futures contracts. In addition, should market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss.
Swaps:
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset or notional principal amount. The Fund will enter into swaps only on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the difference between the two payments. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms
Aberdeen Global Income Fund, Inc.
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Notes to Financial Statements (continued)
October 31, 2013
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, 2013, the Fund used interest rate swaps as a tool to hedge the interest rate risk associated with 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.
Effective June 10, 2013, certain swaps, including interest rate swaps, must be cleared pursuant to U.S. Commodity Futures Trading Commission (“CFTC”) regulations. As a result, interest rate swaps entered into by the Fund after June 10, 2013 can no longer be traded over the counter and become subject to various regulations and rules of the CFTC. The Fund entered into one new swap agreement subject to clearing during the reporting period. In a centrally cleared derivative transaction, a Fund typically enters into the transaction with a financial institution counterparty, and performance of the transaction is effectively guaranteed by a central clearinghouse, thereby reducing or eliminating the Fund’s exposure to the credit risk of its original counterparty. The Fund will be required to post specified levels of margin with the clearinghouse or at the instruction of the clearinghouse; the margin required by a clearinghouse may be greater than the margin the Fund would be required to post in an uncleared transaction. Only a limited number of transactions are currently eligible for clearing.
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, 2013:
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
| | Year Ended October 31, 2013 | | | Year Ended October 31, 2013 | |
Derivatives not accounted for as hedging instruments and risk exposure | | Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
Interest rate swaps (interest rate risk) | | Unrealized appreciation on over-the-counter interest rate swaps | | $ | 103,622 | | | Unrealized depreciation on over-the-counter interest rate swaps | | $ | – | |
| | | | |
Interest rate swaps (interest rate risk)* | | Variation margin receivable for exchange-traded swaps | | | – | | | Variation margin payable for exchange-traded swaps | | | 112,473 | |
| | | | |
Forward foreign exchange contracts (foreign exchange risk) | | Unrealized appreciation on forward foreign currency exchange contracts | | | 6,780 | | | Unrealized depreciation on forward foreign currency exchange contracts | | | 123,028 | |
Total | | | | $ | 110,402 | | | | | $ | 235,501 | |
* | | Includes cumulative appreciation/depreciation on exchange-traded swaps as reported in the Portfolio of Investments. Only current days variation margin is reported within the Statement of Assets and Liabilities. |
Aberdeen Global Income Fund, Inc.
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Notes to Financial Statements (continued)
October 31, 2013
The Effect of Derivative Instruments on the Statement of Operations
for the Year Ended October 31, 2013
| | | | | | | | | | |
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) | | | | $ | (42,203 | ) | | $ | (171 | ) |
| | | |
Forward foreign exchange contracts (foreign exchange risk) | | | | | 764,016 | | | | (114,792 | ) |
Total | | | | $ | 721,813 | | | $ | (114,963 | ) |
Information about forward currency contracts reflected as of the date of this report is generally indicative of the type of activity for the month ended October 31, 2013. In prior months the Fund also held positions in British Pound Sterling, Euro Dollar, Colombian Peso, Euro, Indian Rupee, Mexican Peso and New Zealand Dollar forward contracts. The quarterly average notional values for the Fund’s forward contracts were as follows:
| | | | |
Quarter | | Average Notional Value | |
1st Quarter | | $ | 16,277,772 | |
2nd Quarter | | | 17,797,805 | |
3rd Quarter | | | 19,491,725 | |
4th Quarter | | | 19,609,624 | |
Information about interest rate swaps reflected as of the date of this report is generally indicative of the volume of activity for the year ended October 31, 2013. On October 22, 2013, the Fund closed out a swap agreement with a notional amount of $20,000,000 with a maturity date of November 1, 2013. Also on that date, the Fund entered into a new interest rate swap with a notional amount of $20,000,000 that matures on October 24, 2020. The overall notional value and volume of interest rate swap positions was unvaried for the period.
The Fund values derivatives at fair value, as described in 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) Security Transactions, Investment Income and Expenses:
Security transactions are recorded on the trade date. Realized and unrealized gains/(losses) from security and currency transactions are calculated on the identified cost basis. Interest income and expenses are recorded on an accrual basis. Discounts and premiums on securities purchased are accreted or amortized on an effective yield basis over the estimated lives of the respective securities.
(g) Distributions:
The Fund has a managed distribution policy to pay distributions from net investment income supplemented by net realized foreign exchange gains, net realized short-term capital gains and return of capital distributions, if necessary, on a monthly basis. The managed distribution policy is subject to regular review by the Board. The Fund will also declare and pay distributions at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any. Dividends and distributions to shareholders are recorded on the ex-dividend date.
Dividends and distributions to shareholders are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for foreign currencies, loss deferrals and recognition of market discount and premium.
(h) Federal Income Taxes:
For federal income and excise tax purposes, substantially all of the Fund’s transactions are accounted for using the functional currencies (Australian Dollar, Canadian Dollar or British Pound). Accordingly, realized currency gains/(losses) are realized from changes in the foreign exchange rates against the Australian Dollar or are a result from the repatriation of any of the functional currencies into U.S.
Aberdeen Global Income Fund, Inc.
26
Notes to Financial Statements (continued)
October 31, 2013
Dollars. This may differ substantially from the realized currency gains recognized under GAAP within the financial statements. Furthermore, the Fund’s distribution requirements are calculated on a federal tax basis whereby currency gains/(losses) are considered income and distributed out as such.
The Fund intends to continue to qualify as a “regulated investment company” by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code of 1986, as amended, and to make distributions of net investment income and net realized capital gains sufficient to relieve the Fund from all, or substantially all, federal income taxes. Therefore, no federal income tax provision is required. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended October 31 are subject to such review.
(i) 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 (the “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 (the “Sub-Advisory agreement”) respectively. The Investment Manager, the Investment Adviser and the Sub-Adviser are wholly-owned subsidiaries of Aberdeen Asset Management PLC.
The Investment Manager makes investment decisions on behalf of the Fund on the basis of recommendations and information furnished to it by the Investment Adviser, including the selection of and the placement of orders with, brokers and dealers to execute portfolio transactions on behalf of the Fund. The Sub-Adviser manages the portion of the Fund’s assets that the Investment Manager allocates to it.
The Management Agreement provides the Investment Manager with a fee, payable monthly by the Fund, at the following annual rates: 0.65% of the Fund’s average weekly Managed Assets up to $200 million, 0.60% of Managed Assets between $200 million and $500 million, and 0.55% of Managed Assets in excess of $500 million. Managed Assets is defined in the Management Agreement as net assets plus the amount of any borrowings for investment purposes.
The Investment Manager pays fees to the Investment Adviser for its services rendered. The Investment Manager informed the Fund that it paid $321,550 to the Investment Adviser, with respect to the Fund, during the year ended October 31, 2013. As compensation for its services under the Sub-Advisory Agreement, the Sub-Adviser received $157,014 in sub-advisory fees, with respect to the Fund, during the year ended October 31, 2013.
(b) Fund Administration:
Aberdeen Asset Management Inc. (“AAMI”), an affiliate of the Investment Manager, Investment Adviser and Sub-Adviser, is the Fund’s Administrator, pursuant to an agreement under which AAMI receives a fee, payable monthly by the Fund, at an annual fee rate of 0.125% of the Fund’s average weekly Managed Assets up to $1 billion, 0.10% of the Fund’s average weekly Managed Assets between $1 billion and $2 billion, and 0.075% of the Fund’s average weekly Managed Assets in excess of $2 billion. For the year ended October 31, 2013. AAMI earned $202,984 from the Fund for administration fees.
(c) Investor Relations:
Under the terms of an Investor Relations Services Agreement, AAMI serves as the Fund’s investor relations services provider.
Pursuant to the terms of the Investor Relations Services Agreement, AAMI provides, among other things, objective and timely information to shareholders based on publicly-available information; provides information efficiently through the use of technology while offering shareholders immediate access to knowledgeable investor relations representatives; develops and maintains effective communications with investment professionals from a wide variety of firms; creates and maintains investor relations communication materials such as fund manager interviews, films and webcasts, published white papers, magazine and articles and other relevant materials discussing the Fund’s investment results, portfolio positioning and outlook; develops and maintains effective communications with large institutional shareholders; responds to specific shareholder questions; and reports activities and results to the Board and management detailing insight into general shareholder sentiment.
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27
Notes to Financial Statements (continued)
October 31, 2013
For the year ended October 31, 2013, the Fund incurred fees of approximately $110,669 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, 2013, were $64,807,400 and $70,936,983, respectively.
5. Capital
The authorized capital of the Fund is 300 million shares of $0.001 par value common stock. As of October 31, 2013, there were 9,404,150 shares of common stock issued and outstanding.
The Fund has a “shelf” registration statement with the SEC, which permits the Fund to issue up to $60,000,000 in shares of common stock through one or more public offerings including at-the-market offerings (“ATM” offerings). Shares are offered through ATM offerings only when market conditions are considered favorable. Such shares are only issued when the premium to net asset value is greater than the costs associated with the transaction. Any proceeds raised through ATM offerings are used for investment purposes. The Fund has entered into a sales agreement with JonesTrading Institutional Services LLC (“JonesTrading”) pursuant to which the Fund may offer and sell up to 1,500,000 of its shares from time to time through JonesTrading as its agent for the offer and sale of the shares. Through October 31, 2013, there were 175,334 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, 2013 these costs were $35,818. These costs are noted on the Statements of Changes in Net Assets.
6. Open Market Repurchase Program
On March 1, 2001, the Board approved a stock repurchase program. The Board amended the program on December 12, 2007. The stock repurchase program allows the Fund to repurchase up to 10% of its outstanding common stock in the open market during any 12-month period, if and when the discount to NAV is at least 8%.
For the fiscal year ended October 31, 2013 and fiscal year ended October 31, 2012, the Fund did not repurchase any shares through this program.
7. Revolving Credit Facility
The Fund’s revolving credit loan facility with The Bank of Nova Scotia was renewed for another 364-day term on March 1, 2013. For the fiscal year ended October 31, 2013, the balance of the loan
outstanding was $40,000,000, and the average interest rate on the loan facility was 1.06%. The average balance for the fiscal year was $40,000,000. 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.
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 365 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, 2013, the Fund incurred fees of approximately $6,228.
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
Aberdeen Global Income Fund, Inc.
28
Notes to Financial Statements (continued)
October 31, 2013
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 $75,000,000.
8. Portfolio Investment Risks
(a) Credit and Market Risk:
A debt instrument’s price depends, in part, on the credit quality of the issuer, borrower, counterparty, or underlying collateral and can decline in response to changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral, or changes in specific or general market, economic, industry, political, regulatory, geopolitical, or other conditions. Funds that invest in high yield and emerging market instruments are subject to certain additional credit and market risks. The yields of high yield and emerging market debt obligations reflect, among other things, perceived credit risk. The Fund’s investments in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk of not receiving timely and/or ultimate payment of interest and principal, greater market price volatility, and less liquid secondary market trading.
(b) Interest Rate Risk:
The prices of fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund’s fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk.
(c) Risks Associated with Foreign Securities and Currencies:
Investments in securities of foreign issuers carry certain risks not ordinarily associated with investments in securities of U.S. issuers. These risks include future political and economic developments, and the possible imposition of exchange controls or other foreign governmental laws and restrictions. In addition, with respect to certain countries, there is the possibility of expropriation of assets, confiscatory taxation, and political or social instability or diplomatic developments, which could adversely affect investments in those countries.
Certain countries also may impose substantial restrictions on investments in their capital markets by foreign entities, including restrictions on investments in issuers of industries deemed sensitive
to relevant national interests. These factors may limit the investment opportunities available and result in a lack of liquidity and high price volatility with respect to securities of issuers from developing countries. Foreign securities may also be harder to price than U.S. securities.
(d) Focus Risk:
The Fund may have elements of risk not typically associated with investments in the United States due to focused investments in a limited number of countries or regions subject to foreign securities or currencies risks. Such focused investments may subject the Fund to additional risks resulting from political or economic conditions in such countries or regions and the possible imposition of adverse governmental laws or currency exchange restrictions could cause the securities and their markets to be less liquid and their prices to be more volatile than those of comparable U.S. securities.
(e) Risks Associated with European Markets:
A number of countries in Europe have experienced and may continue to experience 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 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.
9. 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.
Aberdeen Global Income Fund, Inc.
29
Notes to Financial Statements (continued)
October 31, 2013
10. Tax Information
The U.S. federal income tax basis of the Fund’s investments and the net unrealized appreciation as of October 31, 2013 were as follows:
| | | | | | | | | | | | | | |
Tax Basis of Investments | | | Appreciation | | | Depreciation | | | Net Unrealized Appreciation | |
| $143,636,672 | | | $ | 4,578,552 | | | $ | (4,346,883 | ) | | | $231,669 | |
The tax character of distributions paid during the fiscal years ended October 31, 2013 and October 31, 2012 was as follows:
| | | | | | | | |
| | October 31, 2013 | | | October 31, 2012 | |
Distributions paid from: | | | | | | | | |
Ordinary Income | | $ | 7,861,643 | | | $ | 8,406,823 | |
Net long-term capital gains | | | – | | | | – | |
Total tax character of distributions | | $ | 7,861,643 | | | $ | 8,406,823 | |
As of October 31, 2013, the components of accumulated earnings on a tax basis were as follows:
| | | | |
Undistributed ordinary income – net | | $ | 2,561,320 | |
Undistributed long-term capital gains – net | | | – | |
Total undistributed earnings | | $ | 2,561,320 | |
Capital loss carryforward | | | (7,541,317 | )* |
Other currency gains | | | 9,039,504 | |
Other temporary differences | | | (801,305 | ) |
Unrealized appreciation/(depreciation) – securities | | | 231,669 | ** |
Unrealized appreciation/(depreciation) – currency | | | 2,322,112 | ** |
Total accumulated earnings/(losses) – net | | $ | 5,811,983 | |
* | | On October 31, 2013, the Fund had a net capital loss carryforward of $7,541,317, of which $761,906 expires in 2015, $2,330,488 expires in 2016 and $4,448,923 expires in 2017. This amount 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 shortterm as under previous law. |
** | | 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 for tax purposes of unrealized gains/(losses) on certain foreign currency 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, $1,804,569 has been reclassified to distributions in excess of net investment income from accumulated net realized loss from investments, interest rate swaps and futures contracts. $2,251,110 has been reclassified to distributions in excess
of net investment income from accumulated net realized foreign exchange gain and $125,347 has been reclassified from accumulated net realized foreign exchange gain to accumulated net realized loss on investments. These reclassifications have no effect on net assets or net asset values per share.
Aberdeen Global Income Fund, Inc.
30
Notes to Financial Statements (concluded)
October 31, 2013
11. 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 for annual reporting periods beginning on or after January 1, 2013 (and interim periods within those annual periods). Reporting entities will be required to provide both net amounts (those that are offset) and gross information (as if amounts are not offset) in the notes to the financial statements for relevant assets and liabilities. Management is currently evaluating the implications of this ASU and its impact on the financial statements has not been determined.
12. 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, 2013.
On November 12, 2013 and December 10, 2013, the Fund announced that it will pay, on December 13, 2013 and January 17, 2014, a distribution of $0.07 per share to all shareholders of record as of November 29, 2013 and December 31, 2013, respectively.
On December 20, 2013 the Fund announced that it will pay a special distribution on January 17, 2014, of $0.09 per share to all shareholders of record as of December 31, 2013.
Aberdeen Global Income Fund, Inc.
31
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders of
Aberdeen Global Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Aberdeen Global Income Fund, Inc. (the “Fund”), as of October 31, 2013, and the related statement of operations and cash flows for the year then ended, and the statement 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 five-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 audits.
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, 2013, by
correspondence with the custodian 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 Global Income Fund, Inc. present fairly, in all material respects, the financial position of the Fund as of October 31, 2013, 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 five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania
December 23, 2013
Aberdeen Global Income Fund, Inc.
32
Federal Tax Information: Dividends and Distributions (unaudited)
The following information is provided with respect to the distributions paid by the Aberdeen Global Income Fund, Inc. during the fiscal year ended October 31, 2013:
Common Shareholders
| | | | | | | | |
Payable Date | | Foreign Taxes Paid†* | | | Foreign Source Income** | |
11/16/12-10/18/13 | | | .015% | | | | 99.99% | |
† | | 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)
October 31, 2013
Board of Directors’ Consideration of Advisory and Sub-advisory Agreements
At an in-person meeting of the Board of Directors (the “Board”) of Aberdeen Global Income Fund, Inc. (“FCO” or the “Fund”) held on September 3, 2013, the Board, including a majority of the Directors who are not considered to be “interested persons” of the Fund (the “Independent Directors”) under the Investment Company Act of 1940, as amended (the “1940 Act”), approved for an annual period 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 “Sub-Adviser”). Collectively, the Investment Manager, the Investment Adviser and the Sub-Adviser are referred to herein as the “Advisers” and the aforementioned agreements with the Advisers are referred to as the “Advisory Agreements.” The Investment Adviser and the Sub-Adviser are affiliates of the Investment Manager.
In considering whether to approve the renewal of the Fund’s Advisory Agreements, the Board reviews a variety of information provided by the Advisers relating to FCO, the Advisory Agreements and the Advisers, including comparative performance, fee and expense information and other information regarding the nature, extent and quality of services provided by the Advisers under their respective Advisory Agreements. The materials provided to the Board generally include, among other items: (i) information on the
investment performance of the Fund and the performance of peer groups of funds and the Fund’s performance benchmarks; (ii) information on the Fund’s advisory fees and other expenses, including information comparing the Fund’s expenses to those of a peer group of funds and information about any applicable expense limitations and fee “breakpoints”; (iii) information about the profitability of the Advisory Agreements to the Advisers; (iv) 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 (v) a memorandum from the Independent Directors’ independent legal counsel on the responsibilities of the Board in considering for approval the investment advisory and investment sub-advisory arrangements under the 1940 Act and Maryland law. The Board, including the Fund’s 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 Board was afforded the opportunity to ask questions of and request additional materials from the Advisers.
Aberdeen Global Income Fund, Inc.
33
Supplemental Information (unaudited) (continued)
October 31, 2013
In addition to the materials requested by the Directors in connection with their annual consideration of the continuation of the Advisory Agreements, the Directors received materials in advance of each regular quarterly meeting of the Board that provided information relating to the services provided by the Advisers.
The Independent Directors were advised by separate independent legal counsel throughout the process. The Independent Directors also consulted in executive sessions with counsel to the Independent Directors regarding consideration of the renewal of the Advisory Agreements. The Directors also considered the recommendation of the Board’s Contract Review Committee, consisting solely of the Board’s Independent Directors, that the Advisory Agreements be renewed. In considering whether to approve the continuation of the Advisory Agreements, the Board, including the Independent Directors, did not identify any single factor as determinative. Individual Directors may have evaluated the information presented differently from one another, giving different weights to various factors. Matters considered by the Board, including the Independent Directors, in connection with its approval of the continuation of the Advisory Agreements included the factors listed below.
• | | The nature, extent and quality of the services provided to the Fund under the Advisory Agreements. The Directors considered the nature, extent and quality of the services provided by the Advisers to the Fund and the resources dedicated to the applicable Fund by the Advisers. The Board considered, among other things, the Advisers’ investment experience. The Board received information regarding the Advisers’ compliance with applicable laws and SEC and other regulatory inquiries or audits of the Fund and the Advisers. 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 Board also considered the allocation of responsibilities among the Advisers. The Board also considered that they receive information on a regular basis from the Fund’s Chief Compliance Officer regarding the Advisers’ compliance policies and procedures. The Board also considered the Advisers’ risk management processes. The Board considered the Advisers’ brokerage policies and practices. Management reported to the Board on, among other things, its business plans and organizational changes. The Board also took into account their knowledge of management and the quality of the performance of management’s duties through Board meetings, discussion and reports during the preceding year. |
After reviewing these and related factors, the Board concluded that they were satisfied with the nature, extent and quality of
the services provided and supported the renewal of the applicable Advisory Agreements.
• | | Investment performance of the Fund and the Advisers. The Board received and reviewed with management, among other performance data, information compiled by Strategic Insight Mutual Fund Research and Consulting, LLC (“SI”), an independent third-party provider of investment company data as to the Fund’s total return, as compared to the funds in the Fund’s Morningstar category (the “Morningstar Group”). The Board also received performance information from management that compared the Fund’s return to comparable non-U.S. investment companies in its Lipper category. |
The Board received and considered information for each of the last five fiscal years regarding the Fund’s total return on a gross and net basis and relative to the Fund’s benchmark, the Fund’s share performance and premium/discount information and the impact of foreign currency movements on the Fund’s performance. The Board also received and reviewed information as to the Fund’s total return for each of the last five fiscal years as compared with the total returns of its respective Morningstar Group average, and other comparable Aberdeen-managed funds and segregated accounts. The Board considered management’s discussion of the factors contributing to differences in performance, including differences in the investment strategies of each of these other funds and accounts. The Board also reviewed information as to the Fund’s discount/premium ranking relative to its Morningstar Group. The Board took into account management’s discussion of the Fund’s performance. The Board concluded that overall performance results were satisfactory and supported continuance of the Advisory Agreements.
Specifically, the Board received and reviewed, among other performance data, information compiled by SI as to the Fund’s total return, as compared to the funds in the Fund’s Morningstar Group. The SI report indicated that the Fund’s annualized net total return for the one-year period ended April 30, 2013 was above the return of the Fund’s benchmark, and that the Fund’s annualized net total returns for the three-, five- and ten-year periods ended April 30, 2013 were below those of the Fund’s benchmark. The Board also received performance information from management that compared the Fund’s return to comparable non-U.S. investment companies in its Lipper category.
The Board received and considered information for each of the last five fiscal years regarding the Fund’s total return on a gross and net basis and relative to the Fund’s benchmark, the Fund’s
Aberdeen Global Income Fund, Inc.
34
Supplemental Information (unaudited) (continued)
October 31, 2013
share performance and premium/discount information and the impact of foreign currency movements on the Fund’s performance. The Board also received and reviewed information as to the Fund’s total return for the last ten fiscal years as compared with the total returns of the Morningstar Group, and for the last five fiscal years as compared with other Aberdeen-managed clients with sufficiently similar investment portfolios to those of the Fund. The Board considered management’s discussion of the factors contributing to differences in performance, including differences in the investment strategies of each of these other funds and accounts. The Board also reviewed information as to the Fund’s discount/premium ranking relative to the Morningstar Group. The Board also noted the Fund’s annualized net total return for various periods compared to its benchmark and took into account management’s discussion of the Fund’s performance.
• | | Fees and expenses. The Board reviewed with management the effective annual management fee rate paid by the Fund to the Investment Manager for investment management services. Additionally, the Board received and considered information compiled at the request of the Fund by SI, comparing the Fund’s effective annual management fee rate with the fees paid by a peer group consisting of other comparable closed-end funds (each such group, a “Peer Group”). 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 or borrowings, if any. The Board also considered that the compensation paid to the Investment Adviser and Sub-Adviser is paid by the Investment Manager, and, accordingly that the retention of the Investment Adviser and 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 Board also received information from management regarding the fees charged by the Advisers to other U.S. and non-U.S. clients investing primarily in an asset class similar to that of the Fund. The Board considered the fee comparisons in light of the differences in resources and costs required to manage the different types of accounts. |
The Board also took into account management’s discussion of the Fund’s expenses, including the factors that impacted the Fund’s expenses.
Specifically, SI data indicated that: the Fund’s effective management fee rate (computed based on average managed assets for the six months ended April 30, 2013, and which reflects both the advisory fee and the administration fee) was below the median and average fee rates, respectively, of its Peer Group, consisting of closed-end funds in the “World Bond” Morningstar category as compiled by SI; the Fund’s annualized net total expense ratio based on average managed assets, which includes the Fund’s assets attributable to its common stock plus borrowings for investment purposes, including leverage, for the six months ended April 30, 2013 was above the average and median expense ratios, respectively, of its Peer Group; and the Fund’s annualized net total expense ratio based on average net assets, excluding the principal amount of borrowings, for the six months ended April 30, 2013 was above the average and median expense ratios of its Peer Group. The Board took into account the impact of leverage on Fund expenses, information from management regarding profitability and ancillary benefits and the fees charged by the Advisers to other clients with sufficiently similar investment portfolios and investment management services to those of the Fund.
• | | Economies of Scale. The Board took into account management’s discussion of the Fund’s management fee structure. The Board determined that the management fee structure was reasonable and reflects economies of scale being shared between the Fund and the Advisers. This determination was based on various factors, including that the Fund’s management fee schedule provides breakpoints at higher asset levels and how the Fund’s management fee compares relative to its Peer Group at higher asset levels. |
After reviewing these and related factors, the Board concluded that the advisory fee, and as applicable, sub-advisory fee structures were reasonable, and supported the renewal of the Advisory Agreements.
The Directors also considered other factors, which included but were not limited to the following:
| • | | the effect of any market and economic volatility on the performance, asset levels and expense ratios of the Fund. |
| • | | whether the Fund has operated in accordance with its investment objectives and the Fund’s record of compliance with its investment restrictions, and the compliance programs of the Advisers. The Directors also considered the compliance-related resources the Advisers and their affiliates were providing to the Fund. |
Aberdeen Global Income Fund, Inc.
35
Supplemental Information (unaudited) (concluded)
October 31, 2013
| • | | so-called “fallout benefits” to the Advisers and their affiliates, such as reputational and other indirect benefits. The Directors considered any possible conflicts of interest associated with these fallout and other benefits, and the reporting, disclosure and other processes in place to disclose and monitor such possible conflicts of interest. |
* * *
Based on their evaluation of all factors that they deemed to be material, including those factors described above, and assisted by the advice of independent counsel, the Directors, including the Independent Directors, concluded that renewal of the Advisory Agreements would be in the best interest of the Fund and its shareholders. Accordingly, the Board, including the Board’s Independent Directors voting separately, approved the Fund’s Advisory Agreements for an additional one-year period.
Aberdeen Global Income Fund, Inc.
36
Management of the Fund (unaudited)
The names of the Directors and Officers of the Fund, their addresses, years of birth, and principal occupations during the past five years are provided in the tables below. Directors that are deemed “interested persons” (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended) of the Fund, the Investment Manager or Investment Adviser are included in the table below under the heading “Interested Directors.” Directors who are not interested persons, as described above, are referred to in the table below under the heading “Independent Directors.”
As of October 31, 2013
| | | | | | | | | | |
Name, Address and Year of Birth | | Position(s) Held With the Fund | | Term of Office and Length of Time Served | | Principal Occupation(s) During Past Five Years | | Number of Funds in Fund Complex* Overseen by Director | | Other Directorships Held by Director |
| | | | | |
Interested Director | | | | | | | | | | |
| | | | | |
Martin J. Gilbert** Aberdeen Asset Management PLC 10 Queen’s Terrace Aberdeen, Scotland AB10 1YG Year of Birth: 1955 | | Class III Director; Vice President | | Term as Director expires 2016; Director since 2001 | | Mr. Gilbert is a founding director and shareholder, and Chief Executive of Aberdeen Asset Management PLC, the holding company of the fund management group that was established in 1983. He was President of the Fund, of Aberdeen Asia-Pacific Income Fund, Inc. and Aberdeen Australia Equity Fund, Inc. from February 2004 to March 2008. He was Chairman of the Board of the Fund and of Aberdeen Asia-Pacific Income Fund, Inc. from 2001 to September 2005. He has been a Director of Aberdeen Asset Management Asia Limited, the Fund’s Investment Manager, since 1991, a Director of Aberdeen Asset Management Limited, the Fund’s Investment Adviser, since 2000, and a Director of Aberdeen Asset Managers (C.I.) Limited, the Fund’s former investment manager, from 2000 to 2005. He has been a Director since 1995, and has been President since September 2006 of Aberdeen Asset Management Inc., the Fund’s Administrator. Mr. Gilbert also serves as officer and/or director of various Aberdeen group subsidiary companies, Aberdeen-managed investment trusts and funds’ boards. | | 29 | | None |
| | | | | |
Independent Directors | | | | | | | | | | |
| | | | | |
P. Gerald Malone 48 Barmouth Road London SW18 2DP United Kingdom Year of Birth: 1950 | | Chairman of the Board; Class I Director | | Term expires 2014; Director since 2005 | | Mr. Malone is, by profession, a solicitor of some 38 years standing. He has served as a Minister of State in the United Kingdom Government. Mr. Malone currently serves as Independent Chairman of one London AIM-listed company (healthcare software) in addition to a privately owned pharmaceutical company. He is Chairman of the Board of Trustees of Aberdeen Funds and Chairman of the Board of Directors of Aberdeen Asia-Pacific Income Fund, Inc. | | 28 | | None |
| | | | | |
Neville J. Miles 142 Martins Lane Knockrow NSW 2479 Australia Year of Birth: 1946 | | Class III Director | | Term expires 2016; Director since 1999 | | Mr. Miles is, and has been for a period in excess of ten years, Chairman of Ballyshaw Pty. Ltd. (share trading, real estate development and investment). He is Chairman of the Board of Aberdeen Australia Equity Fund, Inc. He also is a non-executive director of a number of Australian companies. | | 28 | | None |
| | | | | |
William J. Potter c/o Aberdeen Asset Management Asia Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1948 | | Class II Director | | Term expires 2015; Director since 1992 | | Mr. Potter has been Chairman of Meredith Financial Group (investment management) since 2004, a Director of Alexandria Bancorp (international banking and trustee services) since 1989, and a Director of National Foreign Trade Council (international trade) since 1983. | | 3 | | None |
Aberdeen Global Income Fund, Inc.
37
Management of the Fund (unaudited) (continued)
| | | | | | | | | | |
Name, Address and Year of Birth | | Position(s) Held With the Fund | | Term of Office and Length of Time Served | | Principal Occupation(s) During Past Five Years | | Number of Funds in Fund Complex* Overseen by Director | | Other Directorships Held by Director |
| | | | | |
Peter D. Sacks c/o Aberdeen Asset Management Inc. 1735 Market St, 32nd Floor Philadelphia, PA 19103 Year of Birth: 1945 | | Class II Director | | Term expires 2015; Director since 1992 | | Mr. Sacks has been Founding Partner of Toron Capital Markets, Inc. (investment management) since 1988. He is also a Director and Investment Advisory Committee member of several private and public sector funds in Canada. | | 28 | | None |
| | | | | |
John T. Sheehy B.V. Murray and Company 666 Goodwin Avenue Suite 300 Midland Park, NJ 07432 Year of Birth: 1942 | | Class I Director | | Term expires 2014; Director since 1992 | | Mr. Sheehy has been a Senior Managing Director of B.V. Murray and Company (investment banking) since 2001 and Director of Macquarie AIR-serv Holding, Inc. (automotive services) from 2006 to June 2013. He was a Managing Member of Pristina Capital Partners, LLC (water purification technology development) from 2007 to 2011, a Director of Smarte Carte, Inc. (airport services) from 2007 until 2010, and Managing Member of The Value Group LLC (venture capital) from 1997 to 2009. | | 28 | | None |
* | | Aberdeen Australia Equity Fund, Inc., Aberdeen Asia-Pacific Income Fund, Inc., Aberdeen Chile Fund, Inc., Aberdeen Israel Fund, Inc., Aberdeen Indonesia Fund, Inc., Aberdeen Latin America Equity Fund, Inc., Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc., the Aberdeen Funds, Aberdeen Singapore Fund, Inc., The Asia-Tigers Fund, Inc., The India Fund, Inc., and Aberdeen Greater China Fund Inc. have the same Investment Manager and Investment Adviser as the Fund, or an investment adviser that is affiliated with the Investment Manager and Investment Adviser and may thus be deemed to be part of the same “Fund Complex” as the Fund. |
** | | Mr. Gilbert is deemed to be an interested person because of his affiliation with the Fund’s Investment Manager. Mr. Gilbert serves as a Director of several Funds in the Fund Complex. |
- | | Further information about the Fund’s Directors is available in the Fund’s Statement of Additional Information, which can be obtained without charge by calling 1-866-839-5233. |
Aberdeen Global Income Fund, Inc.
38
Management of the Fund (unaudited) (continued)
Information Regarding Officers who are not Directors
| | | | | | |
Name, Address and Year of Birth | | Position(s) Held With the Fund | | Term of Office* and Length of Time Served | | Principal Occupation(s) During Past Five Years |
| | | |
Jeffrey Cotton** Aberdeen Asset Management Inc. 1735 Market St. 32nd Floor Philadelphia, PA 19103 Year of Birth: 1977 | | Chief Compliance Officer and Vice President, Compliance | | Since 2011 | | Currently, Vice President and Head of Compliance – Americas for Aberdeen Asset Management Inc. Mr. Cotton joined Aberdeen in 2010. Prior to joining Aberdeen, Mr. Cotton was a Senior Compliance Officer at Old Mutual Asset Management (2009-2010) supporting its affiliated investment advisers and mutual fund platform. Mr. Cotton was also a VP, Senior Compliance Manager at Bank of America/Columbia Management (2006-2009). |
| | | |
Kevin Daly Aberdeen Asset Managers Limited Bow Bells House, 1 Bread Street London United Kingdom Year of Birth: 1960 | | Vice President | | Since 2008 | | Currently, Portfolio Manager on Aberdeen’s Emerging Fixed Income Team (since 2007); previously, Credit Market Analyst for Standard & Poor’s London (1997-2007). |
| | | |
Sharon Ferrari** Aberdeen Asset Management Inc. 1735 Market St. 32nd Floor Philadelphia, PA 19103 Year of Birth: 1977 | | Assistant Treasurer | | Since 2009 | | Currently, Senior Fund Administration Manager for Aberdeen Asset Management Inc. Ms. Ferrari joined Aberdeen Asset Management Inc. as a Senior Fund Administrator in 2008. Prior to joining Aberdeen Asset Management Inc., Ms. Ferrari was an Accounting Analyst at Delaware Investments. |
| | | |
Alan Goodson** Aberdeen Asset Management Inc. 1735 Market St. 32nd Floor Philadelphia, PA 19103 Year of Birth: 1974 | | Vice President | | Since 2009 | | Currently, Head of Product-US, overseeing both Product Management and Product Development for Aberdeen’s registered and unregistered investment companies in the US and Canada. Mr. Goodson is Vice President of Aberdeen Asset Management Inc. and joined Aberdeen in 2000. |
| | | |
Matthew Keener** Aberdeen Asset Management Inc. 1735 Market St. 32nd Floor Philadelphia, PA 19103 Year of Birth: 1976 | | Assistant Secretary | | Since 2008 | | Currently, Senior Product Manager for Aberdeen Asset Management Inc. Mr. Keener joined Aberdeen Asset Management Inc. in 2006 as a Fund Administrator. Prior to joining Aberdeen Asset Management Inc., Mr. Keener was a Private Equity Supervisor with SEI Investments (2004-2006). |
| | | |
Megan Kennedy** Aberdeen Asset Management Inc. 1735 Market St. 32nd Floor Philadelphia, PA 19103 Year of Birth: 1974 | | Vice President and Secretary | | Since 2008 | | Currently, Head of Product Management for Aberdeen Asset Management Inc. Ms. Kennedy joined Aberdeen Asset Management Inc. in 2005 as a Senior Fund Administrator. Ms. Kennedy was promoted to Assistant Treasurer Collective Funds/North American Mutual Funds in February 2008 and promoted to Treasurer Collective Funds/North American Mutual Funds in July 2008. |
| | | |
Adam McCabe** Aberdeen Asset Management Asia Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1979 | | Vice President | | Since 2011 | | Currently, Senior Portfolio Manager/Deputy Head of Asian Fixed Income on the Aberdeen fixed income – Asia Pacific desk, responsible for currency and interest rate strategies in Aberdeen’s Asian fixed income portfolios. Mr. McCabe joined Aberdeen in 2009 following the acquisition of certain asset management businesses from Credit Suisse. Mr. McCabe worked for Credit Suisse since 2001, where he was an investment manager responsible for the development and implementation of its Asian currency and interest rate strategies. |
| | | |
Andrea Melia** Aberdeen Asset Management Inc. 1735 Market St. 32nd Floor Philadelphia, PA 19103 Year of Birth: 1969 | | Treasurer and Principal Accounting Officer | | Since 2009 | | Currently, Head of Fund Administration-U.S. and Vice President for Aberdeen Asset Management Inc. Ms. Melia joined Aberdeen Asset Management Inc. in September 2009. Prior to joining Aberdeen, Ms. Melia was Director of fund administration and accounting oversight for Princeton Administrators LLC, a division of BlackRock Inc. and had worked with Princeton Administrators since 1992. |
| | | |
Anthony Michael** Aberdeen Asset Management Asia Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1963 | | Vice President | | Since 2008 | | Currently, Head of Fixed Income – Asia Pacific for Aberdeen Asset Management Asia Limited. Mr. Michael joined Aberdeen through the acquisition of Deutsche Asset Management’s Australian Fixed Income business in June 2007. Previously, Mr. Michael was Director and Senior Portfolio Manager at Deutsche (2002-2007). |
Aberdeen Global Income Fund, Inc.
39
Management of the Fund (unaudited) (concluded)
| | | | | | |
Name, Address and Year of Birth | | Position(s) Held With the Fund | | Term of Office* and Length of Time Served | | Principal Occupation(s) During Past Five Years |
| | | |
Jennifer Nichols** Aberdeen Asset Management Inc. 1735 Market St. 32nd Floor Philadelphia, PA 19103 Year of Birth: 1978 | | Vice President | | Since 2008 | | Currently, Global Head of Legal and Vice President and Director for Aberdeen Asset Management Inc. Ms. Nichols joined Aberdeen Asset Management Inc. in October 2006. Prior to that, Ms. Nichols was an associate attorney in the Financial Services Group of Pepper Hamilton LLP (law firm) (2003-2006). |
| | | |
Patrick O’Donnell Aberdeen Asset Managers Limited Bow Bells House, 1 Bread Street London United Kingdom Year of Birth: 1973 | | Vice President | | Since 2013 | | Currently, Portfolio Manager for Aberdeen’s Euro Fixed income team. Previously, analyst and Derivatives Trader (from 2005-2011). |
| | | |
Christian Pittard** Aberdeen Asset Managers Limited Bow Bells House, 1 Bread Street London United Kingdom Year of Birth: 1973 | | President | | Since 2009 | | Currently, Group Head of Product Development for Aberdeen Asset Management PLC. Previously, Director and Vice President (2006-2008), Chief Executive Officer (from October 2005 to September 2006) of Aberdeen Asset Management Inc. |
| | | |
Victor Rodriguez** Aberdeen Asset Management Asia Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1971 | | Vice President | | Since 2009 | | Currently, Head of Fixed Income – Australia for Aberdeen Asset Management Limited. Mr. Rodriguez joined Aberdeen Asset Management Limited in 2009 following the acquisition of Credit Suisse Asset Management (Australia) Limited. Mr. Rodriguez was formerly a member of the fixed income team at Credit Suisse Asset Management since 1995. |
| | | |
Lucia Sitar** Aberdeen Asset Management Inc. 1735 Market St. 32nd Floor Philadelphia, PA 19103 Year of Birth: 1971 | | Vice President | | Since 2008 | | Currently, Managing U.S. Counsel for Aberdeen Asset Management Inc. Ms. Sitar joined Aberdeen Asset Management Inc. in July 2007 as U.S. Counsel. Prior to that, Ms. Sitar was an associate attorney in the Investment Management Group of Stradley Ronon Stevens & Young LLP (law firm) (2000-2007). |
* | | Officers hold their positions with the Fund until a successor has been duly elected and qualifies. Officers are generally elected annually at the meeting of the Board of Directors next following the annual meeting of shareholders. The officers were last elected on March 6, 2013. |
** | | Messrs. Cotton, Goodson, Keener, Pittard, McCabe, Michael and Rodriguez and Mses. Ferrari, Kennedy, Melia, Nichols and Sitar hold one or more officer positions with one or more of the following funds: Aberdeen Australia Equity Fund, Inc. and Aberdeen Asia-Pacific Income Fund, Inc., Aberdeen Funds, Aberdeen Indonesia Fund, Inc., Aberdeen Israel Fund, Inc., Aberdeen Latin America Equity Fund, Inc., Aberdeen Chile Fund, Inc., and Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc., Aberdeen Singapore Fund, Inc., The Asia-Tigers Fund, Inc., The India Fund, Inc., and Aberdeen Greater China Fund Inc. each of which may be deemed to be part of the same “Fund Complex” as the Fund. |
Aberdeen Global Income Fund, Inc.
40
Corporate Information
Directors
P. Gerald Malone, Chairman
Martin J. Gilbert
Neville J. Miles
William J. Potter
Peter D. Sacks
John T. Sheehy
Officers
Christian Pittard, President
Jeffrey Cotton, Chief Compliance Officer and Vice President, Compliance
Megan Kennedy, Vice President and Secretary
Andrea Melia, Treasurer and Principal Accounting Officer
Kevin Daly, Vice President
Martin J. Gilbert, Vice President
Alan Goodson, Vice President
Adam McCabe, Vice President
Anthony Michael, Vice President
Jennifer Nichols, Vice President
Patrick O’Donnell, Vice President
Victor Rodriguez, Vice President
Lucia Sitar, Vice President
Sharon Ferrari, Assistant Treasurer
Matthew Keener, Assistant Secretary
Investment Manager
Aberdeen Asset Management Asia Limited
21 Church Street
#01-01 Capital Square Two
Singapore 049480
Investment Adviser
Aberdeen Asset Management Limited
Level 6, 201 Kent Street
Sydney, NSW 2000, Australia
Investment Sub-Adviser
Aberdeen Asset Managers Limited
Bow Bells House, 1 Bread Street
London United Kingdom
EC4M 9HH
Administrator
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Computershare Trust Company, N.A.
P.O. BOX 30170
College Station, TX 77842-3170
Independent Registered Public Accounting Firm
KPMG LLP
1601 Market Street
Philadelphia, PA 19103
Legal Counsel
Willkie Farr & Gallagher LLP
787 Seventh Ave
New York, NY 10019
Investor Relations
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
1-866-839-5233
InvestorRelations@aberdeen-asset.com
Aberdeen Asset Management Asia Limited
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may purchase, from time to time, shares of its common stock in the open market.
Shares of Aberdeen Global Income Fund, Inc. are traded on the NYSE MKT Equities Exchange under the symbol “FCO”. Information about the Fund’s net asset value and market price is available at www.aberdeenfco.com.
This report, including the financial information herein, is transmitted to the shareholders of Aberdeen Global Income Fund, Inc. for their general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person. Past performance is no guarantee of future returns.
Item 2 – Code of Ethics.
As of October 31, 2013, the Registrant had adopted a Code of Ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions (the “Code of Ethics”). During the period covered by this report, there were no material changes to the Code of Ethics. During the period covered by this report, there were no waivers to the provisions of the Code of Ethics. A copy of the Code of Ethics has been filed as an exhibit to this Form N-CSR.
Item 3 – Audit Committee Financial Expert.
The registrant's board of directors has determined that John T. Sheehy, a member of the board of directors’ audit committee, possesses the attributes, and has acquired such attributes through means, identified in instruction 2 of Item 3 to Form N-CSR to qualify as an “audit committee financial expert,” and has designated Mr. Sheehy as the audit committee’s financial expert. Mr. Sheehy in an “independent” director pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
Item 4 – Principal Accountant Fees and Services.
(a) – (d) Below is a table reflecting the fee information requested in Items 4(a) through (d):
| | | | | | | | |
Fiscal Year Ended | | (a) Audit Fees | | (b) Audit-Related Fees | | (c)1 Tax Fees | | (d) All Other Fees |
October 31, 2013 | | $86,518 | | $27,5002 | | $6,700 | | $0 |
October 31, 2012 | | $80,200 | | $30,0003 | | $6,700 | | $0 |
| 1 | The Tax Fees are for the completion of the Registrant’s federal and state tax returns. |
| 2 | $27,500 related to public offering of shares |
| 3 | $30,000 related to public offering of shares |
(e)(1) The Registrant’s audit committee (the “Committee”) has adopted a Charter that provides that the Committee shall annually select, retain or terminate the Fund’s independent auditor and, in connection therewith, to evaluate the terms of the engagement (including compensation of the independent auditor) and the qualifications and independence of the independent auditor, including whether the independent auditor provides any consulting, auditing or tax services to the Registrant’s investment adviser or any sub-adviser, and to receive the independent auditor’s specific representations as to their independence, delineating all relationships between the independent auditor and the Registrant, consistent with the PCAOB Rule 3526 or any other applicable auditing standard. The Committee Charter also provides that the Committee shall review in advance, and consider approval of, any and all proposals by Management or the Registrant’s investment adviser that the Registrant, the investment adviser or their affiliated persons, employ the independent auditor to render “permissible non-audit services” to the Registrant and to consider whether such services are consistent with the independent auditor’s independence.
| (e)(2) | None of the services described in each of paragraphs (b) through (d) of this Item involved a waiver of the pre-approval requirement by the Audit Committee pursuant to Rule 2-01 (c)(7)(i)(C) of Regulation S-X. |
For the fiscal year ended October 31, 2013 and October 31, 2012, respectively KPMG billed $877,862 and $1,023,077 for aggregate non-audit fees for services to the Registrant and to the Registrant’s Investment Manager and Investment Adviser.
| (h) | The Registrant’s Audit and Valuation Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence and has concluded that it is. |
Item 5 – Audit Committee of Listed Registrants.
| (a) | The Registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). |
For the fiscal year ended October 31, 2013, the audit committee members were:
Neville J. Miles
Peter D. Sacks
John T. Sheehy
Item 6 – Investments.
| (a) | Included as part of the Report to Stockholders filed under Item 1 of this Form N-CSR. |
Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Pursuant to the Registrant's Proxy Voting Policy and Procedures, the Registrant has delegated responsibility for its proxy voting to its Investment Manager and Investment Adviser, provided that the Registrant's Board of Directors has the opportunity to periodically review the Investment Manager's and Investment Adviser's proxy voting policies and material amendments thereto. The Registrant's Board of Directors most recently ratified the proxy voting policies of the Investment Manager and Investment Adviser in March 2006.
The proxy voting policies of the Registrant are referenced in Exhibit A and Investment Manager and Investment Adviser are referenced in Exhibit B.
Item 8 – Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) The information in the table below is as of January 6, 2014
| | | | |
Individual & Position | | Services Rendered | | Past Business Experience |
| | | | |
Anthony Michael Head of Fixed Income – Asia Pacific | | Responsible for management and investment performance of Aberdeen’s Non-Japan Asia fixed income and capital market products. | | Joined Aberdeen in 2007 following the acquisition of Deutsche Asset Management’s Fixed Income and Equity businesses that year. He held the position of director/senior portfolio manager with Deutsche in Sydney for five years, responsible for the development and implementation of fixed income and FX strategies. He was also a member of the global strategy group, the global insurance group and was a member of the tactical asset allocation committee. Previously, he worked in similar roles with the Zurich Scudder Group, Perpetual Funds Management Australia and the ING Group. |
Patrick O’Donnell Portfolio Manager | | Responsible for portfolio management | | Joined Aberdeen in 2005 as a summer intern on the emerging market debt team whilst completing his thesis. Mr. O’Donnell then joined the Graduate analyst program and has since held the roles of quantitative analyst and derivatives trader prior to becoming a portfolio manager in 2011. He is currently Portfolio Manager on the Euro Fixed Income Team |
Kevin Daly Fixed Income – EMEA Portfolio Manager | | Currently a Portfolio Manager on the Emerging Markets Debt team. | | Joined Aberdeen in April 2007 having spent the previous ten years at Standard & Poor’s in London and Singapore. During that time he worked as a credit market analyst covering global emerging debt, and was head of origination for Global Sovereign Ratings. He was a regular participant on the Global Sovereign Ratings Committee, and was one of the initial members of the Emerging Market Council, formed in 2006 to advise senior management on business and market developments in emerging markets. |
| | | | |
Victor Rodriguez Head of Fixed Income – Australia | | Responsible for Australia fixed income. | | Joined Aberdeen in 2009 following the acquisition of Credit Suisse Asset Management (Australia) Limited. Joined Credit Suisse Asset Management in 1995 as a member of the fixed income team and became a senior member of the team, specializing in credit strategies. |
Adam McCabe Senior Portfolio Manager – Aberdeen Fixed Income – Asia Pacific | | Responsible for currency and interest rate strategies in Aberdeen’s Asian fixed income portfolios. | | Joined Aberdeen in 2009 following the acquisition of certain asset management businesses from Credit Suisse. He worked for Credit Suisse since 2001, where he was an investment manager responsible for the development and implementation of its Asian currency and interest rate strategies. |
(a)(2) The information in the table below is as of October 31, 2013
| | | | | | | | | | | | | | | | | | |
Name of Portfolio Manager | | Type of Accounts | | Total Number of Accounts Managed | | | Total Assets ($M) | | | Number of Accounts Managed for Which Advisory Fee is Based on Performance | | | Total Assets for Which Advisory Fee is Based on Performance ($M) | |
Anthony Michael | | Registered Investment Companies | | | 4 | | | $ | 2,887.43 | | | | 0 | | | $ | 0 | |
| | Pooled Investment Vehicles | | | 33 | | | $ | 3,975.01 | | | | 0 | | | $ | 0 | |
| | Other Accounts | | | 71 | | | $ | 12,893.80 | | | | 1 | | | $ | 154.43 | |
| | | | | |
Patrick O’Donnell | | Registered Investment Companies | | | 8 | | | $ | 655.62 | | | | 0 | | | $ | 0 | |
| | Pooled Investment Vehicles | | | 85 | | | $ | 15,759.26 | | | | 0 | | | $ | 0 | |
| | Other Accounts | | | 139 | | | $ | 26,089.29 | | | | 2 | | | $ | 299.90 | |
| | | | | |
Kevin Daly | | Registered Investment Companies | | | 8 | | | $ | 655.62 | | | | 0 | | | $ | 0 | |
| | Pooled Investment Vehicles | | | 85 | | | $ | 15,759.26 | | | | 0 | | | $ | 0 | |
| | Other Accounts | | | 139 | | | $ | 26,089.29 | | | | 2 | | | $ | 299.90 | |
| | | | | |
Victor Rodriguez | | Registered Investment Companies | | | 4 | | | $ | 2,887.43 | | | | 0 | | | $ | 0 | |
| | Pooled Investment Vehicles | | | 33 | | | $ | 3,975.01 | | | | 0 | | | $ | 0 | |
| | Other Accounts | | | 71 | | | $ | 12,893.80 | | | | 1 | | | $ | 154.43 | |
| | | | | |
Adam McCabe | | Registered Investment Companies | | | 2 | | | $ | 2,707.60 | | | | 0 | | | $ | 0 | |
| | Pooled Investment Vehicles | | | 16 | | | $ | 2,586.69 | | | | 0 | | | $ | 0 | |
| | Other Accounts | | | 44 | | | $ | 10,389.98 | | | | 0 | | | $ | 0 | |
Total assets are as of October 31, 2013 and have been translated .to U.S. dollars at a rate of £1.00 = $1.61.
In accordance with legal requirements in the various jurisdictions in which they operate, and their own Conflicts of Interest policies, all subsidiaries of Aberdeen Asset Management PLC, (together Aberdeen), have in place arrangements to identify and manage Conflicts of Interest that may arise between them and their clients or between their different clients. Where Aberdeen does not consider that these arrangements are sufficient to manage a particular conflict, it will inform the relevant client(s) of the nature of the conflict so that the client(s) may decide how to proceed.
The portfolio managers’ management of “other accounts”, including (1) mutual funds; (2) other pooled investment vehicles; and (3) other accounts that may pay advisory fees that are based on account performance (“performance-based fees”), may give rise to potential conflicts of interest in connection with their management of a Fund’s investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as a Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby the portfolio manager could favor one account over another. However, Aberdeen believes that these risks are mitigated by the fact that: (i) accounts with like investment strategies managed by a particular portfolio manager are generally managed in a similar fashion, subject to exceptions to account for particular investment restrictions or policies applicable only to certain accounts, differences in cash flows and account sizes, and similar factors; and (ii) portfolio manager personal trading is monitored to avoid potential conflicts. In addition, Aberdeen has adopted trade allocation procedures that require equitable allocation of trade orders for a particular security among participating accounts.
In some cases, another account managed by the same portfolio manager may compensate Aberdeen based on the performance of the portfolio held by that account. The existence of such performance-based fees may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities.
Another potential conflict could include instances in which securities considered as investments for a Fund also may be appropriate for other investment accounts managed by Aberdeen or its affiliates. Whenever decisions are made to buy or sell securities by the Fund and one or more of the other accounts simultaneously, Aberdeen may aggregate the purchases and sales of the securities and will allocate the securities transactions in a manner that it believes to be equitable under the circumstances. As a result of the allocations, there may be instances where the Fund will not participate in a transaction that is allocated among other accounts. While these aggregation and allocation policies could have a detrimental effect on the price or amount of the securities available to a Fund from time to time, it is the opinion of Aberdeen that the benefits from the Aberdeen organization outweigh any disadvantage that may arise from exposure to simultaneous transactions. Aberdeen has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures adopted under such policies will detect each and every situation in which a conflict arises.
(a)(3)
Aberdeen Asset Management PLC’s (“Aberdeen”) remuneration policies are designed to support its business strategy, as a leading international asset manager. The objective is to attract, retain and reward talented individuals for the delivery of sustained, superior returns for its clients and shareholders. Aberdeen operates in a highly competitive international employment market, and aims to maintain its strong track record of success in developing and retaining talent.
Aberdeen’s policy is to recognize corporate and individual achievements each year through an appropriate annual bonus scheme. The aggregate value of awards in any year is dependent on the group’s overall performance and profitability. Consideration is also given to the levels of bonuses paid in the market. Individual awards which are payable to all members of staff are determined by a rigorous assessment of achievement against defined objectives.
A long-term incentive plan for key staff and senior employees comprises of a mixture of cash and deferred shares in Aberdeen PLC or select Aberdeen funds (where applicable). Overall compensation packages are designed to be competitive relative to the investment management industry.
Base Salary
Aberdeen’s policy is to pay a fair salary commensurate with the individual’s role, responsibilities and experience, and having regard to the market rates being offered for similar roles in the asset management sector and other comparable companies. Any increase is to reflect inflation and is applied in a manner consistent with other Aberdeen employees; any other increases must be justified by reference to promotion or changes in responsibilities.
Annual Bonus
Aberdeen’s policy is to recognize corporate and individual achievements each year through an appropriate annual bonus scheme. The Remuneration Committee of Aberdeen determines the key performance indicators that will be applied in considering the overall size of the bonus pool. In line with practice amongst other asset management companies, individual bonuses are not subject to an absolute cap. However, the aggregate size of the bonus pool is dependent on the group’s overall performance and profitability. Consideration is also given to the levels of bonuses paid in the market. Individual awards are determined by a rigorous assessment of achievement against defined objectives, and are reviewed and approved by the Remuneration Committee.
Aberdeen has a deferral policy which is intended to assist in the retention of talent and to create additional alignment of executives’ interests with Aberdeen’s sustained performance and, in respect of the deferral into funds, managed by Aberdeen, to align the interest of asset managers with our clients.
Staff performance is reviewed formally at least once a year. The review process evaluates the various aspects that the individual has contributed to the Aberdeen, and specifically, in the case of portfolio managers, to the relevant investment team. Discretionary bonuses are based on client service, asset growth and the performance of the respective portfolio manager. Overall participation in team meetings, generation of original research ideas and contribution to presenting the team externally are also evaluated.
In the calculation of a portfolio management team’s bonus, the Aberdeen takes into consideration investment matters (which include the performance of funds, adherence to the company investment process, and quality of company meetings) as well as more subjective issues such as team participation and effectiveness at client presentations. To the extent performance is factored in, such performance is not judged against any specific benchmark and is evaluated over the
period of a year - January to December. The pre- or after-tax performance of an individual account is not considered in the determination of a portfolio manager’s discretionary bonus; rather the review process evaluates the overall performance of the team for all of the accounts they manage.
Portfolio manager performance on investment matters is judged over all of the accounts the portfolio manager contributes to and is documented in the appraisal process. A combination of the team’s and individual’s performance is considered and evaluated.
Although performance is not a substantial portion of a portfolio manager’s compensation, the Aberdeen also recognizes that fund performance can often be driven by factors outside one’s control, such as (irrational) markets, and as such pays attention to the effort by portfolio managers to ensure integrity of our core process by sticking to disciplines and processes set, regardless of momentum and ‘hot’ themes. Short-terming is thus discouraged and trading-oriented managers will thus find it difficult to thrive in the Aberdeen environment. Additionally, if any of the aforementioned undue risks were to be taken by a portfolio manager, such trend would be identified via Aberdeen’s dynamic compliance monitoring system.
(a)(4)
| | | | | |
Individual | | Dollar Range of Equity Securities in the Registrant Beneficially Owned by the Portfolio Manager as of October 31, 2013 |
Anthony Michael | | | $ | 0 | |
Patrick O’Donnell | | | $ | 0 | |
Kevin Daly | | | $ | 0 | |
Victor Rodriguez | | | $ | 0 | |
Adam McCabe | | | $ | 0 | |
(b) Not applicable.
Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
REGISTRANT PURCHASES OF EQUITY SECURITIES
| | | | | | | | |
Period | | (a) Total Number of Shares Purchased | | (b) Average Price Paid per Share | | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 1 | | (d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs 1 |
November 1 through November 30, 2012 | | 0 | | 0 | | 0 | | 923,793 |
December 1 through December 31, 2012 | | 0 | | 0 | | 0 | | 923,793 |
January 1 through January 31, 2013 | | 0 | | 0 | | 0 | | 927,508 |
| | | | | | | | | | | | | | | | |
February 1 through February 29, 2013 | | | 0 | | | | 0 | | | | 0 | | | | 935,345 | |
March 1 through March 31, 2013 | | | 0 | | | | 0 | | | | 0 | | | | 940,415 | |
April 1 through April 30, 2013 | | | 0 | | | | 0 | | | | 0 | | | | 940,415 | |
May 1 through May 31, 2013 | | | 0 | | | | 0 | | | | 0 | | | | 940,415 | |
June 1 through June 30, 2013 | | | 0 | | | | 0 | | | | 0 | | | | 940,415 | |
July 1 through July 31, 2013 | | | 0 | | | | 0 | | | | 0 | | | | 940,415 | |
August 1 through August 31, 2013 | | | 0 | | | | 0 | | | | 0 | | | | 940,415 | |
September 1 through September 30, 2013 | | | 0 | | | | 0 | | | | 0 | | | | 940,415 | |
October 1 through October 31, 2013 | | | 0 | | | | 0 | | | | 0 | | | | 940,415 | |
Total | | | 0 | | | | 0 | | | | 0 | | | | 940,415 | |
1 | The Registrant’s stock repurchase program was announced on March 19, 2001 and further amended by the Registrant’s Board of Directors on December 12, 2007. Under the terms of the current program, the Registrant is permitted to repurchase up to 10% of its outstanding shares of common stock, par value $.001 per share, on the open market during any 12 month period if and when the discount to net asset value is at least 8%. |
Item 10 – Submission of Matters to a Vote of Security Holders.
During the period ended October 31, 2013, there were no material changes to the policies by which stockholders may recommend nominees to the Fund’s Board.
Item 11 – Controls and Procedures.
| (a) | It is the conclusion of the Registrant's principal executive officer and principal financial officer that the effectiveness of the Registrant's current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the Registrant has been recorded, processed, summarized and reported within the time period specified in the Commission's rules and forms and that the information required to be disclosed by the Registrant has been accumulated and communicated to the Registrant's principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. |
| (b) | There have been no changes in the Registrant's internal control over financial reporting that occurred during the Registrant’s second fiscal half-year covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12 – Exhibits.
| (a)(1) | Code of Ethics pursuant to Item 2(f) of this Form N-CSR. |
| (a)(2) | Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940, as amended. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, as amended. |
| (c) | A copy of the Registrant’s notices to stockholders, which accompanied distributions paid, pursuant to the Registrant’s Managed Distribution Policy since the Registrant’s last filed N-CSR, are filed herewith as Exhibits (c)(1), (c)(2), (c)(3), (c)(4), and (c)(5) as required by the terms of the Registrant’s SEC exemptive order. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Aberdeen Global Income Fund, Inc.
| | |
By: | | /s/ Christian Pittard |
| | Christian Pittard, Principal Executive Officer of Aberdeen Global Income Fund, Inc. |
Date: January 6, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| | |
By: | | /s/ Christian Pittard |
| | Christian Pittard, Principal Executive Officer of Aberdeen Global Income Fund, Inc. |
Date: January 6, 2014
| | |
By: | | /s/Andrea Melia |
| | Andrea Melia, Principal Financial Officer of Aberdeen Global Income Fund, Inc. |
Date: January 6, 2014
EXHIBIT LIST
12(a)(1) – Code of Ethics
A – Registrant’s Proxy Voting Policies
B – Investment Manager’s and Investment Adviser’s Proxy Voting Policies
12(a)(2) – Rule 30a-2(a) Certifications
12(b) – Rule 30a-2(b) Certifications
12(c)(1), 12(c)(2), 12(c)(3), 12(c)(4), and 12(c)(5) Distribution notice to stockholders