Aberdeen Global Income Fund, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT

OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number:    811-06342
Exact name of registrant as specified in charter:    Aberdeen Global Income Fund, Inc.
Address of principal executive offices:    1735 Market Street, 32nd Floor
   Philadelphia, PA 19103
Name and address of agent for service:    Ms. Andrea Melia
   Aberdeen Asset Management Inc.
   1735 Market Street 32nd Floor
   Philadelphia, PA 19103
Registrant’s telephone number, including area code:    800-522-5465
Date of fiscal year end:    October 31
Date of reporting period:    October 31, 2016


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


LOGO

Aberdeen Global

Income Fund, Inc. (FCO)

Annual Report

October 31, 2016


Managed Distribution Policy (unaudited)

 

 

 

The Board of Directors of the Aberdeen Global Income Fund, Inc. (the “Fund”) has authorized a managed distribution policy (“MDP”) of paying monthly distributions at an annual rate set once a year. The Fund’s current monthly distribution is set at a rate of $0.07 per share. With each distribution, the Fund will issue a notice to shareholders and an accompanying press release which will provide detailed information regarding the amount and estimated composition of the distribution and other information required by the Fund’s MDP exemptive order. The Fund’s Board of Directors may amend or terminate the MDP at any time without prior notice to shareholders; however, at this time, there are no reasonably foreseeable circumstances that might cause the termination of the MDP. You should not draw any conclusions about the Fund’s investment performance from the amount of distributions or from the terms of the Fund’s MDP.

Distribution Disclosure Classification (unaudited)

 

 

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

The Fund is subject to U.S. corporate, tax and securities laws. Under U.S. tax rules, the amount applicable to the Fund and character of distributable income for each fiscal period depends on the actual exchange rates during the entire year between the U.S. Dollar and the currencies in which Fund assets are denominated and on the aggregate gains and losses realized by the Fund during the entire year.

Therefore, the exact amount of distributable income for each fiscal year can only be determined as of the end of the Fund’s fiscal year, October 31. Under Section 19 of the Investment Company Act of 1940, as amended (the “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.

The distributions for the fiscal year ended October 31, 2016 consisted of 100% return of capital.

In January 2017, 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 2016 calendar year.

Dividend Reinvestment and Direct Stock Purchase Plan (unaudited)

 

 

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

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

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

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


Letter to Shareholders (unaudited)

 

 

 

Dear Shareholder,

We present this Annual Report which covers the activities of Aberdeen Global Income Fund, Inc. (the “Fund”) for the fiscal year ended October 31, 2016. 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.

Fund Updates

On June 15, 2016, the Board of Directors of the Fund approved amendments to three non-fundamental investment limitations of the Fund, which went into effect on July 18, 2016. The amendments allow the Fund to increase its Asian local currency exposure and facilitate exposure to the global high yield asset class. Aberdeen Asset Management Asia Limited, the Fund’s investment manager (“Investment Manager”), along with its affiliates Aberdeen Asset Management Limited and Aberdeen Asset Managers Limited, the Fund’s investment adviser and sub-adviser, respectively, believe an increase in the Fund’s Asian local currency exposure and exposure to the global high yield asset class will help to generate higher income for the Fund in an effort to better support the Fund’s managed distribution policy.

  ·  

Up to 75% (from the previous limitation of 40%) of the Fund’s investments (or the issuers of those investments) may be rated, at the time of investment, below investment grade; that is, rated below Baa3 by Moody’s Investor Services (“Moody’s”)1 or BBB- by S&P Global Ratings (“S&P”)2, or comparably rated by another appropriate nationally or internationally recognized rating agency, or if unrated, judged by the Investment Manager to be of equivalent quality.

 

  ·  

Up to 10% (from the previous limitation of 0%) of the Fund’s investments (or the issuers of those investments) may be rated, at the time of investment, Caa1 or below by Moody’s, or CCC+ or below by S&P, or comparably rated by another appropriate nationally or internationally recognized rating agency, or if unrated, judged by the Investment Manager to be of equivalent quality.

 

  ·  

The maximum exposure to issuers in any one Developed Market is limited to 25% of the Fund’s total assets; provided, however, that up to 40% may be invested in issuers in the U.S. (from the previous limitation of 25% for U.S. issuers). The Fund’s ability to have unlimited exposure to the U.S. dollar remains unchanged.

 

 

Effective November 1, 2016, the Fund’s blended benchmark changed, as summarized below:

 

Former Blended Benchmark Components    Weight      New Blended Benchmark Components    Weight  

BofA ML All Maturity Australia Government Index

     20.00%      

BofA ML All Maturity Australia Government Index

     10.00%   

BofA ML UK Gov Bonds Index

     20.00%      

BofA ML Global High Yield Constrained Indexa
(100% Hedged into USD)

     25.00%   

BofA ML Canadian Gov Bonds Index

     15.00%      

JPMorgan EMBI Global Diversified Indexb

     35.00%   

BofA ML New Zealand Government Index

     15.00%      

BofA ML New Zealand Government Index

     5.00%   

BofA ML Global Emerging Markets Sovereign Bond BBB-B Index

     30.00%      

Markit iBoxx Asia Government Indexc

     25.00%   

 

a  

The BofA ML Global High Yield Constrained Index tracks the performance of US, Canadian, British and Euro denominated publicly issued non-investment grade corporate debt but caps per issuer exposure at 2% of the index.

b  

The JPMorgan EMBI Global Diversified Index is a uniquely-weighted version of the JPMorgan EMBI Global Index. It limits the weights of those index countries with larger debt stocks by only including specified portions of these countries’ eligible current face amounts of debt outstanding. The JPMorgan EMBI Global Index tracks the performance of traded external debt instruments in the emerging markets.

c  

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

 

The implementation of the above mentioned amendments resulted in selling the British Pound (“GBP”) and Canadian (“CAD”) denominated securities held in the Fund. These sales generated realized capital gains, which were offset by available capital loss carry forwards. The sales of the GBP and CAD denominated securities also resulted in the liquidation of the GBP and CAD Qualified Business Units (“QBU”) (see Notes to Financial Statements Note 2h) for federal tax purposes. Due to the liquidation of these QBUs, the Fund generated foreign currency

losses which reduced the taxable income available to support the monthly distributions. Ultimately, the Fund designated the monthly distributions as 100% return of capital. Shareholders will receive a Form 1099 in early 2017 with the final characterization of the distributions over the calendar year 2016 for tax return purposes. Additionally, a portion of the currency losses realized were deferred and will be incorporated into the distribution characterization for the fiscal year ended October 31, 2017.

 

 

(1)   

Moody’s credit ratings express the agency’s opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Typically, ratings are expressed as letter grades that range, for example, from “Aaa” to “C” to communicate the agency’s opinion of relative level of credit risk.

(2)   

S&P’s credit ratings express the agency’s opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Typically, ratings are expressed as letter grades that range, for example, from “AAA” to “D” to communicate the agency’s opinion of relative level of credit risk. Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

 

Aberdeen Global Income Fund, Inc.

 

1


Letter to Shareholders (unaudited) (continued)

 

 

 

 

NAV Total Return Performance

The Fund’s total return, based on net asset value (“NAV”) net of fees, was 8.8% for the fiscal year ended October 31, 2016 and 6.9% per annum since inception, assuming the reinvestment of dividends and distributions. The Fund’s total return for the fiscal year ended October 31, 2016 and per annum since inception is based on the reported NAV on each financial reporting period end.

Share Price Total Return Performance & Discount

For the fiscal year ended October 31, 2016, based on market price, the Fund’s total return was 15.5% assuming reinvestment of dividends and distributions. The Fund’s share price increased by 4.3% over the fiscal year, from $8.11 on October 31, 2015 to $8.46 on October 31, 2016. The Fund’s share price on October 31, 2016 represented a discount of 8.2% to the NAV per share of $9.22 on that date, compared with a discount of 13.5% to the NAV per share of $9.38 on October 31, 2015.

Credit Quality

As of October 31, 2016, 35.8% of the Fund’s portfolio was invested in securities where either the issue or the issuer was rated A or better by S&P or Moody’s.

Managed Distribution Policy

Distributions to common shareholders for the twelve months ended October 31, 2016 totaled $0.84 per share. Based on the share price of $8.46 on October 31, 2016, the distribution rate over the 12-month period ended October 31, 2016 was 9.9%. Since all distributions are paid after deducting applicable withholding taxes, the effective distribution rate may be higher for those U.S. investors who are able to claim a tax credit.

On November 9, 2016 and December 9, 2016, the Fund announced that it will pay on November 25, 2016 and January 11, 2017, a distribution of U.S. $0.07 per share to all shareholders of record as of November 18, 2016 and December 30, 2016, respectively.

The Fund’s policy is to provide investors with a stable monthly distribution out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital, which is a non-taxable return of capital. This policy is subject to an annual review as well as regular review at the Board’s quarterly meetings, unless market conditions require an earlier evaluation.

Open Market Repurchase Program

The Fund’s policy is generally to buy back Fund shares on the open market when the Fund trades at certain discounts to NAV and management believes such repurchases may enhance shareholder value. During the fiscal year ended October 31, 2016 and fiscal year

ended October 31, 2015, the Fund repurchased 100,430 and 350,802 shares, respectively.

Revolving Credit Facility

The Fund’s revolving credit facility with The Bank of Nova Scotia was renewed for a 3-year term on February 28, 2014. The outstanding balance on the loan as of October 31, 2016 was $31,500,000. 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’s complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the Fund’s semi-annual and annual reports to shareholders. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund makes the information on Form N-Q available to shareholders on the Fund’s website or upon request and without charge by calling Investor Relations toll-free at 1-800-522-5465.

Proxy Voting

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve months ended June 30 is available by August 31 of the relevant year: (i) upon request and without charge by calling Investor Relations toll-free at 1-800-522-5465; and (ii) on the SEC’s website at http://www.sec.gov.

Unclaimed Share Accounts

Please be advised that abandoned or unclaimed property laws for certain states require financial organizations to transfer (escheat) unclaimed property (including Fund shares) to the state. Each state has its own definition of unclaimed property, and Fund shares could be considered “unclaimed property” due to account inactivity (e.g., no owner-generated activity for a certain period), returned mail (e.g., when mail sent to a shareholder is returned to the Fund’s transfer agent as undeliverable), or a combination of both. If your Fund shares are categorized as unclaimed, your financial advisor or the Fund’s transfer agent will follow the applicable state’s statutory

 

 

Aberdeen Global Income Fund, Inc.

 

2


Letter to Shareholders (unaudited) (concluded)

 

 

 

requirements to contact you, but if unsuccessful, laws may require that the shares be escheated to the appropriate state. If this happens, you will have to contact the state to recover your property, which may involve time and expense. For more information on unclaimed property and how to maintain an active account, please contact your financial adviser or the Fund’s transfer agent.

Investor Relations Information

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

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

For your convenience, included within this report is a reply card with a postage paid envelope. Please take a minute to complete this card

if you would like to be added to our enhanced email services from Aberdeen.

Contact Us:

 

 

Visit: cef.aberdeen-asset.us

 

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

 

Email: InvestorRelations@aberdeen-asset.com

 

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

Yours sincerely,

/s/ Christian Pittard

Christian Pittard

President

 

 

Aberdeen Global Income Fund, Inc.

 

3


Report of the Investment Manager (unaudited)

 

 

 

Market/economic review

Global bonds and currencies ended with mixed performance over the 12-month period ended October 31, 2016. Markets had a volatile start on the back of the interest-rate hike by the U.S. Federal Reserve (Fed) in December 2015, sharp declines in Chinese equities and a tumble in commodity prices. Just when investor sentiment appeared to stabilize going into the second half of the reporting period, risk aversion spiked again, this time caused by the UK’s unexpected Brexit1 vote in June 2016. “Safe-haven” assets, including the Japanese yen, gold and developed-market bonds, rallied. After a brief sell-off, Asia-Pacific and emerging-market bonds rebounded as record-low interest rates in developed bond markets drove global fund flows in search of higher yields. Towards the end of the reporting period, caution rose ahead of the U.S. presidential race in November. Republican Donald Trump subsequently won the election on November 8.

In the wake of the Brexit vote, UK government bond yields fell. The Bank of England cut its benchmark interest rate for the first time in seven years, expanded its bond-buying program and noted that it would strive to support economic growth in the aftermath of the Brexit vote. Finance Minister Philip Hammond also indicated that the government might scale back austerity measures. Nonetheless, the sterling suffered from heightened risk aversion, reaching a 31-year low against the U.S. dollar in early October 2016. Canadian bonds also strengthened in the flight to safety, even though the central bank left rates unchanged. The Canadian dollar weakened against the U.S. dollar over the reporting period.

Australian and New Zealand bond yields fell as their respective central banks remained on a monetary policy easing path, cutting rates in attempts to boost growth. Although Standard and Poor’s (S&P)2 downgraded Australia’s credit-rating outlook to negative, its impact was negligible, in our view. Both the Australian and New Zealand dollars strengthened against their U.S. counterpart during the reporting period.

Emerging-market bond returns were mixed over the reporting period. Indonesian bonds were the strongest performers as indonesia’s central bank continued to cut rates. Investor sentiment was further

boosted by stimulus measures and the tax amnesty bill that investors hoped would encourage overseas asset repatriation.3 The Indonesian rupiah rallied against the U.S. dollar. Brazilian bonds also outperformed the overall market despite initial concerns over the deteriorating political backdrop. In the latter half of the reporting period, tensions abated after former President Dilma Rousseff was impeached by the Senate, allowing Michel Temer to stand in as president until the end of 2018. The Brazilian real rallied over 20% against the U.S. dollar during the reporting period.

Bond yields in Turkey ended the reporting period mixed, with the short end of the curve outperforming the long end. Early gains were eroded by the worsening political environment, sparked by the failed military coup in mid-July 2016. Later in the period, an extension of the state of emergency and downgrades to the country’s credit rating by Moody’s4 and S&P further weighed on market sentiment. The lira weakened against its major currency peers. Philippine bonds underperformed the overall market during the reporting period. Investors initially welcomed President Rodrigo Duterte’s election win but his more strident invectives against the U.S. reignited market jitters. The Philippine peso weakened against the U.S. dollar. In Mexico, yields rose across the curve as the central bank hiked rates in a bid to prop up the currency. The Mexican peso accelerated its downward spiral against the U.S. dollar in the lead-up to the U.S. presidential election, as Donald Trump’s diatribe against the country’s southern neighbor intensified.

Fund performance review

Fund performance for the reporting period benefited mainly from the allocation to emerging-market debt. Positions in Australia and New Zealand bonds, as well as UK and Canadian bonds, also had a positive impact on Fund performance.

Within the Fund’s emerging-market debt strategies, security selection in Brazil and the overweight to the Brazilian real were the primary contributors to Fund performance over the reporting period. Security selection in Indonesia and the overweight to the rupiah also enhanced Fund performance. Additionally, the underweight to Turkish bonds had a positive impact on performance. Conversely, the position in the Mexican peso detracted from Fund performance.

 

 

 

1   

Brexit is an abbreviation of “British exit,” which refers to the June 23, 2016 referendum by British voters to exit the European Union.

2   

S&P’s credit ratings express the agency’s opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Typically, ratings are expressed as letter grades that range, for example, from “AAA” to “D” to communicate the agency’s opinion of relative level of credit risk. Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

3   

Asset repatriation comprises the transfer of a company’s foreign capital to its home country and its conversion into the domestic currency.

4   

Moody’s credit ratings express the agency’s opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Typically, ratings are expressed as letter grades that range, for example, from “Aaa” to “C” to communicate the agency’s opinion of relative level of credit risk.

 

Aberdeen Global Income Fund, Inc.

 

4


Report of the Investment Manager (unaudited) (continued)

 

 

 

Within the Fund’s developed-markets portfolios, the overweight to Australian bonds and underweight to the British pound sterling were notable contributors to Fund performance, but the underweight to UK bonds was a detractor.

The Fund’s use of derivatives had an overall negative impact on performance for the reporting period, attributable primarily to the long position in the U.S. dollar and short positions in both the Australian and New Zealand dollars, given the rally in the latter two currencies over the reporting period.

As part of the liberalization of the domestic bond market, in February 2016, the People’s Republic of China (PRC) announced a new path for international investors to access onshore bonds through the China Interbank Bond Market (CIBM). Because more than 90% of current PRC bond trading activity is transacted in the CIBM, the Fund’s new ability to access PRC bonds (and other products) through CIBM provides greater flexibility and liquidity, while subjecting the Fund to similar risks associated with other methods of investing directly in China.

Outlook

The global markets’ reaction in the immediate aftermath of the U.S. presidential election not only reflected surprise over Donald Trump’s win but also resulted in elevated uncertainty that we think could prevail going into 2017. U.S. Treasuries and some Asian bond markets initially rallied but subsequently sold off, with current yields generally higher than their pre-election levels. The U.S. dollar weakened against its G105 peers but later reversed course, and more recently was firmer against most G10 and emerging-market currencies. Credit spreads narrowed after widening initially. We believe that investors will have to wait for President-elect Trump to set policy direction when he takes office in January 2017. Early assumptions are for the U.S. to embark on fiscal stimulus, which could prove inflationary and cause U.S. Treasury yields to rise further. The Fed also is generally expected to continue on its path of monetary policy normalization, provided that investor sentiment and financial conditions are stable. For Asia and emerging markets, we think that a key risk stems from a potential increase in U.S. protectionism and its impact on global trade. On a positive note, we believe that most central banks still have some room to cut rates if they choose.

Elsewhere, we feel that there may be one more interest-rate cut in New Zealand in the near term, after which the central bank may adopt a more neutral stance, given improvements in economic

activity. In Australia, however, we do not think that low inflation alone will spur the central bank to ease monetary policy further, given the risks posed by burgeoning residential housing supply. In the UK, better-than-expected economic data may reduce the need for further stimulus. Nonetheless, we think that Brexit talks appear headed towards more uncertainty after a high-court ruling placed Parliament firmly in the driver’s seat, which could overshadow all other economic news. As for the European Central Bank, we think that more action is likely despite increased speculation about tapering. In our view, unless more policy measures are announced, the Japanese yen may not weaken. In this environment, we anticipate that interest-rate markets and other carry strategies6 will be well supported.

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 Fund’s loan facility may be invested to seek 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 loan facility, the lender has 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 lender may be able to control the liquidation as well. The loan facility has a term of 3 years 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.

 

 

5   

The G10 nations include Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the UK and the U.S.

6   

An interest-rate carry strategy comprises borrowing at a low interest rate and investing in an asset that provides a higher rate of return.

 

Aberdeen Global Income Fund, Inc.

 

5


Report of the Investment Manager (unaudited) (concluded)

 

 

 

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 Aberdeen Asset Management Asia Limited (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 $60,000,000.

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 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 interest rate exposure and hedge interest rate risk. As of October 31, 2016, the Fund held interest rate swap agreements with an aggregate notional amount of $31,500,000 which represented 100% of the Fund’s total borrowings. 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:

 

Remaining

Term as of

October 31, 2016

  Receive/(Pay)
Floating
Rate
    Amount
(in $ millions)
    Fixed Rate
Payable (%)
 

12 months

    Receive        16.5        0.84   

96 months

    Receive        15.0        2.44   

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.

 

6


Total Investment Returns (unaudited)

 

 

 

The following table summarizes the average annual Fund performance for the 1-year, 3-year, 5-year and 10-year periods as of October 31, 2016. 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.

 

        1 Year        3 Years        5 Years        10 Years  

Net Asset Value (NAV)

       8.8%           -0.1%           0.8%           5.0%   

Market Value

       15.5%           0.2%           -0.5%           4.4%   

Aberdeen Asset Management Inc. has entered into an agreement with the Fund to limit investor relations services fees, without which performance would be lower. See Note 3 in the Notes to Financial Statements. Returns represent past performance. Total investment return at NAV is based on changes in the NAV of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the Fund’s dividend reinvestment program. All return data at NAV includes fees charged to the Fund, which are listed in the Fund’s Statement of Operations under “Expenses”. The Fund’s total investment return at NAV is based on the reported NAV on each financial reporting period end. Total investment return at market value is based on changes in the market price at which the Fund’s shares traded on the NYSE MKT during the period and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the Fund’s dividend reinvestment program. The Fund’s total investment return is based on the reported NAV on the financial reporting period end. Because the Fund’s shares trade in the stock market based on investor demand, the Fund may trade at a price higher or lower than its NAV. Therefore, returns are calculated based on both market price and NAV. Past performance is no guarantee of future results. The performance information provided does not reflect the deduction of taxes that a shareholder would pay on distributions received from the Fund. The current performance of the Fund may be lower or higher than the figures shown. The Fund’s yield, return, market price and NAV will fluctuate. Performance information current to the most recent month-end is available at www.aberdeenfco.com or by calling 800-522-5465.

The net operating expense ratio, excluding fee waivers, based on the fiscal year ended October 31, 2016 was 2.49%. The net operating expense ratio, net of fee waivers, based on the fiscal year ended October 31, 2016 was 2.47%. The net operating expense ratio, excluding interest expense, net of fee waivers, based on the fiscal year ended October 31, 2016 was 1.90%.

 

Aberdeen Global Income Fund, Inc.

 

7


Portfolio Composition (unaudited)

 

 

 

Quality of Investments(1)

As of October 31, 2016, 35.8% of the Fund’s total investments were invested in securities where either the issue or the issuer was rated “A” or better by S&P or Moody’s. The table below shows the asset quality of the Fund’s portfolio as of October 1, 2016 compared with the previous six and twelve months:

 

Date    AAA/Aaa
%
     AA/Aa
%
    

A

%

    

BBB/Baa

%

     BB/Ba*
%
    

B*

%

     C/CCC*
%
    

D*

%

     NR**
%
 

October 31, 2016

     18.2         17.2         0.4         8.5         18.7         20.2         6.0         0.1         10.7   

April 30, 2016

     27.6         33.2         4.6         7.6         12.3         10.1         3.1         0         1.5   

October 31, 2015

     30.3         33.2         4.3         8.3         12.9         8.1         1.5         0         1.4   

 

*   Below investment grade
**   Not Rated
(1)   

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

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 Ocotber 31, 2016, compared with the previous six and twelve months:

 

Date     

Developed Markets

%

      

Investment Grade

Developing Markets

%

      

Sub-Investment Grade

Developing Markets

%

 

October 31, 2016

       71.0           12.5           16.5   

April 30, 2016

       70.4           13.4           16.2   

October 31, 2015

       71.5           12.9           15.6   

Currency Composition

The table below shows the currency composition of the Fund’s total investments as of October 31, 2016, compared with the previous six and twelve months:

 

Date     

Developed Markets

%

      

Investment Grade

Developing Markets

%

      

Sub-Investment Grade

Developing Markets

%

 

October 31, 2016

       95.1           3.4           1.5   

April 30, 2016

       94.2           4.8           1.0   

October 31, 2015

       95.8           2.8           1.4   

 

Aberdeen Global Income Fund, Inc.

 

8


Portfolio Composition (unaudited) (concluded)

 

 

 

Maturity Composition

As of October 31, 2016, the average maturity of the Fund’s total investments was 7.8 years, compared with 10.2 years at April 30, 2016 and 10.3 years at October 31, 2015. The table below shows the maturity composition of the Fund’s investments as of October 31, 2016, 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, 2016

       21.9           17.6           37.7           22.8   

April 30, 2016

       12.4           11.5           45.0           31.1   

October 31, 2015

       15.6           8.8           46.9           28.7   

 

Aberdeen Global Income Fund, Inc.

 

9


Summary of Key Rates (unaudited)

 

 

 

The following table summarizes the movements of key interest rates and currencies from October 31, 2016 and the previous six and twelve month periods.

 

        October 31, 2016        April 30, 2016        October 31, 2015  

Australia

              

90 day Bank Bills

       1.75%           2.16%           2.11%   

10 yr bond

       2.06%           2.30%           2.40%   

Australian Dollar

       $0.76           $0.76           $0.71   

Canada

              

90 day Bank Bills

       0.90%           0.94%           0.84%   

10 yr bond

       1.20%           1.51%           1.54%   

Canadian Dollar

       $0.75           $0.80           $0.76   

New Zealand

              

90 day Bank Bills

       2.14%           2.42%           2.98%   

10 yr bond

       2.71%           2.85%           3.30%   

New Zealand Dollar

       $0.72           $0.70           $0.68   

United Kingdom

              

90 day Bank Bills

       0.40%           0.59%           0.58%   

10 yr bond

       1.25%           1.60%           1.92%   

British Pound

       $1.22           $1.46           $1.54   

South Korea

              

90 day commercial paper

       1.39%           1.61%           1.57%   

10 yr bond

       1.68%           1.80%           2.11%   

South Korean Won*

       W1144.25           W1139.40           W1140.05   

Thailand

              

90 day deposits

       1.00%           1.00%           1.00%   

10 yr bond

       2.13%           1.80%           2.65%   

Thai Baht*

       B35.00           B34.93           B35.57   

Mexico

              

90 day T-Bills

       4.91%           3.85%           3.18%   

10 yr bond

       6.28%           5.88%           6.00%   

Mexican Peso*

       F18.81           F17.13           F16.53   

Malaysia

              

3-month T-Bills

       2.62%           2.48%           2.96%   

10 yr bond

       3.60%           3.88%           4.37%   

Malaysian Ringgit*

       R4.20           R3.91           R4.30   

Brazil

              

3-month T-Bills

       13.74%           14.14%           14.28%   

10 yr bond

       11.40%           12.47%           15.89%   

Brazilian Real*

       R3.17           R3.45           R3.84   

U.S. $ Bonds**

              

Mexico

       3.40%           3.51%           3.67%   

Indonesia

       3.59%           3.96%           4.44%   

Philippines

       1.43%           1.34%           1.57%   

 

*   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.
**   Sovereign issues.

 

Aberdeen Global Income Fund, Inc.

 

10


Portfolio of Investments

As of October 31, 2016

 

 

Principal

Amount

(000)

     Description  

Value

(US$)

 

CORPORATE BONDS—50.6%

  

ARGENTINA—0.2%

  

USD

    150      

Cablevision SA, 6.50%, 06/15/2019 (a)(b)

  $ 156,000   

AUSTRALIA—0.3%

  

USD

    235      

QBE Insurance Group Ltd., 6.75%, 12/02/2024 (a)(b)(c)

    256,620   

BANGLADESH—0.3%

  

USD

    200      

Banglalink Digital Communications Ltd., 8.63%, 05/06/2017 (a)(b)

    212,500   

BARBADOS—0.3%

  

USD

    210      

Sagicor Finance 2015 Ltd., 8.88%, 08/11/2019 (a)(b)

    240,188   

BELGIUM—0.2%

  

EUR

    120      

KBC Group NV, 5.63%, 03/19/2019 (a)(b)(c)(d)

    131,730   

BRAZIL—2.5%

  

USD

    206      

Caixa Economica Federal, 4.25%, 05/13/2019 (b)

    208,369   

USD

    320      

Marfrig Overseas Ltd., 9.50%, 11/30/2016 (a)(b)

    331,264   

USD

    420      

OAS Financial Ltd., 8.88%, 04/25/2018 (a)(b)(d)(e)(f)

    15,750   

USD

    640      

Petrobras Global Finance BV, 8.38%, 05/23/2021

    708,032   

USD

    490      

Petrobras International Finance Co., 5.38%, 01/27/2021

    485,198   

USD

    152      

QGOG Atlantic, 5.25%, 11/30/2016 (a)(b)

    136,518   

USD

    111      

Vale Overseas Ltd., 4.38%, 01/11/2022

    111,277   
                   1,996,408   

CANADA—1.1%

  

USD

    225      

Canadian Natural Resources Ltd., 6.50%, 02/15/2037

    257,097   

USD

    140      

First Quantum Minerals Ltd., 6.75%, 02/15/2017 (a)(b)

    134,050   

CAD

    185      

Gateway Casinos & Entertainment Ltd., 8.50%, 11/30/2016 (a)(b)

    130,340   

USD

    155      

MEG Energy Corp., 6.38%, 07/30/2017 (a)(b)

    127,875   

USD

    145      

MEG Energy Corp., 7.00%, 09/30/2018 (a)(b)

    118,900   

USD

    120      

Teck Resources Ltd., 8.00%, 06/01/2018 (a)(b)

    131,100   
                   899,362   

CHINA—0.3%

  

USD

    210      

Future Land Development Holdings Ltd., 10.25%, 07/21/2017 (a)(b)

    228,631   

DOMINICAN REPUBLIC—0.5%

  

USD

    400      

AES Andres BV / Dominican Power Partners / Empresa Generadora de Electricidad It,
7.95%, 05/11/2021 (a)(b)

    424,000   

FRANCE—0.9%

  

EUR

    110      

BiSoho SAS, 5.88%, 05/01/2019 (a)(b)

    129,229   

EUR

    270      

Novafives SAS, 4.50%, 06/30/2017 (a)(b)

    257,861   

USD

    315      

SFR Group SA, 6.00%, 05/15/2017 (a)(b)

    322,976   
                   710,066   

GEORGIA—1.1%

  

USD

    200      

BGEO Group JSC, 6.00%, 07/26/2023 (b)

    205,108   

USD

    250      

Georgian Oil and Gas Corp., 6.75%, 04/26/2021 (b)

    262,238   

USD

    400      

Georgian Railway JSC, 7.75%, 07/11/2022 (b)

    446,000   
                   913,346   

GERMANY—3.2%

      

EUR

    120      

ALBA Group PLC & Co. KG, 8.00%, 05/15/2017 (a)(b)

    129,122   

 

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

11


Portfolio of Investments (continued)

As of October 31, 2016

 

 

Principal

Amount

(000)

     Description  

Value

(US$)

 

CORPORATE BONDS—(continued)

  

GERMANY—(continued)

  

AUD

    3,000      

Landwirtschaftliche Rentenbank, 6.25%, 04/13/2018 (g)

  $ 2,419,046   
                   2,548,168   

GUATEMALA—0.7%

  

USD

    200      

Comunicaciones Celulares SA, 6.88%, 02/06/2019 (a)(b)

    204,500   

USD

    300      

Industrial Subordinated Trust, 8.25%, 07/27/2021 (b)

    322,875   
                   527,375   

HONG KONG—0.3%

  

USD

    210      

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

    236,792   

INDIA—0.3%

  

USD

    210      

ICICI Bank Ltd., 6.38%, 04/30/2017 (a)(b)(c)

    212,859   

INDONESIA—1.2%

  

USD

    370      

Pertamina Persero PT, 4.30%, 05/20/2023 (b)

    383,469   

USD

    560      

Pertamina Persero PT, 5.63%, 05/20/2043 (b)

    561,729   
                   945,198   

ITALY—0.6%

  

GBP

    200      

Assicurazioni Generali SpA, 6.42%, 02/08/2022 (a)(c)(d)

    245,718   

USD

    200      

Wind Acquisition Finance SA, 7.38%, 04/23/2017 (a)(b)

    205,500   
                   451,218   

KAZAKHSTAN—1.1%

  

USD

    200      

KazMunayGas National Co. JSC, 7.00%, 05/05/2020 (b)

    221,746   

USD

    216      

Tengizchevroil Finance Co. International Ltd., 4.00%, 08/15/2026 (b)

    208,241   

USD

    510      

Zhaikmunai LP Via Zhaikmunai International BV, 7.13%, 12/01/2016 (a)(b)

    470,475   
                   900,462   

LUXEMBOURG—1.2%

  

EUR

    275      

Altice Luxembourg SA, 7.25%, 05/15/2017 (a)(b)

    319,994   

EUR

    240      

ARD Finance SA, 6.63%, 09/15/2019 (a)(b)(h)

    256,948   

EUR

    230      

ConvaTec Healthcare E SA, 10.88%, 11/30/2016 (a)(b)

    255,588   

EUR

    120      

INEOS Group Holdings SA, 5.38%, 08/01/2019 (a)(b)

    131,112   
                   963,642   

MEXICO—2.1%

  

USD

    250      

Alfa SAB de CV, 6.88%, 09/25/2043 (a)(b)

    268,125   

USD

    200      

Cemex SAB de CV, 7.75%, 04/16/2021 (a)(b)

    224,120   

USD

    210      

Credito Real SAB de CV SOFOM ER, 7.25%, 07/20/2020 (a)(b)

    217,182   

USD

    280      

Pemex Project Funding Master Trust, 6.63%, 06/15/2035

    281,820   

USD

    200      

Sixsigma Networks Mexico SA de CV, 8.25%, 11/07/2017 (a)(b)

    195,500   

USD

    270      

Tenedora Nemak SA de CV, 5.50%, 02/28/2018 (a)(b)

    280,328   

USD

    250      

Unifin Financiera SAB de CV SOFOM ENR, 7.25%, 09/27/2020 (a)(b)

    251,625   
                   1,718,700   

NETHERLANDS—0.7%

  

EUR

    130      

Constellium, 4.63%, 05/15/2017 (a)(b)

    129,150   

USD

    200      

GTH Finance BV, 7.25%, 01/26/2023 (a)(b)

    212,900   

 

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

12


Portfolio of Investments (continued)

As of October 31, 2016

 

 

Principal

Amount

(000)

     Description  

Value

(US$)

 

CORPORATE BONDS—(continued)

  

NETHERLANDS—(continued)

  

USD

    260      

Ziggo Secured Finance BV, 5.50%, 01/15/2022 (a)(b)

  $ 256,750   
                   598,800   

NIGERIA—0.5%

  

USD

    210      

Access Bank PLC, 10.50%, 10/19/2021 (b)

    212,625   

USD

    200      

Ihs Netherlands Holdco BV, 9.50%, 10/27/2018 (a)(b)

    208,017   
                   420,642   

PARAGUAY—0.3%

  

USD

    250      

Banco Regional SAECA, 8.13%, 01/24/2019 (b)

    270,050   

PERU—0.2%

  

USD

    160      

Union Andina de Cementos SAA, 5.88%, 10/30/2018 (a)(b)

    166,240   

RUSSIA—2.2%

  

USD

    100      

EDC Finance Ltd., 4.88%, 04/17/2020 (b)

    101,000   

USD

    220      

Evraz Group SA, 6.50%, 04/22/2020 (b)

    226,048   

USD

    310      

Gazprom Neft OAO Via GPN Capital SA, 4.38%, 09/19/2022 (b)

    305,741   

USD

    284      

Global Ports Finance PLC, 6.87%, 01/25/2022 (b)

    293,230   

USD

    300      

Lukoil International Finance BV, 4.56%, 04/24/2023 (b)

    303,786   

USD

    260      

Sberbank of Russia Via SB Capital SA, 6.13%, 02/07/2022 (b)

    282,458   

USD

    270      

Vimpel Communications Via VIP Finance Ireland Ltd. OJSC, 7.75%, 02/02/2021 (b)

    298,293   
                   1,810,556   

SOUTH AFRICA—0.8%

  

USD

    400      

Eskom Holdings SOC Ltd., 7.13%, 02/11/2025 (b)

    413,856   

USD

    200      

MTN Mauritius Investment Ltd., 6.50%, 10/13/2026 (b)

    202,850   
                   616,706   

SPAIN—0.4%

  

EUR

    290      

Obrascon Huarte Lain SA, 4.75%, 03/15/2018 (a)(b)

    253,086   

EUR

    100      

OHL Investments SA, 4.00%, 04/25/2018 (b)

    102,091   
                   355,177   

SUPRANATIONAL—2.5%

  

AUD

    2,000      

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

    1,680,267   

INR

    23,400      

International Bank for Reconstruction & Development, 6.38%, 08/07/2018

    354,224   
                   2,034,491   

SWITZERLAND—0.1%

  

EUR

    100      

Selecta Group BV, 6.50%, 12/15/2016 (a)(b)

    94,407   

TURKEY—1.1%

  

USD

    200      

Arcelik, 5.00%, 04/03/2023 (b)

    196,360   

USD

    420      

Turkiye Vakiflar Bankasi TAO, 6.00%, 11/01/2022 (b)

    413,490   

USD

    250      

Yasar Holdings AS, 8.88%, 11/06/2017 (a)(b)

    266,250   
                   876,100   

UNITED ARAB EMIRATES—0.7%

  

USD

    480      

Jafz Sukuk Ltd., 7.00%, 06/19/2019 (b)

    534,000   

UNITED KINGDOM—3.2%

  

GBP

    100      

Annington Finance No 5 PLC, 13.00%, 01/15/2018 (a)(b)(h)

    138,224   

 

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

13


Portfolio of Investments (continued)

As of October 31, 2016

 

 

Principal

Amount

(000)

     Description  

Value

(US$)

 

CORPORATE BONDS—(continued)

  

UNITED KINGDOM—(continued)

  

GBP

    100      

Boparan Finance PLC, 5.50%, 07/15/2017 (a)(b)

    111,690   

GBP

    110      

Cabot Financial Luxembourg SA, 6.50%, 04/01/2017 (a)(b)

    131,274   

EUR

    130      

Corral Petroleum Holdings, 11.75%, 05/15/2019 (a)(b)(h)

    134,859   

GBP

    110      

CYBG PLC, 5.00%, 02/08/2021 (a)(b)(c)

    127,123   

GBP

    200      

CYBG PLC, 8.00%, 12/08/2022 (a)(b)(c)(d)

    221,226   

GBP

    210      

F&C Asset Management PLC, 6.75%, 12/20/2016 (a)(c)

    256,719   

USD

    135      

Inmarsat Finance PLC, 4.88%, 05/15/2017 (a)(b)

    127,318   

EUR

    262      

International Personal Finance PLC, 5.75%, 04/07/2021 (b)

    261,726   

GBP

    100      

Lloyds Bank PLC, 13.00%, 01/21/2029 (a)(c)(d)

    215,081   

GBP

    115      

New Look Secured Issuer PLC, 6.50%, 06/24/2018 (a)(b)

    126,008   

GBP

    185      

Paragon Group of Cos. PLC, 7.25%, 09/09/2021 (a)(b)(c)

    227,618   

GBP

    110      

Pizzaexpress Financing 2 PLC, 6.63%, 08/01/2017 (a)(b)

    132,331   

EUR

    115      

Thomas Cook Finance PLC, 7.75%, 11/30/2016 (a)(b)

    129,711   

GBP

    207      

Virgin Media Secured Finance PLC, 5.50%, 01/15/2019 (a)(b)

    257,929   
                   2,598,837   

UNITED STATES—19.4%

  

USD

    250      

Albertsons Cos LLC / Safeway, Inc. / New Albertson’s, Inc. / Albertson’s LLC, 6.63%, 06/15/2019 (a)(b)

  $ 259,375   

EUR

    120      

Alliance Data Systems Corp., 5.25%, 11/15/2018 (a)(b)

    132,020   

USD

    63      

Alliance Data Systems Corp., 5.88%, 11/01/2018 (a)(b)

    63,473   

USD

    250      

Ally Financial, Inc., 5.75%, 10/20/2025 (a)

    255,937   

USD

    250      

Altice US Finance I Corp., 5.38%, 07/15/2018 (a)(b)

    255,762   

GBP

    100      

AMC Entertainment Holdings, 6.38%, 11/15/2024 (b)

    122,400   

USD

    185      

American Builders & Contractors Supply Co., Inc., 5.75%, 12/15/2018 (a)(b)

    192,863   

USD

    255      

Avis Budget Car Rental LLC / Avis Budget Finance, Inc., 5.50%, 04/01/2018 (a)

    252,450   

USD

    125      

Bank of America Corp., 6.25%, 09/05/2024 (a)(c)(d)

    130,938   

USD

    260      

Blue Racer Midstream LLC / Blue Racer Finance Corp., 6.13%, 11/15/2017 (a)(b)

    254,150   

USD

    240      

Boyd Gaming Corp., 6.38%, 04/01/2021 (a)(b)

    256,800   

USD

    260      

CalAtlantic Group, Inc., 5.25%, 12/01/2025 (a)

    257,400   

USD

    260      

Calpine Corp., 5.75%, 10/15/2019 (a)

    252,850   

USD

    125      

Carrizo Oil & Gas, Inc., 6.25%, 04/15/2018 (a)

    128,438   

USD

    305      

CCO Holdings LLC / CCO Holdings Capital Corp., 5.75%, 02/15/2021 (a)(b)

    317,772   

USD

    265      

Cengage Learning, Inc., 9.50%, 06/15/2019 (a)(b)

    249,762   

USD

    245      

CenturyLink, Inc., 7.50%, 01/01/2024 (a)

    255,106   

USD

    150      

Cenveo Corp., 6.00%, 02/01/2019 (a)(b)

    132,000   

USD

    38      

Citgo Holding, Inc., 10.75%, 02/15/2020

    38,798   

USD

    121      

Citigroup, Inc., 6.25%, 08/15/2026 (a)(c)(d)

    130,275   

USD

    270      

Compass Minerals International, Inc., 4.88%, 05/15/2024 (a)(b)

    256,837   

USD

    280      

Continental Resources, Inc., 3.80%, 03/01/2024 (a)

    257,600   

USD

    245      

DISH DBS Corp., 5.88%, 11/15/2024

    246,684   

USD

    130      

Dynegy, Inc., 7.63%, 11/01/2019 (a)

    124,475   

USD

    290      

Endo Ltd. / Endo Finance LLC / Endo Finco, Inc., 6.00%, 07/15/2018 (a)(b)

    252,300   

USD

    170      

Ensco PLC, 5.20%, 12/15/2024 (a)

    138,285   

USD

    250      

Equinix, Inc., 5.38%, 04/01/2018 (a)

    260,937   

USD

    250      

First Data Corp., 5.38%, 08/15/2018 (a)(b)

    258,750   

USD

    300      

Fresh Market, Inc. (The), 9.75%, 05/01/2019 (a)(b)

    255,750   

USD

    295      

Frontier Communications Corp., 6.88%, 10/15/2024 (a)

    247,063   

USD

    130      

Goldman Sachs Group, Inc. (The), 5.38%, 05/10/2020 (a)(c)(d)

    130,650   

USD

    125      

Goodyear Tire & Rubber Co. (The), 5.00%, 05/31/2021 (a)

    126,094   

USD

    245      

HCA, Inc., 5.88%, 08/15/2025 (a)

    257,250   

USD

    115      

HCA, Inc., 7.50%, 02/15/2022

    130,870   

USD

    250      

HD Supply, Inc., 5.75%, 04/15/2019 (a)(b)

    262,500   

 

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

14


Portfolio of Investments (continued)

As of October 31, 2016

 

 

Principal

Amount

(000)

     Description  

Value

(US$)

 

CORPORATE BONDS—(continued)

  

USD

    130      

Hilcorp Energy I LP / Hilcorp Finance Co., 5.75%, 04/01/2020 (a)(b)

  $ 130,325   

USD

    240      

KB Home, 7.00%, 09/15/2021 (a)

    257,400   

USD

    210      

Kinder Morgan, Inc., 7.80%, 08/01/2031

    260,290   

USD

    130      

Kindred Healthcare, Inc., 8.75%, 01/15/2018 (a)

    126,100   

USD

    190      

Landry’s, Inc., 6.75%, 10/15/2019 (a)(b)

    193,800   

USD

    185      

Lennar Corp., 4.88%, 09/15/2023 (a)

    188,700   

USD

    253      

Level 3 Financing, Inc., 5.13%, 05/01/2018 (a)

    255,530   

USD

    185      

Level 3 Financing, Inc., 5.38%, 05/01/2020 (a)

    187,775   

USD

    135      

Meritor, Inc., 6.25%, 02/15/2019 (a)

    133,144   

USD

    265      

MGM Resorts International, 4.63%, 06/01/2026 (a)

    255,062   

USD

    295      

Momentive Performance Materials, Inc., 3.88%, 12/01/2016 (a)

    262,550   

USD

    130      

Morgan Stanley, 5.55%, 07/15/2020 (a)(c)(d)

    133,088   

USD

    180      

NCR Corp., 6.38%, 12/15/2018 (a)

    190,350   

USD

    110      

Neiman Marcus Group Ltd., LLC, 8.00%, 12/01/2016 (a)(b)

    90,750   

USD

    260      

NewStar Financial, Inc., 7.25%, 05/01/2017 (a)

    260,000   

USD

    250      

NRG Energy, Inc., 7.25%, 05/15/2021 (a)(b)

    245,978   

USD

    130      

Oasis Petroleum, Inc., 6.50%, 12/01/2016 (a)

    129,188   

USD

    250      

Oasis Petroleum, Inc., 6.88%, 07/15/2017 (a)

    245,000   

USD

    260      

Post Holdings, Inc., 5.00%, 08/15/2021 (a)(b)

    252,200   

USD

    240      

Rite Aid Corp., 6.13%, 04/01/2018 (a)(b)

    253,200   

USD

    150      

Rowan Cos., Inc., 4.88%, 03/01/2022 (a)

    129,000   

USD

    360      

Sabine Pass Liquefaction LLC, 5.63%, 12/01/2024 (a)

    380,934   

USD

    240      

Scientific Games International, Inc., 7.00%, 01/01/2018 (a)(b)

    255,264   

USD

    240      

Sealed Air Corp., 5.50%, 06/15/2025 (a)(b)

    255,900   

USD

    255      

Sinclair Television Group, Inc., 5.63%, 08/01/2019 (a)(b)

    258,187   

USD

    255      

Sprint Corp., 7.88%, 09/15/2023

    252,450   

USD

    120      

Standard Industries, Inc., 5.38%, 11/15/2019 (a)(b)

    124,050   

USD

    120      

State Street Capital Trust IV, 1.85%, 12/01/2016 (c)

    103,200   

USD

    185      

Summit Materials LLC / Summit Materials Finance Corp, 6.13%, 07/15/2018 (a)

    189,625   

USD

    360      

T-Mobile USA, Inc., 6.00%, 04/15/2019 (a)

    382,950   

USD

    255      

Tenet Healthcare Corp., 8.13%, 04/01/2022

    249,262   

USD

    255      

TerraForm Power Operating LLC, 9.38%, 02/01/2018 (a)(b)(i)

    255,637   

USD

    180      

TransDigm, Inc., 6.50%, 07/15/2019 (a)

    189,450   

USD

    140      

Triumph Group, Inc., 5.25%, 06/01/2017 (a)

    128,100   

USD

    145      

Tronox Finance LLC, 7.50%, 03/15/2018 (a)(b)

    129,775   

USD

    255      

United Rentals North America, Inc., 5.50%, 07/15/2020 (a)

    258,187   

USD

    60      

United Rentals North America, Inc., 6.13%, 12/15/2017 (a)

    62,700   

USD

    400      

Valeant Pharmaceuticals International, Inc., 6.38%, 12/01/2016 (a)(b)

    345,000   

USD

    93      

WMG Acquisition Corp., 5.63%, 04/15/2017 (a)(b)

    96,720   

USD

    120      

WR Grace & Co-Conn, 5.13%, 10/01/2021 (b)

    127,800   

USD

    245      

Zayo Group LLC / Zayo Capital Inc, 6.38%, 05/15/2020 (a)

    257,941   
                   15,627,176   

VENEZUELA—0.1%

  

USD

    160      

Petroleos de Venezuela SA, 8.50%, 11/02/2017 (b)

    116,400   
            

Total Corporate Bonds—50.6% (cost $39,774,808)

    40,792,847   

GOVERNMENT BONDS—73.3%

  

ARGENTINA—3.2%

  

USD

    1,110      

Argentina Bonar Bonds, 7.00%, 04/17/2017

    1,131,372   

ARS

    6,030      

Argentine Bonos del Tesoro, 16.00%, 10/17/2023

    402,929   

USD

    323      

Argentine Republic Government International Bond, 7.13%, 07/06/2036 (b)

    333,013   

USD

    645      

Argentine Republic Government International Bond, 7.50%, 04/22/2026 (b)

    704,662   
                   2,571,976   

 

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

15


Portfolio of Investments (continued)

As of October 31, 2016

 

 

Principal

Amount

(000)

     Description  

Value

(US$)

 

GOVERNMENT BONDS—(continued)

  

ARMENIA—0.5%

  

USD

    400      

Republic of Armenia, 144A, 6.00%, 09/30/2020 (b)

  $ 413,500   

AUSTRALIA—22.2%

  

AUD

    800      

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

    656,228   

AUD

    4,700      

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

    4,022,004   

AUD

    1,600      

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

    1,502,973   

AUD

    2,300      

Australia Government Bond, 4.75%, 04/21/2027 (b)

    2,137,225   

AUD

    4,600      

Australia Government Bond, 6.00%, 02/15/2017 (b)

    3,542,889   

AUD

    1,500      

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

    1,200,918   

AUD

    1,500      

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

    1,202,770   

AUD

    1,600      

Queensland Treasury Corp., 6.00%, 06/14/2021 (b)(g)

    1,434,729   

AUD

    1,300      

Queensland Treasury Corp., 6.00%, 07/21/2022 (b)

    1,189,273   

AUD

    1,115      

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

    970,335   
                   17,859,344   

AZERBAIJAN—0.5%

  

USD

    348      

Southern Gas Corridor CJSC, 6.88%, 03/24/2026 (b)(g)

    392,572   

BAHRAIN—0.2%

  

USD

    200      

Bahrain Government International Bond, 7.00%, 10/12/2028 (b)

    206,000   

BRAZIL—2.3%

  

BRL

    4,870      

Brazil Notas do Tesouro Nacional Series F, 10.00%, 01/01/2023

    1,440,758   

USD

    400      

Brazilian Government International Bond, 7.13%, 01/20/2037

    456,000   
                   1,896,758   

COLOMBIA—0.5%

  

USD

    200      

Colombia Government International Bond, 4.50%, 10/28/2025 (a)

    214,000   

USD

    120      

Colombia Government International Bond, 7.38%, 09/18/2037

    153,600   
                   367,600   

COSTA RICA—0.3%

  

USD

    250      

Costa Rica Government International Bond, 4.25%, 01/26/2023 (b)

    241,875   

DOMINICAN REPUBLIC—1.2%

  

USD

    210      

Dominican Republic International Bond, 5.88%, 04/18/2024 (b)(j)

    217,900   

USD

    100      

Dominican Republic International Bond, 6.88%, 01/29/2026 (b)

    110,750   

USD

    530      

Dominican Republic International Bond, 8.63%, 04/20/2027 (b)(j)

    622,750   
                   951,400   

ETHIOPIA—0.6%

  

USD

    500      

Ethiopia International Bond, 6.63%, 12/11/2024 (b)

    473,050   

GHANA—0.8%

  

USD

    250      

Ghana Government International Bond, 8.13%, 01/18/2026 (b)

    239,442   

GHS

    1,500      

Ghana Government International Bond, 23.00%, 08/21/2017

    372,568   
                   612,010   

HONDURAS—0.5%

  

USD

    330      

Honduras Government International Bond, 7.50%, 03/15/2024 (b)

    367,950   

INDONESIA—2.5%

  

USD

    850      

Indonesia Government International Bond, 5.88%, 01/15/2024 (b)

    986,071   

 

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

16


Portfolio of Investments (continued)

As of October 31, 2016

 

 

Principal

Amount

(000)

     Description  

Value

(US$)

 

GOVERNMENT BONDS—(continued)

  

INDONESIA—(continued)

  

USD

    200      

Indonesia Government International Bond, 6.75%, 01/15/2044 (b)

  $ 263,668   

IDR

    5,600,000      

Indonesia Treasury Bond, 5.25%, 05/15/2018

    419,099   

IDR

    4,850,000      

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

    389,360   
                   2,058,198   

IRAQ—0.8%

  

USD

    800      

Iraq International Bond, 5.80%, 12/15/2016 (a)(b)(j)

    642,981   

IVORY COAST—0.6%

  

USD

    495      

Ivory Coast Government International Bond, 5.75%, 12/31/2016 (b)(i)

    484,882   

JAMAICA—0.6%

  

USD

    400      

Jamaica Government International Bond, 7.88%, 07/28/2045

    461,056   

KAZAKHSTAN—1.7%

  

USD

    520      

Kazakhstan Government International Bond, 3.88%, 10/14/2024 (b)

    537,555   

USD

    820      

Kazakhstan Government International Bond, 4.88%, 10/14/2044 (b)

    828,233   
                   1,365,788   

MEXICO—1.6%

  

USD

    350      

Mexico Government International Bond, 6.05%, 01/11/2040

    416,063   

USD

    390      

Petroleos Mexicanos, 6.50%, 06/02/2041

    379,080   

USD

    130      

Petroleos Mexicanos, 6.63%, 06/15/2038

    129,025   

USD

    159      

Petroleos Mexicanos, 6.88%, 08/04/2026 (b)

    177,762   

MXN

    4,000      

Petroleos Mexicanos, 7.19%, 09/12/2024 (b)

    193,496   
                   1,295,426   

MONGOLIA—0.7%

  

USD

    680      

Mongolia Government International Bond, 5.13%, 12/05/2022 (b)

    600,142   

NEW ZEALAND—19.6%

  

NZD

    3,100      

New Zealand Government Bond, 3.00%, 04/15/2020 (b)

    2,281,097   

NZD

    1,700      

New Zealand Government Bond, 4.50%, 04/15/2027 (b)

    1,410,745   

NZD

    7,900      

New Zealand Government Bond, 5.50%, 04/15/2023 (b)

    6,688,984   

NZD

    6,555      

New Zealand Government Bond, 6.00%, 05/15/2021 (b)

    5,452,055   
                   15,832,881   

PARAGUAY—0.3%

  

USD

    200      

Paraguay Government International Bond, 5.00%, 04/15/2026 (b)

    212,500   

PERU—0.6%

  

PEN

    1,450      

Peruvian Government International Bond, 6.90%, 08/12/2037 (b)

    464,443   

PHILIPPINES—0.1%

  

USD

    40      

Philippine Government International Bond, 8.38%, 06/17/2019

    46,931   

ROMANIA—1.7%

  

USD

    1,090      

Romanian Government International Bond, 6.13%, 01/22/2044 (b)

    1,415,245   

RUSSIA—3.7%

  

RUB

    166,560      

Russian Federal Bond—OFZ, 7.05%, 01/19/2028

    2,370,938   

USD

    200      

Russian Foreign Bond—Eurobond, 4.88%, 09/16/2023 (b)

    214,992   

USD

    380      

Vnesheconombank Via VEB Finance PLC, 6.80%, 11/22/2025 (b)

    406,600   
                   2,992,530   

 

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

17


Portfolio of Investments (continued)

As of October 31, 2016

 

 

Principal

Amount

(000)

     Description  

Value

(US$)

 

GOVERNMENT BONDS—(continued)

  

RWANDA—0.7%

  

USD

    550      

Rwanda International Government Bond, 6.63%, 05/02/2023 (b)

    550,094   

SENEGAL—0.5%

  

USD

    330      

Senegal Government International Bond, 8.75%, 05/13/2021 (b)

    372,583   

SOUTH AFRICA—1.7%

  

USD

    280      

Eskom Holdings Ltd., 5.75%, 01/26/2021 (b)

    281,400   

ZAR

    3,300      

Republic of South Africa Government Bond, 6.25%, 03/31/2036

    177,882   

ZAR

    4,730      

Republic of South Africa Government Bond, 10.50%, 12/21/2026

    388,514   

USD

    400      

Republic of South Africa Government International Bond, 4.88%, 04/14/2026

    415,059   

USD

    100      

Republic of South Africa Government International Bond, 6.25%, 03/08/2041

    116,567   
                   1,379,422   

TANZANIA—0.2%

  

USD

    156      

Tanzania Government International Bond, 7.25%, 03/09/2020 (b)(c)(j)(k)

    162,036   

TURKEY—0.6%

  

USD

    320      

Turkey Government International Bond, 6.25%, 09/26/2022

    348,092   

TRY

    620      

Turkey Government International Bond, 8.00%, 03/12/2025

    179,934   
                   528,026   

UKRAINE—1.5%

  

USD

    810      

Ukraine Government International Bond, 7.75%, 09/01/2023 (b)

    785,781   

USD

    430      

Ukraine Government International Bond, 7.75%, 09/01/2024 (b)

    413,948   
                   1,199,729   

URUGUAY—0.6%

 

USD

    50      

Uruguay Government International Bond, 4.38%, 10/27/2027 (j)

    52,813   

USD

    146      

Uruguay Government International Bond, 7.63%, 03/21/2036 (j)

    201,261   

USD

    165      

Uruguay Government International Bond, 7.88%, 01/15/2033

    229,102   
                   483,176   

ZAMBIA—0.2%

 

USD

    200      

Zambia Government International Bond, 8.97%, 07/30/2027 (b)(j)

    196,088   
            

Total Government Bonds—73.3% (cost $59,698,858)

    59,098,192   
        Description   Shares or
Principal
Amount
    Value
(US$)
 

SHORT-TERM INVESTMENT—(11.7%)

  

UNITED STATES—(11.7%)

  

            

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

    9,421,181      $ 9,421,181   
            

Total Short-Term Investment—11.7% (cost $9,421,181)

            9,421,181   
            

Total Investments—135.6% (cost $108,894,847)

            109,312,220   
            

Liabilities in Excess of Other Assets—(35.6)%

            (28,705,772
            

Net Assets—100.0%

          $ 80,606,448   

 

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

18


Portfolio of Investments (continued)

As of October 31, 2016

 

 

 

ARS—Argentine Peso
AUD—Australian Dollar
BRL—Brazilian Real
CAD—Canadian Dollar
EUR—Euro Currency
GBP—British Pound Sterling
GHS—Ghanaian Cedi
IDR—Indonesian Rupiah
INR—Indian Rupee
MXN—Mexican Peso
NZD—New Zealand Dollar
PEN—Peruvian Sol
RUB—New Russian Ruble
TRY—Turkish Lira
USD—U.S. Dollar
ZAR—South African Rand
 

 

(a)   The maturity date presented for these instruments represents the next call/put date.
(b)   Denotes a restricted security.
(c)   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.
(d)   Perpetual bond. This is a bond that has no maturity date, is redeemable and pays a steady stream of interest indefinitely.
(e)   Security is in default.
(f)   Illiquid security.
(g)   This security is government guaranteed.
(h)   Payment-in-kind. This is a type of bond that pays interest in additional bonds rather than in cash.
(i)   Indicates a stepped coupon bond. This bond was issued with a low coupon that gradually increases over the life of the bond.
(j)   Sinkable security.
(k)   Variable or Floating Rate Security. Rate disclosed is as of October 31, 2016.
(l)   Registered investment company advised by State Street Global Advisors.

At October 31, 2016, the Fund’s open forward foreign currency exchange contracts were as follows:

 

Sale Contracts
Settlement Date
   Counterparty   

Amount

Purchased

     Amount Sold      Fair Value      Unrealized
Appreciation/
(Depreciation)
 

United States Dollar/Australian Dollar

  

        
12/15/2016   

Royal Bank of Canada

     USD3,700,000         AUD4,954,061       $ 3,764,393       $ (64,393

United States Dollar/British Pound

  

        
03/01/2017   

Citibank

     USD2,152,150         GBP1,760,000         2,159,937         (7,787
03/01/2017   

JPMorgan Chase

     USD235,675         GBP192,500         236,243         (568

United States Dollar/Canadian Dollar

  

        
02/10/2017   

Citibank

     USD136,827         CAD183,000         136,563         264   

United States Dollar/Euro

  

        
02/10/2017   

Citibank

     USD2,331,698         EUR2,134,500         2,354,051         (22,353
02/10/2017   

JPMorgan Chase

     USD461,800         EUR421,500         464,855         (3,055

United States Dollar/Mexican Peso

  

        
01/11/2017   

Citibank

     USD153,895         MXN2,950,000         154,910         (1,015

United States Dollar/New Russian Ruble

  

        
11/23/2016   

Citibank

     USD816,193         RUB51,812,000         812,984         3,209   

United States Dollar/New Zealand Dollar

  

        
11/09/2016   

Royal Bank of Canada

     USD8,200,000         NZD11,051,213         7,900,290         299,710   

United States Dollar/South African Rand

  

        
01/11/2017   

JPMorgan Chase

     USD500,714         ZAR7,316,000         535,007         (34,293
                            $ 18,519,233       $ 169,719   

 

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

19


Portfolio of Investments (concluded)

As of October 31, 2016

 

 

At October 31, 2016, the Fund’s interest rate swaps were as follows:

 

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

Over-the-counter swap agreements:

  

        

USD

     16,500,000         11/01/2017         Barclays         Receive         3-month LIBOR Index         0.84    $ (11,209

Centrally cleared swap agreements:

  

        

USD

     15,000,000         11/04/2024         Citibank         Receive         3-month LIBOR Index         2.44      (1,149,014
       $ (1,160,223

 

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

20


Statement of Assets and Liabilities

As of October 31, 2016

 

 

Assets

        

Investments, at value (cost $99,473,666)

   $ 99,891,039   

Short-term investments, at value (cost $9,421,181)

     9,421,181   

Cash

     3,761,572   

Foreign currency, at value (cost $2,576,080)

     2,743,068   

Cash at broker for interest rate swaps

     688,940   

Due from broker

     3,700,737   

Interest receivable

     1,382,318   

Unrealized appreciation on forward foreign currency exchange contracts

     303,183   

Other receivables

     192,387   

Prepaid expenses

     33,817   

Total assets

     122,118,242   

Liabilities

  

Bank loan payable (Note 7)

     31,500,000   

Payable for investments purchased

     6,125,608   

Due to custodian

     3,550,712   

Unrealized depreciation on forward foreign currency exchange contracts

     133,464   

Investment management fees payable (Note 3)

     62,602   

Variation margin payable for centrally cleared credit default swap contracts

     15,201   

Administration fee payable (Note 3)

     12,039   

Unrealized depreciation on interest rate swaps

     11,209   

Investor relations fees payable (Note 3)

     7,328   

Deferred foreign capital gains tax

     3,479   

Interest payable on bank loan

     1,378   

Accrued expenses

     88,774   

Total liabilities

     41,511,794   
          

Net Assets

   $ 80,606,448   

Composition of Net Assets:

  

Common stock (par value $.001 per share) (Note 5)

   $ 8,744   

Paid-in capital in excess of par

     93,316,125   

Distributions in excess of net investment income

     (3,334,645

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

     (4,448,922

Net unrealized appreciation on investments and interest rate swaps

     2,350,289   

Accumulated net realized foreign exchange losses

     (4,521,536

Net unrealized foreign exchange and forward foreign currency contract gains

     (2,763,607

Net Assets

   $ 80,606,448   

Net asset value per share based on 8,744,328 shares issued and outstanding

   $ 9.22   

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

21


Statement of Operations

For the Year Ended October 31, 2016

 

 

Net Investment Income

        

Income

  

Interest and amortization of discount and premium (net of foreign withholding taxes of $3,334)

   $ 4,754,350   

Other income

     192,388 (a)  
       4,946,738   

Expenses

  

Investment management fee (Note 3)

     735,157   

Director fees and expenses

     225,667   

Administration fee (Note 3)

     141,376   

Investor relations fees and expenses (Note 3)

     110,038   

Independent auditor fees and expenses

     78,750   

Reports to shareholders and proxy solicitation

     74,225   

Insurance expense

     63,645   

Bank loan fees and expenses

     35,837   

Legal fees and expenses

     35,257   

Custodian fees and expenses

     33,195   

Transfer agent fees and expenses

     31,582   

Miscellaneous

     5,820   

Total operating expenses, excluding interest expense

     1,570,549   

Interest expense (Note 7)

     464,442   

Total operating expenses before reimbursed/waived expenses

     2,034,991   

Less: Investor relations fee waiver (Note 3)

     (20,145

Net operating expenses

     2,014,846   
          

Net Investment Income

     2,931,892   
          

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

  

Net realized gain/(loss) from:

  

Investment transactions (including $1,511 capital gains tax)

     6,161,153   

Interest rate swaps

     (353,558

Forward and spot foreign currency exchange contracts

     (1,090,356

Foreign currency transactions

     (7,046,947
       (2,329,708

Net change in unrealized appreciation/(depreciation) on:

  

Investments (including change in deferred capital gains tax of $3,479)

     (903,852

Interest rate swaps

     (372,970

Forward foreign currency exchange rate contracts

     160,077   

Foreign currency translation

     6,301,581   
       5,184,836   

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

     2,855,128   

Net Increase in Net Assets Resulting from Operations

   $ 5,787,020   

 

(a)   Other income includes a one-time reimbursement for overbilling of prior year custodian out-of-pocket fees.

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

22


Statements of Changes in Net Assets

 

 

 

      For the
Year Ended
October 31, 2016
     For the
Year Ended
October 31, 2015
 

Increase/(Decrease) in Net Assets

     

Operations:

     

Net investment income

   $ 2,931,892       $ 3,532,316   

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

     5,807,595         (650,449

Net realized loss from foreign currency transactions

     (8,137,303      (5,254,938

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

     (1,276,822      (2,376,418

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

     6,461,658         (7,220,849

Net increase/(decrease) in net assets resulting from operations

     5,787,020         (11,970,338

Distributions to Shareholders from:

     

Net investment income

             (6,796,976

Tax return of capital

     (7,360,663      (768,965

Net decrease in net assets from distributions

     (7,360,663      (7,565,941

Common Stock Transactions:

     

Repurchase of common stock resulting in the reduction of 100,430 and 350,802 shares of common stock, respectively (Note 6)

     (766,510      (3,170,004

Change in net assets from capital transactions

     (766,510      (3,170,004

Change in net assets resulting from operations

     (2,340,153      (22,706,283

Net Assets:

     

Beginning of year

     82,946,601         105,652,884   

End of year (including distributions in excess of net investment income of ($3,334,645) and ($1,947,991), respectively)

   $ 80,606,448       $ 82,946,601   

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

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

23


Statement of Cash Flows

For the Year Ended October 31, 2016

 

 

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

  

Cash flows provided from (used for) operating activities:

  

Interest received and other income (excluding discount and premium amortization of $634,687)

   $ 5,564,701   

Operating expenses paid

     (2,014,929

Payments paid to broker for collateral on interest rate swaps

     (3,957,603

Purchases of short-term portfolio investments

     (314,157,972

Sales of short-term portfolio investments

     306,066,791   

Purchases of long-term portfolio investments

     (82,882,534

Proceeds from sales of long-term portfolio investments

     106,249,947   

Realized losses on forward foreign currency exchange contracts closed

     (1,156,743

Realized losses on interest rate swap transactions

     (353,558

Decrease in prepaid expenses

     178   

Net cash provided from operating activities

     13,358,278   

Cash flows provided from (used for) financing activities

  

Repurchase of common stock

     (766,510

Dividends paid to common shareholders

     (7,360,663

Change in payable due to Custodian

     3,527,413   

Net cash used for financing activities

     (4,599,760

Effect of exchange rate on cash

     (6,795,690

Net increase in cash

     1,962,828   

Cash at beginning of year

     4,541,812   

Cash at end of year

   $ 6,504,640   

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

  

Net increase in total net assets resulting from operations

   $ 5,787,020   

Decrease in investments

     9,761,952   

Net realized gain on investment transactions

     (6,161,572

Net realized foreign exchange losses

     6,980,600   

Net change in unrealized appreciation/depreciation on investments

     903,852   

Net change in unrealized foreign exchange gains/losses

     (6,461,658

Increase in interest and other receivable

     (16,724

Decrease in receivable for investments sold

     30,423   

Decrease in interest payable on bank loan

     (12,113

Decrease in prepaid expenses

     178   

Increase in payable for investments purchased

     6,118,504   

Change in interest receivable/payable for closed interest rate swaps

     (3,725,954

Payments received from broker for interest rate swaps

     141,321   

Payments received from broker for futures contracts

     419   

Increase in accrued expenses and other liabilities

     12,030   

Total adjustments

     7,571,258   

Net cash provided from operating activities

   $ 13,358,278   

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

24


 

 

[THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

 


Financial Highlights

 

 

 

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

Per Share Operating Performance(a):

                                        
Net asset value per common share, beginning of year      $9.38        $11.49        $12.25        $13.88        $13.45   
Net investment income      0.33 (b)      0.39        0.47        0.54        0.61   
Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions      0.33        (1.71     (0.32     (1.33     0.73   
Total from investment operations applicable to common shareholders      0.66        (1.32     0.15        (0.79     1.34   
Distributions to common shareholders from:           
Net investment income             (0.76     (0.93     (0.84     (0.92
Tax return of capital      (0.84     (0.08                     
Total distributions      (0.84     (0.84     (0.93     (0.84     (0.92
Capital Share Transactions:           
Impact of at-the-market stock offering (Note 5)                                  0.01   
Impact of open market repurchase program (Note 6)      0.02        0.05        0.02                 
Total from capital transactions      0.02        0.05        0.02                 
Net asset value per common share, end of year      $9.22        $9.38        $11.49        $12.25        $13.88   
Market value, end of year      $8.46        $8.11        $10.55        $11.15        $14.06   
Total Investment Return Based on(c):           
Market value      15.48%        (15.54%     2.99%        (15.00%     14.54%   
Net asset value      8.81% (b)      (10.30%     2.09%        (5.49% )(d)      10.21% (d) 
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data:           
Net assets applicable to common shareholders, end of year (000 omitted)      $80,606        $82,947        $105,653        $115,209        $128,112   
Average net assets applicable to common shareholders (000 omitted)      $81,601        $93,299        $110,812        $122,387        $123,780   
Net operating expenses, net of fee waivers      2.47%        2.55% (e)      2.18%        2.04%        2.07%   
Net operating expenses, excluding fee waivers      2.49%        2.56% (e)                      
Net operating expenses, excluding interest expense, net of fee waivers      1.90%        2.09% (e)      1.76%        1.68%        1.68%   
Net investment income      3.59% (b)      3.77%        3.94%        4.10%        4.50%   
Portfolio turnover      80%        41%        59%        43%        34%   
Senior securities (loan facility) outstanding (000 omitted)      $31,500        $31,500        $40,000        $40,000        $40,000   
Asset coverage ratio on revolving credit facility at year end      356%        363%        364%        388%        420%   
Asset coverage per $1,000 on revolving credit facility at year end(f)      $3,559        $3,633        $3,641        $3,880        $4,196   

 

Aberdeen Global Income Fund, Inc.

 

26


Financial Highlights (concluded)

 

 

 

 

(a)   Based on average shares outstanding.
(b)   Included within Net Investment Income per share, Total Return, and Ratio of Net Investment Income to Average Net Assets are the effects of a one-time reimbursement for overbilling of prior years’ custodian out-of-pocket fees. If such amounts were excluded, the Net Investment Income per share, Total Investment Return on Net Asset Value, and Ratio of Net Investment Income to Average Net Assets would have been $0.31, 8.58%, and 3.36%, respectively.
(c)   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.
(d)   The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments.
(e)   The expense ratio includes a one-time expense associated with the January 2011 shelf offering costs attributable to the registered but unsold shares that expired in January 2015.
(f)   Asset coverage ratio is calculated by dividing net assets plus the amount of any borrowings, for investment purposes by the amount of the Revolving Credit Facility.

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

See Notes to Financial Statements.

 

Aberdeen Global Income Fund, Inc.

 

27


Notes to Financial Statements

October 31, 2016

 

 

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, 2016, securities of the following countries comprised the Citigroup World Government Bond Index: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Malaysia, Mexico, Netherlands, Norway, Poland, Singapore, South Africa, Spain, Sweden, Switzerland, the 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 values its securities at current market value or fair value, consistent with regulatory requirements. “Fair value” is defined in the Fund’s Valuation and Liquidity Procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to contract at the measurement date.

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Fund discloses the fair value of its investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1 measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for similar assets, and Level 3 measurements to valuations based upon unobservable inputs that are significant to the valuation. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement.

Long-term debt and other fixed-income securities are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service provider approved by the Board. Pricing services generally price debt securities assuming orderly transactions of an institutional “round lot” size, but some trades occur in smaller, “odd lot” sizes at lower prices than institutional round lot trades. If there are no current day bids, the security is valued at the previously applied bid. Short-term debt securities (such

 

 

Aberdeen Global Income Fund, Inc.

 

28


Notes to Financial Statements (continued)

October 31, 2016

 

 

as commercial paper and U.S. treasury bills) having a remaining maturity of 60 days or less are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service, or on the basis of amortized cost, if it represents the best approximation of fair value. Debt and other fixed-income securities are generally determined to be Level 2 investments.

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

Derivatives are valued at fair value. Exchange traded derivatives are generally Level 1 investments and over-the-counter derivatives are generally Level 2 investments. Forward foreign currency contracts are generally valued based on the bid price of the forward rates and the current spot rate. Forward exchange rate quotations are available

for scheduled settlement dates, such as 1-, 3-, 6-, 9-, and 12-month periods. An interpolated valuation is derived based on the actual settlement dates of the forward contracts held. Interest rate swaps are generally valued by an approved pricing agent based on the terms of the swap agreement (including future cash flows).

In the event that a security’s market quotations are not readily available or are deemed unreliable, the security is valued at fair value as determined by the Fund’s Pricing Committee, taking into account the relevant factors and surrounding circumstances using valuation policies and procedures approved by the Board. A security that has been fair valued by the Fund’s Pricing Committee may be classified as Level 2 or Level 3 depending on the nature of the inputs. The three-level hierarchy of inputs is summarized below:

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

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

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

 

 

A summary of standard inputs is listed below:

 

Security Type    Standard Inputs
   

Debt and other fixed-income securities

   Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, credit quality, yield, and maturity.
   

Forward foreign currency contracts

   Forward exchange rate quotations.
   

Swap agreements

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

 

Aberdeen Global Income Fund, Inc.

 

29


Notes to Financial Statements (continued)

October 31, 2016

 

 

The following is a summary of the inputs used as of October 31, 2016 in valuing the Fund’s investments and other financial instruments at fair value. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Please refer to the Portfolio of Investments for a detailed breakout of the security types:

 

Investments, at Value      Level 1        Level 2        Level 3        Total  

Fixed Income Investments

                     

Corporate Bonds

     $         $ 40,792,847         $         $ 40,792,847   

Government Bonds

                 59,098,192                     59,098,192   

Total Fixed Income Investments

                 99,891,039                     99,891,039   

Short-Term Investment

       9,421,181                               9,421,181   

Total Investments

     $ 9,421,181         $ 99,891,039         $         $ 109,312,220   

Other Financial Instruments

                     

Forward Foreign Currency Exchange Contracts

                 303,183                     303,183   

Total Other Financial Instruments

     $         $ 303,183         $           303,183   

Total Assets

     $ 9,421,181         $ 100,194,222         $           109,615,403   

Liabilities

                     

Other Financial Instruments

                     

Forward Foreign Currency Exchange Contracts

                 (133,464                  (133,464

Interest Rate Swap Agreements

                 (1,160,223                  (1,160,223

Total Liabilities

     $         $ (1,293,687      $         $ (1,293,687

 

For movements between the Levels within the fair value hierarchy, the Fund has adopted a policy of recognizing transfers at the end of each fiscal period. During the fiscal year ended October 31, 2016, there have been no transfers between levels and no significant changes to the fair valuation methodologies.

b. Restricted Securities:

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

c. Foreign Currency Translation:

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

regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time).

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

 

(i)   market value of investment securities, other assets and liabilities – at the 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

 

 

Aberdeen Global Income Fund, Inc.

 

30


Notes to Financial Statements (continued)

October 31, 2016

 

 

appreciation/(depreciation) includes changes in the value of portfolio securities and other assets and liabilities arising as a result of changes in the exchange rate. The net realized and unrealized foreign exchange gain/(loss) shown in the composition of net assets represents foreign exchange gain/(loss) for book purposes that may not have been recognized for tax purposes.

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

d. Derivative Financial Instruments:

The Fund is authorized to use derivatives to manage currency 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, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. Forward contracts are used to manage the Fund’s currency exposure in an efficient manner. They are used to sell unwanted currency exposure that comes with holding securities in a market, or to buy currency exposure where the exposure from holding securities is insufficient to give the desired currency exposure either in absolute terms or relative to the benchmark. The use of forward contracts allows the separation of decision-making between markets and their currencies. The forward contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized appreciation or depreciation. Forward contracts’ prices are received daily from an independent pricing provider. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. These realized and unrealized gains and losses are reported on the Statement of Operations. The Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts or from unanticipated movements in exchange rates. During the fiscal year

ended October 31, 2016, the Fund used forward contracts to hedge certain emerging market currencies.

While the Fund may enter into forward contracts to seek to reduce currency exchange rate risks, transactions in such contracts involve certain risks. The Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in exchange rates. Thus, while the Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for the Fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between the Fund’s portfolio holdings or securities quoted or denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving a complete hedge, which will expose the Fund to the risk of foreign exchange loss.

Forward contracts are subject to the risk that a counterparty to such 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.

Swaps:

A swap is an agreement that obligates two parties to exchange a series of cash flows and/or meet certain obligations at specified intervals based upon or calculated by reference to changes in specified prices or rates (interest rates in the case of interest rate swaps, currency exchange rates in the case of currency swaps) or the occurrence of a credit event with respect to an underlying reference obligation (in the case of a credit default swap) for a specified amount of an underlying asset or notional principal amount. The Fund will enter into swaps only on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the amount of the difference between the two payments. Except for currency swaps and credit default swaps, the notional principal amount is used solely to calculate the payment streams but is not exchanged. With respect to currency swaps, actual principal amounts of currencies may be exchanged by the counterparties at the initiation, and again upon the termination of the transaction.

Traditionally, swaps were customized, privately negotiated agreements executed between two parties (“OTC Swaps”) but since 2013, certain swaps are required to be cleared pursuant to rules and regulations related to the Dodd–Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”) and/or Regulation (EU)

 

 

Aberdeen Global Income Fund, Inc.

 

31


Notes to Financial Statements (continued)

October 31, 2016

 

 

No 648/2012 on OTC Derivatives, Central Counterparties and Trade Repositories (“EMIR”) (“Cleared Swaps”). Like OTC Swaps, Cleared Swaps are negotiated bilaterally. Unlike OTC Swaps, the act of clearing results in two swaps executed between each of the parties and a central counterparty (“CCP”), and thus the counterparty credit exposure of the parties is to the CCP rather than to one another. Upon entering into a Cleared Swap, a Fund is required to pledge an amount of cash and/or other assets equal to a certain percentage of the contract amount. This payment is known as “initial margin”. Subsequent payments, known as “variation margin,” are calculated each day, depending on the daily fluctuations in the fair value/market value of the underlying assets. An unrealized gain or loss equal to the variation margin is recognized on a daily basis. When the contract matures or is terminated, the gain or loss is realized and is presented in the Statements of Operations as a net realized gain or loss on swap contracts. As of March 2017, a Fund may be required to provide variation and/or initial margin for OTC Swaps pursuant to further rules and regulations related to Dodd Frank and EMIR. The margin requirements associated with OTC Swaps and Cleared Swaps may not be the same.

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

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

on its obligation to perform and that there may be unfavorable changes in the value of the index or securities underlying the agreement. The Funds’ maximum risk of loss from counterparty risk related to swaps is the fair value of the contract. This risk is mitigated by the posting of collateral by the counterparties to the Funds to cover the Funds’ exposure to the counterparty.

Interest Rate Swaps

A Fund uses interest rate swap contracts to manage its exposure to interest rates. Interest rate swap contracts typically represent the exchange between a Fund and a counterparty of respective commitments to make variable rate and fixed rate payments with respect to a notional amount of principal. Interest rate swap contracts may have a term that is greater than one year, but typically require periodic interim settlement in cash, at which time the specified value of the variable interest rate is reset for the next settlement period. Net payments of interest are recorded as realized gains or losses. During the period that the swap contract is open, the contract is marked-to-market as the net amount due to or from a Fund and changes in the value of swap contracts are recorded as unrealized gains or losses. During the fiscal year ended October 31, 2016, the Fund used interest rate swaps to hedge the interest rate risk on the Fund’s Revolving Credit Facility (as defined below).

Credit Default Swaps

A credit default swap is an agreement whereby one party, the buyer, is obligated to pay the other party, the seller, a periodic stream of payments over the term of the contract in return for a contingent payment upon the occurrence of a credit event with respect to an underlying reference obligation. A Fund might use credit default swap contracts to limit or to reduce risk exposure of the Fund to defaults of corporate and sovereign issues (i.e., to reduce risk when the Fund owns or has exposure to such issuers). A Fund also might use credit default swap contracts to create direct or synthetic short or long exposure to domestic or foreign corporate debt securities or certain sovereign debt securities to which the Fund is not otherwise exposed. During the fiscal year ended October 31, 2016, the Fund did not invest in credit default swaps.

 

 

Aberdeen Global Income Fund, Inc.

 

32


Notes to Financial Statements (continued)

October 31, 2016

 

 

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, 2016:

 

     Asset Derivatives      Liability Derivatives  
     Year Ended October 31, 2016      Year Ended October 31, 2016  
Derivatives not accounted for
as hedging instruments and
risk exposure
   Statement of Assets
and Liabilities Location
   Fair Value      Statement of Assets
and Liabilities Location
   Fair Value  

Interest rate swaps
(interest rate risk)

   Variation margin receivable for centrally cleared swaps    $       Variation margin payable for centrally cleared swaps    $ 15,201   

Interest rate swaps
(interest rate risk)

   Unrealized appreciation on over-the-counter interest rate swaps            Unrealized depreciation on over-the-counter interest rate swaps      11,209   

Forward foreign exchange contracts (foreign exchange risk)

   Unrealized appreciation on forward currency exchange contracts      303,183       Unrealized depreciation on forward currency exchange contracts      133,464   

Total

        $ 303,183            $ 159,874   

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

The Fund has transactions that may be subject to enforceable master netting agreements. A reconciliation of the gross amounts on the Statement of Assets and Liabilities as of October 31, 2016 to the net amounts by broker and derivative type, including any collateral received or pledged, is included in the following tables:

 

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

Forward foreign currency (2)

               

Citibank

  $ 3,473      $ (3,473   $      $      $ 31,155      $ (3,473   $      $ 27,682   

JPMorgan Chase

                                37,916                      37,916   

Royal Bank of Canada

    299,710        (64,393            235,317        64,393        (64,393              

Interest rate swaps (2)

               

Barclays

  $      $      $      $      $ 11,209      $      $ (10,000   $ 1,209   

 

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

 

Aberdeen Global Income Fund, Inc.

 

33


Notes to Financial Statements (continued)

October 31, 2016

 

 

The Effect of Derivative Instruments on the Statement of Operations for the fiscal year ended October 31, 2016:

 

Derivatives not accounted for as
hedging instruments
     Location of Gain or (Loss)
on Derivatives
     Realized
Gain or
(Loss) on
Derivatives
       Change in
Unrealized
Appreciation/
(Depreciation)
on Derivatives
 
     Realized/Unrealized Gain/(Loss) from Investments, Interest Rate Swaps, Futures Contracts and Foreign Currencies          

Interest rate swaps (interest rate risk)

          $ (353,558      $ (372,970

Forward foreign exchange contracts (foreign exchange risk)

              (1,156,743        160,077   

Total

            $ (1,510,301      $ (212,893

 

Information about derivatives reflected as of the date of this report is generally indicative of the type of activity for the fiscal year ended October 31, 2016. The table below summarizes the weighted average values of derivatives holdings for the Fund during the fiscal year ended October 31, 2016.

 

Forward foreign
exchange contracts
(Average
Notional Value)
     Swap Contracts
(Average
Notional Value)
 
$17,395,763      $ 31,500,000   

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

e. Bank Loans:

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

direct interest in the floating rate loan, or as a participation interest in another lender’s portion of the floating rate loan.

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

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

As of October 31, 2016, the Fund held no unfunded commitments or bridge loans.

 

 

Aberdeen Global Income Fund, Inc.

 

34


Notes to Financial Statements (continued)

October 31, 2016

 

 

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 U.S. federal income purposes, the Fund is comprised of separately identifiable units called Qualified Business Units (“QBU”) (see Internal Revenue Code of 1986, as amended (“IRC”) section 987). The Fund has operated with QBUs for U.S. federal income purposes since 1991. The home office of the Fund is designated as the United States and of the QBUs are Australia, Canada and the United Kingdom with functional currency of Australian dollar, Canadian dollar and British pound sterling, respectively. As of October 31, 2016, the Fund terminated the Canada and the United Kingdom QBUs. The securities held within the Fund reside within one of the QBUs or the home office depending on certain factors including geographic region. As an example, New Zealand and Indonesian securities reside within the Australian QBU. When sold, Australian dollar denominated securities within the Australian QBU generate capital gain/loss (which are translated for U.S. federal income tax purposes into U.S. dollars based on the weighted average exchange rate for the period) but not currency gain/loss. When a New Zealand security is sold within the Australian QBU, the sale generates capital gain/loss as well as currency gain/loss from the currency exchange between the New Zealand dollar and the Australian dollar.

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

The Fund intends to continue to qualify as a “regulated investment company” by complying with the provisions available to certain investment companies, as defined in Subchapter M of the IRC, and to make distributions of net investment income and net realized capital gains sufficient to relieve the Fund from all federal income taxes. Therefore, no federal income tax provision is required. Dividend and interest income from non-U.S. sources received by the Fund are generally subject to non-U.S. withholding taxes. In addition, the Fund may be subject to capital gains tax in certain countries in which it invests. The above taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties with some of these countries. The Fund accrues such taxes when the related income is earned.

i. Foreign Withholding Tax:

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

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

 

 

Aberdeen Global Income Fund, Inc.

 

35


Notes to Financial Statements (continued)

October 31, 2016

 

 

j. Cash Flow Information:

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

k. Repurchase Agreements

The Funds may enter into repurchase agreements under the terms of a Master Repurchase Agreement. It is each 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 a 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 Funds may be delayed or limited. Repurchase agreements are subject to contractual netting arrangements with the counterparty, Fixed Income Clearing Corp. To the extent a Fund enters into repurchase agreements, additional information on individual repurchase agreements is included in the Statements of Investments.

3. Agreements and Transactions with Affiliates

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

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 (collectively, the “Advisers”) are wholly-owned subsidiaries of Aberdeen Asset Management PLC.

The Investment Manager makes investment decisions on behalf of the Fund on the basis of recommendations and information furnished to it by the Investment Adviser, including the selection of

and the placement of orders with, brokers and dealers to execute portfolio transactions on behalf of the Fund. The Sub-Adviser manages the portion of the Fund’s assets that the Investment Manager allocates to it.

The 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.

For the fiscal year ended October 31, 2016, AAML earned $735,157 from the Fund for investment management fees.

b. Fund Administration:

Aberdeen Asset Management Inc. (“AAMI”), an affiliate of the Investment Manager, Investment Adviser and Sub-Adviser, is the Fund’s Administrator, pursuant to an agreement under which AAMI receives a fee, payable monthly by the Fund, at an annual fee rate of 0.125% of the Fund’s average weekly Managed Assets up to $1 billion, 0.10% of the Fund’s average weekly Managed Assets between $1 billion and $2 billion, and 0.075% of the Fund’s average weekly Managed Assets in excess of $2 billion. For the fiscal year ended October 31, 2016, AAMI earned $141,376 from the Fund for administration fees.

c. Investor Relations:

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

Pursuant to the terms of the Investor Relations Services Agreement, AAMI 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

 

 

Aberdeen Global Income Fund, Inc.

 

36


Notes to Financial Statements (continued)

October 31, 2016

 

 

of firms; creates and maintains investor relations communication materials such as fund manager interviews, films and webcasts, published white papers, magazine articles and other relevant materials discussing the Fund’s investment results, portfolio positioning and outlook; develops and maintains effective communications with large institutional shareholders; responds to specific shareholder questions; and reports activities and results to the Board and management detailing insight into general shareholder sentiment.

During the fiscal year ended October 31, 2016, the Fund incurred investor relations fees of approximately $108,813, of which AAMI waived $20,145, 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, 2016, were $83,543,197 and $96,687,811, respectively.

5. Capital

The authorized capital of the Fund is 300 million shares of $0.001 par value common stock. During the fiscal year ended October 31, 2016, the Fund repurchased 100,430 shares pursuant to its Open Market Repurchase Program, see Note 6 for further information. As of October 31, 2016, there were 8,744,328 shares of common stock issued and outstanding.

6. Open Market Repurchase Program

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

For the fiscal year ended October 31, 2016 and fiscal year ended October 31, 2015, the Fund repurchased 100,430 shares and 350,802 shares, respectively, through this program.

7. Credit Facility

The Fund’s revolving credit loan facility with The Bank of Nova Scotia was renewed for a 3-year term on February 28, 2014. For the fiscal year ended October 31, 2016, the balance of the loan outstanding was $31,500,000, and the average interest rate on the loan facility was 1.47%. The average balance for the fiscal year was $31,500,000. 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 loan facility, the lenders have the right to cause a liquidation of the collateral (i.e., sell portfolio securities and other assets of the Fund) and, if any such default is not cured, the lenders may be able to control the liquidation as well. The loan facility has a term of three years 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 fiscal year ended October 31, 2016, the Fund incurred fees of approximately $35,837.

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. The covenants also include a requirement that the Fund maintain a net asset value of no less than $60,000,000. Furthermore, non-compliance with such covenants or the occurrence of other events could lead to the cancellation of the loan facility.

 

 

Aberdeen Global Income Fund, Inc.

 

37


Notes to Financial Statements (continued)

October 31, 2016

 

 

The estimated fair value of the loan facility was calculated, for disclosure purposes, by discounting future cash flows by a rate equal to the current U.S. Treasury rate with an equivalent maturity date, the spread between the U.S. insurance and financial debt rate and the U.S. Treasury rate. The following table shows the maturity date, interest rate, notional/carrying amount and estimated fair value outstanding as of October 31, 2016.

 

Maturity
Date
     Interest
Rate
     Notional/
Carrying
Amount
     Estimated
Fair Value
 
  February 28, 2017         1.58%       $ 31,500,000       $ 31,467,105   

8. Portfolio Investment Risks

a. Bank Loan Risk

There are a number of risks associated with an investment in bank loans including credit risk, interest rate risk, illiquid securities risk, and prepayment risk. There is also the possibility that the collateral securing a loan, if any, may be difficult to liquidate or be insufficient to cover the amount owed under the loan. These risks could cause the Fund to lose income or principal on a particular investment, which in turn could affect the Fund’s returns.

b. 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.

c. Emerging Markets Risk

The Fund is subject to Emerging Markets Risk. This is a magnification of the risks that apply to foreign investments. These risks are greater for securities of companies in emerging markets countries because the countries may have less stable governments, more volatile currencies and less established markets (see “Risks Associated with Foreign Securities and Currencies” below).

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

The Fund’s investments in high-yield bonds (commonly referred to as “junk bonds”) and other lower-rated securities will subject the Fund to substantial risk of loss. Investments in high-yield bonds are

speculative and issuers of these securities are generally considered to be less financially secure and less able to repay interest and principal than issuers of investment-grade securities. Prices of high-yield bonds tend to be very volatile. These securities are less liquid than investment-grade debt securities and may be difficult to price or sell, particularly in times of negative sentiment toward high-yield securities.

e. Interest Rate Risk:

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

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

f. 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.

 

 

Aberdeen Global Income Fund, Inc.

 

38


Notes to Financial Statements (continued)

October 31, 2016

 

 

 

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

g. 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. Concentrating investments in the Asia-Pacific region subjects the Fund to more volatility and greater risk of loss than geographically diverse funds. Such focused investments may subject the Fund to additional risks resulting from political or economic conditions in such countries or regions and the possible imposition of adverse governmental laws or currency exchange restrictions could cause the securities and their markets to be less liquid and their prices to be more volatile than those of comparable U.S. securities.

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.

10. Tax Information

The U.S. federal income tax basis of the Fund’s investments and the net unrealized appreciation as of October 31, 2016 were as follows:

 

Tax Basis of
Investments
     Appreciation      Depreciation    

Net

Unrealized

Appreciation

 
  $106,841,450       $ 3,817,787       $ (1,347,017   $ 2,470,770   
 

 

The tax character of distributions paid during the fiscal years ended October 31, 2016 and October 31, 2015 was as follows:

 

        October 31, 2016        October 31, 2015  

Distributions paid from:

         

Ordinary Income

     $         $ 6,796,976   

Net long-term capital gains

                   

Tax return of capital

       7,360,663           768,965   

Total tax character of distributions

     $ 7,360,663         $ 7,565,941   

As of October 31, 2016, the components of accumulated earnings on a tax basis were as follows:

 

Undistributed ordinary income – net

     $   

Undistributed long-term capital gains – net

         

Total undistributed earnings

     $   

Capital loss carryforward

       (4,448,923 )* 

Other currency gains

       (4,521,536

Other temporary differences

       (2,298,597 )** 

Unrealized appreciation/(depreciation) – securities

       1,647,253 *** 

Unrealized appreciation/(depreciation) – currency

       (3,096,618 )*** 

Total accumulated earnings/(losses) – net

     $ (12,718,421

 

*   On October 31, 2016, the Fund has a net capital loss carryforward of $(4,448,923) which will be available to offset like amounts of any future taxable gains. Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short term as under previous law. Capital loss carryforwards expire in October 2017.

 

Aberdeen Global Income Fund, Inc.

 

39


Notes to Financial Statements (concluded)

October 31, 2016

 

 

**   Included within the other temporary differences is a late year loss deferral of $2,237,179.
***   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, the table below details the necessary reclassifications, which are a result of permanent differences primarily attributable to premium amortization, distributions in excess of earnings and profits, swap reclasses, foreign currency gain/(loss) and net operating losses. These reclassifications have no effect on net assets or net asset values per share.

 

Paid-in
capital
       Accumulated net
investment
loss
      

Accumulated

net realized

loss

      

Accumulated net
realized foreign
exchange gain

 
$ (872,843      $ (4,318,546      $ (1,199,258      $ 6,390,647   

 

11. Subsequent Events

Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no disclosures or adjustments were required to the financial statements as of October 31, 2016, other than those listed below.

On November 9, 2016 and December 9, 2016, the Fund announced that it will pay on November 25, 2016 and January 11, 2017, a distribution of $0.07 per share to all shareholders of record as of November 18, 2016 and December 30, 2016, respectively.

 

 

Aberdeen Global Income Fund, Inc.

 

40


Report of Independent Registered Public Accounting Firm

 

 

 

The 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, 2016, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, the statement of cash flows for the year 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, 2016, 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 referred to above present fairly, in all material respects, the financial position of the Fund as of October 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, its cash flows for the year 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.

 

LOGO

Philadelphia, Pennsylvania

December 29, 2016

 

 

Aberdeen Global Income Fund, Inc.

 

41


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, 2016:

Common Shareholders

 

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

11/30/15-1/12/16

     0.032%         57.69%   

1/28/16-10/28/16

     0.000%         00.00%   

 

  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)

 

 

 

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 7, 2016, 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.

 

42


Supplemental Information (unaudited) (continued)

 

 

 

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 continuation of the Advisory Agreements.

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

 

 

Aberdeen Global Income Fund, Inc.

 

43


Supplemental Information (unaudited) (concluded)

 

 

 

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.

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. 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.

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 their investment objectives and the Fund’s record of compliance with their 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.

 

 

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.

 

44


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, 2016

 

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 2019; 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 was a Director of Aberdeen Asset Management Asia Limited, the Fund’s Investment Manager, from 1991 to 2014 and a Director of Aberdeen Asset Management Limited, the Fund’s Investment Adviser, from 2000 to 2014. He was a Director from 1995 to 2014, and was President from September 2006 to 2014 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.   26   None

Independent Directors

         

P. Gerald Malone

c/o Aberdeen Asset

Management Inc.,

1735 Market St, 32nd Floor

Philadelphia, PA 19103

 

Year of Birth: 1950

  Chairman of the Board; Class I Director   Term expires 2017; Director since 2005   Mr. Malone is, by profession, a solicitor of some 40 years standing. He has served as a Minister of State in the United Kingdom Government. Mr. Malone currently serves as Independent Chairman of two UK companies, Crescent OTC Ltd (pharmaceutical services) and fluidOil Ltd. (oil services). He also serves as a director of US company Rejuvenan llc (wellbeing services). He is Chairman of the Board of Trustees of Aberdeen Funds, Chairman of the Board of Directors of Aberdeen Global Income Fund, Inc. and a Director of Aberdeen Australia Equity Fund, Inc. He previously served as chairman of Ultrasis plc (healthcare software services company) until October 2014.   25   None

Neville J. Miles

142 Martins Lane

Knockrow NSW 2479

Australia

 

Year of Birth: 1946

  Class III Director   Term expires 2019; Director since 1999   Mr. Miles is, and has been for over 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.   25   None

William J. Potter

c/o Aberdeen Asset

Management Inc.,

1735 Market St, 32nd Floor

Philadelphia, PA 19103

 

Year of Birth: 1948

  Class II Director   Term expires 2018; 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.

 

45


Management of the Fund