0000876717 falseRepresents the estimated commission with respect to the Common Shares being sold in the Offering. Jones Trading will be entitled to compensation of 1.00% to 3.00% of the gross proceeds of the sale of any Common Shares under the Sales Agreement, with the exact amount of such compensation to be mutually agreed upon in writing by the Fund and Jones Trading from time to time. The Fund has assumed that Jones Trading will receive a commission of 1.50% of the gross sale proceeds of the Common Shares sold in the Offering. This is the only sales load to be paid in connection with the Offering.
Offering expenses payable by the Fund will be deducted from the proceeds, before expenses, to the Fund.
The Investment Manager receives a monthly fee 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. The advisory fee percentage calculation assumes the use of leverage by the Fund as discussed in note (5). To derive the annual advisory fee as a percentage of the Fund’s net assets (which are the Fund’s total assets less all of the Fund’s liabilities), the Fund’s average Managed Assets for the year ended October 31, 2023 (which includes the use of leverage discussed in note (5)) were multiplied by the annual advisory fee rate and then divided by the Fund’s average net assets for the same period.
The percentage in the table is based on total borrowings of $20,350,000 (the balance outstanding under the Fund’s credit facility as of October 31, 2023), representing approximately 28.87% of the Fund’s Managed Assets and an average interest rate during the year ended October 31, 2023 of 5.94%. There can be no assurances that the Fund will be able to obtain such level of borrowing (or to maintain its current level of borrowing), that the terms under which the Fund borrows will not change, or that the Fund’s use of leverage will be profitable. The expenses shown under “Interest expense on bank borrowings” in the table above reflect the cost to the Fund of borrowings, expressed as a percentage of the Fund’s net assets as of October 31, 2022, based on interest rates in effect as of October 31, 2023. The Fund currently intends during the next twelve months to maintain a similar proportionate amount of borrowings but may increase such amount to 33 1/3% of the average daily value of the Fund’s total assets.
The examples above should not be considered representations of future expenses. Actual expenses may be higher or lower than those shown. The examples assume that all dividends and distributions are reinvested at net asset value. The Fund’s actual rate of return may be greater or less than the hypothetical 5% return shown in the examples. For more complete descriptions of certain of the Fund’s costs and expenses, see “Management of the Fund — Advisory Agreements” in the Fund’s Prospectus.
Shareholders who participate in the Fund’s Dividend Reinvestment and Optional Cash Purchase Plan (the “Plan”) may be subject to fees on certain transactions. The Plan Agent’s (as defined under “Dividend Reinvestment and Optional Cash Purchase Plan” in the Fund’s Prospectus) fees for the handling of the reinvestment of dividends will be paid by the Fund; however, participating shareholders will pay a $0.02 per share fee incurred in connection with open-market purchases in connection with the reinvestment of dividends, capital gains distributions and voluntary cash payments made by the participant, which will be deducted from the value of the dividend. For optional share purchases, shareholders will also be charged a $2.50 fee for automatic debits from a checking/savings account, a $5.00 one-time fee for online bank debit and/or $5.00 for check. Shareholders will be subject to $0.12 per share fee and either a $10.00 fee (for batch orders) or $25.00 fee (for market orders) for sales of shares held in a dividend reinvestment account. Per share fees include any applicable brokerage commissions the Plan agent is required to pay. For more details about the Plan, see “Dividend Reinvestment and Optional Cash Purchase Plan” in the Fund’s Prospectus.
Notwithstanding this assumption, in actuality, these fees will be indirectly borne by all holders of Common Shares.
Based on average shares outstanding.
Source: Bloomberg L.P.
Data presented are with respect to a short period of time and are not indicative of future performance.
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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: |
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811-06342 |
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Exact name of registrant as specified in charter: |
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abrdn Global Income Fund, Inc. |
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Address of principal executive offices: |
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1900 Market Street, Suite 200 |
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Philadelphia, PA 19103 |
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Name and address of agent for service: |
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Sharon Ferrari |
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abrdn Inc. |
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1900 Market Street Suite 200 |
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Philadelphia, PA 19103 |
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Registrant’s telephone number, including area code: |
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1-800-522-5465 |
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Date of fiscal year end: |
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October 31 |
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Date of reporting period: |
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October 31, 2023 |
Item 1. Reports to Stockholders.
abrdn Global Income Fund, Inc. (FCO)
Annual Report
October 31, 2023
Letter to Shareholders (unaudited)
Dear Shareholder,
We present the Annual Report, which covers the activities of abrdn Global Income Fund, Inc. (the “Fund”), for the fiscal year ended October 31, 2023. The Fund’s principal investment objective is to provide high current income by investing primarily in fixed income securities. As a secondary investment objective, the Fund seeks capital appreciation, but only when consistent with its principal investment objective.
Total Investment Return1
For the fiscal year ended October 31, 2023, the total return to shareholders of the Fund based on the net asset value (“NAV”) and market price of the Fund, respectively, compared to the Fund’s benchmark is as follows:
NAV2,3 |
10.17% |
Market Price2 |
58.66% |
Blended Benchmark4 |
6.19% |
For more information about Fund performance, please visit the Fund on the web at www.abrdnfco.com. Here, you can view quarterly commentary on the Fund's performance, monthly fact sheets, distribution and performance information, and other Fund literature.
NAV, Market Price and Premium(+)/Discount(-)
The below table represents comparison from current fiscal year end to prior fiscal year end of market price to NAV and associated Premium(+) and Discount(-).
|
|
|
|
|
NAV |
Closing Market Price |
Premium(+)/ Discount(-) |
10/31/2023 |
$ 3.74 |
$6.09 |
62.83% |
10/31/2022 |
$3.98 |
$4.50 |
13.07% |
During the fiscal year ended October 31, 2023, the Fund’s NAV traded within a range of $3.70 to $4.43 and the Fund’s market price traded
within a range of $4.39 to $6.47. During the fiscal year ended October 31, 2023, the Fund’s shares traded within a range of a premium(+)/discount(-) of 7.06% to 62.83%.
Managed Distribution Policy
The Fund's distributions to common shareholders and the annualized distribution rates based on market price and NAV, respectively, for the fiscal years ended October 31, 2023, October 31, 2022 and October 31, 2021 are shown in the table below:
|
Distribution per share to common shareholders |
Market Price |
Market Price 12- month distribution rate |
NAV |
NAV 12- month distribution rate |
10/31/2023 |
$0.84 |
$6.09 |
13.8% |
$3.74 |
22.5% |
10/31/2022 |
$0.84 |
$4.50 |
18.7% |
$3.98 |
21.1% |
10/31/2021 |
$0.84 |
$8.35 |
10.1% |
$6.28 |
13.4% |
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, 2023 and December 11, 2023, the Fund announced that it will pay on November 30, 2023 and January 10, 2024, respectively, a distribution of U.S. $0.07 per share to all shareholders of record as of November 22, 2023 and December 29, 2023, 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 quarterly meetings of the Fund’s Board of Directors (the "Board"), unless market conditions require an earlier evaluation.
Revolving Credit Facility
The Fund’s $40,000,000 revolving credit facility with The Bank of Nova Scotia was renewed for a 3-year term on February 28, 2020 and last amended on September 21, 2021 (“Revolving Credit Facility”). On February 28, 2023, the Fund’s Revolving Credit Facility with the Bank
{foots1}
1 |
Past performance is no guarantee of future results. Investment returns and principal value will fluctuate and shares, when sold, may be worth more or less than original cost. Current performance may be lower or higher than the performance quoted. Net asset value return data include investment management fees, custodial charges and administrative fees (such as Director and legal fees) and assumes the reinvestment of all distributions. |
{foots1}
2 |
Assuming the reinvestment of dividends and distributions. |
{foots1}
3 |
The Fund’s total return is based on the reported NAV for each financial reporting period end and may differ from what is reported on the Financial Highlights due to financial statement rounding or adjustments. |
{foots1}
4 |
Blended Benchmark as defined in Total Investment Return section on Page 8. |
abrdn Global Income Fund, Inc. |
1 |
Letter to Shareholders (unaudited) (concluded)
of Nova Scotia was amended to extend the scheduled commitment termination date to February 27, 2024 with a committed facility amount of $25,000,000. The Fund’s outstanding balance as of October 31, 2023 was $20,350,000. 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. A more detailed description of the Fund’s Revolving Credit Facility can be found in the Notes to Financial Statements.
Unclaimed Share Accounts
Please be advised that abandoned or unclaimed property laws for certain states require financial organizations to transfer (escheat) unclaimed property (including Fund shares) to the state. Each state has its own definition of unclaimed property, and Fund shares could be considered “unclaimed property” due to account inactivity (e.g., no owner-generated activity for a certain period), returned mail (e.g., when mail sent to a shareholder is returned to the Fund's transfer agent as undeliverable), or a combination of both. If your Fund shares are categorized as unclaimed, your financial advisor or the Fund's transfer agent will follow the applicable state’s statutory requirements to contact you, but if unsuccessful, laws may require that the shares be escheated to the appropriate state. If this happens, you will have to contact the state to recover your property, which may involve time and expense. For more information on unclaimed property and how to maintain an active account, please contact your financial adviser or the Fund's transfer agent.
Open Market Repurchase Program
The Board approved an open market repurchase and discount management policy (the “Program”). The Program allows the Fund to purchase, in the open market, its outstanding common shares, with the amount and timing of any repurchase determined at the discretion of the Fund's investment manager. Such purchases may be made opportunistically at certain discounts to NAV per share in the reasonable judgment of management based on historical discount levels and current market conditions. If shares are repurchased, the Fund reports repurchase activity on its website on a monthly basis. For the fiscal year ended October 31, 2023, the Fund did not repurchase any shares through the Program.
On a quarterly basis, the Board will receive information on any transactions made pursuant to this policy during the prior quarter and if shares are repurchased management will post the number of shares repurchased on the Fund's website on a monthly basis. Under the terms of the Program, the Fund is permitted to repurchase up to 10%
of its outstanding shares of common stock in the open market during any 12 month period.
Portfolio Holdings Disclosure
The Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year are included in the Fund's semi-annual and annual reports to shareholders. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. These reports are available on the SEC’s website at http://www.sec.gov. The Fund makes the information available to shareholders 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 12 month period ended June 30 is available by August 31 of the relevant year: (1) upon request without charge by calling Investor Relations toll-free at 1-800-522-5465; and (2) on the SEC’s website at http://www.sec.gov.
Investor Relations Information
As part of abrdn’s commitment to shareholders, we invite you to visit the Fund on the web at www.abrdnfco.com. Here, you can view monthly fact sheets, quarterly commentary, distribution and performance information, and other Fund literature.
Enroll in abrdn’s email services and be among the first to receive the latest closed-end fund news, announcements, videos, and other 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 https://www.abrdn.com/en-us/cefinvestorcenter/contact-us/preferences
Contact Us:
• | Visit: https://www.abrdn.com/en-us/cefinvestorcenter |
• | Email: Investor.Relations@abrdn.com; or |
• | Call: 1-800-522-5465 (toll free in the U.S.). |
Yours sincerely,
/s/ Christian Pittard
Christian Pittard
President
{foots1}
All amounts are U.S. Dollars unless otherwise stated.
2 | abrdn Global Income Fund, Inc. |
Report of the Investment Manager (unaudited)
Market Review
Although U.S. Treasury yields generally rose over the 12 months under review, global bond markets delivered positive returns overall. Shorter-dated government bonds outperformed, with the yield curve flattening over the period under review, while still remaining inverted. Investors now expect that the U.S. Federal Reserve (Fed) has delivered its final interest rate hike in October, taking the federal funds rate to 5.25–5.50%.
The U.S. 10-year Treasury yield briefly traded above 5.00% in October before ending the period at 4.93%, as economic data continued to illustrate a resilient U.S. economy. That said, at the time of writing, yields have fallen back, with cracks in the economic outlook starting to appear: delinquencies rising, the pandemic build-up in household savings largely run down, credit card debt hitting record levels, and an increasing number of people drawing down hardship payments from their 401k pension accounts. Meanwhile, the U.S. dollar retreated from its historic highs in October 2022, although remaining at elevated levels, with the DXY Index1 above 100 for the period under review.
While the rhetoric from developed market (DM) central banks was that interest rates would remain higher for longer, it seemed most monetary authorities were now at, or very close to, their peak policy2 rates. More surprising was the loosening of the yield curve control policy by the Bank of Japan (BoJ) under its new governor, Kazuo Ueda. With the BoJ predicting that inflation will hit 2.0% in 2024, the central bank first loosened the ‘ceiling’ for the 10-year Japanese government bond yield to around 1.0%, before re-defining this as a loose ‘upper bound’ and removing its pledge to defend this level.
Asia and its central banks are in a very different position to developed markets. Data in Asia has generally remained on the weaker side and growth pressures are more evident. Currency performance was mixed, with a basket of Asian currencies strengthening against the U.S. dollar overall, mainly due to strong performance from the Thai baht, Korean won, and Sri Lankan rupee. Asian local currency government bonds delivered positive returns over the 12 months, outperforming U.S. Treasuries.
Asian corporate bonds (credit) delivered positive returns over the 12 months, although the performance deteriorated over the second half of the period as it became clear that the federal funds rate would stay elevated for longer. In addition, purchasing managers’ indices pointed to economic activity levels slowing across the region apart from in Malaysia, which was flat, and in the Philippines, which expanded at a faster rate. Economic activity contracted in October in half of Asia’s economies, including China, with only India still growing strongly in both its manufacturing and services sectors.
Asia’s inflation picture has become more nuanced, with the latest prints showing that Thailand slipped into deflation3 for the first time in over two years. Inflation printed on target in Hong Kong, India, and Indonesia. Meanwhile, in the Philippines, Singapore, and South Korea, inflation was above central banks’ targets and rose further in the latest prints, most notably in the Philippines. Elsewhere, prices in China remained flat while further economic data continued to highlight economic weakness in the country.
Emerging market (EM) bonds performed strongly, driven by improved risk sentiment combined with countries making progress to achieve debt sustainability. EM central banks coming to the end of their rate-hiking cycles also contributed to performance on a local currency assets, which outperformed hard currency4 debt over the period under review. Investment-grade bonds5 outperformed lower-quality high yield (HY) bonds6, which fell over the 12-month period. Investment-grade spreads7 tightened over the period. In EM currencies, the Russian ruble underperformed against the U.S. dollar, while the Chilean peso, Mexican peso, and Brazilian real all strengthened over the 12 months.
The past 12 months-to-end October 2023 saw a reversal of fortune for HY investors. Returns were aided by a coinciding rally in government bond markets that propelled yields lower at the start of the period, while tighter credit spreads also aided performance. EM returns nearly matched the strength of the U.S. These returns were slightly tempered by rising government bond yields towards the end of the period, but it was still a solid 12 months for HY investors.
{foots1}
1 | An index that measures the value of the U.S. dollar against a basket of global currencies. |
{foots1}
2 | Monetary policy refers to decisions made by a government, usually through its central bank, regarding the amount of money in circulation in the economy. This includes setting official interest rates. |
{foots1}
3 | Deflation is the opposite of inflation, describing a situation where there is a fall in the general price level. |
{foots1}
4 | Emerging market bonds issued in other currencies (such as the U.S. dollar and euro) that investors feel are more stable. These are typically denominated in U.S. dollars. |
{foots1}
5 | Companies whose bonds are rated as 'investment grade' have a lower chance of defaulting on their debt than those rated as 'non-investment grade'. Generally, these bonds are issued by long-established companies with strong balance sheets. Bonds rated BBB or above are known as investment-grade bonds. |
{foots1}
6 | Companies whose bonds have a higher chance of defaulting on their debt than those rated as ‘investment grade’. Bonds rated BB and below are considered ‘high yield’. Also known as ‘non-investment grade’. |
{foots1}
7 | Difference in yield of two fixed income securities with similar maturities but different credit quality. |
abrdn Global Income Fund, Inc. | 3 |
Report of the Investment Manager (unaudited) (continued)
Performance Review
The abrdn Global Income Fund returned 10.2% on a net asset value8 basis for the year ended October 31, 2023, versus the 6.2% return of its blended benchmark9 for the same period. While the performance of the net asset value includes the impact of leverage10, the benchmark performance does not. The unlevered NAV generated a return, after fees and expenses, of 7.5% for the 12-month reporting period ended October 31, 2023, demonstrating that the leverage added an incremental 2.7% to fund performance over that timeframe.
Tighter credit spreads and a return to favor for EM debt and global HY contributed to the positive total return for the reporting period. The Fund’s use of leverage magnified the positive impact of the investment returns on the net asset value.
Leverage is used strategically by the Fund to support its income-generating capacity. The Fund continues to benefit from a positive interest rate differential between the interest income on the investment portfolio and the cost of the leverage.
Relative to the Fund’s blended benchmark, the investment portfolio outperformed. The principal driver of the outperformance was the overweight11 allocation to EM debt, while our underweight12 exposure to Australia and New Zealand was also accretive, with this region producing negative returns over the period.
During the reporting period, the Fund's performance was positively impacted by about 2.9% due to the use of the various forms of derivatives. The use of derivatives to hedge the interest rate risk (primarily paid interest rate swap positions to fix the cost of the leverage) in the portfolio contributed positively, while the use of currency forwards detracted value.
The monthly distribution reflects the Fund’s current policy to provide shareholders with a relatively stable cash flow per share. This policy did not have a material effect on the Fund’s investment strategy over the reporting period.
Outlook
Core rates markets rallied sharply in early November 2022 after U.S. inflation printed below expectations and China announced a long-awaited easing of its COVID restrictions. This performance of the rates market gives a flavor of the environment we looked to
position for. However, we are mindful that the market may be overreacting due to technical factors around positioning, largely short rates and long U.S. dollars. The move in U.S. Treasuries prices out too much of the tail end of the policy normalization cycle, and with inflation expected to remain high, we anticipate that the Fed will likely still take the terminal rate to 4.75%–5.00%.
While EM spreads remain relatively contained following the sharp rally seen in June and July, they are well below the levels seen in March–May 2023 (during the regional banking crisis in the U.S.) as hopes of a soft landing13 continue. Wider concerns about the economic outlook in DM credit could harm EM relative valuations. However, if spreads move to price in the expectation of a recession, a lower Fed terminal rate14 and the end of U.S. growth exceptionalism could be beneficial for EMs. The ‘Goldilocks’ scenario for EM combines the current rate path for the Fed with the realization of Fed Chairman Powell’s forecast for a soft landing, resulting in slower U.S. growth and a weaker U.S. dollar. The two scenarios that could lead to a more challenging environment for EMs would be a higher terminal rate due to persistent U.S. inflation, or markedly lower bond yields due to financial stability risks.
Regarding HY, it appears that investors finally came to the realization that lower quality credits will struggle to refinance their bonds at reasonable levels in a higher-for-longer environment, driving spread widening across quality. We maintain our view that the higher quality end of HY offers very attractive return potential. In the meantime, we continue to be focused on looking for good credits, with long maturity runways and ample yield.
Loan Facilities 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
{foots1}
8 | A key measure of the value of a company, fund, or trust is the total value of assets less liabilities, divided by the number of shares. |
{foots1}
9 | The Fund’s blended benchmark is composed of 25% iBoxx Asia ex-Japan Sovereign, 25% Merrill Lynch Global High Yield Constrained, 35% JP Morgan EMBI Global Diversified, 10% ICE BofA Merrill Lynch Australian Government Bond Index, and 5% ICE BofA Merrill Lynch New Zealand Government Bond Index. |
{foots1}
10 | Leverage refers to a fund being exposed by more than 100% of its net asset value to assets or markets; typically resulting from the use of debt or derivatives. |
{foots1}
11 | A portfolio holding an excess amount of a particular security (or sector or region) compared to the security’s weight in the benchmark portfolio. |
{foots1}
12 | A portfolio holding less of a particular security (or sector or region) than the security’s weight in the benchmark portfolio. |
{foots1}
13 | A milder economic slowdown compared to a recession. |
{foots1}
14 | The interest rate at which the economy is experiencing stable inflation and full employment. |
4 | abrdn Global Income Fund, Inc. |
Report of the Investment Manager (unaudited) (continued)
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. A liquidation of the Fund’s collateral assets in an event of default, or a voluntary paydown of the loan facility in order to avoid an event of default, would typically involve administrative expenses and sometimes penalties. Additionally, such liquidations often involve selling off of portions of the Fund’s assets at inopportune times which can result in losses when markets are unfavorable. 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.
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 Investment Company Act of 1940, as amended (the “1940 Act”). The covenants or guidelines could impede management of the Fund 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 net assets of no less than $25,000,000.
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 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. Under the Fund's loan facilities, the Fund is charged interest on amounts borrowed at a variable rate, which may be based on a reference rate such as the Secured Overnight Financing Rate ("SOFR”), plus a spread. Additionally, the Fund may invest in certain debt securities, derivatives or other financial instruments that utilize SOFR as a “benchmark” or “reference rate” for various interest rate calculations.
Interest Rate Swaps
The Fund enters into interest rate swaps to hedge interest rate risk on the credit facility. As of October 31, 2023, the Fund held interest rate swap agreements with an aggregate notional amount of $20,350,000 which represented 100% of the Fund’s total borrowings. Under the terms of the agreements currently in effect, the Fund receives a floating rate of interest and pays fixed rates of interest for the terms and based upon the notional amounts set forth below:
Remaining Term as of October 31, 2023 | Receive/(Pay) Floating Rate | Amount (in $ thousands) | Fixed Rate Payable (%) |
76 months | Receive | $5,000.0 | 3.46% |
100 months | Receive | $5,000.0 | 3.40% |
112 months | Receive | $ 7,350.0 | 3.38% |
116 months | Receive | $3,000.0 | 3.72% |
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.
Risk Considerations
Past performance is not an indication of future results.
Foreign securities may be more volatile, harder to price and less liquid than U.S. securities. They are subject to risks associated with less stringent accounting and regulatory standards, the impact of currency exchange rate fluctuation, political and economic instability, reduced information about issuers, higher transaction costs and delayed settlement. The Fund focuses its investments in the Asia-Pacific region, which may subject the Fund to more volatility and greater risk of loss than geographically diverse funds.
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), extension (principal repayments may not occur as quickly as anticipated, causing the
abrdn Global Income Fund, Inc. | 5 |
Report of the Investment Manager (unaudited) (concluded)
expected maturity of a security to increase) and issuer risk (the value of a security may decline for reasons related to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or services).
abrdn Asia Limited
6 | abrdn Global Income Fund, Inc. |
Total Investment Return (unaudited)
The following table summarizes the average annual Fund performance compared to the Fund’s primary benchmark and a blended benchmark for the 1-year, 3-year, 5-year and 10-year periods ended October 31, 2023.
| 1 Year | 3 Years | 5 Years | 10 Years |
Net Asset Value (NAV) | 10.17% | -4.76% | -2.30% | -0.66% |
Market Price | 58.66% | 10.66% | 7.10% | 5.28% |
Blended Benchmark* | 6.19% | -3.86% | 0.67% | 0.77% |
Bloomberg Global Aggregate Index1 | 1.72% | -7.33% | -1.64% | -0.66% |
* | The blended benchmark is summarized in the table below: |
Blended Benchmark Constituents | Weight |
ICE BofA Merrill Lynch Australian Government Bond Index2 | 10.0% |
ICE BofA Merrill Lynch New Zealand Government Bond Index3 | 5.0% |
iBoxx Asia Government (U.S. dollar unhedged)4 | 25.0% |
J.P. Morgan Emerging Markets Bond (EMBI) Global Diversified Index5 | 35.0% |
ICE BofA Global High Yield Constrained Index6 | 25.0% |
Performance of a $10,000 Investment (as of October 31, 2023)
This graph shows the change in value of a hypothetical investment of $10,000 in the Fund for the periods indicated. For comparison, the same investment is shown in the indicated index.
{foots1}
1 | The Bloomberg Global Aggregate Index is a measure of global investment grade debt from 24 local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. |
{foots1}
2 | The ICE BofA Merrill Lynch Australian Government Bond Index tracks the performance of AUD denominated sovereign debt publicly issued by the Australian government in its domestic market. |
{foots1}
3 | The ICE BofA Merrill Lynch New Zealand Government Bond Index tracks the performance of NZD denominated sovereign debt publicly issued by the New Zealand government in its domestic market. |
{foots1}
4 | The iBoxx Asia Government (U.S. dollar unhedged) tracks the performance of local currency-denominated sovereign and quasi-sovereign debt from 11 Asian countries/territories. |
{foots1}
5 | The J.P. Morgan Emerging Markets Bond (EMBI) Global Diversified Index is a comprehensive global local emerging markets index comprising liquid, fixed rate, domestic currency government bonds. |
{foots1}
6 | The ICE BofA Global High Yield Constrained Index contains all securities in the ICE BofA Global High Yield Index but caps issuer exposure at 2%. Index constituents are capitalization-weighted, based on their current amount outstanding, provided the total allocation to an individual issuer does not exceed 2%. Issuers that exceed the limit are reduced to 2% and the face value of each of their bonds is adjusted on a pro-rata basis. |
abrdn Global Income Fund, Inc. | 7 |
Total Investment Return (unaudited) (concluded)
abrdn Inc. has entered into an agreement with the Fund to limit investor relations services fees, without which performance would be lower. This agreement aligns with the term of the advisory agreement and may not be terminated prior to the end of the current term of the advisory agreement. 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 dividend reinvestment program sponsored by the Fund’s transfer agent. All return data at NAV includes fees charged to the Fund, which are listed in the Fund’s Statement of Operations under “Expenses.” Total investment return at market value is based on changes in the market price at which the Fund’s shares traded on the NYSE American during the period and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Fund’s transfer agent. The Fund’s total investment return is based on the reported NAV as of the financial reporting period end date of October 31, 2023. 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.abrdnfco.com or by calling 800-522-5465.
The net operating expense ratio excluding fee waivers based on the fiscal year ended October 31, 2023 was 4.59%. The net operating expense ratio net of fee waivers based on the fiscal year ended October 31, 2023 was 4.53%. The net operating expenses net of fee waivers and excluding interest expense based on the fiscal year ended October 31, 2023 was 2.38%.
8 | abrdn Global Income Fund, Inc. |
Portfolio Composition (as a percentage of net assets) (unaudited)
As of October 31, 2023
Quality of Investments(1)
As at October 31, 2023, 7.2% of the Fund’s investments were invested in securities where either the issue or the issuer was rated “A” or better by S&P Global Ratings ("S&P"), Moody's Investors Service, Inc. ("Moody's") or Fitch Ratings, Inc. ("Fitch") or, if unrated, was judged to be of equivalent quality by abrdn Asia Limited (the “Investment Manager”). The following table shows the ratings of securities held by the Fund as at October 31, 2023, compared with April 30, 2023 and October 31, 2022:
Date | AAA/Aaa % | AA/Aa % | A % | BBB/Baa % | BB/Ba % | B % | B or below % | NR % |
October 31, 2023 | 0.5 | 3.1 | 3.6 | 27.2 | 29.8 | 25.4 | 8.1 | 2.3 |
April 30, 2023 | 1.6 | 2.2 | 5.0 | 24.4 | 31.9 | 20.2 | 6.6 | 8.1 |
October 31, 2022 | 1.7 | 2.6 | 4.9 | 11.9 | 34.9 | 24.1 | 6.2 | 13.5 |
(1) | For financial reporting purposes, credit quality ratings shown above reflect the lowest rating assigned by either S&P, Moody’s or Fitch 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 these rating agencies. 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 at October 31, 2023, compared with April 30, 2023 and October 31, 2022:
Date | Developed Markets % | Investment Grade Developing Markets % | Sub-Investment Grade Developing Markets % |
October 31, 2023 | 49.9 | 20.8 | 29.3 |
April 30, 2023 | 51.2 | 21.6 | 27.2 |
October 31, 2022 | 51.3 | 22.2 | 26.5 |
Currency Composition
The table below shows the currency composition of the Fund’s total investments as of October 31, 2023, compared with April 30, 2023 and October 31, 2022:
Date | Developed Markets % | Investment Grade Developing Markets % | Sub-Investment Grade Developing Markets % |
October 31, 2023 | 86.5 | 6.7 | 6.8 |
April 30, 2023 | 77.3 | 13.9 | 8.8 |
October 31, 2022 | 82.8 | 12.8 | 4.4 |
abrdn Global Income Fund, Inc. | 9 |
Portfolio Composition (as a percentage of net assets) (unaudited) (concluded)
As of October 31, 2023
Maturity Composition
The average maturity of the Fund’s total investments was 6.6 years at October 31, 2023, compared with 6.4 years at April 30, 2023, and 9.4 years at October 31, 2022. The following table shows the maturity composition of the Fund’s investments as at October 31, 2023, compared with April 30, 2023 and October 31, 2022:
Date | 0 to 5 Years % | 5 to 10 Years % | 10 Years & Over % |
October 31, 2023 | 25.1 | 48.4 | 26.5 |
April 30, 2023 | 45.4 | 35.1 | 19.5 |
October 31, 2022 | 43.4 | 35.0 | 21.6 |
Modified Duration
As of October 31, 2023, the modified duration* of the Fund was 2.2 years. This calculation excludes the interest rate swaps that are used to manage the leverage of the Fund. Excluding swaps will decrease portfolio duration.
* | Modified duration is a measure of the sensitivity of the price of a bond to the fluctuations in interest rates. |
10 | abrdn Global Income Fund, Inc. |
Summary of Key Rates (unaudited)
The following table summarizes the movements of key interest rates and currencies from October 31, 2023 compared to April 30, 2023 and October 31, 2022.
| | Oct–23 | Apr–23 | Oct-22 |
Australia | 90 day Bank Bills | 4.36% | 3.68% | 3.09% |
| 10 yr bond | 3.90% | 3.58% | 3.14% |
| currency local per 1USD | $1.58 | $1.51 | $1.56 |
New Zealand | 90 day Bank Bills | 5.64% | 5.56% | 4.10% |
| 10 yr bond | 5.55% | 4.09% | 4.19% |
| currency local per 1USD | $1.72 | $1.62 | $1.72 |
Malaysia | 3-month T-Bills | 3.21% | 2.85% | 2.71% |
| 10 yr bond | 4.10% | 3.73% | 4.37% |
| currency local per 1USD | RM4.76 | RM4.46 | RM4.73 |
India | 3-month T-Bills | 6.89% | 6.78% | 6.42% |
| 10 yr bond | 7.35% | 7.11% | 7.45% |
| currency local per 1USD | ₹83.26 | ₹81.84 | ₹82.78 |
Indonesia | 3 months deposit rate | 4.10% | 3.94% | 3.55% |
| 10 yr bond | 7.09% | 6.51% | 7.51% |
| currency local per 1USD | Rp15,885.00 | Rp14,670.00 | Rp15,597.50 |
Russia | Zero Cpn 3m | 13.13% | 7.23% | 7.48% |
| 10 yr bond | 15.99% | 15.99% | 15.99% |
| currency local per 1USD | ₽93.58 | ₽80.20 | ₽61.70 |
USD Denominated Bonds | Mexico | 6.78% | 5.28% | 6.48% |
| Indonesia | 5.85% | 4.44% | 5.88% |
| Argentina | 23.20% | 23.20% | 23.20% |
| Romania | 5.37% | 4.95% | 5.49% |
abrdn Global Income Fund, Inc. | 11 |
Portfolio of Investments
As of October 31, 2023
| Shares or Principal Amount | Value |
CORPORATE BONDS—91.1% | |
AUSTRALIA—12.7% | | |
Australia & New Zealand Banking Group Ltd. | | | |
(fixed rate to 06/15/2026, variable rate thereafter), 6.75%, 06/15/2026(a)(b) | $ | 200,000 | $ 194,040 |
(fixed rate to 02/10/2033, variable rate thereafter), 6.74%, 02/10/2038(a)(c) | AUD | 1,300,000 | 828,633 |
Commonwealth Bank of Australia, (fixed rate to 03/15/2033, variable rate thereafter), 6.70%, 03/15/2038(c) | | 1,800,000 | 1,142,879 |
Mineral Resources Ltd., 8.00%, 11/01/2027(a)(c) | $ | 1,520,000 | 1,468,761 |
National Australia Bank Ltd. | | | |
(fixed rate to 08/03/2027, variable rate thereafter), 6.32%, 08/03/2032(a)(c) | AUD | 1,000,000 | 633,382 |
(fixed rate to 03/09/2028, variable rate thereafter), 6.16%, 03/09/2033(c) | | 800,000 | 499,347 |
NBN Co. Ltd., 6.00%, 10/06/2033(a)(c) | $ | 800,000 | 787,387 |
Westpac Banking Corp. | | | |
(fixed rate to 06/23/2028, variable rate thereafter), 6.49%, 06/23/2033(c) | AUD | 600,000 | 379,831 |
(fixed rate to 06/23/2033, variable rate thereafter), 6.93%, 06/23/2038(a)(c) | | 700,000 | 447,846 |
Total Australia | | 6,382,106 |
BARBADOS—0.4% | | |
Sagicor Financial Co. Ltd., 5.30%, 05/13/2028(a)(c) | $ | 210,000 | 195,489 |
BRAZIL—2.1% | | |
Banco do Brasil SA VRN, (fixed rate to 04/15/2024, variable rate thereafter), 6.25%, 04/15/2024(a)(b) | | 620,000 | 594,223 |
BRF SA, 5.75%, 09/21/2050(a)(c) | | 200,000 | 130,297 |
Guara Norte Sarl, 5.20%, 06/15/2034(a)(d) | | 176,852 | 150,008 |
Minerva Luxembourg SA, 8.88%, 09/13/2033(a)(c) | | 200,000 | 196,290 |
Total Brazil | | 1,070,818 |
CANADA—2.4% | | |
Enerflex Ltd., 9.00%, 10/15/2027(a)(c) | | 238,000 | 216,580 |
GFL Environmental, Inc. | | | |
5.13%, 12/15/2026(a)(c) | | 23,000 | 21,824 |
4.75%, 06/15/2029(a)(c) | | 78,000 | 68,281 |
Rogers Communications, Inc., (fixed rate to 03/15/2027, variable rate thereafter), 5.25%, 03/15/2082(a)(c) | | 275,000 | 241,924 |
Teck Resources Ltd., 3.90%, 07/15/2030(c) | | 354,000 | 301,069 |
| Shares or Principal Amount | Value |
Titan Acquisition Ltd. / Titan Co-Borrower LLC, 7.75%, 04/15/2026(a)(c) | $ | 125,000 | $ 116,264 |
TransAlta Corp., 7.75%, 11/15/2029(c) | | 220,000 | 218,881 |
Total Canada | | 1,184,823 |
CHILE—0.9% | | |
Corp. Nacional del Cobre de Chile, 3.75%, 01/15/2031(a)(c) | | 330,000 | 273,849 |
Empresa Nacional del Petroleo, 3.45%, 09/16/2031(a)(c) | | 200,000 | 155,151 |
Total Chile | | 429,000 |
CHINA—2.5% | | |
China Evergrande Group, 8.75%, 06/28/2025(a)(c)(e)(f) | | 200,000 | 3,000 |
China Huadian Overseas Development 2018 Ltd. VRN, (fixed rate to 06/23/2025, variable rate thereafter), 3.38%, 06/23/2025(a)(b) | | 200,000 | 190,760 |
Huarong Finance II Co. Ltd. | | | |
5.50%, 01/16/2025(a) | | 619,000 | 594,240 |
5.00%, 11/19/2025(a) | | 200,000 | 184,214 |
Kaisa Group Holdings Ltd., 11.95%, 11/12/2023(a)(c)(e)(f) | | 200,000 | 6,250 |
Logan Group Co. Ltd. | | | |
7.50%, 08/25/2022(a)(c)(e)(f) | | 200,000 | 12,000 |
6.50%, 07/16/2023(a)(c)(e)(f) | | 200,000 | 11,696 |
Shandong Iron & Steel Xinheng International Co. Ltd., 6.50%, 11/05/2023(a) | | 200,000 | 199,608 |
Sunac China Holdings Ltd., 6.80%, 10/20/2024(a)(c)(e)(f) | | 200,000 | 31,000 |
Zhenro Properties Group Ltd., 6.63%, 01/07/2026(a)(c)(e)(f) | | 200,000 | 1,000 |
Total China | | 1,233,768 |
COLOMBIA—1.9% | | |
Bancolombia SA VRN, (fixed rate to 12/18/2024, variable rate thereafter), 4.63%, 12/18/2029(c) | | 200,000 | 175,013 |
Ecopetrol SA | | | |
5.38%, 06/26/2026(c) | | 351,000 | 336,056 |
8.88%, 01/13/2033(c) | | 105,000 | 100,842 |
Empresas Publicas de Medellin ESP, 4.38%, 02/15/2031(a)(c) | | 437,000 | 323,698 |
Total Colombia | | 935,609 |
DOMINICAN REPUBLIC—0.4% | | |
AES Espana BV, 5.70%, 05/04/2028(a)(c) | | 202,000 | 177,150 |
ECUADOR—0.4% | | |
International Airport Finance SA, 12.00%, 03/15/2033(a)(c)(d) | | 192,467 | 184,073 |
FRANCE—0.9% | | |
Altice France SA, 5.88%, 02/01/2027(a)(c) | EUR | 100,000 | 87,600 |
BNP Paribas SA VRN, (fixed rate to 02/25/2030,variable rate thereafter), 4.50%, 02/25/2030(a)(b) | $ | 200,000 | 135,795 |
12 | abrdn Global Income Fund, Inc. |
Portfolio of Investments (continued)
As of October 31, 2023
| Shares or Principal Amount | Value |
CORPORATE BONDS (continued) | |
FRANCE (continued) | | |
Cerba Healthcare SACA, 3.50%, 05/31/2028(a)(c) | EUR | 130,000 | $ 111,371 |
Electricite de France SA, (fixed rate to 01/22/2026, variable rate thereafter), 5.00%, 01/22/2026(a)(b) | | 100,000 | 101,029 |
Total France | | 435,795 |
GEORGIA—0.6% | | |
Georgian Railway JSC, 4.00%, 06/17/2028(a)(c) | $ | 359,000 | 305,186 |
GERMANY—2.2% | | |
CT Investment GmbH, 5.50%, 04/15/2026(a)(c) | EUR | 100,000 | 99,112 |
Deutsche Bank AG | | | |
2.63%, 12/16/2024(a) | GBP | 100,000 | 115,951 |
(fixed rate to 04/30/2026, variable rate thereafter), 7.13%, 04/30/2026(a)(b) | | 100,000 | 98,786 |
Gruenenthal GmbH, 3.63%, 11/15/2026(a)(c) | EUR | 100,000 | 100,255 |
HT Troplast GmbH, 9.38%, 07/15/2028(a)(c) | | 110,000 | 112,893 |
IHO Verwaltungs GmbH PIK, 8.75%, 05/15/2028(a)(c)(g) | | 103,347 | 112,510 |
PrestigeBidCo GmbH FRN, 3 mo. Euribor + 6.000%, 9.97%, 07/15/2027(a)(c)(h) | | 109,000 | 115,621 |
Schaeffler AG, 2.88%, 03/26/2027(a)(c) | | 60,000 | 59,359 |
Techem Verwaltungsgesellschaft 675 mbH, 2.00%, 07/15/2025(a)(c) | | 106,000 | 107,797 |
TK Elevator Midco GmbH, 4.38%, 07/15/2027(a)(c) | | 100,000 | 95,758 |
ZF Europe Finance BV, 2.50%, 10/23/2027(a)(c) | | 100,000 | 92,869 |
Total Germany | | 1,110,911 |
GHANA—0.6% | | |
Tullow Oil PLC, 7.00%, 03/01/2025(a)(c) | $ | 362,000 | 285,756 |
HONG KONG—1.0% | | |
AIA Group Ltd., 5.63%, 10/25/2027(a)(c) | | 500,000 | 499,642 |
INDIA—4.9% | | |
GMR Hyderabad International Airport Ltd., 5.38%, 04/10/2024(a) | | 200,000 | 198,062 |
HDFC Bank Ltd., 8.10%, 03/22/2025(a) | INR | 110,000,000 | 1,304,953 |
India Green Power Holdings, 4.00%, 02/22/2027(a)(c)(d) | $ | 200,000 | 171,252 |
Indiabulls Housing Finance Ltd., Series 6B, 9.00%, 09/26/2026 | INR | 50,000,000 | 579,101 |
REC Ltd., 5.25%, 11/13/2023(a) | $ | 200,000 | 199,995 |
Total India | | 2,453,363 |
INDONESIA—1.4% | | |
Medco Laurel Tree Pte. Ltd., 6.95%, 11/12/2028(a)(c) | | 221,000 | 204,121 |
| Shares or Principal Amount | Value |
Medco Oak Tree Pte Ltd., 7.38%, 05/14/2026(a)(c) | $ | 200,000 | $ 198,826 |
Perusahaan Perseroan Persero PT, Perusahaan Listrik Negara, 5.25%, 10/24/2042(a) | | 400,000 | 313,075 |
Total Indonesia | | 716,022 |
IRELAND—0.3% | | |
Cimpress PLC, 7.00%, 06/15/2026(c) | | 160,000 | 148,067 |
ISRAEL—0.8% | | |
Bank Leumi Le-Israel BM, (fixed rate to 04/18/2028, variable rate thereafter), 7.13%, 07/18/2033(a)(c) | | 200,000 | 178,000 |
Energian Israel Finance Ltd., 8.50%, 09/30/2033(a)(c) | | 230,000 | 200,387 |
Total Israel | | 378,387 |
ITALY—0.4% | | |
Lottomatica/Roma SpA 3 mo. Euribor + 4.125%, 7.93%, 06/01/2028(a)(c)(h) | EUR | 100,000 | 105,921 |
Telecom Italia Capital SA, 6.38%, 11/15/2033 | $ | 140,000 | 119,380 |
Total Italy | | 225,301 |
KAZAKHSTAN—1.6% | | |
KazMunayGas National Co. JSC | | | |
3.50%, 04/14/2033(a)(c) | | 200,000 | 145,500 |
5.75%, 04/19/2047(a) | | 870,000 | 644,687 |
Total Kazakhstan | | 790,187 |
KUWAIT—0.4% | | |
MEGlobal Canada ULC, 5.00%, 05/18/2025(a) | | 200,000 | 194,500 |
LUXEMBOURG—1.8% | | |
Albion Financing 1 SARL/Aggreko Holdings, Inc., 5.25%, 10/15/2026(a)(c) | EUR | 100,000 | 99,990 |
Altice Financing SA, 5.75%, 08/15/2029(a)(c) | $ | 204,000 | 157,755 |
Altice France Holding SA | | | |
8.00%, 05/15/2027(a)(c) | EUR | 100,000 | 56,860 |
10.50%, 05/15/2027(a)(c) | $ | 200,000 | 108,820 |
Cidron Aida Finco Sarl, 6.25%, 04/01/2028(a)(c) | GBP | 100,000 | 106,504 |
Cullinan Holdco Scsp, 4.63%, 10/15/2026(a)(c) | EUR | 100,000 | 73,940 |
LHMC Finco 2 Sarl PIK, 7.25%, 10/02/2025(a)(c)(g) | | 4,866 | 4,947 |
Matterhorn Telecom SA, 3.13%, 09/15/2026(a)(c) | | 200,000 | 197,336 |
Monitchem HoldCo 3 SA, 8.75%, 05/01/2028(a)(c) | | 110,000 | 111,402 |
Total Luxembourg | | 917,554 |
MEXICO—2.6% | | |
BBVA Bancomer SA VRN, (fixed rate to 01/17/2028, variable rate thereafter), 5.13%, 01/18/2033(a)(c) | $ | 470,000 | 397,706 |
Braskem Idesa SAPI, 6.99%, 02/20/2032(a)(c) | | 200,000 | 118,046 |
abrdn Global Income Fund, Inc. | 13 |
Portfolio of Investments (continued)
As of October 31, 2023
| Shares or Principal Amount | Value |
CORPORATE BONDS (continued) | |
MEXICO (continued) | | |
Cemex SAB de CV, (fixed rate to 03/14/2028, variable rate thereafter), 9.13%, 03/14/2028(a)(b) | $ | 200,000 | $ 205,027 |
Petroleos Mexicanos | | | |
7.19%, 09/12/2024(a) | MXN | 4,200,000 | 219,195 |
7.19%, 09/12/2024(a) | | 3,378,800 | 176,337 |
Sixsigma Networks Mexico SA de CV, 7.50%, 05/02/2025(a)(c) | $ | 210,000 | 188,834 |
Total Mexico | | 1,305,145 |
MOROCCO—0.5% | | |
Vivo Energy Investments BV, 5.13%, 09/24/2027(a)(c) | | 255,000 | 229,500 |
NETHERLANDS—1.2% | | |
OCI NV, 3.63%, 10/15/2025(a)(c) | EUR | 90,000 | 93,113 |
Stichting AK Rabobank Certificaten, 6.50%, 12/29/2049(a)(b)(i) | | 60,000 | 57,143 |
Summer BidCo BV PIK, 9.00%, 11/15/2025(a)(c)(g) | | 120,973 | 124,801 |
UPC Holding BV, 5.50%, 01/15/2028(a)(c) | $ | 200,000 | 174,500 |
Versuni Group BV, 3.13%, 06/15/2028(a)(c) | EUR | 100,000 | 81,362 |
VZ Vendor Financing II BV, 2.88%, 01/15/2029(a)(c) | | 100,000 | 80,642 |
Total Netherlands | | 611,561 |
NIGERIA—2.2% | | |
Access Bank PLC, 6.13%, 09/21/2026(a) | $ | 216,000 | 178,870 |
BOI Finance BV, 7.50%, 02/16/2027(a)(j) | EUR | 196,000 | 175,025 |
IHS Netherlands Holdco BV, 8.00%, 09/18/2027(a)(c) | $ | 230,000 | 187,450 |
SEPLAT Energy PLC, 7.75%, 04/01/2026(a)(c) | | 297,000 | 248,589 |
United Bank for Africa PLC, 6.75%, 11/19/2026(a) | | 380,000 | 326,663 |
Total Nigeria | | 1,116,597 |
OMAN—0.5% | | |
EDO Sukuk Ltd., 5.88%, 09/21/2033(a) | | 250,000 | 239,625 |
PERU—0.4% | | |
Petroleos del Peru SA, 5.63%, 06/19/2047(a) | | 400,000 | 218,872 |
PHILIPPINES—0.9% | | |
International Container Terminal Services, Inc., 4.75%, 06/17/2030(a) | | 260,000 | 241,099 |
Manila Water Co., Inc., 4.38%, 07/30/2030(a)(c) | | 243,000 | 212,746 |
Total Philippines | | 453,845 |
RUSSIA—0.0% | | |
Sovcombank Via SovCom Capital DAC, (fixed rate to 05/06/2025, variable rate thereafter), 7.75%, 05/06/2025(a)(b)(e)(f)(k)(l) | | 250,000 | – |
| Shares or Principal Amount | Value |
SINGAPORE—1.2% | | |
DBS Group Holdings Ltd., (fixed rate to 12/11/2023, variable rate thereafter), 4.52%, 12/11/2028(a)(c) | $ | 200,000 | $ 199,634 |
Puma International Financing SA, 5.00%, 01/24/2026(a)(c) | | 210,000 | 188,006 |
Vena Energy Capital Pte Ltd., 3.13%, 02/26/2025(a) | | 210,000 | 199,627 |
Total Singapore | | 587,267 |
SOUTH AFRICA—2.9% | | |
Eskom Holdings SOC Ltd. | | | |
7.13%, 02/11/2025(a) | | 410,000 | 401,800 |
0.01%, 12/31/2032(f)(m) | ZAR | 28,700,000 | 304,902 |
Liquid Telecommunications Financing PLC, 5.50%, 09/04/2026(a)(c) | $ | 446,000 | 272,901 |
Sasol Financing USA LLC, 5.50%, 03/18/2031(c) | | 400,000 | 306,247 |
Transnet SOC Ltd., 8.25%, 02/06/2028(a) | | 200,000 | 189,025 |
Total South Africa | | 1,474,875 |
SPAIN—1.5% | | |
Banco Bilbao Vizcaya Argentaria SA, (fixed rate to 03/05/2025, variable rate thereafter), Series 9, 6.50%, 03/05/2025(b) | | 200,000 | 188,424 |
Banco de Sabadell SA | | | |
(fixed rate to 06/16/2027, variable rate thereafter), 0.88%, 06/16/2028(a)(c) | EUR | 100,000 | 90,855 |
(fixed rate to 02/07/2028, variable rate thereafter), 5.25%, 02/07/2029(a)(c) | | 100,000 | 104,573 |
Cellnex Finance Co. SA | | | |
1.50%, 06/08/2028(a)(c) | | 100,000 | 90,797 |
2.00%, 09/15/2032(a)(c) | | 100,000 | 81,478 |
Lorca Telecom Bondco SA, 4.00%, 09/18/2027(a)(c) | | 100,000 | 98,139 |
Unicaja Banco SA, (fixed rate to 11/15/2026, variable rate thereafter), 7.25%, 11/15/2027(a)(c) | | 100,000 | 107,903 |
Total Spain | | 762,169 |
SWITZERLAND—0.4% | | |
Consolidated Energy Finance SA, 5.63%, 10/15/2028(a)(c) | $ | 150,000 | 123,255 |
Dufry One BV, 2.50%, 10/15/2024(a)(c) | EUR | 100,000 | 103,165 |
Total Switzerland | | 226,420 |
TANZANIA—0.4% | | |
HTA Group Ltd., 7.00%, 12/18/2025(a)(c) | $ | 200,000 | 193,148 |
TRINIDAD—1.1% | | |
Heritage Petroleum Co. Ltd., 9.00%, 08/12/2029(a)(c) | | 291,000 | 302,058 |
WE Soda Investments Holding PLC, 9.50%, 10/06/2028(a)(c) | | 275,000 | 274,230 |
Total Trinidad | | 576,288 |
14 | abrdn Global Income Fund, Inc. |
Portfolio of Investments (continued)
As of October 31, 2023
| Shares or Principal Amount | Value |
CORPORATE BONDS (continued) | |
UKRAINE—0.9% | | |
Kernel Holding SA, 6.75%, 10/27/2027(a)(c)(f) | $ | 206,000 | $ 128,791 |
MHP Lux SA, 6.95%, 04/03/2026(a)(f) | | 218,000 | 160,416 |
NPC Ukrenergo, 6.88%, 11/09/2028(a)(e)(f)(j) | | 200,000 | 52,990 |
Ukraine Railways Via Rail Capital Markets PLC, 8.25%, 07/09/2026(a)(e)(f) | | 200,000 | 103,724 |
Total Ukraine | | 445,921 |
UNITED ARAB EMIRATES—0.4% | | |
MAF Global Securities Ltd., (fixed rate to 03/20/2026, variable rate thereafter), 6.38%, 03/20/2026(a)(b) | | 200,000 | 190,404 |
UNITED KINGDOM—2.3% | | |
BCP V Modular Services Finance II PLC, 4.75%, 11/30/2028(a)(c) | EUR | 125,000 | 109,447 |
Bellis Acquisition Co. PLC, 4.50%, 02/16/2026(a)(c) | GBP | 124,000 | 133,548 |
Ithaca Energy North Sea PLC, 9.00%, 07/15/2026(a)(c) | $ | 200,000 | 192,006 |
Jerrold Finco PLC, 4.88%, 01/15/2026(a)(c) | GBP | 100,000 | 112,611 |
Macquarie Airfinance Holdings Ltd., 8.13%, 03/30/2029(a)(c) | $ | 125,000 | 123,131 |
Phoenix Group Holdings PLC, 6.63%, 12/18/2025(a) | GBP | 150,000 | 181,272 |
Pinewood Finance Co. Ltd., 3.25%, 09/30/2025(a)(c) | | 100,000 | 114,683 |
Virgin Media Vendor Financing Notes III DAC, 4.88%, 07/15/2028(a)(c) | | 200,000 | 203,249 |
Total United Kingdom | | 1,169,947 |
UNITED STATES—30.4% | | |
Academy Ltd., 6.00%, 11/15/2027(a)(c) | $ | 296,000 | 278,648 |
ACI Worldwide, Inc., 5.75%, 08/15/2026(a)(c) | | 229,000 | 219,213 |
Acushnet Co., 7.38%, 10/15/2028(a)(c) | | 116,000 | 116,211 |
Adams Homes, Inc. | | | |
7.50%, 02/15/2025(a)(c) | | 117,000 | 114,513 |
9.25%, 10/15/2028(a)(c) | | 204,000 | 197,162 |
Adient Global Holdings Ltd. | | | |
3.50%, 08/15/2024(a)(c) | EUR | 17,635 | 18,334 |
7.00%, 04/15/2028(a)(c) | $ | 45,000 | 44,294 |
8.25%, 04/15/2031(a)(c) | | 45,000 | 43,797 |
Affinity Interactive, 6.88%, 12/15/2027(a)(c) | | 211,000 | 171,983 |
Ball Corp. | | | |
2.88%, 08/15/2030(c) | | 137,000 | 106,867 |
3.13%, 09/15/2031(c) | | 34,000 | 26,320 |
Builders FirstSource, Inc., 4.25%, 02/01/2032(a)(c) | | 351,000 | 279,346 |
Caesars Entertainment, Inc., 7.00%, 02/15/2030(a)(c) | | 4,000 | 3,860 |
Carnival Corp. | | | |
7.63%, 03/01/2026(a)(c) | | 96,000 | 93,350 |
6.00%, 05/01/2029(a)(c) | | 56,000 | 47,309 |
CCM Merger, Inc., 6.38%, 05/01/2026(a)(c) | | 197,000 | 186,476 |
| Shares or Principal Amount | Value |
CCO Holdings LLC / CCO Holdings Capital Corp. | | | |
5.38%, 06/01/2029(a)(c) | $ | 38,000 | $ 33,261 |
4.25%, 02/01/2031(a)(c) | | 225,000 | 175,095 |
4.75%, 02/01/2032(a)(c) | | 63,000 | 49,175 |
4.25%, 01/15/2034(a)(c) | | 486,000 | 351,039 |
Centene Corp., 3.38%, 02/15/2030(c) | | 233,000 | 192,656 |
Chart Industries, Inc., 7.50%, 01/01/2030(a)(c) | | 93,000 | 91,325 |
CHS/Community Health Systems, Inc., 5.25%, 05/15/2030(a)(c) | | 120,000 | 85,218 |
Civitas Resources, Inc. | | | |
8.38%, 07/01/2028(a)(c) | | 73,000 | 73,450 |
8.63%, 11/01/2030(a)(c) | | 56,000 | 56,998 |
8.75%, 07/01/2031(a)(c) | | 73,000 | 73,676 |
Clean Harbors, Inc. | | | |
4.88%, 07/15/2027(a)(c) | | 233,000 | 217,202 |
5.13%, 07/15/2029(a)(c) | | 16,000 | 14,391 |
6.38%, 02/01/2031(a)(c) | | 29,000 | 27,563 |
Cleveland-Cliffs, Inc., 6.75%, 04/15/2030(a)(c) | | 83,000 | 76,957 |
Consensus Cloud Solutions, Inc. | | | |
6.00%, 10/15/2026(a)(c) | | 37,000 | 34,270 |
6.50%, 10/15/2028(a)(c) | | 102,000 | 84,533 |
Cornerstone Building Brands, Inc., 6.13%, 01/15/2029(a)(c) | | 171,000 | 125,018 |
CSC Holdings LLC | | | |
6.50%, 02/01/2029(a)(c) | | 200,000 | 158,138 |
5.75%, 01/15/2030(a)(c) | | 200,000 | 104,634 |
Darling Ingredients, Inc., 6.00%, 06/15/2030(a)(c) | | 145,000 | 136,039 |
DISH Network Corp., 11.75%, 11/15/2027(a)(c) | | 163,000 | 161,461 |
Encore Capital Group, Inc., 5.38%, 02/15/2026(a)(c) | GBP | 100,000 | 110,727 |
EnLink Midstream LLC, 6.50%, 09/01/2030(a)(c) | $ | 118,000 | 113,265 |
EnLink Midstream Partners LP, 5.45%, 06/01/2047(c) | | 159,000 | 119,522 |
Ford Motor Co. | | | |
6.63%, 10/01/2028 | | 44,000 | 43,480 |
9.63%, 04/22/2030(c) | | 148,000 | 165,028 |
Ford Motor Credit Co. LLC | | | |
4.54%, 03/06/2025 | GBP | 211,000 | 248,561 |
2.39%, 02/17/2026 | EUR | 100,000 | 100,324 |
Frontier Communications Holdings LLC | | | |
6.00%, 01/15/2030(a)(c) | $ | 96,000 | 72,263 |
8.75%, 05/15/2030(a)(c) | | 83,000 | 79,078 |
8.63%, 03/15/2031(a)(c) | | 119,000 | 111,884 |
GLP Capital, LP/GLP Financing II, Inc. REIT, 5.75%, 06/01/2028(c) | | 137,000 | 128,444 |
Goodyear Europe BV, 2.75%, 08/15/2028(a)(c) | EUR | 116,000 | 102,641 |
Goodyear Tire & Rubber Co. (The) | | | |
9.50%, 05/31/2025(c) | $ | 230,000 | 232,645 |
5.00%, 07/15/2029(c) | | 120,000 | 103,203 |
Graphic Packaging International LLC, 3.75%, 02/01/2030(a)(c) | | 278,000 | 227,376 |
abrdn Global Income Fund, Inc. | 15 |
Portfolio of Investments (continued)
As of October 31, 2023
| Shares or Principal Amount | Value |
CORPORATE BONDS (continued) | |
UNITED STATES (continued) | | |
Hess Midstream Operations LP | | | |
4.25%, 02/15/2030(a)(c) | $ | 129,000 | $ 110,382 |
5.50%, 10/15/2030(a)(c) | | 20,000 | 18,156 |
Howard Midstream Energy Partners LLC, 8.88%, 07/15/2028(a)(c) | | 113,000 | 113,602 |
Howmet Aerospace, Inc. | | | |
3.00%, 01/15/2029(c) | | 210,000 | 177,254 |
5.95%, 02/01/2037 | | 76,000 | 69,427 |
Hyundai Capital America, 6.38%, 04/08/2030(a)(c) | | 200,000 | 196,880 |
International Game Technology PLC, 3.50%, 06/15/2026(a)(c) | EUR | 179,000 | 180,447 |
IQVIA, Inc., 1.75%, 03/15/2026(a)(c) | | 125,000 | 123,739 |
Iron Mountain, Inc. | | | |
5.00%, 07/15/2028(a)(c) | $ | 23,000 | 20,582 |
4.88%, 09/15/2029(a)(c) | | 60,000 | 52,264 |
5.25%, 07/15/2030(a)(c) | | 167,000 | 144,968 |
ITT Holdings LLC, 6.50%, 08/01/2029(a)(c) | | 104,000 | 86,970 |
JBS USA LUX SA/JBS USA Food Co./JBS USA Finance, Inc., 5.75%, 04/01/2033(c) | | 174,000 | 153,680 |
JPMorgan Chase & Co. VRN, Series CC, 8.22%, 02/01/2024(b)(h) | | 180,000 | 179,629 |
JPMorgan Chase Bank NA, 11.67%, 11/27/2023(a)(f) | UAH | 10,041,000 | 239,269 |
Level 3 Financing, Inc., 10.50%, 05/15/2030(a)(c) | $ | 192,000 | 192,150 |
Macy's Retail Holdings LLC | | | |
5.88%, 04/01/2029(a)(c) | | 139,000 | 122,542 |
5.88%, 03/15/2030(a)(c) | | 3,000 | 2,538 |
6.13%, 03/15/2032(a)(c) | | 54,000 | 44,596 |
MajorDrive Holdings IV LLC, 6.38%, 06/01/2029(a)(c) | | 225,000 | 174,375 |
Mauser Packaging Solutions Holding Co., 9.25%, 04/15/2027(a)(c) | | 48,000 | 39,975 |
MGM Resorts International | | | |
5.75%, 06/15/2025(c) | | 113,000 | 110,500 |
5.50%, 04/15/2027(c) | | 73,000 | 68,106 |
MIWD Holdco II LLC / MIWD Finance Corp., 5.50%, 02/01/2030(a)(c) | | 281,000 | 223,044 |
NCL Corp. Ltd. | | | |
5.88%, 02/15/2027(a)(c) | | 87,000 | 80,081 |
8.38%, 02/01/2028(a)(c) | | 34,000 | 33,683 |
7.75%, 02/15/2029(a)(c) | | 124,000 | 108,226 |
NCR Atleos Escrow Corp., 9.50%, 04/01/2029(a)(c) | | 115,000 | 112,726 |
Neptune Bidco US, Inc., 9.29%, 04/15/2029(a)(c) | | 239,000 | 210,929 |
New Enterprise Stone & Lime Co., Inc., 5.25%, 07/15/2028(a)(c) | | 87,000 | 76,777 |
Novelis Corp., 3.25%, 11/15/2026(a)(c) | | 163,000 | 145,093 |
Novelis Sheet Ingot GmbH, 3.38%, 04/15/2029(a)(c) | EUR | 100,000 | 90,038 |
| Shares or Principal Amount | Value |
NRG Energy, Inc. | | | |
3.38%, 02/15/2029(a)(c) | $ | 15,000 | $ 12,208 |
5.25%, 06/15/2029(a)(c) | | 134,000 | 118,223 |
3.63%, 02/15/2031(a)(c) | | 202,000 | 152,437 |
3.88%, 02/15/2032(a)(c) | | 68,000 | 50,535 |
7.00%, 03/15/2033(a)(c) | | 56,000 | 52,930 |
Occidental Petroleum Corp. | | | |
5.50%, 12/01/2025(c) | | 26,000 | 25,662 |
5.55%, 03/15/2026(c) | | 22,000 | 21,705 |
6.45%, 09/15/2036 | | 47,000 | 45,650 |
OI European Group BV, 6.25%, 05/15/2028(a)(c) | EUR | 100,000 | 104,501 |
Organon & Co. / Organon Foreign Debt Co-Issuer BV, 2.88%, 04/30/2028(a)(c) | | 196,000 | 179,017 |
Owens-Brockway Glass Container, Inc., 7.25%, 05/15/2031(a)(c) | $ | 76,000 | 69,540 |
Perrigo Finance Unlimited Co., 4.65%, 06/15/2030(c) | | 200,000 | 167,011 |
Post Holdings, Inc. | | | |
5.63%, 01/15/2028(a)(c) | | 70,000 | 65,056 |
5.50%, 12/15/2029(a)(c) | | 120,000 | 107,018 |
Royal Caribbean Cruises Ltd. | | | |
11.50%, 06/01/2025(a)(c) | | 12,000 | 12,682 |
3.70%, 03/15/2028(c) | | 136,000 | 115,909 |
8.25%, 01/15/2029(a)(c) | | 87,000 | 89,186 |
Sabre GLBL, Inc., 11.25%, 12/15/2027(a)(c) | | 41,000 | 36,510 |
Sabre Global, Inc., 8.63%, 06/01/2027(a)(c) | | 94,000 | 77,959 |
Sirius XM Radio, Inc., 4.13%, 07/01/2030(a)(c) | | 143,000 | 113,544 |
Six Flags Entertainment Corp., 5.50%, 04/15/2027(a)(c) | | 116,000 | 105,603 |
Six Flags Theme Parks, Inc., 7.00%, 07/01/2025(a)(c) | | 105,000 | 104,276 |
Southwestern Energy Co., 4.75%, 02/01/2032(c) | | 210,000 | 180,597 |
Staples, Inc., 7.50%, 04/15/2026(a)(c) | | 84,000 | 68,518 |
Star Parent, Inc., 9.00%, 10/01/2030(a)(c) | | 158,000 | 156,797 |
SunCoke Energy, Inc., 4.88%, 06/30/2029(a)(c) | | 264,000 | 220,968 |
Talen Energy Supply LLC, 8.63%, 06/01/2030(a)(c) | | 124,000 | 125,998 |
Tempur Sealy International, Inc., 3.88%, 10/15/2031(a)(c) | | 175,000 | 131,054 |
Tenet Healthcare Corp., 6.13%, 10/01/2028(c) | | 145,000 | 134,487 |
TransDigm, Inc., 6.75%, 08/15/2028(a)(c) | | 118,000 | 114,576 |
Travel & Leisure Co. | | | |
5.65%, 04/01/2024(c) | | 115,000 | 114,137 |
6.00%, 04/01/2027(c) | | 80,000 | 74,720 |
4.63%, 03/01/2030(a)(c) | | 25,000 | 20,466 |
Turning Point Brands, Inc., 5.63%, 02/15/2026(a)(c) | | 108,000 | 99,090 |
U.S. Foods, Inc. | | | |
6.88%, 09/15/2028(a)(c) | | 77,000 | 75,257 |
7.25%, 01/15/2032(a)(c) | | 79,000 | 77,549 |
16 | abrdn Global Income Fund, Inc. |
Portfolio of Investments (continued)
As of October 31, 2023
| Shares or Principal Amount | Value |
CORPORATE BONDS (continued) | |
UNITED STATES (continued) | | |
Uniti Group LP / Uniti Group Finance Inc / CSL Capital LLC, 10.50%, 02/15/2028(a)(c) | $ | 113,000 | $ 108,814 |
Univision Communications, Inc. | | | |
6.63%, 06/01/2027(a)(c) | | 97,000 | 88,599 |
8.00%, 08/15/2028(a)(c) | | 62,000 | 58,548 |
7.38%, 06/30/2030(a)(c) | | 95,000 | 83,648 |
Venture Global Calcasieu Pass LLC | | | |
3.88%, 08/15/2029(a)(c) | | 73,000 | 60,749 |
6.25%, 01/15/2030(a)(c) | | 114,000 | 107,543 |
4.13%, 08/15/2031(a)(c) | | 145,000 | 116,581 |
3.88%, 11/01/2033(a)(c) | | 98,000 | 74,054 |
Venture Global LNG, Inc. | | | |
8.13%, 06/01/2028(a)(c) | | 222,000 | 215,522 |
8.38%, 06/01/2031(a)(c) | | 232,000 | 221,387 |
Viatris, Inc., 2.70%, 06/22/2030(c) | | 229,000 | 175,877 |
Vistra Operations Co. LLC, 4.38%, 05/01/2029(a)(c) | | 126,000 | 107,024 |
Vital Energy, Inc., 9.75%, 10/15/2030(c) | | 169,000 | 165,625 |
Weatherford International Ltd. | | | |
6.50%, 09/15/2028(a)(c) | | 57,000 | 57,294 |
8.63%, 04/30/2030(a)(c) | | 68,000 | 68,713 |
Wolverine World Wide, Inc., 4.00%, 08/15/2029(a)(c) | | 257,000 | 191,618 |
Total United States | | 15,253,823 |
ZAMBIA—0.7% | | |
First Quantum Minerals Ltd. | | | |
7.50%, 04/01/2025(a)(c) | | 200,000 | 187,578 |
8.63%, 06/01/2031(a)(c) | | 200,000 | 168,820 |
Total Zambia | | 356,398 |
Total Corporate Bonds | | 45,665,312 |
GOVERNMENT BONDS—43.6% | |
ANGOLA—1.0% | | |
Angolan Government International Bond, 9.13%, 11/26/2049(a) | | 701,000 | 490,700 |
ARGENTINA—1.6% | | |
Argentine Republic Government International Bond | | | |
1.00%, 07/09/2029(c)(d) | | 71,292 | 18,970 |
4.25%, 01/09/2038(c)(d)(i) | | 1,609,200 | 483,928 |
3.63%, 07/09/2046(c)(d)(i) | | 1,293,010 | 318,901 |
Total Argentina | | 821,799 |
AUSTRALIA—1.9% | | |
Australia Government Bond,Series 154, 2.75%, 11/21/2029(a) | AUD | 600,000 | 342,808 |
Queensland Treasury Corp., 3.50%, 08/21/2030(a) | | 1,100,000 | 631,975 |
Total Australia | | 974,783 |
BAHRAIN—1.4% | | |
Bahrain Government International Bond | | | |
4.25%, 01/25/2028(a) | $ | 390,000 | 349,523 |
5.45%, 09/16/2032(a) | | 229,000 | 192,786 |
6.25%, 01/25/2051(a) | | 210,000 | 149,887 |
Total Bahrain | | 692,196 |
| Shares or Principal Amount | Value |
BRAZIL—3.5% | | |
Brazil Notas do Tesouro Nacional,Series NTNF, 10.00%, 01/01/2029 | BRL | 7,434,000 | $ 1,386,741 |
Brazilian Government International Bond, 7.13%, 01/20/2037 | $ | 370,000 | 363,477 |
Total Brazil | | 1,750,218 |
CHILE—0.6% | | |
Chile Government International Bond, 4.34%, 03/07/2042(c) | | 386,000 | 298,489 |
COLOMBIA—1.3% | | |
Colombia Government International Bond, 5.20%, 05/15/2049(c) | | 200,000 | 127,894 |
Colombia TES,Series B, 9.25%, 05/28/2042 | COP | 2,757,800,000 | 534,739 |
Total Colombia | | 662,633 |
DOMINICAN REPUBLIC—2.8% | | |
Dominican Republic International Bond | | | |
5.50%, 02/22/2029(a)(c) | $ | 200,000 | 182,010 |
5.88%, 01/30/2060(a) | | 1,230,000 | 872,054 |
Dominican Republic International Bonds, 11.25%, 09/15/2035(a)(c) | DOP | 19,200,000 | 333,010 |
Total Dominican Republic | | 1,387,074 |
ECUADOR—1.7% | | |
Ecuador Government International Bond, 3.50%, 07/31/2035(a)(d)(i) | $ | 2,205,200 | 834,782 |
EGYPT—1.4% | | |
Egypt Government International Bond | | | |
7.63%, 05/29/2032(a) | | 400,000 | 228,008 |
7.90%, 02/21/2048(a) | | 992,000 | 502,305 |
Total Egypt | | 730,313 |
GEORGIA—0.5% | | |
Georgia Government International Bond, 2.75%, 04/22/2026(a) | | 306,000 | 271,412 |
GHANA—0.3% | | |
Ghana Government International Bond, 7.63%, 05/16/2029(a)(d)(e) | | 385,000 | 162,570 |
HUNGARY—0.7% | | |
Hungary Government Bond,Series 24/C, 2.50%, 10/24/2024 | HUF | 128,420,000 | 335,763 |
INDONESIA—4.7% | | |
Indonesia Government International Bond | | | |
7.75%, 01/17/2038(a) | $ | 100,000 | 113,989 |
3.70%, 10/30/2049 | | 1,180,000 | 797,604 |
Indonesia Treasury Bond | | | |
Series FR77, 8.13%, 05/15/2024 | IDR | 14,800,000,000 | 937,632 |
Series FR81, 6.50%, 06/15/2025 | | 780,000,000 | 48,729 |
Series FR82, 7.00%, 09/15/2030 | | 341,000,000 | 21,260 |
Series FR83, 7.50%, 04/15/2040 | | 6,535,000,000 | 419,951 |
Total Indonesia | | 2,339,165 |
IRAQ—1.0% | | |
Iraq International Bond | | | |
5.80%, 01/15/2028(a)(c)(d) | $ | 445,500 | 395,738 |
5.80%, 01/15/2028(a)(c)(d) | | 140,625 | 124,917 |
Total Iraq | | 520,655 |
abrdn Global Income Fund, Inc. | 17 |
Portfolio of Investments (continued)
As of October 31, 2023
| Shares or Principal Amount | Value |
GOVERNMENT BONDS (continued) | |
IVORY COAST—0.6% | | |
Ivory Coast Government International Bond, 6.63%, 03/22/2048(a)(d) | EUR | 444,000 | $ 314,764 |
KENYA—1.3% | | |
Republic of Kenya Government International Bonds, 8.25%, 02/28/2048(a) | $ | 932,000 | 652,400 |
MALAYSIA—1.6% | | |
Malaysia Government Bond | | | |
Series 0411, 4.23%, 06/30/2031 | MYR | 1,100,000 | 232,246 |
Series 0419, 3.83%, 07/05/2034 | | 800,000 | 162,256 |
Series 0519, 3.76%, 05/22/2040 | | 1,000,000 | 192,592 |
Series 0120, 4.07%, 06/15/2050 | | 1,100,000 | 212,712 |
Total Malaysia | | 799,806 |
MEXICO—2.1% | | |
Mexican Bonos | | | |
Series M, 5.75%, 03/05/2026 | MXN | 6,120,200 | 305,046 |
Series M, 7.75%, 11/13/2042 | | 16,497,100 | 730,387 |
Total Mexico | | 1,035,433 |
MOROCCO—0.6% | | |
Morocco Government International Bond, 2.38%, 12/15/2027(a) | $ | 328,000 | 280,663 |
NIGERIA—0.6% | | |
Nigeria Government International Bond, 7.63%, 11/28/2047(a) | | 435,000 | 292,538 |
OMAN—2.6% | | |
Oman Government International Bond, 7.00%, 01/25/2051(a) | | 1,400,000 | 1,284,500 |
PERU—2.0% | | |
Peruvian Government International Bond, 6.90%, 08/12/2037(a) | PEN | 4,138,000 | 999,432 |
POLAND—0.7% | | |
Republic of Poland Government Bond,Series 0432, 1.75%, 04/25/2032 | PLN | 1,894,000 | 334,890 |
QATAR—0.9% | | |
Qatar Government International Bond, 4.40%, 04/16/2050(a) | $ | 576,000 | 443,871 |
RWANDA—0.6% | | |
Rwanda International Government Bond, 5.50%, 08/09/2031(a) | | 400,000 | 302,510 |
SAUDI ARABIA—0.8% | | |
Saudi Government International Bond, 4.38%, 04/16/2029(a) | | 410,000 | 384,754 |
SOUTH KOREA—0.6% | | |
Industrial Bank of Korea, 5.13%, 10/25/2024(a) | | 300,000 | 297,950 |
TURKEY—2.0% | | |
Turkiye Government International Bonds, 9.38%, 01/19/2033 | | 1,001,000 | 1,002,702 |
UKRAINE—0.2% | | |
Ukraine Government International Bonds, 7.75%, 09/01/2029(a)(e) | | 424,000 | 118,190 |
| Shares or Principal Amount | Value |
URUGUAY—1.3% | | |
Uruguay Government International Bond | | | |
4.38%, 12/15/2028(d)(n) | UYU | 11,583,427 | $ 300,187 |
7.88%, 01/15/2033(g) | $ | 165,000 | 188,625 |
7.63%, 03/21/2036(d) | | 146,000 | 165,165 |
Total Uruguay | | 653,977 |
UZBEKISTAN—0.7% | | |
National Bank of Uzbekistan, 4.85%, 10/21/2025(a) | | 200,000 | 182,800 |
Republic of Uzbekistan International Bond, 3.70%, 11/25/2030(a) | | 252,000 | 191,627 |
Total Uzbekistan | | 374,427 |
Total Government Bonds | | 21,845,359 |
WARRANTS—0.0% | |
BRAZIL—0.0% | | |
OAS SA(f)(k)(o) | | 61,465 | – |
UNITED STATES—0.0% | | |
Delco, Series A(e)(f)(k)(o) | | 73,666 | – |
Total Warrants | | – |
SHORT-TERM INVESTMENT—0.8% | |
State Street Institutional U.S. Government Money Market Fund, Premier Class, 5.30%(p) | | 413,338 | 413,338 |
Total Short-Term Investment | | 413,338 |
Total Investments (Cost $78,090,888)(q)—135.5% | | 67,924,009 |
Liabilities in Excess of Other Assets—(35.5%) | | (17,795,850) |
Net Assets—100.0% | | $ 50,128,159 |
(a) | Denotes a security issued under Regulation S or Rule 144A. |
(b) | Perpetual maturity. Maturity date presented represents the next call date. |
(c) | The maturity date presented for these instruments represents the next call/put date. |
(d) | Sinkable security. |
(e) | Security is in default. |
(f) | Illiquid security. |
(g) | Payment-in-kind security for which part of the income earned may be paid as additional principal. |
(h) | Variable or Floating Rate security. Rate disclosed is as of October 31, 2023. |
(i) | Step bond. Rate disclosed is as of October 31, 2023. |
(j) | Denotes the security is government guaranteed. |
(k) | Level 3 security. See Note 2(a) of the accompanying Notes to Financial Statements. |
(l) | The Fund’s adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. Illiquid securities held by the Fund represent 0.00% of net assets as of October 31, 2023. |
(m) | Zero coupon bond. Rate represents yield to maturity. |
(n) | Inflation linked security. |
(o) | Non-income producing security. |
(p) | Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of October 31, 2023. |
(q) | See accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation) of securities. |
18 | abrdn Global Income Fund, Inc. |
Portfolio of Investments (continued)
As of October 31, 2023
BRL | Brazilian Real |
CNH | Chinese Yuan Renminbi Offshore |
COP | Colombian Peso |
DOP | Dominican Republic Peso |
EUR | Euro Currency |
FRN | Floating Rate Note |
GBP | British Pound Sterling |
HUF | Hungarian Forint |
IDR | Indonesian Rupiah |
INR | Indian Rupee |
KRW | South Korean Won |
MXN | Mexican Peso |
MYR | Malaysian Ringgit |
PEN | Peruvian Sol |
PIK | Payment-In-Kind |
PLC | Public Limited Company |
PLN | Polish Zloty |
REIT | Real Estate Investment Trust |
SGD | Singapore Dollar |
UAH | Ukraine Hryvna |
USD | U.S. Dollar |
UYU | Uruguayan Peso |
VRN | Variable Rate Note |
ZAR | South African Rand |
At October 31, 2023, the Fund held the following forward foreign currency contracts: |
Purchase Contracts Settlement Date* | Counterparty | Currency Purchased | Amount Purchased | Currency Sold | Amount Sold | Fair Value | Unrealized Appreciation/ (Depreciation) |
Chinese Yuan Renminbi Offshore/United States Dollar | | | | | |
11/28/2023 | Royal Bank of Canada | CNH | 19,507,367 | USD | 2,687,886 | $ 2,662,084 | $ (25,802) |
Indonesian Rupiah/United States Dollar | | | | | |
12/11/2023 | UBS AG | IDR | 31,055,400,000 | USD | 2,018,731 | 1,951,942 | (66,789) |
Singapore Dollar/United States Dollar | | | | | |
01/11/2024 | Citibank N.A. | SGD | 5,716,118 | USD | 4,198,088 | 4,188,100 | (9,988) |
South Korean Won/United States Dollar | | | | | |
11/21/2023 | Citibank N.A. | KRW | 7,227,445,888 | USD | 5,496,449 | 5,350,626 | (145,823) |
| $14,152,752 | $(248,402) |
Sale Contracts Settlement Date* | Counterparty | Currency Purchased | Amount Purchased | Currency Sold | Amount Sold | Fair Value | Unrealized Appreciation/ (Depreciation) |
United States Dollar/British Pound | | | | | |
11/21/2023 | Morgan Stanley & Co. | USD | 1,354,585 | GBP | 1,104,125 | $ 1,342,139 | $ 12,446 |
United States Dollar/Euro | | | | | |
11/21/2023 | Deutsche Bank AG | USD | 4,173,363 | EUR | 3,937,117 | 4,168,957 | 4,406 |
11/21/2023 | Morgan Stanley & Co. | USD | 113,196 | EUR | 106,824 | 113,114 | 82 |
United States Dollar/South African Rand | | | | | |
11/21/2023 | Morgan Stanley & Co. | USD | 292,049 | ZAR | 5,544,000 | 296,994 | (4,945) |
United States Dollar/South Korean Won | | | | | |
11/21/2023 | Royal Bank of Canada | USD | 5,349,396 | KRW | 7,227,445,888 | 5,350,626 | (1,230) |
| $11,271,830 | $ 10,759 |
Unrealized appreciation on forward foreign currency exchange contracts | $ 16,934 |
Unrealized depreciation on forward foreign currency exchange contracts | $(254,577) |
* | Certain contracts with different trade dates and like characteristics have been shown net. |
At October 31, 2023, the Fund held the following centrally cleared interest rate swaps: |
Currency | Notional Amount | Expiration Date | Counterparty | Receive (Pay) Floating Rate | Floating Rate Index | Fixed Rate | Frequency of Paid Payments Made | Premiums Paid (Received) | Value | Unrealized Appreciation/ (Depreciation) |
USD | 7,350,000 | 03/17/2033 | Citigroup | Receive | 12-month SOFR | 3.38% | Annually | $- | $ 722,745 | $ 722,745 |
USD | 5,000,000 | 03/17/2030 | Citigroup | Receive | 12-month SOFR | 3.46% | Annually | - | 345,050 | 345,050 |
USD | 5,000,000 | 03/17/2032 | Citigroup | Receive | 12-month SOFR | 3.40% | Annually | - | 443,963 | 443,963 |
abrdn Global Income Fund, Inc. | 19 |
Portfolio of Investments (concluded)
As of October 31, 2023
Currency | Notional Amount | Expiration Date | Counterparty | Receive (Pay) Floating Rate | Floating Rate Index | Fixed Rate | Frequency of Paid Payments Made | Premiums Paid (Received) | Value | Unrealized Appreciation/ (Depreciation) |
USD | 3,000,000 | 07/13/2033 | Citigroup | Receive | 12-month SOFR | 3.72% | Annually | $- | $ 205,785 | $ 205,785 |
| | $- | $1,717,543 | $1,717,543 |
See Notes to Financial Statements.
20 | abrdn Global Income Fund, Inc. |
Statement of Assets and Liabilities
As of October 31, 2023
Assets |
|
Investments, at value (cost $77,677,550) |
$ 67,510,671 |
Short-term investments, at value (cost $413,338) |
413,338 |
Foreign currency, at value (cost $573,354) |
479,634 |
Cash at broker for interest rate swaps |
860,861 |
Cash at broker for forward foreign currency contracts |
200,000 |
Receivable for investments sold |
28,168 |
Interest and dividends receivable |
1,358,726 |
Receivable for common shares issued |
45 |
Unrealized appreciation on forward foreign currency exchange contracts |
16,934 |
Variation margin receivable for centrally cleared swaps |
25,948 |
Prepaid expenses in connection with the at-the-market stock offering (Note 5) |
94,492 |
Prepaid expenses in connection with the shelf registration (Note 5) |
43,583 |
Prepaid expenses in connection with revolving credit facility (Note 7) |
8,738 |
Prepaid expenses |
25,033 |
Total assets |
71,066,171 |
Liabilities |
|
Revolving credit facility payable (Note 7) |
20,350,000 |
Unrealized depreciation on forward foreign currency exchange contracts |
254,577 |
Due to custodian |
89,383 |
Interest payable on bank loan |
82,120 |
Investment management fees payable (Note 3) |
40,577 |
Administration fees payable (Note 3) |
7,803 |
Investor relations fees payable (Note 3) |
2,984 |
Other accrued expenses |
110,568 |
Total liabilities |
20,938,012 |
|
Net Assets |
$ 50,128,159 |
Composition of Net Assets |
|
Common stock (par value $0.001 per share) (Note 5) |
$ 13,392 |
Paid-in capital in excess of par |
70,786,208 |
Accumulated loss |
(20,671,441) |
Net Assets |
$ 50,128,159 |
Net asset value per share based on 13,392,080 shares issued and outstanding |
$ 3.74 |
See Notes to Financial Statements.
abrdn Global Income Fund, Inc. |
21 |
Statement of Operations
For the Year Ended October 31, 2023
Net Investment Income |
|
Investment Income: |
|
Interest and amortization of discount and premium (net of foreign withholding taxes of $21,600) |
$ 4,779,273 |
Total investment income |
4,779,273 |
Expenses: |
|
Investment management fee (Note 3) |
456,297 |
Directors' fees and expenses |
197,333 |
Bank loan fees and expenses |
100,702 |
Independent auditors’ fees and expenses |
93,111 |
Legal fees and expenses |
90,575 |
Administration fee (Note 3) |
87,749 |
Investor relations fees and expenses (Note 3) |
57,780 |
Reports to shareholders and proxy solicitation |
54,203 |
Insurance expense |
31,872 |
Custodian’s fees and expenses |
30,101 |
Transfer agent’s fees and expenses |
27,782 |
Miscellaneous |
35,562 |
Total operating expenses, excluding interest expense |
1,263,067 |
Interest expense (Note 7) |
1,115,533 |
Total operating expenses before reimbursed/waived expenses |
2,378,600 |
Less: Investor relations fee waiver (Note 3) |
(31,890) |
Net expenses |
2,346,710 |
|
Net Investment Income |
2,432,563 |
Net Realized/Unrealized Gain/(Loss) from Investments and Foreign Currency Related Transactions: |
|
Net realized gain/(loss) from: |
|
Investment transactions |
(2,543,996) |
Interest rate swaps |
3,621 |
Forward foreign currency exchange contracts |
(619,675) |
Foreign currency transactions |
(157,196) |
|
(3,317,246) |
Net change in unrealized appreciation/(depreciation) on: |
|
Investments (including change in deferred capital gains tax of $295) |
3,258,888 |
Interest rate swaps |
1,717,543 |
Forward foreign currency exchange contracts |
375,901 |
Foreign currency translation |
532,017 |
|
5,884,349 |
Net realized and unrealized gain from investments, interest rate swaps, forward foreign currency exchange contracts and foreign currencies |
2,567,103 |
Change in Net Assets Resulting from Operations |
$ 4,999,666 |
See Notes to Financial Statements.
22 |
abrdn Global Income Fund, Inc. |
Statements of Changes in Net Assets
|
For the Year Ended October 31, 2023 |
For the Year Ended October 31, 2022 |
Increase/(Decrease) in Net Assets: |
|
|
Operations: |
|
|
Net investment income |
$ 2,432,563 |
$ 2,459,102 |
Net realized loss from investments, interest rate swaps, forward foreign currency exchange contracts and foreign currency transactions |
(3,317,246) |
(4,489,942) |
Net change in unrealized appreciation/(depreciation) on investments, interest rate swaps, forward foreign currency exchange contracts and foreign currency translation |
5,884,349 |
(13,883,934) |
Net increase/(decrease) in net assets resulting from operations |
4,999,666 |
(15,914,774) |
Distributions to Shareholders From: |
|
|
Distributable earnings |
(2,494,822) |
(1,030,650) |
Return of capital |
(8,139,764) |
(7,146,830) |
Net decrease in net assets from distributions |
(10,634,586) |
(8,177,480) |
Proceeds from at-the-market offering resulting in the issuance of 2,362,324 and 2,114,574 shares of common stock, respectively (Note 5) |
12,016,192 |
12,183,264 |
Expenses in connection with the at-the-market stock offering (Note 5) |
(146,704) |
(99,522) |
Expenses in connection with the shelf offering (Note 5) |
(25,801) |
(17,907) |
Reinvestment of dividends resulting in the issuance of 26,982 and 25,019 shares of common stock, respectively |
141,353 |
138,357 |
Change in net assets from capital transactions |
11,985,040 |
12,204,192 |
Change in net assets |
6,350,120 |
(11,888,062) |
Net Assets: |
|
|
Beginning of year |
43,778,039 |
55,666,101 |
End of year |
$ 50,128,159 |
$43,778,039 |
See Notes to Financial Statements.
abrdn Global Income Fund, Inc. |
23 |
Statement of Cash Flows
For the Year Ended October 31, 2023
Cash flows from operating activities: |
|
Net increase/(decrease) in net assets resulting from operations |
$ 4,999,666 |
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: |
|
Investments purchased |
(33,803,312) |
Investments sold and principal repayments |
23,378,312 |
Decrease in short-term investments, excluding foreign government |
4,256,187 |
Net amortization/accretion of premium (discount) |
(303,352) |
Decrease in receivable for common shares sold |
11,600 |
Decrease in cash due to broker for forward foreign currency exchange contracts |
(40,000) |
Increase in interest, dividends and other receivables |
(336,993) |
Net change unrealized appreciation on forward foreign currency exchange contracts |
(375,901) |
Decrease in prepaid expenses |
78,683 |
Increase in interest payable on bank loan |
27,496 |
Increase in accrued investment management fees payable |
6,912 |
Increase in other accrued expenses |
50,848 |
Net change in unrealized appreciation of investments |
(3,258,888) |
Net change in unrealized appreciation on foreign currency translations |
(532,017) |
Net realized loss on investments transactions |
2,543,996 |
Net cash used in operating activities |
(3,296,763) |
Cash flows from financing activities: |
|
Increase in payable to custodian |
89,383 |
Borrowings on line of credit |
3,000,000 |
Distributions paid to shareholders |
(10,634,586) |
Proceeds from stock offering |
12,016,192 |
Proceeds from reinvestment of dividends |
141,353 |
Cash paid for swap contracts |
(25,948) |
Expenses in connection with the at-the-market and shelf offering |
(172,505) |
Net cash provided by financing activities |
4,413,889 |
Effect of exchange rate on cash |
(68,469) |
Net change in cash |
1,048,657 |
Unrestricted and restricted cash and foreign currency, beginning of year |
491,838 |
Unrestricted and restricted cash and foreign currency, end of year |
$ 1,540,495 |
Supplemental disclosure of cash flow information: |
|
Cash paid for interest and fees on borrowing |
$ 1,088,037 |
See Notes to Financial Statements.
24 |
abrdn Global Income Fund, Inc. |
Statement of Cash Flows (concluded)
For the Year Ended October 31, 2023
Reconciliation of unrestricted and restricted cash to the statements of assets and liabilities |
|
|
Year Ended October 31, 2023 |
Foreign currency, at value |
$ 479,634 |
Cash at broker for interest rate swaps |
860,861 |
Cash at broker for forward foreign currency contracts |
200,000 |
|
$1,540,495 |
See Notes to Financial Statements.
abrdn Global Income Fund, Inc. |
25 |
|
For the Fiscal Years Ended October 31, |
|
2023 |
2022 |
2021 |
2020 |
2019 |
PER SHARE OPERATING PERFORMANCE(a): |
|
|
|
|
|
Net asset value per common share, beginning of year |
$3.98 |
$6.28 |
$6.55 |
$7.83 |
$7.99 |
Net investment income |
0.19 |
0.25 |
0.31 |
0.32 |
0.35 |
Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions |
0.24 |
(1.92) |
0.22 |
(0.76) |
0.33 |
Total from investment operations applicable to common shareholders |
0.43 |
(1.67) |
0.53 |
(0.44) |
0.68 |
Distributions to common shareholders from: |
|
|
|
|
|
Net investment income |
(0.19) |
(0.10) |
(0.21) |
(0.17) |
(0.36) |
Return of capital |
(0.65) |
(0.74) |
(0.63) |
(0.67) |
(0.48) |
Total distributions |
(0.84) |
(0.84) |
(0.84) |
(0.84) |
(0.84) |
Capital Share Transactions: |
|
|
|
|
|
Impact of shelf offering |
0.17 |
0.21 |
0.04 |
– |
– |
Net asset value per common share, end of year |
$3.74 |
$3.98 |
$6.28 |
$6.55 |
$7.83 |
Market price, end of year |
$6.09 |
$4.50 |
$8.35 |
$6.80 |
$8.41 |
Total Investment Return Based on(b): |
|
|
|
|
|
Market price |
58.66% |
(37.38%) |
36.38% |
(8.35%) |
13.46% |
Net asset value |
10.17% |
(26.36%) |
6.49% |
(5.18%) |
8.68% |
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data: |
|
|
|
|
|
Net assets applicable to common shareholders, end of year (000 omitted) |
$50,128 |
$43,778 |
$55,666 |
$57,148 |
$68,335 |
Average net assets applicable to common shareholders (000 omitted) |
$51,781 |
$48,635 |
$58,918 |
$60,738 |
$69,229 |
Net operating expenses, net of fee waivers |
4.53% |
3.11% |
2.62% |
2.89% |
3.45% |
Net operating expenses, excluding fee waivers |
4.59% |
3.18% |
2.66% |
2.93% |
3.46% |
Net operating expenses, excluding interest expense, net of fee waivers |
2.38% |
2.25% |
2.19% |
2.11% |
2.04% |
Net Investment income |
4.70% |
5.06% |
4.57% |
4.63% |
4.47% |
Portfolio turnover |
35% |
39% |
44% |
75% |
59% |
Revolving credit facility outstanding (000 omitted) |
$20,350 |
$17,350 |
$21,900 |
$20,300 |
$29,300 |
Asset coverage ratio on revolving credit facility at year end |
346% |
352% |
354% |
382% |
333% |
Asset coverage per $1,000 on revolving credit facility at year end(c) |
$3,463 |
$3,523 |
$3,542 |
$3,815 |
$3,332 |
(a) |
Based on average shares outstanding. |
(b) |
Total investment return based on market value is calculated assuming that shares of the Fund’s common stock were purchased at the closing market price as of the beginning of the period, dividends, capital gains and other distributions were reinvested as provided for in the Fund’s dividend reinvestment plan and then sold at the closing market price per share on the last day of the period. The computation does not reflect any sales commission investors may incur in purchasing or selling shares of the Fund. The total investment return based on the net asset value is similarly computed except that the Fund’s net asset value is substituted for the closing market value. |
(c) |
Asset coverage ratio is calculated by dividing net assets plus the amount of any borrowings for investment purposes by the amount of any borrowings. |
Amounts listed as “–” are $0 or round to $0.
See Notes to Financial Statements.
26 |
abrdn Global Income Fund, Inc. |
Notes to Financial Statements
October 31, 2023
1. Organization
abrdn 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. 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 and/or regions contained in the FTSE World Government Bond Index, New Zealand, Luxembourg and the Hong Kong Special Administrative Region. As of October 31, 2023, securities of the following countries comprised the FTSE World Government Bond Index: Australia, Austria, Belgium, Canada, China, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New Zealand, Norway, Poland, Singapore, Spain, Sweden, United Kingdom and the United States. New Zealand was added to the FTSE World Government Bond Index in November 2022. "Investment Grade Developing Markets" are those countries and /or regions that are not Developed Markets, and whose sovereign debt is rated not less than Baa3 by Moody's Investor Services ("Moody's") or BBB- by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or comparably rated by another appropriate nationally or internationally recognized rating agency. As of October 31, 2023, "Investment Grade Developing Markets" are comprised of the following countries and/or regions: Andorra, Aruba, Bermuda, Botswana, Bulgaria, Cayman Islands, Chile, Colombia, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Estonia, Hungary, Iceland, India, Indonesia, Isle of Man, Jersey, Kazakhstan, Republic of Korea (South Korea), Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Macao, Malta, Mauritius, Montserrat, Panama, Peru, Philippines, Portugal, Qatar, Romania, Saudi Arabia, Slovakia, Slovenia, Switzerland, Taiwan, Thailand, Trinidad & Tobago, United Arab Emirates (U.A.E.), and Uruguay. “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. Fixed income securities of issuers in Sub-Investment Grade Developing Markets may be rated below investment grade, as described below, at the time of investment (sometimes referred to as “junk bonds”). Below investment grade securities are considered to be speculative with respect to the issuer’s ability to pay interest and principal when due. 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services-Investment Companies. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to generally accepted accounting principles ("GAAP") in the United States of America. 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.
a. Security Valuation:
The Fund values its securities at current market value or fair value, consistent with regulatory requirements. "Fair value" is defined in the Fund's Valuation and Liquidity Procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to transact at the measurement date. Pursuant to Rule 2a-5 under the Investment Company Act of 1940, as amended (the "1940 Act"), the Board designated abrdn Asia Limited (“abrdn Asia” or the “Investment Manager”) as the valuation designee ("Valuation Designee") for the Fund to perform the fair value determinations relating to Fund investments for which market quotations are not readily available or deemed unreliable.
In accordance with the authoritative guidance on fair value measurements and disclosures under U.S. GAAP, the Fund discloses the fair value of its investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1, the highest level, measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in
abrdn Global Income Fund, Inc. |
27 |
Notes to Financial Statements (continued)
October 31, 2023
active markets for similar assets, and Level 3, the lowest level, measurements to valuations based upon unobservable inputs that are significant to the valuation. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement.
Open-end mutual funds are valued at the respective net asset value ("NAV") as reported by such company. The prospectuses for the registered open-end management investment companies in which the Fund invests explain the circumstances under which those companies will use fair value pricing and the effects of using fair value pricing. Closed-end funds and exchange-traded funds (“ETFs”) are valued at the market price of the security at the Valuation Time (defined below). A security using any of these pricing methodologies is generally determined to be a Level 1 investment.
Long-term debt and other fixed-income securities are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service provider. If there are no current day bids, the security is valued at the previously applied bid. Pricing services generally price debt securities assuming orderly transactions of an institutional “round lot” size and the strategies employed by the Valuation Designee generally trade in round lot sizes. In certain circumstances, some trades may occur in smaller “odd lot” sizes which may be effected at lower, or higher, prices than institutional round lot trades. Short-term debt securities (such as commercial paper and U.S. treasury bills) having a remaining maturity of 60 days or less are valued at 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, which has elected to qualify as a “government money market fund” pursuant to Rule 2a-7 under the 1940 Act, and has an objective, which is not guaranteed, to maintain a $1.00 per share NAV. Generally, these investment types are categorized as Level 1 investments.
Derivatives are valued at fair value. Exchange traded derivatives are generally Level 1 investments and over-the-counter and centrally cleared derivatives are generally Level 2 investments. Forward foreign currency contracts are generally valued based on the bid price of the forward rates and the current spot rate. Forward exchange rate quotations are available for scheduled settlement dates, such as 1-, 3-, 6-, 9- and 12-month periods. An interpolated valuation is derived based on the actual settlement dates of the forward contracts held. Futures contracts are valued at the settlement price or at the last bid price if no settlement price is available. Interest rate swaps agreements are generally valued by an approved pricing agent based on the terms of the swap agreement (including future cash flows).
In the event that a security’s market quotations are not readily available or are deemed unreliable (for reasons other than because the foreign exchange on which it trades closes before the Valuation Time), the security is valued at fair value as determined by the Valuation Designee, taking into account the relevant factors and surrounding circumstances using valuation policies and procedures approved by the Board. Under normal circumstances the Valuation Time is as of the close of regular trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern Time). A security that has been fair valued by the Manager 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 (unadjusted) in active markets for identical investments;
Level 2 - other significant observable inputs (including valuation factors, quoted prices for similar securities, interest rates, prepayment speeds, and credit risk, etc.); or
Level 3 - significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
28 |
abrdn Global Income Fund, Inc. |
Notes to Financial Statements (continued)
October 31, 2023
A summary of standard inputs is listed below:
Security Type |
Standard Inputs |
Debt and other fixed-income securities |
Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, credit quality, yield, and maturity. |
Forward foreign currency contracts |
Forward exchange rate quotations. |
Swap agreements |
Market information pertaining to the underlying reference assets, i.e., credit spreads, credit event probabilities, fair values, forward rates, and volatility measures. |
The following is a summary of the inputs used as of October 31, 2023 in valuing the Fund's investments and other financial instruments at fair value. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Please refer to the Portfolio of Investments for a detailed breakout of the security types:
Investments, at Value |
Level 1 – Quoted Prices |
Level 2 – Other Significant Observable Inputs |
Level 3 – Significant Unobservable Inputs |
Total |
Assets |
|
|
Investments in Securities |
|
|
|
Corporate Bonds |
$ – |
$ 45,665,312 |
$– |
$ 45,665,312 |
Government Bonds |
– |
21,845,359 |
– |
21,845,359 |
Warrants |
– |
– |
– |
– |
Short-Term Investment |
413,338 |
– |
– |
413,338 |
Total Investments |
$413,338 |
$ 67,510,671 |
$– |
$ 67,924,009 |
Other Financial Instruments |
|
|
|
Centrally Cleared Interest Rate Swap Agreements |
$ – |
$ 1,717,543 |
$– |
$ 1,717,543 |
Foreign Currency Exchange Contracts |
– |
16,934 |
– |
16,934 |
Total Other Financial Instruments |
– |
1,734,477 |
– |
1,734,477 |
Total Investment Assets |
$413,338 |
$69,245,148 |
$– |
$69,658,486 |
Liabilities |
|
|
Other Financial Instruments |
|
|
|
Foreign Currency Exchange Contracts |
$ – |
$ (254,577) |
$– |
$ (254,577) |
Total Investment Liabilities |
$ – |
$ (254,577) |
$– |
$ (254,577) |
Amounts listed as “–” are $0 or round to $0.
During the fiscal year ended October 31, 2023, there have been no transfers between levels and no significant changes to the fair valuation methodologies. Level 3 investments held during and at the end of the fiscal year in relation to net assets were not significant (0.0% of total net assets) and accordingly, a reconciliation of Level 3 assets for the fiscal year ended October 31, 2023 is not presented. The valuation technique used at October 31, 2023 was fair valuation at zero pursuant to procedures approved by the Board.
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.
Foreign currency amounts are translated into U.S. Dollars on the following basis:
(i) market value of investment securities, other assets and liabilities – at the current daily rates of exchange at the Valuation Time; and
abrdn Global Income Fund, Inc. |
29 |
Notes to Financial Statements (continued)
October 31, 2023
(ii) purchases and sales of investment securities, income and expenses – at the relevant rates of exchange prevailing on the respective dates of such transactions.
The Fund isolates that portion of the results of operations arising from changes in the foreign exchange rates due to the fluctuations in the market prices of the securities held at the end of the reporting period. Similarly, the Fund isolates the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of portfolio securities sold during the reporting period.
Net realized foreign exchange gains or losses represent foreign exchange gains and losses from transactions in foreign currencies and forward foreign currency contracts, exchange gains or losses realized between the trade date and settlement date on security transactions, and the difference between the amounts of interest and dividends recorded on the Fund’s books and the U.S. Dollar equivalent of the amounts actually received.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. Dollar. Generally, when the U.S. Dollar rises in value against foreign currency, the Fund's investments denominated in that foreign currency will lose value because the foreign currency is worth fewer U.S. Dollars; the opposite effect occurs if the U.S. Dollar falls in relative value.
d. Rights Issues and Warrants:
Rights issues give the right, normally to existing shareholders, to buy a proportional number of additional securities at a given price (generally at a discount) within a fixed period (generally a short-term period) and are offered at the company's discretion. Warrants are securities that give the holder the right to buy common stock at a specified price for a specified period of time. Rights issues and warrants are speculative and have no value if they are not exercised before the expiration date. Rights issues and warrants are valued at the last sale price on the exchange on which they are traded.
e. Derivative Financial Instruments:
The Fund is authorized to use derivatives to manage currency risk, credit risk, and interest rate risk and to replicate, or use 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 a particular benchmark or index. The use of forward contracts allows for the separation of investment decision-making between foreign exchange holdings 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, 2023, the Fund used forward contracts to hedge its currency exposure.
While the Fund may enter into forward contracts to seek to reduce currency exchange rate risks, transactions in such contracts involve certain risks. The Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in exchange rates. Thus, while the Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for the Fund than if it had not engaged in any such transactions. Moreover, there may be an 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 the counterparties to such contracts may default on their obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearing house, a default on the contract would deprive the Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force the Fund to cover its purchase or sale commitments, if any, at the market price at the time of the default.
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
30 |
abrdn Global Income Fund, Inc. |
Notes to Financial Statements (continued)
October 31, 2023
credit event with respect to an underlying reference obligation (in the case of a credit default swap) for a specified amount of an underlying asset or notional principal amount. The Fund will enter into swaps only on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the amount of the difference between the two payments. Except for currency swaps and credit default swaps, the notional principal amount is used solely to calculate the payment streams but is not exchanged. With respect to currency swaps, actual principal amounts of currencies may be exchanged by the counterparties at the initiation, and again upon the termination of the transaction.
Traditionally, swaps were customized, privately negotiated agreements executed between two parties (“OTC Swaps”) but since 2013, certain swaps are required to be cleared pursuant to rules and regulations related to the Dodd – Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”) and/or Regulation (EU) No 648/2012 on OTC Derivatives, Central Counterparties and Trade Repositories (“EMIR”) (“Cleared Swaps”). Like OTC Swaps, Cleared Swaps are negotiated bilaterally. Unlike OTC Swaps, the act of clearing results in two swaps executed between each of the parties and a central counterparty (“CCP”), and thus the counterparty credit exposure of the parties is to the CCP rather than to one another. Upon entering into a Cleared Swap, the Fund is required to pledge an amount of cash and/or other assets equal to a certain percentage of the contract amount. This payment is known as “initial margin”. Subsequent payments, known as “variation margin,” are calculated each day, depending on the daily fluctuations in the fair value/market value of the underlying assets. An unrealized gain/(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. The margin requirements associated with OTC Swaps and Cleared Swaps may not be the same.
Entering into swap agreements involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform and that there may be unfavorable changes in the value of the index or securities underlying the agreement. The Fund's maximum risk of loss from counterparty risk related to swaps is the fair value of the contract. This risk is mitigated by the posting of collateral by the counterparties to the Fund to cover the Fund's exposure to the counterparty.
Interest Rate Swaps
The Fund may use interest rate swap contracts to manage its exposure to interest rates. Interest rate swap contracts typically represent the exchange between the Fund and a counterparty of respective commitments to make variable rate and fixed rate payments with respect to a notional amount of principal. Interest rate swap contracts may have a term that is greater than one year, but typically require periodic interim settlement in cash, at which time the specified value of the variable interest rate is reset for the next settlement period. Net payments of interest are recorded as realized gains or losses. During the period that the swap contract is open, the contract is marked-to-market as the net amount due to or from the Fund and changes in the value of swap contracts are recorded as unrealized gains or losses.
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, 2023:
|
Risk Exposure Category |
|
Interest Rate Contracts |
Foreign Currency Contracts |
Credit Contracts |
Equity Contracts |
Commodity Contracts |
Other |
Total |
|
Assets: |
Unrealized appreciation on: |
Forward Foreign Currency Exchange Contracts |
$ – |
$ 16,934 |
$– |
$– |
$– |
$– |
$ 16,934 |
Swap Contracts |
1,717,543 |
– |
– |
– |
– |
– |
1,717,543 |
Total |
$1,717,543 |
$ 16,934 |
$– |
$– |
$– |
$– |
$1,734,477 |
abrdn Global Income Fund, Inc. |
31 |
Notes to Financial Statements (continued)
October 31, 2023
|
Risk Exposure Category |
|
Interest Rate Contracts |
Foreign Currency Contracts |
Credit Contracts |
Equity Contracts |
Commodity Contracts |
Other |
Total |
Liabilities: |
Unrealized depreciation on: |
Forward Foreign Currency Exchange Contracts |
$ – |
$ 254,577 |
$– |
$– |
$– |
$– |
$ 254,577 |
Total |
$ – |
$254,577 |
$– |
$– |
$– |
$– |
$ 254,577 |
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, 2023 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 the Statement of Assets and Liabilities |
|
Gross Amounts Not Offset in the Statement of Assets and Liabilities |
|
Gross Amounts of Assets Presented in Statement of Assets and Liabilities |
Financial Instruments |
Collateral Received |
Net Amount |
Gross Amounts of Liabilities Presented in Statement of Assets and Liabilities |
Financial Instruments |
Collateral Pledged |
Net Amount |
Description |
Assets |
Liabilities |
Foreign Currency Exchange Contracts |
Citibank N.A. |
$– |
$– |
$– |
$– |
$155,811 |
$– |
$(130,000) |
$25,811 |
Deutsche Bank AG |
4,406 |
– |
– |
4,406 |
– |
– |
– |
– |
Morgan Stanley & Co. |
12,528 |
(4,945) |
– |
7,583 |
4,945 |
(4,945) |
– |
– |
Royal Bank of Canada |
– |
– |
– |
– |
27,032 |
– |
– |
27,032 |
UBS AG |
– |
– |
– |
– |
66,789 |
– |
(66,789) |
– |
Amounts listed as “–” are $0 or round to $0.
The effect of derivative instruments on the Statement of Operations for the fiscal year ended October 31, 2023:
|
Risk Exposure Category |
|
Interest Rate Contracts |
Foreign Currency Contracts |
Credit Contracts |
Equity Contracts |
Commodity Contracts |
Total |
|
Realized Gain/(Loss) on Derivatives Recognized as a Result of Operations: |
Net realized gain/(loss) on: |
Forward Currency Contracts |
$ – |
$ (619,675) |
$– |
$– |
$– |
$ (619,675) |
Swap Contracts |
3,621 |
– |
– |
– |
– |
3,621 |
Total |
$ 3,621 |
$(619,675) |
$– |
$– |
$– |
$ (616,054) |
32 |
abrdn Global Income Fund, Inc. |
Notes to Financial Statements (continued)
October 31, 2023
|
Risk Exposure Category |
|
Interest Rate Contracts |
Foreign Currency Contracts |
Credit Contracts |
Equity Contracts |
Commodity Contracts |
Total |
Net Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized as a Result of Operations: |
Net change in unrealized appreciation/(depreciation) of: |
Forward Currency Contracts |
$ – |
$ 375,901 |
$– |
$– |
$– |
$ 375,901 |
Swap Contracts |
1,717,543 |
– |
– |
– |
– |
1,717,543 |
Total |
$1,717,543 |
$ 375,901 |
$– |
$– |
$– |
$2,093,444 |
Amounts listed as “–” are $0 or round to $0.
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, 2023. The table below summarizes the weighted average values of derivatives holdings for the Fund during the fiscal year ended October 31, 2023.
Derivative |
Average Notional Value |
Swap Contracts at Notional Amount |
$18,850,000 |
Foreign Currency Contracts Purchased |
$ 13,288,711 |
Foreign Currency Contracts Sold |
$ 8,118,543 |
f. Bank Loans:
The Fund may invest in bank loans. Bank loans include floating and fixed-rate debt obligations. Floating rate loans are debt obligations issued by companies or other entities with floating interest rates that reset periodically. Bank loans may include, but are not limited to, term loans, delayed funding loans, bridge loans and revolving credit facilities. Loan interest will primarily take the form of assignments purchased in the primary or secondary market but may include participations. Floating rate loans are secured by specific collateral of the borrower and are senior to most other securities of the borrower (e.g., common stock or debt instruments) in the event of bankruptcy. Floating rate loans are often issued in connection with recapitalizations, acquisitions, leveraged buyouts, and refinancings. Floating rate loans are typically structured and administered by a financial institution that acts as the agent of the lenders participating in the floating rate loan. Floating rate loans may be acquired directly through the agent, as an assignment from another lender who holds a direct interest in the floating rate loan, or as a participation interest in another lender’s portion of the floating rate loan.
The Fund may also enter into, or acquire 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.
See “Bank Loan Risk” under “Portfolio Investment Risks” for information regarding the risks associated with an investment in bank loans.
g. Security Transactions, Investment Income and Expenses:
Security transactions are recorded on the trade date. Realized and unrealized gains/(losses) from security and foreign currency transactions are calculated on the identified cost basis. Interest income and expenses are recorded on an accrual basis. Discounts and premiums on securities purchased are accreted or amortized on an effective yield basis over the estimated lives of the respective securities.
h. Distributions:
The Fund has a managed distribution policy to pay distributions from net investment income supplemented by net realized foreign exchange gains, net realized short-term capital gains, net realized long-term capital gains and return of capital distributions, if necessary, on a monthly basis. The managed distribution policy is subject to regular review by the Board. The Fund will also declare and pay distributions at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any. Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations, which may differ from GAAP.
abrdn Global Income Fund, Inc. |
33 |
Notes to Financial Statements (continued)
October 31, 2023
i. Federal Income Taxes:
The Fund intends to continue to qualify as a “regulated investment company” by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code"), 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.
The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the most recent four fiscal years up to the most recent fiscal year ended October 31, 2023 are subject to such review.
j. 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, if any, is reported on the Statement of Assets and Liabilities.
k. Cash Flow Information:
The Fund invests in securities and distributes dividends from net investment income and net realized gains on investment and currency transactions which are paid in cash or are reinvested at the discretion of shareholders. These activities are reported in the Statements of Changes in Net Assets and additional information on cash receipts and cash payments is presented in the Statement of Cash Flows. Cash includes domestic and foreign currency as well as cash in segregated accounts for financial futures, swaps, and forward contracts which has been designated as collateral.
l. Payment-In-Kind:
The Fund may invest in the open market or receive pursuant to debt restructuring, securities that pay-in-kind ("PIK") the interest due on such debt instruments. The PIK interest, computed at the contractual
rate specified, is added to the existing principal balance of the debt when issued bonds have same terms as the bond or recorded as a separate bond when terms are different from the existing debt, and is recorded as interest income.
3. Agreements and Transactions with Affiliates
Investment Manager, Investment Sub-Adviser and Fund Administrator:
abrdn Asia Limited serves as the Investment Manager to the Fund, pursuant to a management agreement (the “Management Agreement”). abrdn Investments Limited (the "Sub-Adviser") serves as the sub-adviser, pursuant to a sub-advisory agreement. The Investment Manager and the Sub-Adviser (collectively, the “Advisers”) are wholly-owned indirect subsidiaries of abrdn plc. In rendering advisory services, the Advisers may use the resources of investment advisor subsidiaries of abrdn plc. These affiliates have entered into procedures pursuant to which investment professionals from affiliates may render portfolio management and research services as associated persons of the Advisers.
The Investment Manager manages the Fund’s investments and makes investment decisions on behalf of the Fund, including the selection of and the placement of orders with, brokers and dealers to execute portfolio transactions on behalf of the Fund. The Sub-Adviser manages the portion of the Fund’s assets that the Investment Manager allocates to it. The Sub-Adviser is paid by the Investment Manager, not the Fund.
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, 2023, the Fund paid the Investment Manager $456,297.
abrdn, Inc., an affiliate of the Advisers, is the Fund’s administrator, pursuant to an agreement under which abrdn, Inc. 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, 2023, abrdn, Inc. earned $87,749 from the Fund for administration services.
Investor Relations:
Under the terms of the Investor Relations Services Agreement, abrdn, Inc. provides and/or engages third parties to provide investor relations services to the Fund and certain other funds advised by abrdn Asia or
34 |
abrdn Global Income Fund, Inc. |
Notes to Financial Statements (continued)
October 31, 2023
its affiliates as part of an Investor Relations Program. Under the Investor Relations Services Agreement, the Fund owes a portion of the fees related to the Investor Relations Program (the “Fund’s Portion”). However, Investor Relations Services fees are limited by abrdn, Inc. 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 abrdn, Inc.
During the fiscal year ended October 31, 2023, the Fund incurred investor relations fees of approximately $57,780. For the fiscal year ended October 31, 2023, abrdn, Inc. bore $31,890 of the investor relations cost allocated to the Fund because the investor relations fees were above 0.05% of the Fund’s average weekly net assets on an annual basis.
4. Investment Transactions
Purchases and sales of investment securities (excluding short-term securities) for the fiscal year ended October 31, 2023, were $32,414,992 and $22,065,598, respectively.
5. Capital
The authorized capital of the Fund is 300 million shares of $0.001 par value per share of common stock. During the fiscal year ended October 31, 2023, the Fund reinvested 26,982 shares pursuant to its Dividend Reinvestment and Cash Purchase Plan. As of October 31, 2023, there were 13,392,080 shares of common stock issued and outstanding.
On September 23, 2021, the Fund entered into an underwriting sales agreement with Jones Trading Institutional Services LLC (“Jones”), pursuant to which the Fund may offer and sell up to $35,000,000 of common shares of beneficial interest, par value $0.001 per share (“Common Shares”), from time to time, through Jones as its agent, in transactions deemed to be “at the market” as defined in Rule 415 under the 1933 Act (the “ATM Offering”). During the fiscal year ended October 31, 2023, 2,362,324 shares of common stock were sold under this agreement for $12,016,192 (net of commissions to Jones of $121,378).
Offering costs associated with Fund’s shelf registration statement initially effective with the SEC on July 2021 are approximately $88,543 of which $44,959 were charged to paid-in-capital upon the issuance of associated shares. The Fund’s ATM Offering, through Jones, was made under this shelf registration statement and the associated offering costs are approximately $344,090 of which $249,598 were charged to paid-in-capital upon the issuance of associated shares and $94,492 remains in prepaid expenses..
Additional shares of the Fund may be issued under certain circumstances, including pursuant to the Fund’s Dividend
Reinvestment and Optional Cash Purchase Plan. Additional information concerning the Automatic Dividend Reinvestment Plan is included within this report.
6. Open Market Repurchase Policy
The Board approved an open market repurchase and discount management policy (the “Program”). The Program allows the Fund to purchase, in the open market, its outstanding common shares, with the amount and timing of any repurchase determined at the discretion of the Investment Manager. Such purchases may be made opportunistically at certain discounts to NAV per share in the reasonable judgment of management based on historical discount levels and current market conditions.
On a quarterly basis, the Board will receive information on any transactions made pursuant to this policy during the prior quarter and if shares are repurchased management will post the number of shares repurchased on the Fund’s website on a monthly basis. Under the terms of the Program, the Fund is permitted to repurchase up to 10% of its outstanding shares of common stock in the open market during any 12 month period.
For the fiscal year ended October 31, 2023, the Fund did not repurchase any shares through this Program.
7. Credit Facility
The Fund may use leverage to the maximum extent permitted by the 1940 Act, which permits leverage to exceed 33 1/3% of the Fund’s total assets (including the amount obtained through leverage) in certain market conditions.
The Fund’s Revolving Credit loan Facility with The Bank of Nova Scotia was renewed for a 3-year term on February 28, 2020 and was last amended on September 21, 2021. On February 28, 2023, the Fund’s Revolving Credit Facility with the Bank of Nova Scotia was amended to extend the scheduled commitment termination date to February 27, 2024 with a committed facility amount of $25,000,000. As of October 31, 2023, the balance of the loan outstanding was $20,350,000. For the fiscal year ended October 31, 2023 the average interest rate on the loan facility was 5.94% and the average balance was $18,426,713. 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
abrdn Global Income Fund, Inc. |
35 |
Notes to Financial Statements (continued)
October 31, 2023
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. A liquidation of the Fund’s collateral assets in an event of default, or a voluntary paydown of the loan facility in order to avoid an event of default, would typically involve administrative expenses and could involve penalties. Additionally, such liquidations often involve selling off portions of the Fund’s assets at inopportune times which can result in losses when markets are unfavorable. 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, 2023, the Fund incurred fees of approximately $100,702.
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 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 net assets of no less than $25,000,000. Furthermore, non-compliance with such covenants or the occurrence of other events could lead to the cancelation of the loan facility.
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. In addition, bank loans may settle on a delayed basis, resulting in the proceeds from the sale of such loans not being readily available to make additional investments or distributions. To the extent the extended settlement process gives rise to short-term liquidity needs, the Fund may hold additional cash, sell investments or temporarily borrow from banks or other lenders.
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. Economic, financial or political events, trading and tariff arrangements, war, terrorism, natural disasters, public health issues like pandemics or epidemics, and other circumstances in one country or region could have profound impacts on global economies or markets.
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 market 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). Additional risks associated with investing in emerging markets include, among other things, smaller market capitalizations, less government regulation, less extensive and less frequent accounting, financial and other reporting requirements, loss resulting from problems in share registration and custody, and the nationalization of foreign deposits or assets.
d. Focus Risk:
The Fund may have elements of risk not typically associated with investments in the United States due to focused investments in a limited number of countries or regions subject to foreign securities or currency risks. 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
36 |
abrdn Global Income Fund, Inc. |
Notes to Financial Statements (continued)
October 31, 2023
governmental laws or currency exchange restrictions could cause the securities and their markets to be less liquid and their prices to be more volatile than those of comparable U.S. securities.
e. 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.
f. 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 a changing interest rate environment and the effect of potential government monetary and fiscal policy initiatives and resulting market reaction to those initiatives.
Changes in interest rates or a lack of market participants may lead to decreased liquidity and increased volatility in the fixed-income or debt markets, making it more difficult for the Fund to sell its holdings.
g. Risk 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. Foreign securities may also be harder to price than U.S. securities.
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.
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.
h. Russia/Ukraine Risk:
In February 2022, Russia commenced a military attack on Ukraine. The outbreak of hostilities between the two countries and the threat of wider spread hostilities could have a severe adverse effect on the region and global economies, including significant negative impacts on the markets for certain securities and commodities, such as oil and natural gas. In addition, sanctions imposed on Russia by the United States and other countries, and any sanctions imposed in the future, could have a significant adverse impact on the Russian economy and related markets. The price and liquidity of investments may fluctuate widely as a result of the conflict and related events. This armed conflict is still ongoing as of the date of this report. How long the armed conflict and related events will last cannot be predicted. These tensions and any related events could have a significant impact on Fund performance and the value of the Fund's investments.
9. Contingencies
In the normal course of business, the Fund may provide general indemnifications pursuant to certain contracts and organizational documents. The Fund's maximum exposure under these arrangements is dependent on future claims that may be made against the Fund, and therefore, cannot be estimated; however, the Fund expects the risk of loss from such claims to be remote.
abrdn Global Income Fund, Inc. |
37 |
Notes to Financial Statements (concluded)
October 31, 2023
10. Tax Information
The U.S. federal income tax basis of the Fund's investments (including derivatives, if applicable) and the net unrealized depreciation as of October 31, 2023, were as follows:
Tax Cost of Securities |
Unrealized Appreciation |
Unrealized Depreciation |
Net Unrealized Appreciation/ (Depreciation) |
$77,136,941 |
$4,160,592 |
$(13,373,524) |
$(9,212,932) |
The tax character of distributions paid during the fiscal years ended October 31, 2023 and October 31, 2022 was as follows:
|
October 31, 2023 |
October 31, 2022 |
Distributions paid from: |
|
|
Ordinary Income |
$ 2,494,822 |
$1,030,650 |
Return of Capital |
8,139,764 |
7,146,830 |
Total tax character of distributions |
$10,634,586 |
$8,177,480 |
As of October 31, 2023, the components of accumulated earnings on a tax basis were as follows:
Undistributed Ordinary Income |
$ - |
Undistributed Long-Term Capital Gains |
- |
Total undistributed earnings |
$ - |
Capital loss carryforward |
$ (11,083,285)* |
Other currency gains |
- |
Other Temporary Differences |
(272,158) |
Unrealized Appreciation/(Depreciation) |
(9,315,998)** |
Total accumulated earnings/(losses) – net |
$(20,671,441) |
Amounts listed as “–” are $0 or round to $0.
* |
On October 31, 2023, the Fund had a net capital loss carryforward of $(11,083,285) which will be available to offset like amounts of any future taxable gains. The Fund is permitted to carry forward capital losses for an unlimited period and capital losses that are carried forward will retain their character as either short-term or long-term capital losses. The breakdown of capital loss carryforwards are as follows: |
Amounts |
Expires |
$ 587,885 |
Unlimited (Short—Term) |
10,495,400 |
Unlimited (Long—Term) |
**The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable to the difference between book and tax amortization methods for premiums and discounts on fixed income securities, the tax deferral of wash sales and the realization for tax purposes of unrealized gains/(losses) on certain foreign currency contracts.
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 and/or adjustments were required to the financial statements as of October 31, 2023, other than as noted below.
On November 9, 2023 and December 11, 2023, the Fund announced that it will pay on November 30, 2023 and January 10, 2024, respectively, a distribution of U.S. $0.07 per share to all shareholders of record as of November 22, 2023 and December 29, 2023, respectively.
38 |
abrdn Global Income Fund, Inc. |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
abrdn Global Income Fund, Inc.:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of abrdn Global Income Fund, Inc. (the Fund), including the portfolio of investments, as of October 31, 2023, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2023, by correspondence with custodians and brokers; when replies were not received from brokers, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
![tm2327714d15stylizedsemii004.jpg](https://www.sec.gov/Archives/edgar/data/876717/000110465924002209/tm2327714d15stylizedsemii004.jpg)
We have served as the auditor of one or more abrdn investment companies since 2009.
Philadelphia, Pennsylvania
December 28, 2023
abrdn Global Income Fund, Inc. | 39 |
Federal Tax Information: Dividends and Distributions (Unaudited)
Certain information for the Fund is required to be provided to shareholders based on the Fund’s income and distributions for the taxable year ended December 31, 2023. In February 2024, shareholders will receive Form 1099-DIV. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual tax returns.
40 | abrdn Global Income Fund, Inc. |
Supplemental Information (Unaudited)
Results of Annual Meeting of Shareholders
The Annual Meeting of Shareholders was held on May 25, 2023. The description of the proposal and number of shares voted at the meeting are as follows:
To elect two Class I Directors to the Board of Directors:
| Votes For | Votes Withheld | Votes Abstained |
P. Gerald Malone | 7,692,327 | 202,639 | 154,442 |
Moritz Sell | 7,687,033 | 207,839 | 154,536 |
To approve the continuation of the term for one Director under the Corporate Governance Policies:
| Votes For | Votes Against/ Withheld | Votes Abstained |
William J. Potter | 7,684,894 | 211,437 | 153,077 |
Board of Directors’ Consideration of Management and Sub-Advisory Agreements
At a regularly scheduled quarterly meeting (the “Quarterly Meeting”) of the Board of Directors (the “Board” or “Directors”) of abrdn Global Income Fund, Inc. (“FCO” or the “Fund”) held on June 13, 2023, 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 abrdn Asia Limited (the “Investment Manager”) and the investment sub-advisory agreement among the Fund, the Investment Manager and abrdn Investments Limited (the “Sub-Adviser”). In addition, the Independent Directors of the Fund held a separate telephonic meeting on June 7, 2023 and a separate in-person meeting on June 12, 2023 (together with the in-person Quarterly Meeting held on June 13, 2023, the “Meetings”) to review the materials provided and the relevant legal considerations. The Investment Manager and the Sub-Adviser are referred to collectively herein as the “Advisers” or “abrdn” and the aforementioned agreements with the Advisers are referred to as the “Advisory Agreements.” The Sub-Adviser is an affiliate of the Investment Manager.
In connection with their consideration of whether to approve the continuation of the Fund’s Advisory Agreements, the Board members received and reviewed a variety of information provided by the Advisers relating to the Fund, the Advisory Agreements and the Advisers, including information regarding the nature, extent and quality of services provided by the Advisers under the respective Advisory Agreements, comparative investment performance, fee and expense information of a peer group of funds (the “Peer Group”) selected by Institutional Shareholder Services Inc. (“ISS”), an independent third-party provider of investment company data and other performance information for relevant benchmark indices. The materials provided to the Board generally included, among other items: (i) information on the Fund’s advisory fees and other expenses, including information comparing the Fund’s expenses to those of the Peer Group and information about any applicable expense limitations and fee breakpoints; (ii) information about the profitability of the management agreement to the Investment Manager; (iii) information on the investment performance of the Fund and the performance of the Peer Group and the Fund’s performance benchmark; (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’ investment personnel and operations; (ii) the Advisers’ financial condition and stability; (iii) the resources devoted by the Advisers to the Fund; (iv) the Fund’s investment objective and strategy; (v) the Advisers’ record of compliance with the Fund’s investment policies and restrictions, policies on personal securities transactions and other compliance policies; (vi) possible conflicts of interests; and (vii) 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. Throughout the process, the Board had the opportunity to ask questions of and request additional information from the Advisers.
The Board also noted that 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 and reviewed materials in advance of each regular quarterly meeting of the Board that contained information about the Fund’s investment performance and information relating to the services provided by the Advisers.
The Independent Directors were advised by separate independent legal counsel throughout the process and consulted in executive sessions with their independent legal counsel regarding their consideration of the renewal of the Advisory Agreements. In considering whether to approve the
abrdn Global Income Fund, Inc. | 41 |
Supplemental Information (Unaudited) (continued)
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.
Fees and expenses. The Board reviewed with the Advisers the effective annual fee rate paid by the Fund to the Advisers for investment management services. The Board also received and considered information compiled at the request of the Fund by ISS that compared the Fund’s effective annual management fee rate with the fees paid by the Peer Group. The Board 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 information from the Advisers about the fees charged by the Advisers to other clients investing primarily in an asset class similar to that of the Fund. The Board reviewed and considered additional information about the Advisers’ fees. The Board considered that the compensation paid to the Sub-Adviser was paid by the Investment Manager, accordingly that the retention of the Sub-Adviser did not increase the fees or expenses otherwise incurred by the Fund’s shareholders. 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.
Investment performance of the Fund and the Advisers. The Board received and reviewed with management, among other performance data, information that compared the Fund’s return to comparable investment companies focused on non-U.S. regions. The Board also received and considered performance information compiled by ISS, as compared with the funds in the Fund’s Morningstar category (the “Morningstar Group”).
In addition, the Board received and reviewed information regarding the Fund’s total return on a gross and net basis and relative to the Fund’s benchmark, the impact of foreign currency movements on the Fund’s performance and the Fund’s share performance and premium/discount information. The Board also received and reviewed information on the Fund’s total return as compared with the total returns of its Morningstar Group average. The Board took into account information about the Fund’s discount/premium ranking relative to its Peer Group and considered management’s discussion of the Fund’s performance. Additionally, the Directors 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 considered the Advisers’ performance generally, the historical responsiveness of the Advisers to Director concerns about performance, and the willingness of the Advisers to take steps intended to improve performance.
The nature, extent and quality of the services provided to the Fund under the Advisory Agreements. The Board considered, among other things, the nature, extent and quality of the services provided by the Advisers to the Fund and the resources dedicated to the Fund by the Advisers. The Directors took into account the Advisers’ investment experience and considered the allocation of responsibilities between the Advisers. The Board also considered the Advisers’ risk management processes. The Board 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 information regarding the Advisers’ compliance with applicable laws and Securities and Exchange Commission and other regulatory inquiries or audits of the Fund and the Advisers. The Board considered that they received information on a regular basis from the Fund’s Chief Compliance Officer regarding the Advisers’ compliance policies and procedures and considered the Advisers’ brokerage policies and practices. Management reported to the Board on, among other things, its business plans and organizational structures. The Directors 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 the nature, extent and quality of the services provided supported the renewal of the Advisory Agreements.
Economies of Scale. The Board considered management’s discussion of the Fund’s management fee structure and determined that the management fee structure was reasonable. The Board based this determination on various factors, including how the Fund’s management fee compared to its Peer Group at higher asset levels and that the Fund’s management fee schedule provides breakpoints at higher asset levels, as applicable.
The Directors also considered other factors, which included but were not limited to the following:
• | the nature, quality, cost and extent of administrative services and investor relations services provided by abrdn Inc., an affiliate of the Investment Manager, under separate agreements covering administrative services and investor relations services. |
• | whether the Fund has operated in accordance with its investment objective and the Fund’s record of compliance with its investment restrictions, and the compliance programs of the Advisers. The Directors also considered the compliance-related resources the Advisers and their affiliates were providing to the Fund. |
42 | abrdn Global Income Fund, Inc. |
Supplemental Information (Unaudited) (concluded)
• | the effect of any market and economic volatility on the performance, asset levels and expense ratios of the Fund. |
• | so-called “fallout benefits” to the Advisers and their affiliates, including 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 and the Independent Directors, voting separately, approved the Fund’s Advisory Agreements for an additional one-year period.
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Additional Information Regarding the Fund (Unaudited)
RECENT CHANGES
The following information is a summary of certain changes during the fiscal year ended October 31, 2023. This information may not reflect all of the changes that have occurred since you purchased the Fund.
During the applicable period, there have been: (i) no material changes to the Fund’s investment objectives and policies that constitute its principal portfolio emphasis that have not been approved by shareholders, (ii) no material changes to the Fund’s principal risks, (iii) no changes to the persons primarily responsible for day-to-day management of the Fund; and (iv) no changes to the Fund’s charter or by-laws that would delay or prevent a change of control that have not been approved by shareholders.
INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES
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 objective. There is no assurance that the Fund will achieve its investment objectives. The Fund's investment objectives may not be changed without the approval of the holders of a majority of the outstanding voting securities.
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. If the Fund
changes its 80% policy, it will notify shareholders at least 60 days before the change and the name of the Fund may need to be changed.
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 (as defined below), 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 (as defined below), whether or not denominated in the currency of such country. Fixed income securities of issuers in Sub-Investment Grade Developing Markets may be rated below investment grade, as described below, at the time of investment (sometimes referred to as "junk bonds"). Below investment grade securities are considered to be speculative with respect to the issuer's ability to pay interest and principal when due.
The following will be deemed to be "issuers in" a particular market:
• |
governmental entities of the particular country; |
• |
banks, companies and other entities which are located in the particular country; |
• |
banks, companies and other entities which are organized under the laws of the particular country; |
• |
banks, companies and other entities for which the principal securities trading market is in the particular country; |
• |
entities which, although not located in the particular country, derive at least 50% of their revenues from that country or have at least 50% of their assets located in that country; and |
• |
wholly-owned subsidiaries of an entity whose principal place of business is located in the particular country, provided that the debt securities are guaranteed by a parent entity whose principal place of business is located in the particular country. |
The Fund may also consider, among other criteria, the currency that securities are denominated in, or linked to, in determining whether the issuer of such securities is deemed to be an "issuer in" a particular market.
"Developed Markets" are those countries and/or regions contained in the FTSE World Government Bond Index, New Zealand, Luxembourg and the Hong Kong Special Administrative Region. As of October 31, 2023, securities of the following countries comprised the FTSE World Government Bond Index: Australia, Austria, Belgium, Canada, China, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New Zealand, Norway, Poland, Singapore, Spain, Sweden, United Kingdom and the United States. New Zealand was added to the FTSE World Government Bond Index in November 2022
"Investment Grade Developing Markets" are those countries and /or regions that are not Developed Markets, and whose sovereign debt is rated not less than Baa3 by Moody's Investor Services ("Moody's") or BBB- by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or comparably rated by another appropriate nationally or internationally recognized rating agency. As of October 31, 2023, "Investment Grade Developing Markets" are comprised of the following countries and/or regions: Andorra, Aruba, Bermuda, Botswana, Bulgaria, Cayman Islands, Chile, Colombia, Croatia, Curacao, Cyprus, Czech Republic, Estonia, Hungary, Iceland, India, Indonesia, Isle of Man, Jersey, Kazakhstan, Republic of Korea (South Korea), Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Macao, Malta, Mauritius, Montserrat, Panama, Peru, Philippines, Portugal, Qatar, Romania, Saudi Arabia, Slovakia, Slovenia, Switzerland, Taiwan, Thailand, Trinidad & Tobago, United Arab Emirates (U.A.E.), and Uruguay.
"Sub-Investment Grade Developing Markets" are those countries that are not Developed Markets or Investment Grade Developing Markets (Sub-Investment Grade Developing Markets, together with Investment Grade Developing Markets are referred to herein as "Developing Markets"). Securities of issuers in Sub-Investment Grade Developing Markets may be rated below investment grade at the time of investment.
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Additional Information Regarding the Fund (Unaudited) (continued)
While the credit quality of a market is reviewed at the time of the Fund's investment in that market, classification of a market may be amended by the Investment Manager as ratings and/or circumstances change over time.
The Fund will invest in debt securities that are economically tied to a number of countries throughout the world and will, under normal circumstances, be invested in three or more different non-U.S. countries. The maximum exposure to issuers in any one Developed Market is up to 25% of the Fund's total assets; provided, however, that no more than 40% may be invested in issuers in the U.S. The maximum exposure to issuers in any one Investment Grade Developing Market is up to 20% of the Fund's total assets. The maximum exposure to issuers in any one Sub-Investment Grade Developing Market is up to 15% of the Fund's total assets. Such exposure limits are applied at the time of investment, although classification of a market or an issuer in a market may be amended by the Investment Manager as ratings and/or circumstances change over time.
The maximum exposure to the currency of any one Developed Market is up to 25% of the Fund's total assets; provided, however, the Fund may exceed this limitation with respect to the U.S. dollar. The maximum exposure to the currency of any one Investment Grade Developing Market is up to 20% of the Fund's total assets. The maximum exposure to the currency of any one Sub-Investment Grade Developing Market is up to 15% of the Fund's total assets. Such exposure limits are applied at the time of investment, although, as stated above, classification of a market may be amended by the Investment Manager as ratings and/or circumstances change over time.
Up to 75% of the Fund's investments (or the issuers of those investments) may be rated below investment grade at the time of investment; that is rated below Baa3 by Moody's or BBB- 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. Up to 10% 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. Before purchasing an unrated security, the Investment Manager or Sub-Adviser analyzes the creditworthiness of the issuer of the security and of any financial institution or other party responsible for payments on the security in order to assign a rating to the security. In the event that a security receives different ratings from different rating agencies (Fitch, Moody's and S&P), the Investment Manager or Sub-Adviser will apply the highest rating received from the rating agencies in determining compliance with these guidelines. While the
credit quality of each of the Fund's investments is evaluated at the time of investment, the credit quality of the Fund's portfolio may be reviewed from time to time and adjusted accordingly.
The Investment Manager and Sub-Adviser consider external credit assessments available from international rating agencies such as Moody's and S&P, as well as any reports on the issuer which may be available from brokers or other sources. In some Developing Markets, where issues are often unrated or are at the lower end of the credit risk spectrum, the Investment Manager and the Sub-Adviser believe that opportunities exist for skilled analysts to add value through extensive company research and detailed credit assessment.
Low-credit debt can sometimes become equity. Due to the conversion of convertible notes and warrants, the Fund may from time to time become an (often) involuntary holder of equities until such stock can be sold as and when an optimal price can be achieved, given market conditions. It may be in the interests of shareholders for the Fund to hold such stock for short term periods.
Similarly, distressed companies can sometimes restructure via debt-for-equity swaps in order to stay solvent and viable. In this case, the investor becomes an involuntary equity holder and, once again, it may be in the best interests of shareholders that the Fund holds such securities for short periods of time, especially in extreme market conditions, until optimal prices can be obtained.
The Fund currently utilizes and in the future expects to continue to utilize leverage through borrowings or through other transactions, such as reverse repurchase agreements, which have the effect of leverage. The Fund may also utilize leverage through the issuance of debt securities or preferred stock, although it has no current intention to do so. The 1940 Act generally prohibits the Fund from engaging in most forms of leverage representing indebtedness other than preferred shares unless immediately after such incurrence the Fund's total assets less all liabilities and indebtedness not represented by senior securities (for these purposes, "total net assets") is at least 300% of the aggregate senior securities representing indebtedness (i.e., the use of leverage through senior securities representing indebtedness may not exceed 33 1/3% of the Fund's total net assets (including the proceeds from leverage)). Additionally, under the 1940 Act, the Fund generally may not declare any dividend or other distribution upon any class of its capital shares, or purchase any such capital shares, unless at the time of such declaration or purchase, this asset coverage test is satisfied. The Fund generally will not utilize leverage if it anticipates that the Fund's leveraged capital structure would result in a lower return to shareholders than that obtainable over time with an unleveraged capital structure. Use of leverage creates an opportunity for increased income and capital appreciation for shareholders but, at the same time, creates special risks, and there
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Additional Information Regarding the Fund (Unaudited) (continued)
can be no assurance that a leveraging strategy will be successful during any period in which it is employed.
Consistent with its investment objectives, the Fund may invest in a broad array of financial instruments and securities in which the value of the instrument or security is "derived" from the performance of an underlying asset or a "benchmark" such as a security index, an interest rate or a foreign currency ("derivatives"). The Fund may use derivatives to manage currency risk, credit risk and interest rate risk and to replicate or as a substitute for physical securities. The Fund may use interest rate swaps to hedge the Fund's liability with respect to its leverage. There is no limit on the amount of interest rate swap transactions that may be entered into by the Fund.
Derivative debt securities that replicate, or substitute for, the currency of a particular country will be counted toward the limitations applicable with respect to issuers in that country. The Fund may invest in over-the-counter or exchange traded derivatives. The Fund may invest in derivatives up to the limits allowed under the 1940 Act.
The Fund may invest in securities issued by investment companies registered as such under the 1940 Act and unregistered, private funds (each, an "acquired company"), subject to the limitations of the 1940 Act (which are to be applied immediately after the acquisition of such securities).
In response to adverse market, political or economic conditions, or in other circumstances when warranted in the Investment Manager's judgment, the Fund may invest without limit in U.S. Government securities and short-term debt obligations of U.S. banks and corporations rated not less than Aa or Prime-2 by Moody's or AA or A-2 by S&P at the time of purchase for temporary defensive purposes. The Fund also may invest in these instruments on a temporary basis to meet liquidity or distribution requirements. To the extent the Fund invests in these securities, it may not achieve its investment objectives. The yield on these securities may be lower than the yields on lower rated debt securities Although Prime-2 and A-2 ratings denote issuers with a strong (Moody's) or satisfactory (S&P) ability to repay short-term debt in a timely manner, the relative degree of safety is not as high as the very highest rating categories. In addition, the Fund may enter into repurchase agreements and lending agreements involving these securities.
As a general matter and subject to applicable law, if a percentage limitation is satisfied at the time of investment, a later increase or decrease in such percentage resulting from a change in the value of the Fund's investments will not constitute a violation of such limitation, except that any borrowing by the Fund that exceeds the corresponding fundamental investment limitation stated in the "Fundamental Investment Restrictions” section of this annual report must be reduced to meet such limitation within the period required
by the 1940 Act (currently three days). Otherwise, the Fund may continue to hold a security even though it causes the Fund to exceed a percentage limitation because of fluctuation in the value of the Fund's assets.
Unless otherwise indicated, the investment policies described above are not "fundamental" and may be changed by the Fund at any time.
INVESTMENT SECURITIES
The principal types of debt securities in which the Fund is permitted to invest include those described below. The list is not exclusive, but is indicative of the kinds of securities which the Fund's investment objectives, policies and restrictions permit it to buy.
Debt Securities
Local Currency Sovereign and Quasi-Sovereign Bonds. The Fund is permitted to invest in securities issued or guaranteed by governmental entities, including sovereign and quasi-sovereign entities, whether or not denominated in the currency of the country where such entity is located. The available maturities for these types of securities vary from country to country.
Commercial Banks. The Fund may also invest in securities issued by banks, whether or not denominated in the currency of the country where such bank is located.
U.S. Dollar-Denominated Debt Securities. The Fund is also permitted to invest in U.S. dollar-denominated debt securities in order to gain exposure to certain global debt markets without exposing the Fund to local currency risk. Such debt securities may be issued by issuers in Developed Markets, Investment Grade Developing Markets, or Sub-Investment Grade Developing Markets and may be issued and/or registered in the United States. U.S. dollar-denominated debt securities are subject to credit risk relating primarily to the issuer of the bond and liquidity risk relating to the maintenance of a sufficiently liquid market for the specific security. Such securities are also affected by movements in U.S. interest rates.
External Debt. The Fund may invest in external debt obligations, which are often longer-maturity (up to 30 years) securities, registered in London or globally, that are generally issued in U.S. dollars, but are increasingly issued in euros and occasionally in yen. External debt is typically issued in bearer form, carry a fixed or floating rate of interest, and amortize principal through a bullet payment with semi-annual interest payments in the currency in which the bond is issued.
Supranational Debt Obligations. The Fund may invest in debt issued by supranational entities. Supranational entities are entities constituted by the national governments of several countries to promote economic development, such as the World Bank, the International Monetary Fund, the European Investment Bank and the Asian Development Bank. Obligations of these entities are supported by
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Additional Information Regarding the Fund (Unaudited) (continued)
appropriated but unpaid commitments of their member countries, and there can be no assurances that these commitments will be undertaken or met in the future.
Companies. The Fund is permitted to invest in publicly-traded notes and debentures or bills of exchange issued or guaranteed as to the payment of principal and interest by companies domiciled in a Developed Market, an Investment Grade Developing Market or a Sub-Investment Grade Developing Market.
U.S. Securities
Government. The Fund is permitted to invest in U.S. government securities, including obligations issued or guaranteed by U.S. government agencies or instrumentalities, some of which are backed by the full faith and credit of the U.S. Treasury (such as direct pass-through certificates of the Government National Mortgage Association), some of which are supported by the right of the issuer to borrow from the U.S. government (such as obligations of Federal Home Loan Banks), and some of which are backed only by the credit of the issuer itself. Government obligations do not generally involve the credit risks associated with other types of interest bearing securities, although, as a result, the yields available from U.S. government obligations are generally lower than the yields available from corporate interest bearing securities. Like other interest bearing securities, however, the value of Government obligations changes as interest rates fluctuate.
Corporations and Banks. The Fund is permitted to invest for defensive and other temporary purposes in U.S. corporate debt instruments rated at the time of investment Aa or better by Moody's or AA or better by S& P, finance company and corporate commercial paper, and other short-term obligations, in each case rated at the time of investment Prime-2 or better by Moody's or A-2 or better by S&P. The Fund is also permitted to invest in obligations of U.S. Federal or state chartered banks and bank holding companies rated at the time of investment Aa or better by Moody's or AA or better by S&P (including certificates of deposit, bankers' acceptances and other short-term obligations).
Bank Loans
The Fund may acquire privately held loans from banks, insurance companies, financial institutions, or other lenders, as well as claims held by trade or other creditors, and may originate these types of loans. The bank loans in which the Fund invests may be structured and administered by a third party that acts as agent for a group of lenders that make or hold interests in the loan. The Fund may acquire interests in such loans by taking an assignment of all or a portion of a direct interest in a loan previously held by another institution or by acquiring a participation in an interest in a loan that continues to be held by another institution.
Convertible Securities
Convertible securities include bonds, debentures, notes, preferred stocks and other securities that entitle the holder to acquire common stock or other equity securities of the same or a different issuer. Convertible securities have general characteristics similar to both debt and equity securities. A convertible security generally entitles the holder to receive interest or preferred dividends paid or accrued until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics similar to non-convertible debt obligations. Convertible securities rank senior to common stock in a corporation's capital structure and, therefore, generally entail less risk than the corporation's common stock, although the extent to which such risk is reduced depends in large measure upon the degree to which the convertible security sells above its value as a debt obligation. A convertible security may be subject to redemption at the option of the issuer at a predetermined price. If a convertible security held by the Fund is called for redemption, the Fund would be required to permit the issuer to redeem the security and convert it to underlying common stock, or would sell the convertible security to a third party, which may have an adverse effect on the Fund's ability to achieve its investment objectives. The price of a convertible security often reflects variations in the price of the underlying common stock in a way that non-convertible debt may not. The value of a convertible security is a function of (i) its yield in comparison to the yields of other securities of comparable maturity and quality that do not have a conversion privilege and (ii) its worth if converted into the underlying common stock.
Asset-Backed Securities
Asset-backed securities are a form of structured debt obligation. Asset-backed securities are payment claims that are securitized in the form of negotiable paper that is issued by a financing company (generally called a special purpose vehicle). Collateral assets brought into a pool according to specific diversification rules. A special purpose vehicle is founded for the purpose of securitizing these payment claims and the assets of the special purpose vehicle are the diversified pool of collateral assets. The special purpose vehicle issues marketable securities which are intended to represent a lower level or risk than an underlying collateral asset individually, due to the diversification in the pool. The redemption of the securities issued by the special purpose vehicle takes place out of the cash flow generated by the collected assets. A special purpose vehicle may issue multiple securities with different priorities to the cash flows generated and the collateral assets. The collateral for asset-backed securities may include home equity loans, automobile and credit card receivables, boat loans, computer leases, airplane leases, mobile home loans, recreational vehicle loans and hospital account receivables. The Fund may invest in these and other types of asset-backed securities that
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Additional Information Regarding the Fund (Unaudited) (continued)
may be developed in the future. There is the possibility that recoveries on the underlying collateral may not, in some cases, be available to support payments on these securities.
Derivatives
With respect to all of its portfolio the Fund will invest in derivatives for two main purposes: (1) to modify interest rate risk, modify credit risk and adjust currency risk within the portfolio, and (2) to enable the Fund to replicate or substitute for a particular security in order to gain access to a particular global market or security, where either the physical security is judged by the Investment Manager to be too expensive, or the Investment Manager believes there is an insufficient supply of the particular security or no security fitting the precise needs of the Fund exists. The types of derivatives which may be used include, but are not limited to, futures, options, forwards, forwards that can only be settled in U.S. dollars, swaps, and securities with structured cash flows, whether traded on an exchange or over-the-counter, that have as their underlying security reference to a fixed income security or currency. In general, derivatives will not be utilized to leverage the Fund.
Investment in fixed income securities may at certain times be more efficiently achieved using derivative securities to replicate physical securities. These types of derivatives carry identical market price risks to the equivalent physical securities but provide a number of transactional benefits. For example, by using derivatives, the Fund may be able to implement investment decisions at lower costs, increase the after-tax yield, obtain prices that are not available in the underlying cash market, or settle in U.S. dollars. In less developed markets, liquidity and credit quality can be enhanced and transaction costs reduced by using derivatives rather than the underlying securities. In certain circumstances, due to lack of available direct investment opportunity or government regulations, the only means of gaining exposure to particular countries is through derivatives.
The derivatives used for adjusting currency exposures or replicating underlying securities are usually over-the-counter ("OTC") securities. OTC securities carry credit risk associated with the counterparty institution. See "Risk Factors – Derivatives." To manage this risk, the Fund will only use counterparty institutions rated A- or better by a recognized international rating agency. Up to 10% of total assets may be put at risk in derivatives transactions with any single counterparty (aggregate interest rate, credit and currency derivatives exposure). A maximum of 10% of total assets may be at risk in currency-linked notes.
The types of derivatives used by the Fund and the techniques employed may change over time as new derivatives and strategies are developed or regulatory changes occur. The Fund will not use derivatives where it would contravene the guidelines set by the lending banks for the Fund's bank loan.
In general, derivatives will not be utilized to leverage the Fund, although they may be used to hedge the interest rate risk associated with the Fund's outstanding leverage. The Fund may use interest rate swaps to hedge the Fund's liability with respect to its bank loan. At present, the Fund has been authorized by its Board of Directors to hedge up to 100% of the Fund's liability with respect to its bank loan. See "Investment Securities – Derivatives – Swaps" and "Risk Factors – Derivatives."
Forward Currency Contracts. The Fund may enter into forward currency contracts. A forward currency contract involves an obligation to purchase or 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.
The cost to the Fund of engaging in forward currency contracts will vary with factors such as the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually conducted on a principal basis, no fees or commissions are involved, although the price charged in the transaction includes a dealer's markup. The use of forward currency contracts in this manner is intended to fix a rate of exchange that can be achieved at a certain time in the future.
Futures Contracts. The Fund may enter into futures contracts in U.S. domestic markets or on exchanges located outside the United States for both hedging and non-hedging purposes. Foreign markets may offer advantages such as trading opportunities or arbitrage possibilities not available in the United States. Foreign markets, however, may have greater risk potential than domestic markets. For example, some foreign exchanges are principal markets so that no common clearing facility exists and an investor may look only to the broker for performance of the contract. In addition, any profits the Fund might realize in trading could be eliminated by adverse changes in the exchange rate, or the Fund could incur losses as a result of those changes. Transactions on foreign exchanges may include both underlying assets which are traded on U.S. commodities exchanges and those which are not. Unlike trading on U.S. exchanges, trading on foreign commodities exchanges is not regulated by the Commodity Futures Trading Commission ("CFTC").
Engaging in these transactions involves risk of loss to the Fund which could adversely affect the value of the Fund's net assets. No assurance can be given that a liquid market will exist for any particular futures contract at any particular time. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified periods during the trading day. Futures contract prices could move to the limit for several consecutive trading days with little or no trading,
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Additional Information Regarding the Fund (Unaudited) (continued)
thereby preventing prompt liquidation of futures positions and potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Advisers' ability to predict correctly movements in the direction of the relevant market, and, to the extent the transaction is entered into for hedging purposes, to ascertain the appropriate correlation between the transaction being hedged and the price movements of the futures contract.
The Fund also may purchase and write options to buy or sell those futures contracts in which it may invest. Such investment strategies will be used for hedging purposes and for non-hedging purposes, subject to applicable law. An option on a futures contract provides the holder with the right to enter into a "long" position in the underlying futures contract, in the case of a call option, or a "short" position in the underlying futures contract, in the case of a put option, at a fixed exercise price up to a stated expiration date or, in the case of certain options, on such date. Upon exercise of the option by the holder, the contract market clearinghouse establishes a corresponding short position for the writer of the option, in the case of a call option, or a corresponding long position in the case of a put option. In the event that an option is exercised, the parties will be subject to all the risks associated with the trading of futures contracts, such as payment of initial and variation margin deposits. In addition, the writer of an option on a futures contract, unlike the holder, is subject to initial and variation margin requirements on the option position.
A position in an option on a futures contract may be terminated by the purchaser or seller prior to expiration by effecting an offsetting purchase or sale transaction, subject to the continued availability of a liquid secondary market, which is the purchase or sale of an option of the same type (i.e., the same exercise price and expiration date) as the option previously purchased or sold. The difference between the premiums paid and received represents the Fund's profit or loss on the transaction.
Options on futures contracts that are written or purchased by the Fund on U.S. exchanges are traded on the same contract market as the underlying futures contract, and, like futures contracts, are subject to regulation by the CFTC and the performance guarantee of the exchange clearinghouse.
The Investment Manager has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act ("CEA") pursuant to Rule 4.5 under the CEA with respect to the Fund. The Investment Manager is not, therefore, subject to registration or regulation as a "commodity pool operator" under the CEA with respect of the Fund.
Swaps. The Fund may enter into interest rate swaps, currency swaps, credit default swaps and other types of available swap agreements,
including swaps on securities, financial assets and indices, and related types of derivatives, such as caps, collars and floors. A swap is an agreement between two parties pursuant to which each party agrees to make one or more payments to the other on regularly scheduled dates over a stated term, based on different interest rates, currency exchange rates, security or financial asset prices, the prices or rates of other types of financial instruments or assets or the levels of specified indices. Under a typical swap, one party may agree to pay a fixed rate or a floating rate determined by reference to a specified instrument, rate or index, multiplied in each case by a specified amount (the "notional amount"), while the other party agrees to pay an amount equal to a different floating rate multiplied by the same notional amount. On each payment date, the obligations of parties are netted, with only the net amount paid by one party to the other. All swap agreements entered into by the Fund with the same counterparty are generally governed by a single master agreement, which provides for the netting of all amounts owed by the parties under the agreement upon the occurrence of an event of default, thereby reducing the credit risk to which such party is exposed.
Swap agreements are typically individually negotiated and structured to provide exposure to a variety of different types of investments or market factors. Swap agreements may be entered into for hedging or non-hedging purposes and, therefore, may increase or decrease the Fund's exposure to the underlying instrument, rate, asset or index. Swap agreements can take many different forms and are known by a variety of names. The Fund is not limited to any particular form or variety of swap agreement if the Advisers determine that it is consistent with the Fund's investment objectives and policies.
Private Placements
Certain debt securities purchased by the Fund may have been placed privately. These securities, which include debt securities offered in the Euromarkets, are somewhat less liquid than securities which are widely traded by the public and there may be contractual restrictions on their resale to the public. Therefore, although these securities may be resold in privately negotiated transactions, the prices realized from such sales may be less than what might have been realized on a more active public trading market.
Other Investment Companies
Subject to the limitations set forth in Section 12(d) of the 1940 Act, the Fund may invest in securities issued by other investment companies that invest primarily in fixed-income securities. As a shareholder of another investment company, the Fund will bear its pro rata portion of the other investment company's expenses, including advisory fees. These expenses would be in addition to the expenses, including advisory fees, that the Fund bears in connection with its own operations.
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Additional Information Regarding the Fund (Unaudited) (continued)
Repurchase and Securities Lending Agreements
The Fund is permitted to invest in repurchase agreements with banks and broker-dealers. A repurchase agreement is a contract under which the Fund acquires a security for a relatively short period (usually no more than one week) subject to the obligations of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Investment Manager monitors the value of such securities daily to determine that the value equals or exceeds the repurchase price. Under the 1940 Act, repurchase agreements are considered to be loans made by the Fund which are collateralized by the securities subject to repurchase. Repurchase agreements may involve risks in the event of default or insolvency of the seller, including possible delays or restrictions upon the Fund's ability to dispose of the underlying securities. The Fund will enter into repurchase agreements only with parties who meet creditworthiness standards approved by the Fund's Board of Directors, i.e., banks or broker-dealers which have been determined by the Investment Manager to present no serious risk of becoming involved in bankruptcy proceedings within the time frame contemplated by the repurchase transaction.
The Fund may also lend to banks and broker-dealers portfolio securities with an aggregate market value of up to one-third of its total assets when it deems advisable. Any such loans must be secured by collateral (consisting of any combination of cash, U.S. Government securities, irrevocable letters of credit or other high-quality debt securities) in an amount at least equal (on a daily marked-to-market basis) to the current market value of the securities loaned. The Fund may terminate the loans at any time and obtain the return of the securities. The Fund will continue to receive any interest or dividends paid on the loaned securities and will continue to have voting rights with respect to the securities. In connection with the lending of its portfolio securities, the Fund is exposed to the risk of delay in recovery of the securities loaned or possible loss of right in the collateral should the borrower become insolvent.
Issuers of irrevocable letters of credit used as collateral for securities lending agreements must meet the same or similar standards.
Firm Commitment Agreements and When-Issued Securities
The Fund may purchase debt securities on a firm commitment or when-issued basis. New issues of certain debt securities are often offered on a when-issued basis; that is, the payment obligation and the interest rate are fixed at the time the buyer enters into the commitment, but delivery and payment for the securities normally take place after the date of the commitment to purchase. Firm commitment agreements call for the purchase of securities at an agreed-upon price on a specified future date. The transactions are entered into in order to secure what is considered to be an advantageous price and yield to the Fund and not for purposes of
leveraging the Fund's assets. The Fund will not earn any income on these securities prior to delivery. The value of when-issued securities and firm commitment agreements may vary prior to and after delivery depending on market conditions and changes in interest rate levels. There is a risk that a party with whom the Fund has entered into such transactions will not perform its commitment, which could result in a gain or loss to the Fund.
RISK FACTORS
The Fund is a non-diversified, closed-end investment company designed primarily as a long-term investment vehicle and not as a trading tool. The Fund invests generally in a portfolio of fixed income securities. An investment in the Fund's Common Stock may be speculative and involves a high degree of risk. The Fund should not be considered a complete investment vehicle program. Due to the uncertainty in all investments, there can be no assurance that the Fund will achieve its investment objectives. The value of an investment in the Fund's common shares could decline substantially and cause you to lose some or all of your investment. Before investing in the Fund's common shares you should consider carefully the following principal risks of investing in the Fund.
Management Risk
The Fund's ability to achieve its investment objectives is directly related to the Advisers' investment strategies for the Fund. The value of your investment in the Fund's common shares may vary with the effectiveness of the research and analysis conducted by the Advisers and their ability to identify and take advantage of attractive investment opportunities. If the investment strategies of the Advisers do not produce the expected results, the value of your investment could be diminished or even lost entirely, and the Fund could underperform the market or other funds with similar investment objectives. Additionally, there can be no assurance that all of the personnel of the Advisers will continue to be associated with the Advisers for any length of time. The loss of the services of one or more key employees of the Advisers could have an adverse impact on the Fund's ability to realize its investment objectives.
Investment and Capital Market Risk
An investment in the Fund's Shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. Your investment in Shares represents an indirect investment in the securities owned by the Fund. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably, and these fluctuations are likely to have a greater impact on the value of the Shares during periods in which the Fund utilizes a leveraged capital structure. If the current global economic downturn continues into a prolonged recession or deteriorates further, the ability of issuers of the corporate fixed-income securities
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and other securities in which the Fund invests to service their obligations could be materially and adversely affected.
The value of the securities in which the Fund invests will affect the value of the Shares. Your Shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
Credit Risk
Investments in debt securities expose the Fund to credit risk. Credit risk is the risk that one or more of the Fund's investments in debt securities or other instruments will decline in price, or fail to pay interest, liquidation value or principal when due, because the issuer of the obligation or the issuer of a reference security experiences an actual or perceived decline in its financial status. Credit risk is influenced by changes in general economic and political conditions and changes in the financial condition of the issuers. During periods of economic downturn or rising interest rates, issuers of securities with a low credit rating may experience financial weakness that could affect their ability to make payments of interest and principal.
Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the value and liquidity of securities with low credit ratings, especially in markets characterized by a low volume of trading.
Interest Rate and Pre-Payment Risk
Generally, when market interest rates rise, the prices of debt obligations fall, and vice versa. Interest rate risk is the risk that debt obligations and other instruments in the Fund's portfolio will decline in value because of increases in market interest rates. This risk may be particularly acute when market interest rates are at low levels. The prices of long-term debt obligations generally fluctuate more than prices of short-term debt obligations as interest rates change. During periods of rising interest rates, the average life of certain types of securities may be extended due to slower than expected payments. This may lock in a below market yield, increase the security's duration and reduce the security's value.
Investments in floating rate debt instruments, although generally less sensitive to interest rate changes than longer duration fixed rate instruments, may nevertheless decline in value in response to rising interest rates if, for example, the rates at which they pay interest do not rise as much, or as quickly, as market interest rates in general. Conversely, floating rate instruments will not generally increase in value if interest rates decline. Inverse floating rate debt securities may also exhibit greater price volatility than a fixed rate debt obligation with similar credit quality. To the extent the Fund holds floating rate instruments, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect
the income received from such securities and the net asset value of the Fund's common shares.
Pre-payment risk refers to the risk that a debt obligations are prepaid ahead of schedule. In this event, the proceeds from the prepaid securities would likely be reinvested by the Fund in securities bearing a lower interest rate. Pre-payment rates usually increase when interest rates are falling.
Private Placements and Other Restricted Securities Risk
Private placement and other restricted securities include securities that have been privately placed and are not registered under the Securities Act, such as unregistered securities eligible for resale without registration pursuant to Rule 144A ("Rule 144A Securities") and privately placed securities of U.S. and non-U.S. issuers offered outside of the
United States without registration with the SEC pursuant to Regulation S ("Regulation S Securities"). Private placements may offer attractive opportunities for investment not otherwise available on the open market.
Private placements securities typically may be sold only to qualified institutional buyers (or, in the case of the initial sale of certain securities, such as those issued in collateralized debt obligations or collateralized loan obligations, to accredited investors (as defined in Rule 501(a) under the Securities Act)), or in a privately negotiated transaction or to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration. Rule 144A Securities and Regulation S Securities may be freely traded among certain qualified institutional investors, such as the Fund, but their resale in the U.S. is permitted only in limited circumstances. Issuers of restricted securities may not be subject to the disclosure and other investor protection requirements that would be applicable if their securities were publicly traded. Where a registration statement is required for the resale of restricted securities, the Fund may be required to bear all or part of the registration expenses. The Fund may be deemed to be an "underwriter" for purposes of the Securities Act when selling restricted securities to the public and, in such event, the Fund may be liable to purchasers of such securities if the registration statement prepared by the issuer is materially inaccurate or misleading. Private placements typically are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such securities, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the Fund could find it more difficult to sell such securities when it may be advisable to do so or it may be able to sell such securities only at prices lower than if such securities were more widely held. At times, it also may be more difficult to
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determine the fair value of such securities for purposes of computing the Fund's net asset value NAV due to the absence of a trading market.
Private placements and restricted securities may be considered illiquid securities, which could have the effect of increasing the level of the Fund's illiquidity. Additionally, a restricted security that was liquid at the time of purchase may subsequently become illiquid. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the Fund to sell them promptly at an acceptable price. The Fund may have to bear the extra expense of registering the securities for resale and the risk of substantial delay in effecting the registration. In addition, market quotations typically are less readily available for these securities.
Foreign Securities Risk
Investing in foreign securities involves certain special considerations that are not typically associated with investments in the securities of U.S. issuers. Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards and may have policies that are not comparable to those of domestic issuers. As a result, there may be less information available about foreign issuers than about domestic issuers. Securities of some foreign issuers may be less liquid and more volatile than securities of comparable domestic issuers. There is generally less government supervision and regulation of securities markets, brokers and issuers than in the United States. In addition, with respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, political and social instability, or diplomatic developments, which could affect the value of investments in those countries. These risks are heightened under adverse economic, market, geopolitical and other conditions. The costs of investing in foreign countries frequently are higher than the costs of investing in the United States. Although the Advisers endeavor to achieve the most favorable execution costs in portfolio transactions, trading costs in non-U.S. securities markets are generally higher than trading costs in the United States.
Investments in securities of foreign issuers often will be denominated in foreign currencies. Accordingly, the value of the Fund's assets, as measured in U.S. dollars, may be affected favorably or unfavorably by changes in currency exchange rates and in exchange control regulations. The Fund may incur costs in connection with conversions between various currencies.
The Fund generally holds its foreign securities and cash in foreign banks and securities depositories approved by State Street Bank and Trust Company, the Fund's Foreign Custody Manager (as that term is defined in Rule 17f-5 under the 1940 Act). Some foreign banks and securities depositories may be recently organized or new to the foreign custody business. There may be limited or no regulatory
oversight over their operations. Also, the laws of certain countries may put limits on the Fund's ability to recover its assets if a foreign bank, depository or issuer of a security, or any of their agents, goes bankrupt. In addition, it is often more expensive for the Fund to buy, sell and hold securities in certain foreign markets than in the United States. The increased expense of investing in foreign markets reduces the amount the Fund can earn on its investments and typically results in a higher operating expense ratio for the Fund than for investment companies invested only in the United States.
Certain foreign governments levy withholding or other taxes on dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion of foreign withholding taxes will reduce the income received from investments in such countries.
From time to time, the Fund may have invested in certain sovereign debt obligations that are issued by, or certain companies that operate in or have dealings with, countries that become subject to sanctions or embargoes imposed by the U.S. government and the United Nations and/or countries identified by the U.S. government as state sponsors of terrorism. Investments in such countries may be adversely affected because, for example, the credit rating of the sovereign debt security may be lowered due to the country's instability or unreliability or the company may suffer damage to its reputation if it is identified as a company which operates in, or has dealings with, such countries. As an investor in such companies, the Fund will be indirectly subject to those risks.
Developing and Emerging Markets Risk
Investing in the securities of issuers located in developing and emerging market countries (and to a certain extent non-U.S. developed market countries) involves a high degree of risk and special considerations not typically associated with investing in the securities of U.S. issuers and other developed market issuers. Compared to the United States and other developed countries, emerging market countries may have relatively unstable governments, economies which may be more likely to take extra-legal action with respect to companies, industries, assets, or foreign ownership than those in more developed markets and therefore issuers of such emerging markets may be more affected by the performance of such industries or sectors. Emerging market economies may be based on only a few industries and securities markets that trade a small number of securities. Securities issued by companies or governments located in emerging market countries tend to be especially volatile (particularly during market closures due to local market holidays or other reasons) and may be less liquid than securities traded in developed countries. Securities in these countries have been characterized by greater potential loss than securities of companies and governments located in developed countries. Investments in the securities of issuers
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located in emerging markets could be affected by risks associated with expropriation and/or nationalization, political or social instability, pervasiveness of corruption and crime, armed conflict, the impact on the economy of civil war, religious or ethnic unrest and the withdrawal or non-renewal of any license enabling the Fund to trade in securities of a particular country, confiscatory taxation, restrictions on transfers of assets, lack of uniform accounting and auditing standards, less publicly available financial and other information, diplomatic development which could affect U.S. investments in those countries, and potential difficulties in enforcing contractual obligations. International trade barriers or economic sanctions against foreign countries, organizations, entities and/or individuals in response to geopolitical tensions or conflicts may adversely affect the value of the Fund's foreign holdings. The type and severity of sanctions and other similar measures are difficult to measure or predict. Emerging market countries generally have less developed legal, accounting and financial reporting systems than those in more developed markets, which may reduce the scope or quality of financial information available to investors. Moreover, it can be more difficult for investors to bring litigation or enforce judgments against issuers in emerging markets or for U.S. regulators to bring enforcement actions against such issuers.
Countries in emerging markets are also more likely to experience high levels of inflation, deflation or currency devaluation, which could also hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative.
The economies of individual developing and emerging market countries may differ favourably or unfavorably from the United States economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, capital reinvestment, resource self-sufficiency and balance of payments position. Governments of many developing and emerging market countries have exercised and continue to exercise substantial influence over many aspects of the private sector. In some cases, the government owns or controls many companies, including some of the largest in the country.
Accordingly, government actions could have a significant effect on economic conditions in a developing or emerging market country and on market conditions, prices and yields of securities in the Fund's portfolio. Moreover, the economies of developing and emerging market countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. Many developing and emerging market economies are considered to be
more politically volatile than the developed markets. Investments in securities of issuers in countries other than the U.S. may involve greater political risk, including in some countries, the possibility of nationalization of assets, expropriation or confiscatory taxation, restrictions on repatriation, and the establishment of foreign exchange controls, political changes, government regulation, overburdened and obsolete or unseasoned financial systems, environmental problems, less developed legal systems, economic or social instability or diplomatic developments (including war) which could affect adversely the economies of such countries or the value of the Fund's investments in those countries. Central authorities also tend to exercise a high degree of control over the economies and in many cases have ownership over core productive assets.
The legal systems in many developing and emerging market countries are less developed than those in more developed countries, with the administration of laws and regulations often subject to considerable discretion. Non-U.S. markets may offer less protection to investors than U.S. or other developed markets. It also may be difficult to obtain and enforce a judgment in a court outside of the United States.
Adequate public information on non-U.S. issuers may not be available, and it may be difficult to secure information regarding corporate actions on a timely basis. In general, there is less overall governmental supervision and regulation of securities exchanges, brokers, and listed companies than in the United States or other developed market countries.
Due to their strong reliance on international trade, most developing and emerging market economies tend to be sensitive both to economic changes in their own region and to changes affecting their major trading partners. These include changes in growth, inflation, foreign exchange rates, current account positions, government policies, taxation and tariffs.
Investments in developing and emerging market countries may entail purchasing securities issued by or on behalf of entities that are insolvent, bankrupt, in default or otherwise engaged in an attempt to reorganize or reschedule their obligations or in entities that have little or no proven credit rating or credit history. In any such case, the issuer's poor or deteriorating financial condition may increase the likelihood that the Fund will experience losses or diminution in available gains due to bankruptcy, insolvency or fraud.
Foreign Currency Risk
The Fund may invest all of its assets in debt securities which are denominated in currencies other than the U.S. dollar. Currency exchange rates can fluctuate significantly over short periods and can be subject to unpredictable changes based on a variety of factors including political developments and currency controls by governments. A change in the value of a currency in which a security is
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denominated against the U.S. dollar will generally result in a change in the U.S. dollar value of the Fund's assets. If the exchange rate for a non-U.S. currency declines compared to the U.S. dollar, the Fund's NAV would decline. In addition, although much of the Fund's income will be received or realized in non-U.S. currencies, the Fund is required to compute and distribute its income in U.S. dollars. Therefore, for example, if the exchange rate for a non-U.S. currency declines after the Fund's income has been accrued and translated into U.S. dollars, but before the income has been received or converted into U.S. dollars, the Fund could be required to liquidate securities to make distributions. Similarly, if the exchange rate declines between the time the Fund incurs expenses in U.S. dollars and the time expenses are paid, the amount of non-U.S. currency required to be converted into U.S. dollars in order to pay such U.S. dollar expenses will be greater than the non-U.S. currency equivalent of the expenses at the time they were incurred.
The currencies of Developing Markets, in particular, have experienced periods of steady declines or even sudden devaluations relative to the U.S. dollar. Some Developing Market currencies may not be internationally traded or may be subject to strict controls by local governments, resulting in undervalued or overvalued currencies. Some Developing Markets have experienced balance of payment deficits and shortages in foreign exchange reserves. Governments have responded by restricting currency conversions. Future restrictive exchange controls could prevent or restrict a company's ability to make dividend or interest payments in the original currency of an obligation (often U.S. dollars). In addition, even though the currencies of some Developing Markets may be convertible into U.S. dollars, the conversion rates may be artificial to their actual market values.
Sovereign Debt Obligations Risk
Investments in Developing Market countries' government debt obligations involve special risks. Certain Developing Market countries have historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. The issuer or governmental authority that controls the repayment of a Developing Market country's debt may not be able or willing to repay the principal and/or interest when due in accordance with the terms of such debt. A debtor's willingness or ability to repay principal and interest due in a timely manner may be affected by, among other factors, its cash flow situation and, in the case of a government debtor, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the government debtor's policy towards the International Monetary Fund and the political constraints to which a government debtor may be subject. Government debtors may default on their debt and may also be dependent on expected disbursements
from foreign governments, multilateral agencies and others abroad to reduce principal and interest arrearages on their debt. The commitment on the part of these governments, agencies and others to make such disbursements may be conditioned on a debtor's implementation of economic reforms and/or economic performance and the timely service of such debtor's obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third parties' commitments to lend funds to the government debtor, which may further impair such debtor's ability or willingness to service its debts on a timely basis. Holders of government debt, including the Fund, may be requested to participate in the rescheduling of such debt and to extend further loans to government debtors.
As a result of the foregoing, a government obligor may default on its obligations. If such an event occurs, the Fund may have limited legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting party itself, and the ability of the holder of foreign government debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the holders of more senior fixed income securities, such as commercial bank debt, will not contest payments to the holders of other foreign government debt securities in the event of default under their commercial bank loan agreements.
Government obligors in Developing Market countries are among the world's largest debtors to commercial banks, other governments, international financial organizations and other financial institutions. The issuers of the government debt securities in which the Fund may invest have in the past experienced substantial difficulties in servicing their external debt obligations, which led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements, and obtaining new credit to finance interest payments. Holders of certain foreign government debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the foreign government debt securities in which the Fund may invest will not be subject to similar restructuring arrangements or to requests for new credit, which may adversely affect the Fund's holdings. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants. Investments in Developing Market countries' government debt securities involve currency risk. See "Foreign Currency Risk" above.
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Corporate Debt Risk
The Fund may invest in debt securities of non-governmental issuers. Like all debt securities, corporate debt securities generally represent an issuer's obligation to repay to the investor (or lender) the amount borrowed plus interest over a specified time period. A typical corporate bond specifies a fixed date when the amount borrowed (principal) is due in full, known as the maturity date, and specifies dates when periodic interest (coupon) payments will be made over the life of the security.
Corporate debt securities come in many varieties and may differ in the way that interest is calculated, the amount and frequency of payments, the type of collateral, if any, and the presence of special features (e.g., conversion rights). The Fund's investments in corporate debt securities may include, but are not limited to, senior, junior, secured and unsecured bonds, notes and other debt securities, and may be fixed rate, floating rate, zero coupon and inflation linked, among other things.
Prices of corporate debt securities fluctuate and, in particular, are subject to several key risks including, but not limited to, interest rate risk (which may be heightened in a market environment where interest rates are high or rising), credit risk, prepayment risk and spread risk. The market value of a corporate bond may be affected by the financial condition or the credit rating of the corporation, the corporation's performance and perceptions of the corporation in the market place and government regulations impacting the industry in which the corporation operates. There is a risk that the issuers of the corporate debt securities in which the Fund may invest may not be able to meet their obligations on interest or principal payments at the time called for by an instrument.
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. The Fund's investments in lower rated securities may involve the following specific risks: greater risk of loss due to default because of the increased likelihood that adverse economic or company specific events will make the issuer unable to pay interest and/or principal when due; wider price fluctuations due to changing interest rates and/or adverse economic and business developments; and greater risk of loss due to declining credit quality.
Leverage Risk
The Fund generally seeks to enhance its total returns through the use of leverage. The Fund currently has a bank loan to finance investments as a form of leverage.
The Fund also has authority to issue preferred stock to finance investments. Leverage entails particular risks for holders of the Fund's common stock. The issuance of preferred stock would affect the amount of income available for distribution on the Fund's common stock as well as the net asset value of the common stock and the voting rights of holders of common stock. Leverage would exaggerate the effects of both currency fluctuations and of market downturns or upturns on the net asset value and market value of the Fund's common stock, as well as on distributions to holders of common stock. Leverage can also increase the volatility of the Fund's net asset value, and expenses related to leverage can reduce the Fund's income. In the case of leverage, if Fund assets decline in value so that legal asset coverage requirements for any borrowings or preferred stock would not be met, the Fund may be prevented from paying distributions, which could jeopardize its qualification for pass-through tax treatment, make it liable for excise taxes and/ or force it to sell portfolio securities at an inopportune time. Holders of preferred stock have the right to elect two directors, and such holders, as well as Fund creditors, have the right under certain circumstances to elect a majority of the Fund's directors.
As noted above, the Fund currently leverages through borrowings from a credit facility. The Fund has entered into a revolving Credit Agreement with The Bank of Nova Scotia to borrow up to $25 million. Such borrowings constitute financial leverage. The Credit Agreement contains customary covenant, negative covenant and default provisions, including covenants that limit the Fund's ability to incur additional debt or consolidate or merge into or with any person, other than as permitted, or sell, lease or otherwise transfer, directly or indirectly, all or substantially all of its assets. The covenants also 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. In addition, the Fund agreed not to purchase assets not contemplated by the investment policies and restrictions in effect when the Credit Agreement became effective. The covenants or guidelines could impede the Investment Manager or Sub-Adviser from fully managing the Fund's portfolio in accordance with the Fund's investment objectives and policies. Furthermore, non-compliance with such covenants or the occurrence of other events could lead to the cancellation of the loan facility. The Fund may not incur additional debt from any other party, except for in limited circumstances (e.g., in the ordinary course of business). The covenants include a requirement that the Fund maintain net assets of
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no less than $25 million. Such restrictions shall apply only so long as the Credit Agreement remains in effect.
Indebtedness issued under the Credit Agreement is not convertible into any other securities of the Fund. Outstanding amounts would be payable at maturity or such earlier times as required by the Credit Agreement. The Fund may be required to prepay outstanding amounts under the Credit Agreement in the event of the occurrence of certain events of default. The Fund is expected to indemnify the lenders under the Credit Agreement against certain liabilities they may incur in connection with the Credit Agreement. The Fund is required to pay commitment fees under the terms of the Credit Agreement. With the use of borrowings, there is a risk that the interest rates paid by the Fund on the amount it borrows will be higher than the return on the Fund's investments. The credit facility with The Bank of Nova Scotia may in the future be replaced or refinanced by one or more credit facilities having substantially different terms, or the Fund may be unable to renew or replace its credit facility upon the termination of the current facility, possibly requiring it to sell portfolio securities at times or prices that are disadvantageous. Any of these situations could adversely impact income or total return to shareholders.
The Fund must comply with investment quality, diversification and other guidelines established by the credit facility. The Fund does not anticipate that such guidelines will have a material adverse effect on the Fund's common stockholders or its ability to achieve its investment objectives.
Successful use of a leveraging strategy may depend on the Investment Manager's ability to predict correctly interest rates and market movements, and there is no assurance that a leveraging strategy will be successful during any period in which it is employed.
Liquidity Risk
While the Fund ordinarily invests in debt securities for which there is an active secondary market, the Fund may invest in debt securities for which there is no established secondary market. The securities markets that exist in developing and emerging market countries are substantially smaller, less developed, less liquid and more volatile than the securities markets of the United States and other more developed countries. Settlement and custodial practices (including those involving securities settlement where fund assets may be released prior to receipt of payment) are also often less developed than those in U.S. or other developed markets, and may result in increased risk or substantial delays in the event of a failed trade or the insolvency of, or breach of duty by, a non-U.S. broker-dealer, securities depository or non-U.S. subcustodian.
Liquidity in developing markets may be low and transaction costs high. Reduced liquidity often creates higher volatility, as well as
difficulties in obtaining accurate market quotations for financial reporting purposes and for calculating net asset values, and sometimes also an inability to buy and sell securities. Market quotations on many non-U.S. debt securities may only be available from a limited number of dealers and may not necessarily represent firm bids from those dealers or prices for actual sales.
In addition, the markets for below investment grade securities may be substantially smaller, less developed, less liquid and more volatile than the markets for prime rated securities, which may make obtaining accurate market quotations for financial reporting purposes and for calculating net asset values more difficult. Market quotations on many sub-investment grade securities may only be available from a limited number of dealers and may not necessarily represent firm bids from those dealers or prices for actual sales.
The Fund may not be able readily to dispose of illiquid securities at prices that approximate those at which the Fund could sell such securities if they were more widely traded and, as result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. Illiquid securities generally trade at a discount.
Bank Loan Risk
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.
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
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loans not being readily available to make additional investments. To the extent the extended settlement process gives rise to short-term liquidity needs, the Fund may hold additional cash or sell investments.
Convertible Securities Risk
The Fund may invest in convertible securities, which include bonds, debentures, notes, preferred stocks and other securities that entitle the holder to acquire common stock or other equity securities of the same or a different issuer. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. As with all debt securities, the market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. Convertible securities also tend to reflect the market price of the underlying stock in varying degrees, depending on the relationship of such market price to the conversion price in the terms of the convertible security, and, therefore, is also subject to the same types of market and issuer risks that may negatively affect the underlying common stock. Convertible securities rank senior to common stock in an issuer's capital structure and consequently entail less risk than the issuer's common stock.
Asset-Backed Securities Risk
Payment of interest and repayment of principal on asset-backed securities is largely dependent upon the cash flows generated by the assets backing the securities and, in certain cases, supported by letters of credit, surety bonds or other credit enhancements. Asset-backed security values may also be affected by the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables and any entities providing the credit enhancement. In addition, the underlying assets are subject to prepayments that shorten the securities' weighted average maturity and may lower their return. Asset-backed securities are in particular subject to interest rate risk. Generally, asset-backed securities increase in value to a lesser extent when interest rates decline and generally decline in value to a similar or greater extent when interest rates rise. Asset-backed securities are also subject to liquidity and valuation risk.
Derivatives Risk
Consistent with its investment objectives, the Fund may invest in a broad array of financial instruments and securities in which the value of the instrument or security is "derived" from the performance of an underlying asset or a "benchmark" such as a security index, an interest rate or a foreign currency ("derivatives"). Derivatives are most often used to manage interest rate, currency and credit risk, to increase or decrease exposure to an asset class or benchmark (as a hedge or to enhance return), or to create an investment position directly (often because it is more efficient or less costly than direct investment). There is no guarantee that these results can be achieved through the
use of derivatives and any success in their use depends on a variety of factors including the ability of the Advisers to predict correctly the direction of interest rates, securities prices, currency exchange rates and other factors.
The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may increase or decrease. Adverse movements in the value of the underlying asset can expose the Fund to losses, which can be increased if derivatives are used to obtain leverage. In addition, risks in the use of derivatives include:
• |
an imperfect correlation between the price of derivatives and the movement of the securities prices, interest rates or currency exchange rates being hedged or replicated; |
• |
the possible absence of a liquid secondary market for any particular derivatives contract at any time and the need to continue making margin and settlement payments thereunder; |
• |
the potential loss if the counterparty to the transaction does not perform as promised; |
• |
the possible need to defer closing out certain positions to avoid adverse tax consequences, as well as the possibility that derivative transactions may result in acceleration of gain, deferral of losses or a change in the character of gain realized; |
• |
the risk that the financial intermediary "manufacturing" the over-the-counter derivative, being the most active market maker and offering the best price for repurchase, will not continue to create a credible market in the derivative; |
• |
because certain derivatives are "manufactured" by financial institutions, the risk that the Fund may develop a substantial exposure to financial institution counterparties; |
• |
the risk that a full and complete appreciation of the complexity of derivatives and how future value is affected by various factors including changing interest rates, exchange rates and credit quality is not attained; and |
• |
the risk that the Fund would need additional liquidity to meet the payment obligations created by the derivatives contract. |
Derivatives also may create operational and legal risks for the Fund. There is no guarantee that derivatives will provide successful results and any success in their use depends on a variety of factors including the ability of the Advisers to predict correctly the direction of interest rates, securities prices, currency exchange rates and other factors. Recent legislation calls for new and/or expanded regulation of the derivatives markets. The extent and impact of the regulation are not yet completely known and may not be known for some time. New and/or expanded regulation of derivatives may make them more costly, may limit their availability, or may otherwise adversely affect their value or performance.
The Fund may use interest rate swaps to hedge the Fund's liability with respect to its leverage. A significant type of 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
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Additional Information Regarding the Fund (Unaudited) (continued)
the amount expected to be received under the swap agreement. 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 its leverage.
Rule 18f-4 under the 1940 Act governs a registered investment company's use of derivatives, short sales, reverse repurchase agreements, and certain other instruments. Under Rule 18f-4, the fund's must limit its derivatives exposure through a value-at-risk test, adopt and implement a derivatives risk management program and comply with certain reporting requirements. However, subject to certain conditions, funds that do not invest heavily in derivatives may be deemed limited derivatives users and would not be subject to the full requirements of Rule 18f-4. Under the rule, when the Fund trades reverse repurchase agreements or similar financing transactions, including certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the Fund’s asset coverage ratio or treat all such transactions as derivatives transactions. In addition, under the rule, the Fund is permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security (as defined under Section 18(g) of the 1940 Act), provided that, (i) the Fund intends to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the “Delayed-Settlement Securities Provision”). The Fund may otherwise engage in when-issued, forward-settling and non-standard settlement cycle securities transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the Fund treats any such transaction as a “derivatives transaction” for purposes of compliance with the rule. Furthermore, under the rule, the Fund is permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if the Fund reasonably believes, at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all such agreements as they come due. These requirements may limit the ability of the Fund to use derivatives, reverse repurchase agreements and similar financing transactions, and other relevant transaction as part of its investment strategies. These requirements may increase the cost of the Fund’s investments and cost of doing business, which could adversely affect investors.
Hedging Strategy Risk
Certain of the investment techniques that the Fund may employ for hedging will expose the Fund to additional or increased risks.
There may be an imperfect correlation between changes in the value of the Fund's portfolio holdings and hedging positions entered into by the Fund, which may prevent the Fund from achieving the intended hedge or expose the Fund to risk of loss. In addition, the Fund's success in using hedge instruments is subject to the Advisers’ ability to predict correctly changes in the relationships of such hedge instruments to the Fund's portfolio holdings, and there can be no assurance that the Advisers’ judgment in this respect will be accurate. Consequently, the use of hedging transactions might result in a poorer overall performance for the Fund, whether or not adjusted for risk, than if the Fund had not hedged its portfolio holdings.
The Advisers are under no obligation to engage in any hedging strategies, and may, in its discretion, choose not to engage in hedging strategies. Even if the Advisers desire to hedge some of the Fund's risks, suitable hedging transactions may not be available or, if available, attractive. A failure to hedge may result in losses to the value of the Fund's investments.
Counterparty Risk
The Fund will be subject to credit risk with respect to the counterparties to the derivative contracts purchased or sold by the Fund. Although the Advisers monitor the creditworthiness of the Fund's counterparties, there can be no assurance that the Fund's counterparties will not experience difficulties, possibly resulting in losses to the Fund. Counterparty risk also encompasses the risk of having concentrated exposure to one or more counterparties. If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances. Such risk is heightened in a market environment where interest rates are either high or rising.
Inflation Risk
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. To the extent that inflation occurs, it will reduce the real value of dividends paid by the Fund and the Fund’s Common Shares. Most emerging market countries, in particular, have experienced substantial, and in some periods extremely high and volatile, rates of inflation. Inflation and rapid fluctuations in inflation rates have had and may continue to have very negative effects on the economies and securities markets globally. In an attempt to control inflation, wage and price controls have been imposed at times in certain countries.
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Additional Information Regarding the Fund (Unaudited) (continued)
Market Events Risk
The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, investor sentiment and other factors that may or may not be related to the issuer of the security or other asset. Economies and financial markets throughout the world are increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, arrangements, actual or threatened wars or other armed conflicts (such as the Russia/Ukraine and Israel/Hamas conflicts), terrorism, natural disasters and other circumstances in one country or region could have profound impacts on global economies or markets. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund's investments may be negatively affected. In addition, any spread of an infectious illness, public health threat or similar issue could reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines, and generally have a significant impact on the world economy, which in turn could adversely affect the Fund's investments.
Russia/Ukraine Risk. In February 2022, Russia commenced a military attack on Ukraine. The outbreak of hostilities between the two countries and the threat of wider spread hostilities could have a severe adverse effect on the region and global economies, including significant negative impacts on the markets for certain securities and commodities, such as oil and natural gas. In addition, sanctions imposed on Russia by the United States and other countries, and any sanctions imposed in the future, could have a significant adverse impact on the Russian economy and related markets. The price and liquidity of investments may fluctuate widely as a result of the conflict and related events. How long the armed conflict and related events will last cannot be predicted. These tensions and any related events could have a significant impact on Fund performance and the value of the Funds’ investments.
Europe Related Risk.
A number of countries in Europe have experienced severe economic and financial difficulties. Many non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts; many other issuers have faced difficulties obtaining credit or refinancing existing obligations; financial institutions have in many cases required government or central bank support, have needed to raise capital, and/or have been impaired in their ability to extend credit; and financial markets in Europe and elsewhere have experienced extreme volatility and declines in asset values and liquidity. These difficulties may continue, worsen or spread within and outside Europe.
Responses to the financial problems by European governments, central banks and others, including austerity measures and reforms, may not work, may result in social unrest and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and others of their debt could have additional adverse effects on economies, financial markets and asset valuations around the world.
Government Intervention in Financial Markets Risk
U.S. federal and state governments and foreign governments, their regulatory agencies or self-regulatory organizations may take additional actions that affect the regulation of the securities in which the Fund invests, or the issuers of such securities, in ways that are unforeseeable. Under certain circumstances, the withdrawal of U.S. government and foreign government support could negatively affect financial markets generally as well as reduce the value and liquidity of certain securities.
Additionally, issuers of corporate fixed income securities might seek protection under the bankruptcy laws. Legislation or regulation may also change the way in which the Fund itself is regulated. Such legislation or regulation could limit or preclude the Fund's ability to achieve its investment objectives. The Investment Manager will monitor developments and seek to manage the Fund's portfolio in a manner consistent with achieving the Fund's investment objectives, but there can be no assurance that it will be successful in doing so.
In addition, policy and legislative changes in the United States and in other countries are affecting many aspects of financial regulation. New or revised laws or regulations may be imposed by the Security and Exchange Commission (“SEC”), the CFTC, the Internal Revenue Services (“IRS”), the U.S. Federal Reserve or other governmental regulatory authorities or self-regulatory organizations that could adversely affect the Fund’s performance. The Fund may also be adversely impacted by changes in the enforcement or interpretation of existing statutes and rules by governmental regulatory authorities or self-regulatory organizations. The impact of these changes on the markets, and the practical implications for market participants, may not be fully known for some time. Furthermore, volatile financial markets can expose the Fund to greater market and liquidity risk and potential difficulty in valuing portfolio instruments held by the Fund. The value of the Fund's holdings is also generally subject to the risk of future local, national, or global economic disturbances based on unknown weaknesses in the markets in which the Fund invests. In addition, it is not certain that the U.S. Government will intervene in response to a future market disturbance and the effect of any such future intervention cannot be predicted.
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Additional Information Regarding the Fund (Unaudited) (continued)
Cybersecurity Risk
The Fund is subject to direct cybersecurity risk. Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder information), or proprietary information, or cause the Fund, the Advisers and/or the Fund's service providers (including, but not limited to, Fund accountants, custodians, sub-custodians and transfer agents) to suffer data breaches, data corruption or lose operational functionality. Furthermore, the Fund may be an appealing target for cybersecurity threats such as hackers and malware.
Net Asset Value Discount
Shares of closed-end investment companies frequently trade at a discount from net asset value. This characteristic is a risk separate and distinct from the risk that net asset value will decrease. The Fund cannot predict whether its Shares in the future will trade at, below or above net asset value. This risk that shares of a closed-end fund might trade at a discount is more significant for investors who wish to sell their shares in a relatively short period of time. For those investors, realization of gain or loss on their investment is likely to be more dependent upon the existence of a premium or discount than upon portfolio performance.
Distribution Rate
It is the Fund's current policy to pay distributions on a monthly basis. If the Fund's investments do not generate sufficient income, the Fund may be required to liquidate a portion of its portfolio to fund these distributions, and therefore a portion or all of such distributions may represent a reduction of the shareholders' principal investment. Such liquidation might be at a time when independent investment judgment would not dictate such action, increasing the Fund's overall portfolio turnover (and related transaction costs) and making it more difficult for the Fund to achieve its investment objectives.
Non-Diversification Risk
The Fund is classified as a "non-diversified" management investment company under the 1940 Act. This means that the Fund is not subject to limits under the 1940 Act as to the proportion of its assets that may be invested in the securities of a single issuer. As a non-diversified investment company, the Fund may therefore invest its assets in securities of a smaller number of issuers or may invest a larger proportion of its assets in a single issuer than a diversified fund, and, as a result, would be more susceptible than a diversified fund to any single corporate, political, geographic or regulatory occurrence. Although the Fund must comply with certain diversification requirements in order to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended ("Code"), the Fund may be more susceptible to any single economic, political or regulatory occurrence than would be the case if it had elected to
diversify its holding sufficiently to be classified as a "diversified" management investment company under the 1940 Act. The Fund, however, intends to comply with the diversification requirements imposed by the Code for qualification as a regulated investment company.
Conflicts of Interest Risk
The Advisers’ advisory fees are based on net assets plus the amount of any borrowings for investment purposes. Consequently, the Advisers will benefit from an increase in the Fund's net assets resulting from an offering.
Additionally, the portfolio managers' management of "other accounts" may give rise to potential conflicts of interest in connection with their management of the Fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objectives as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby the portfolio manager could favor one account over another. However, the Advisers believe that these risks are mitigated by the fact that: (i) accounts with like investment strategies managed by a particular portfolio manager are generally managed in a similar fashion, subject to exceptions to account for particular investment restrictions or policies applicable only to certain accounts, differences in cash flows and account sizes, and similar factors; and (ii) portfolio manager personal trading is monitored to avoid potential conflicts. In addition, the Advisers have adopted trade allocation procedures that require equitable allocation of trade orders for a particular security among participating accounts.
In some cases, another account managed by the same portfolio manager may compensate the Advisers based on the performance of the portfolio held by that account. The existence of such a performance-based fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities.
Another potential conflict could include instances in which securities considered as investments for the Fund also may be appropriate for other investment accounts managed by the Advisers or their affiliates. Whenever decisions are made to buy or sell securities by the Fund and one or more of the other accounts simultaneously, the Advisers may aggregate the purchases and sales of the securities and will allocate the securities transactions in a manner that it believes to be equitable under the circumstances. As a result of the allocations, there may be instances where the Fund will not participate in a transaction that is allocated among other accounts. While these aggregation and allocation policies could have a detrimental effect on the price or amount of the securities available to the Fund from time to time, it is the opinion of the Advisers that the benefits from the policies outweigh any disadvantage that may arise from exposure to
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Additional Information Regarding the Fund (Unaudited) (continued)
simultaneous transactions. The Advisers has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures adopted under such policies will detect each and every situation in which a conflict arises.
From time to time, the Advisers may seed proprietary accounts for the purpose of evaluating a new investment strategy that eventually may be available to clients through one or more product structures. Such accounts also may serve the purpose of establishing a performance record for the strategy. The management by the Advisers of accounts with proprietary interests and nonproprietary client accounts may create an incentive to favor the proprietary accounts in the allocation of investment opportunities, and the timing and aggregation of investments. The Advisers' proprietary seed accounts may include long-short strategies, and certain client strategies may permit short sales. A conflict of interest arises if a security is sold short at the same time as a long position, and continuous short selling in a security may adversely affect the stock price of the same security held long in client accounts. The Advisers have adopted various policies to mitigate these conflicts.
In addition, the 1940 Act limits the Fund’s ability to enter into certain transactions with certain affiliates of the Advisers. As a result of these restrictions, the Fund may be prohibited from buying or selling any security directly from or to any portfolio company of a fund managed by the Advisers or one of their affiliates. Nonetheless, the Fund may under certain circumstances purchase any such portfolio company’s loans or securities in the secondary market, which could create a conflict for the Advisers between the interests of the Fund and the portfolio company, in that the ability of the Advisers to recommend actions in the best interest of the Fund might be impaired. The 1940 Act also prohibits certain “joint” transactions with certain of the Fund’s affiliates (which could include other abrdn-managed Funds), which could be deemed to include certain types of investments, or restructuring of investments, in the same portfolio company (whether at the same or different times). These limitations may limit the scope of investment opportunities that would otherwise be available to the Fund. The Board has approved policies and procedures reasonably designed to monitor potential conflicts of interest. The Board will review these procedures and any conflicts that may arise.
The Advisers or their respective members, officers, directors, employees, principals or affiliates may come into possession of material, non-public information. The possession of such information may limit the ability of the Fund to buy or sell a security or otherwise to participate in an investment opportunity. Situations may occur where the Fund could be disadvantaged because of the investment activities conducted by the Advisers for other clients, and the Advisers will not employ information barriers with regard to its operations on behalf of its registered and private funds, or other accounts. In certain circumstances, employees of the Advisers may serve as board
members or in other capacities for portfolio or potential portfolio companies, which could restrict the Fund’s ability to trade in the securities of such companies.
Anti-Takeover Charter Provisions
The Fund's charter and by-laws contain several provisions that may be regarded as "anti-takeover" because they have the effect of maintaining continuity of management. Also, charter provisions subject the Fund to certain provisions of the Maryland General Corporation Law with respect to unsolicited takeovers.
Repurchase Agreement Risk
Repurchase agreements may involve risks in the event of default or insolvency of the seller, including possible delays or restrictions with respect to the Fund's ability to dispose of the underlying securities, and the possibility that the collateral might not be sufficient to cover any losses incurred by the Fund.
Securities Lending Risk
In connection with its loans of portfolio securities, the Fund may be exposed to the risk of delay in recovery of the loaned securities or possible loss of rights in the collateral should the borrower become insolvent. The Fund also bears the risk of loss on the investment of cash collateral. There is also the risk that, in the event of default by the borrower, the collateral might not be sufficient to cover any losses incurred by the Fund. There can be no assurance that the return to the Fund from a particular loan, or from its loans overall, will exceed the related costs and any related losses.
Tax Risk
The Fund may invest in securities of which the federal income tax treatment may not be clear or may be subject to recharacterization by the IRS. It could be more difficult for the Fund to comply with the United States tax requirements applicable to regulated investment companies, or with other tax requirements applicable to foreign investors, if the tax characterization of the Fund's investments or the tax treatment of the income from such investments were successfully challenged by the IRS.
FUNDAMENTAL INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies, which cannot be changed without the approval of the holders of a majority of the Fund's outstanding voting securities, which as used herein means the lesser of (i) 67% or more of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares. In the event that the Fund issues preferred shares, changes in investment restrictions would also require approval by a majority of the outstanding preferred shares, voting as a separate class. If a percentage restriction on investment or use of assets set forth below is adhered to at the
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Additional Information Regarding the Fund (Unaudited) (continued)
time a transaction is effected, later changes in a percentage resulting from changing values will not be considered a violation, except that any borrowing by the Fund that exceeds the corresponding fundamental investment limitation below must be reduced to meet such limitation within the period required by the 1940 Act (currently three days).
The Fund will not:
1. Issue senior securities except (i) insofar as the Fund may be deemed to have issued a senior security in connection with any repurchase or securities lending agreement or any borrowing permitted by these investment restrictions, and (ii) that the Fund may issue one or more series of a class of preferred shares pursuant to its Articles of Amendment and Restatement.
2. Borrow money, except as permitted under, or to the extent not prohibited by, the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction, from time to time
3. "Concentrate" its investments in a particular industry or group of industries, except as permitted under the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction from time to time, and further provided that this limitation will not apply to the Fund's investments in, among other things, (i) securities of other investment companies; (ii) securities issued or guaranteed as to principal and/or interest by the U.S. Government, its agencies or instrumentalities; or (iii) repurchase agreements (collateralized by the instruments described in clause (ii)).
4. Make loans except through the purchase of debt obligations and the entering into of repurchase and securities lending agreements in accordance with the Fund's investment objectives and policies.
5. Act as an underwriter of other issuer's securities (except to the extent the Fund may be deemed to be an underwriter in connection with the sale of securities in the Fund's investment portfolio).
6. (i) Purchase or sell real estate, except that it may purchase and sell mortgage-backed securities, debt securities issued by real estate investment trusts, and debt securities of companies which deal in real estate or interests therein, or (ii) purchase or sell commodities (other than transactions in foreign currencies and forward currency contracts or derivatives in accordance with the Fund's investment objectives and policies).
For the purposes of determining compliance with the Fund's policy on concentrating in any one industry or group of industries, the Fund will endeavor to consider the concentration policy of underlying investment companies in which the Fund is invested.
EFFECTS OF LEVERAGE
The following table is furnished in response to requirements of the SEC. It is designed to, among other things, illustrate the effects of leverage through the use of senior securities, as that term is defined under Section 18 of the 1940 Act, on Common Share total return, assuming investment portfolio total returns (consisting of income and changes in the value of investments held in a Fund's portfolio) of -10%, -5%, 0%, 5% and 10%. The table below reflects the Fund's continued use of the revolving credit facility, as of October 31, 2023 as a percentage of total managed assets (including assets attributable to such leverage) and the annual return that the Fund's portfolio must experience (net of expenses) in order to cover such costs. The information below does not reflect the Fund's use of certain other forms of economic leverage achieved through the use of other instruments or transactions not considered to be senior securities under the 1940 Act, such as covered credit default swaps or other derivative instruments, if any.
The assumed investment portfolio returns in the table below are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced by the Fund. Your actual returns may be greater or less than those appearing below. In addition, actual borrowing expenses associated with reverse repurchase agreements (or dollar rolls or borrowings, if any) used by the Fund may vary frequently and may be significantly higher or lower than the rate used for the example below.
Assumed annual returns on the Fund's portfolio (net of expenses) |
(10%) |
(5%) |
0% |
5% |
10% |
Corresponding return of shareholder |
(16.7%) |
(9.7%) |
(2.7%) |
4.4% |
11.4% |
Based on estimated indebtedness of $20,350,000 (representing approximately 28.87% of the Fund's Managed Assets as of October 31, 2023), and an annual interest rate of 6.53% (effective interest rate as of October 31, 2023), the Fund's investment portfolio at fair value would have to produce an annual return of approximately 1.89% to cover annual interest payments on the estimated debt.
Share total return is composed of two elements – the distributions paid by the Fund to holders of Shares (the amount of which is largely determined by the net investment income of the Fund after paying dividend payments on any preferred shares issued by the Fund and expenses on any forms of leverage outstanding) and gains or losses on the value of the securities and other instruments the Fund owns. As required by SEC rules, the table assumes that a Fund is more likely to
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Additional Information Regarding the Fund (Unaudited) (concluded)
suffer capital losses than to enjoy capital appreciation. For example, to assume a total return of 0%, a Fund must assume that the income it receives on its investments is entirely offset by losses in the value of those investments. This table reflects hypothetical performance of a Fund's portfolio and not the actual performance of the Fund's Shares, the value of which is determined by market forces and other factors.
Should the Fund elect to add additional leverage to its portfolio, any benefits of such additional leverage cannot be fully achieved until the
proceeds resulting from the use of such leverage have been received by the Fund and invested in accordance with the Fund's investment objective and policies. As noted above, the Fund's willingness to use additional leverage, and the extent to which leverage is used at any time, will depend on many factors, including, among other things, the Adviser's assessment of the yield curve environment, interest rate trends, market conditions and other factors.
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Dividend Reinvestment and Optional Cash Purchase Plan (Unaudited)
The Fund intends to distribute to shareholders substantially all of its net investment income and to distribute any net realized capital gains at least annually. Net investment income for this purpose is income other than net realized long-term and short-term capital gains net of expenses. Pursuant to the Dividend Reinvestment and Optional Cash Purchase Plan (the “Plan”), shareholders whose shares of common stock are registered in their own names will be deemed to have elected to have all distributions automatically reinvested by Computershare Trust Company N.A. (the “Plan Agent”) in the Fund shares pursuant to the Plan, unless such shareholders elect to receive distributions in cash. Shareholders who elect to receive distributions in cash will receive such distributions paid by check in U.S. Dollars mailed directly to the shareholder by the Plan Agent, as dividend paying agent. In the case of shareholders such as banks, brokers or nominees that hold shares for others who are beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by the shareholders as representing the total amount registered in such shareholders’ names and held for the account of beneficial owners that have not elected to receive distributions in cash. Investors that own shares registered in the name of a bank, broker or other nominee should consult with such nominee as to participation in the Plan through such nominee and may be required to have their shares registered in their own names in order to participate in the Plan. Please note that the Fund does not issue certificates so all shares will be registered in book entry form. The Plan Agent serves as agent for the shareholders in administering the Plan. If the Directors of the Fund declare an income dividend or a capital gains distribution payable either in the Fund’s common stock or in cash, nonparticipants in the Plan will receive cash and participants in the Plan will receive common stock, to be issued by the Fund or purchased by the Plan Agent in the open market, as provided below. If the market price per share (plus expected per share fees) on the valuation date equals or exceeds NAV per share on that date, the Fund will issue new shares to participants at NAV; provided, however, that if the NAV is less than 95% of the market price on the valuation date, then such shares will be issued at 95% of the market price. The valuation date will be the payable date for such distribution or dividend or, if that date is not a trading day on the NYSE, the immediately preceding trading date. If NAV exceeds the market price of Fund shares at such time, or if the Fund should declare an income dividend or capital gains distribution payable only in cash, the Plan Agent will, as agent for the participants, buy Fund shares in the open market, on the NYSE or elsewhere, for the participants’ accounts on, or shortly after, the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the NAV of the Fund share, the average per share purchase price paid by the Plan Agent may exceed the NAV of the Fund’s shares, resulting in the acquisition of fewer shares than if the distribution had been paid in shares issued by the Fund on the dividend payment date. Because of
the foregoing difficulty with respect to open-market purchases, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent will cease making open-market purchases and will receive the uninvested portion of the dividend amount in newly issued shares at the close of business on the last purchase date.
Participants have the option of making additional cash payments of a minimum of $50 per investment (by check, one-time online bank debit or recurring automatic monthly ACH debit) to the Plan Agent for investment in the Fund’s common stock, with an annual maximum contribution of $250,000. The Plan Agent will wait up to three business days after receipt of a check or electronic funds transfer to ensure it receives good funds. Following confirmation of receipt of good funds, the Plan Agent will use all such funds received from participants to purchase Fund shares in the open market on the 25th day of each month or the next trading day if the 25th is not a trading day.
If the participant sets up recurring automatic monthly ACH debits, funds will be withdrawn from his or her U.S. bank account on the 20th of each month or the next business day if the 20th is not a banking business day and invested on the next investment date. The Plan Agent maintains all shareholder accounts in the Plan and furnishes written confirmations of all transactions in an account, including information needed by shareholders for personal and tax records. Shares in the account of each Plan participant will be held by the Plan Agent in the name of the participant, and each shareholder’s proxy will include those shares purchased pursuant to the Plan. There will be no brokerage charges with respect to common shares issued directly by the Fund. However, each participant will pay a per share fee of $0.02 incurred with respect to the Plan Agent’s open market purchases in connection with the reinvestment of dividends, capital gains distributions and voluntary cash payments made by the participant. Per share fees include any applicable brokerage commissions the Plan Agent is required to pay.
Participants also have the option of selling their shares through the Plan. The Plan supports two types of sales orders. Batch order sales are submitted on each market day and will be grouped with other sale requests to be sold. The price will be the average sale price obtained by Computershare’s broker, net of fees, for each batch order and will be sold generally within 2 business days of the request during regular open market hours. Please note that all written sales requests are always processed by Batch Order. ($10 and $0.12 per share). Market Order sales will sell at the next available trade. The shares are sold real time when they hit the market, however an available trade must be presented to complete this transaction. Market Order sales may only
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Dividend Reinvestment and Optional Cash Purchase Plan (Unaudited) (concluded)
be requested by phone at 1-800-647-0584 or using Investor Center through www.computershare.com/buyaberdeen. ($25 and $0.12 per share).
The receipt of dividends and distributions under the Plan will not relieve participants of any income tax that may be payable on such dividends or distributions. The Fund or the Plan Agent may terminate the Plan as applied to any voluntary cash payments made and any dividend or distribution paid subsequent to notice of the termination sent to members of the Plan at least 30 days prior to the record date for such dividend or distribution. The Plan also may be amended by
the Fund or the Plan Agent, but (except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority) only by mailing a written notice at least 30 days prior to the effective date to the participants in the Plan. All correspondence concerning the Plan should be directed to the Plan Agent by phone at 1-800-647-0584, using Investor Center through www.computershare.com/buyaberdeen or in writing to Computershare Trust Company N.A., P.O. Box 43006, Providence, RI 02940-3078.
abrdn Global Income Fund, Inc. | 65 |
Management of the Fund (Unaudited)
As of October 31, 2023
The names, years of birth and business addresses of the Board Members and officers of the Fund as of the most recent fiscal year end, their principal occupations during at least the past five years, the number of portfolios each Board Member oversees and other directorships they hold are provided in the tables below. Board Members 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 or the Fund's Advisers are included in the table below under the heading “Interested Board Members.” Board Members who are not interested persons, as described above, are referred to in the table below under the heading “Independent Board Members.” abrdn Inc., its parent company abrdn plc, and its advisory affiliates are collectively referred to as “abrdn” in the tables below.
Name, Address and Year of Birth | Position(s) Held with the Fund | Term of Office and Length of Time Served | Principal Occupation(s) During at Least the Past Five Years | Number of Registered Investment Companies ("Registrants") consisting of Investment Portfolios ("Portfolios") in Fund Complex* Overseen by Board Members | Other Directorships Held by Board Member** |
Interested Board Members | | | | | |
Stephen Bird† co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1967 | Class II Director | Term as Director expires 2024; Director since 2021 | Mr. Bird joined the Board of abrdn plc in July 2020 as Chief Executive-Designate, and was formally appointed Chief Executive Officer in September 2020. Previously, Mr. Bird served as chief executive officer of global consumer banking at Citigroup from 2015, retiring from the role in November 2019. His responsibilities encompassed all consumer and commercial banking businesses in 19 countries, including retail banking and wealth management, credit cards, mortgages, and operations and technology supporting these businesses. Prior to this, Mr. Bird was chief executive for all of Citigroup’s Asia Pacific business lines across 17 markets in the region, including India and China. Mr. Bird joined Citigroup in 1998, and during his 21 years with the company he held a number of leadership roles in banking, operations and technology across its Asian and Latin American businesses. Before this, he held management positions in the UK at GE Capital – where he was director of UK operations from 1996 to 1998 – and at British Steel. | 15 Registrants consisting of 33 Portfolios | None. |
66 | abrdn Global Income Fund, Inc. |
Management of the Fund (Unaudited) (continued)
As of October 31, 2023
Name, Address and Year of Birth | Position(s) Held with the Fund | Term of Office and Length of Time Served | Principal Occupation(s) During at Least the Past Five Years | Number of Registered Investment Companies ("Registrants") consisting of Investment Portfolios ("Portfolios") in Fund Complex* Overseen by Board Members | Other Directorships Held by Board Member** |
Independent Board Members | | | | | |
Radhika Ajmera co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1964 | Class III Director | Term expires 2025; Director since 2021 | Ms. Ajmera was appointed Chair of abrdn Japan Equity Fund Inc in 2017, having served as a director since 2014. She has been an independent non-executive director of abrdn Asia-Pacific Income Fund VCC since 2015. She is also an independent non-executive director of abrdn Asia-Pacific Income Fund Inc, abrdn Global Income Fund Inc and abrdn Australia Fund Inc since 2021. She has over 20 years’ experience in fund management, predominantly in emerging markets. She has also held a number of UK closed end fund non-executive directorships. Ms. Ajmera is a graduate of the London School of Economics. | 5 Registrants consisting of 23 Portfolios | None. |
P. Gerald Malone co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1950 | Chair of the Board; Class I Director | Term expires 2026; Director since 2005 | Mr. Malone is, by profession, a lawyer of over 40 years. Currently, he is a non-executive director of a number of U.S. companies, including Medality Medical (medical technology company) since 2018. He is also Chairman of many of the open and closed end funds in the Fund Complex. He previously served as a non-executive director of U.S. healthcare company Bionik Laboratories Corp. (2018 - July 2022), as Independent Chairman of UK companies Crescent OTC Ltd (pharmaceutical services) until February 2018; and fluidOil Ltd. (oil services) until June 2018; U.S. company Rejuvenan llc (wellbeing services) until September 2017 and as chairman of UK company Ultrasis plc (healthcare software services company) until October 2014. Mr. Malone was previously a Member of Parliament in the U.K. from 1983 to 1997 and served as Minister of State for Health in the U.K. government from 1994 to 1997. | 9 Registrants consisting of 27 Portfolios | None. |
abrdn Global Income Fund, Inc. | 67 |
Management of the Fund (Unaudited) (continued)
As of October 31, 2023
Name, Address and Year of Birth | Position(s) Held with the Fund | Term of Office and Length of Time Served | Principal Occupation(s) During at Least the Past Five Years | Number of Registered Investment Companies ("Registrants") consisting of Investment Portfolios ("Portfolios") in Fund Complex* Overseen by Board Members | Other Directorships Held by Board Member** |
William J. Potter co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1948 | Class II Director | Term expires 2024; Director since 1992 | Mr. Potter has been the Chairman of Arsenal Square Holdings (consulting and advisory) since 2018, a Director of Alexandria Bancorp (international banking and trustee services from 1989-2021), director of Howell Biopharma Ltd (healthcare) since 2018, director and chairman of Arrow Robotics Ltd (technology) since 2018, and advisory board member of Nuvve Holding Corporation (technology) since 2020. He also serves on the boards or advisory boards of a number of private companies and charities including the Queen Elizabeth September 11th Garden and an Educational and Cancer Foundation. | 3 Registrants consisting of 3 Portfolios | None. |
Moritz Sell co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1967 | Class I Director | Term expires 2026; Director since 2018 | Mr. Sell currently serves as a Principal at Edison Holdings GmbH (commercial real estate and venture capital) (since October 2015). In addition, Mr. Sell served as Senior Advisor to Markston International, LLC, an independent investment manager (from 2014 through 2019). | 3 Registrants consisting of 3 Portfolios | Swiss Helvetia Fund (since June 2017) and High Income Securities Fund (since June 2018). |
* | As of the most recent fiscal year end, the Fund Complex has a total of 18 Registrants with each Board member serving on the Boards of the number of Registrants listed. Each Registrant in the Fund Complex has one Portfolio except for two Registrants that are open-end funds, abrdn Funds and abrdn ETFs, which each have multiple Portfolios. The Registrants in the Fund Complex are as follows: abrdn Asia-Pacific Income Fund, Inc., abrdn Global Income Fund, Inc., abrdn Australia Equity Fund, Inc., abrdn Emerging Markets Equity Income Fund, Inc., The India Fund, Inc., abrdn Japan Equity Fund, Inc., abrdn Income Credit Strategies Fund, abrdn Global Dynamic Dividend Fund, abrdn Global Premier Properties Fund, abrdn Total Dynamic Dividend Fund, abrdn Global Infrastructure Income Fund, abrdn National Municipal Income Fund, abrdn Healthcare Investors, abrdn Life Sciences Investors, abrdn Healthcare Opportunities Fund, abrdn World Healthcare Fund, abrdn Funds (19 Portfolios), and abrdn ETFs (3 Portfolios). |
** | Current directorships (excluding Fund Complex) as of the most recent fiscal year end held in (1) any other investment companies registered under the 1940 Act, (2) any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “1934 Act”) or (3) any company subject to the requirements of Section 15(d) of the Exchange Act. |
† | Mr. Bird is considered to be an “interested person” of the Fund as defined in the 1940 Act because of his affiliation with abrdn. |
68 | abrdn Global Income Fund, Inc. |
Management of the Fund (Unaudited) (continued)
As of October 31, 2023
Officers of the Fund
Name, Address and Year of Birth | Position(s) Held with the Fund | Term of Office* and Length of Time Served | Principal Occupation(s) During at Least the Past Five Years |
Kenneth Akintewe** co abrdn Asia Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1980 | Vice President | Since 2014 | Currently, Head of Asian Sovereign Debt on the Asian Fixed Income Team at abrdn. Mr. Akintewe joined abrdn in 2002. |
Joseph Andolina** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1978 | Chief Compliance Officer; Vice President –Compliance | Since 2017 | Currently, Chief Risk Officer – Americas for abrdn Inc. and serves as the Chief Compliance Officer for abrdn Inc. Prior to joining the Risk and Compliance Department, he was a member of abrdn Inc.'s Legal Department, where he served as US Counsel since 2012. |
Mark Baker** co abrdn Asia Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1981 | Vice President | Since 2019 | Currently, Head of Fixed Income – Hong Kong on the Asian Fixed Income Team at abrdn. Mr. Baker joined abrdn in 2012. |
Katherine Corey** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1985 | Vice President | Since 2023 | Currently, Senior Legal Counsel, Product Governance US for abrdn Inc. Ms. Corey joined abrdn Inc. as U.S. Counsel in 2013. |
Sharon Ferrari** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1977 | Treasurer and Chief Financial Officer | Treasurer and Chief Financial Officer Since 2023; Fund Officer Since 2009 | Currently, Director, Product Management for abrdn Inc. Ms. Ferrari joined abrdn Inc. as a Senior Fund Administrator in 2008. |
Katie Gebauer** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1986 | Vice President | Since 2023 | Currently, Chief Compliance Officer—ETFs and serves as the Chief Compliance Officer for abrdn ETFs Advisors LLC. Ms. Gebauer joined abrdn Inc. in 2014. |
Alan Goodson** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1974 | Vice President | Since 2009 | Currently, Executive Director, Product & Client Solutions – Americas for abrdn Inc., overseeing Product Management & Governance , Product Development and Client Solutions for registered and unregistered investment companies in the U.S., Brazil and Canada. Mr. Goodson is Director and Vice President of abrdn Inc. and joined abrdn Inc. in 2000. |
Heather Hasson** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1982 | Vice President | Since 2022 | Currently, Senior Product Solutions and Implementation Manager, Product Governance US for abrdn Inc. Ms. Hasson joined the company in 2006. |
Robert Hepp** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1986 | Vice President | Since 2022 | Currently, Senior Product Governance Manager – US for abrdn Inc. Mr. Hepp joined abrdn Inc. as a Senior Paralegal in 2016. |
abrdn Global Income Fund, Inc. | 69 |
Management of the Fund (Unaudited) (concluded)
As of October 31, 2023
Name, Address and Year of Birth | Position(s) Held with the Fund | Term of Office* and Length of Time Served | Principal Occupation(s) During at Least the Past Five Years |
Megan Kennedy** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1974 | Vice President and Secretary | Since 2008 | Currently, Senior Director, Product Governance for abrdn Inc. Ms. Kennedy joined abrdn Inc. in 2005. |
Andrew Kim** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1983 | Vice President | Since 2022 | Currently, Senior Product Governance Manager – US for abrdn Inc. Mr. Kim joined abrdn Inc. as a Product Manager in 2013. |
Brian Kordeck** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1978 | Vice President | Since 2022 | Currently, Senior Product Manager – US for abrdn Inc. Mr. Kordeck joined abrdn Inc. as a Senior Fund Administrator in 2013. |
Michael Marsico** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1980 | Vice President | Since 2022 | Currently, Senior Product Manager – US for abrdn Inc. Mr. Marsico joined abrdn Inc. as a Fund Administrator in 2014. |
Adam McCabe** co abrdn Asia Limited 21 Church Street #01-01 Capital Square Two Singapore 049480 Year of Birth: 1979 | Vice President | Since 2011 | Currently, Head of Fixed Income – Asia Pacific at abrdn. Mr. McCabe joined abrdn in 2009 following the acquisition of certain asset management businesses from Credit Suisse. |
Christian Pittard** c/o abrdn Investments Limited 280 Bishopsgate London, EC2M 4AG Year of Birth: 1973 | President | Since 2009 | Currently, Head of Closed End Funds & Managing Director - Corporate Finance. Mr. Pittard joined abrdn from KPMG in 1999. |
Lucia Sitar** co abrdn Inc. 1900 Market Street Suite 200 Philadelphia, PA 19103 Year of Birth: 1971 | Vice President | Since 2008 | Currently, Vice President and Head of Product Management and Governance for abrdn Inc. since 2020. Previously, Ms. Sitar was Managing U.S. Counsel for abrdn Inc. She joined abrdn Inc. as U.S. Counsel in 2007. |
* | Officers hold their positions with the Fund until a successor has been duly elected and qualifies. Officers are appointed annually at a meeting of the Fund Board. |
** | Each officer may hold officer position(s) in one or more other funds which are part of the Fund Complex. |
Further information about the Fund's Board Members and Officers is available in the Fund's Statement of Additional Information, which can be obtained without charge by calling (800) 522-5465.
70 | abrdn Global Income Fund, Inc. |
Additional Information (unaudited)
Summary of Fund Expenses
The purpose of the following table and the example below is to help you understand the fees and expenses that holders of Common Shares (“Common Shareholders”) would bear directly or indirectly. The table and example below are based on the Fund’s capital structure as of October 31, 2023. The expenses shown in the table under “Other expenses,” “Interest expenses on bank borrowings” and “Total annual expenses” are based on the Fund’s annual report dated October 31, 2023. As of October 31, 2023, the Fund had $20,350,000 of leverage outstanding through bank borrowings which represented 28.87% of the Managed Assets as of October 31, 2023. The table reflects Fund expenses as a percentage of net assets attributable to Common Shares. The following table should not be considered a representation of the Fund’s future expenses. Actual expenses may be greater or less than those shown below.
Common Shareholder transaction expenses |
|
Sales load (as a percentage of offering price)(1) |
1.50% |
Offering expenses (as a percentage of offering price)(2) |
1.55% |
Dividend reinvestment and optional cash purchase plan fees (per share for open-market purchases of common shares)(3) |
|
Fee for Open Market Purchases of Common Shares |
$0.02 (per share) |
Fee for Optional Shares Purchases |
$5.00 (max) |
Sales of Shares Held in a Dividend Reinvestment Account |
$0.12 (per share) and $25.00 (max) |
|
Annual expenses (as a percentage of net assets attributable to Common Shares) |
Advisory fee(4) |
0.88% |
Interest expenses on bank borrowings(5) |
2.15% |
Other expenses |
1.50% |
Total annual expenses |
4.53% |
(1) Represents the estimated commission with respect to the Common Shares being sold in the Offering. Jones Trading will be entitled to compensation of 1.00% to 3.00% of the gross proceeds of the sale of any Common Shares under the Sales Agreement, with the exact amount of such compensation to be mutually agreed upon in writing by the Fund and Jones Trading from time to time. The Fund has assumed that Jones Trading will receive a commission of 1.50% of the gross sale proceeds of the Common Shares sold in the Offering. This is the only sales load to be paid in connection with the Offering.
(2) Offering expenses payable by the Fund will be deducted from the proceeds, before expenses, to the Fund.
(3) Shareholders who participate in the Fund’s Dividend Reinvestment and Optional Cash Purchase Plan (the “Plan”) may be subject to fees on certain transactions. The Plan Agent’s (as defined under “Dividend Reinvestment and Optional Cash Purchase Plan” in the Fund’s Prospectus) fees for the handling of the reinvestment of dividends will be paid by the Fund; however, participating shareholders will pay a $0.02 per share fee incurred in connection with open-market purchases in connection with the reinvestment of dividends, capital gains distributions and voluntary cash payments made by the participant, which will be deducted from the value of the dividend. For optional share purchases, shareholders will also be charged a $2.50 fee for automatic debits from a checking/savings account, a $5.00 one-time fee for online bank debit and/or $5.00 for check. Shareholders will be subject to $0.12 per share fee and either a $10.00 fee (for batch orders) or $25.00 fee (for market orders) for sales of shares held in a dividend reinvestment account. Per share fees include any applicable brokerage commissions the Plan agent is required to pay. For more details about the Plan, see “Dividend Reinvestment and Optional Cash Purchase Plan” in the Fund’s Prospectus.
(4) The Investment Manager receives a monthly fee 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. The advisory fee percentage calculation assumes the use of leverage by the Fund as discussed in note (5). To derive the annual advisory fee as a percentage of the Fund’s net assets (which are the Fund’s total assets less all of the Fund’s liabilities), the Fund’s average Managed Assets for the year ended October 31, 2023 (which includes the use of leverage discussed in note (5)) were multiplied by the annual advisory fee rate and then divided by the Fund’s average net assets for the same period.
abrdn Global Income Fund, Inc. |
71 |
Additional Information (unaudited) (continued)
(5) The percentage in the table is based on total borrowings of $20,350,000 (the balance outstanding under the Fund’s credit facility as of October 31, 2023), representing approximately 28.87% of the Fund’s Managed Assets and an average interest rate during the year ended October 31, 2023 of 5.94%. There can be no assurances that the Fund will be able to obtain such level of borrowing (or to maintain its current level of borrowing), that the terms under which the Fund borrows will not change, or that the Fund’s use of leverage will be profitable. The expenses shown under “Interest expense on bank borrowings” in the table above reflect the cost to the Fund of borrowings, expressed as a percentage of the Fund’s net assets as of October 31, 2022, based on interest rates in effect as of October 31, 2023. The Fund currently intends during the next twelve months to maintain a similar proportionate amount of borrowings but may increase such amount to 33 1/3% of the average daily value of the Fund’s total assets.
Example
The following examples illustrate the expenses you would pay on a $1,000 investment in common shares assuming that (i) all dividends and other distributions are reinvested at NAV (ii) the percentage amounts listed under “Total annual expenses” above remain the same in the years shown and (iii) a 5% annual portfolio total return.(1)
The following example does not include the sales load:
1 Year |
3 Years |
5 Years |
10 Years |
$ 45 |
$ 137 |
$ 229 |
$ 464 |
The following example assumes a transaction fee of 3.05%, as a percentage of the offering price, as if it were borne solely by you, as purchaser(2):
1 Year |
3 Years |
5 Years |
10 Years |
$ 75 |
$ 163 |
$ 253 |
$ 480 |
(1) The examples above should not be considered representations of future expenses. Actual expenses may be higher or lower than those shown. The examples assume that all dividends and distributions are reinvested at net asset value. The Fund’s actual rate of return may be greater or less than the hypothetical 5% return shown in the examples. For more complete descriptions of certain of the Fund’s costs and expenses, see “Management of the Fund — Advisory Agreements” in the Fund’s Prospectus.
(2) Notwithstanding this assumption, in actuality, these fees will be indirectly borne by all holders of Common Shares.
Senior Securities
The following table sets forth information about the Fund’s outstanding senior securities as of the end of each of the Fund’s last ten fiscal years. The Fund’s senior securities during this time period are comprised of borrowings which constitutes a “senior security” as defined in the 1940 Act. The information in this table for the fiscal years ended 2023, 2022, 2021, 2020, 2019 and 2018 has been audited by KPMG LLP, independent registered public accounting firm. The Fund’s audited financial statements, including the report of KPMG LLP thereon, and accompanying notes thereto, are included in this Annual Report.
Fiscal Period Ended) |
Title of Security |
Total Principal Amount Outstanding |
Asset Coverage Per $1,000 of Principal Amount |
October 31, 2023 |
Senior Securities |
$ 20,350,000 |
$ 3,463 |
October 31, 2022 |
Senior Securities |
$ 17,350,000 |
$ 3,523 |
October 31, 2021 |
Senior Securities |
$ 21,900,000 |
$ 3,542 |
October 31, 2020 |
Senior Securities |
$ 20,300,000 |
$ 3,815 |
October 31, 2019 |
Senior Securities |
$ 29,300,000 |
$ 3,332 |
October 31, 2018 |
Senior Securities |
$ 28,600,000 |
$ 3,437 |
October 31, 2017 |
Senior Securities |
$ 31,500,000 |
$ 3,540 |
October 31, 2016 |
Senior Securities |
$ 31,500,000 |
$ 3,559 |
October 31, 2015 |
Senior Securities |
$ 31,500,000 |
$ 3,633 |
October 31, 2014 |
Senior Securities |
$ 40,000,000 |
$ 3,641 |
72 |
abrdn Global Income Fund, Inc. |
Additional Information (unaudited) (concluded)
Net Asset Value and Market Price Information
Net Asset Value
The Fund’s currently outstanding Common Shares, and the Common Shares offered pursuant to the Prospectus Supplement and the accompanying Prospectus are listed on the NYSE American. The Common Shares commenced trading on the New York Stock Exchange (“NYSE”) on February 28, 1992. Effective November 4, 2002, the Fund transferred the listing of its Common Shares from the NYSE to the NYSE American (formerly, American Stock Exchange).
The Common Shares have traded both at a premium and at a discount to the Fund’s NAV per Common Share. Although the Common Shares recently have traded at a premium to NAV, there can be no assurance that this will continue after the Offering nor that the Common Shares will not trade at a discount in the future. Shares of closed-end investment companies frequently trade at a discount to NAV. The Fund’s NAV will be reduced immediately following an offering of the Common Shares due to the costs of such offering, which will be borne entirely by the Fund. The sale of Common Shares by the Fund (or the perception that such sales may occur) may have an adverse effect on prices of Common Shares in the secondary market. An increase in the number of Common Shares available may result in downward pressure on the market price for Common Shares.
As of December 26, 2023, 13,397,419 Common Shares were outstanding. The last reported sales price, NAV per Common Share and percentage premium to NAV per Common Share on December 26, 2023 was $6.63, $4.04 and 64.11%, respectively. The Fund cannot predict whether its Common Shares will trade in the future at a premium to or discount from NAV, or the level of any premium or discount. Shares of closed-end investment companies frequently trade at a discount from NAV.
Market Price Information
The Fund’s Common Shares are publicly held and are listed and traded on the NYSE American (trading symbol “FCO”). The following table sets forth for the fiscal quarters indicated the highest and lowest daily prices during the applicable quarter at the close of market on the NYSE American per Common Share along with (i) the highest and lowest closing NAV and (ii) the highest and lowest premium or discount from NAV represented by such prices at the close of the market on the NYSE American.
|
NYSE Market Price(1) |
NAV at NYSE Market Price(1) |
Market Premium/(Discount) to NAV on Date of NYSE Market Price(1) |
Quarter Ended (2) |
High |
Low |
High |
Low |
High |
Low |
October 31, 2023 |
$ 6.47 |
$ 5.74 |
$ 4.13 |
$ 3.70 |
62.83 % |
40.49 % |
July 31, 2023 |
$ 6.38 |
$ 5.01 |
$ 4.18 |
$ 4.04 |
53.27 % |
21.31 % |
April 30, 2023 |
$ 5.79 |
$ 4.94 |
$ 4.43 |
$ 4.07 |
35.71 % |
20.19 % |
January 31, 2023 |
$ 5.69 |
$ 4.39 |
$ 4.39 |
$ 3.95 |
30.95 % |
7.06 % |
October 31, 2022 |
$ 5.35 |
$ 4.30 |
$ 4.59 |
$ 3.88 |
18.63 % |
8.04 % |
July 31,2022 |
$ 5.90 |
$ 4.95 |
$ 4.92 |
$ 4.23 |
21.62 % |
14.58 % |
April 30, 2022 |
$ 7.35 |
$ 5.55 |
$ 5.90 |
$ 4.91 |
25.64 % |
9.90 % |
January 31, 2022 |
$ 8.44 |
$ 6.78 |
$ 6.30 |
$ 5.84 |
34.82 % |
11.15 % |
October 31, 2021 |
$ 9.71 |
$ 7.70 |
$ 6.61 |
$ 6.28 |
48.50 % |
21.80 % |
July 31, 2021 |
$ 9.33 |
$ 8.36 |
$ 6.82 |
$ 6.53 |
42.90 % |
23.50 % |
April 30, 2021 |
$ 8.79 |
$ 7.98 |
$ 7.04 |
$ 6.67 |
29.26 % |
14.16 % |
January 31, 2021 |
$ 8.10 |
$ 7.45 |
$ 7.10 |
$ 6.55 |
14.08 % |
8.13 % |
January 31, 2020 |
$ 8.48 |
$ 7.78 |
$ 7.99 |
$ 7.70 |
7.61 % |
0.39 % |
(1) Source: Bloomberg L.P.
(2) Data presented are with respect to a short period of time and are not indicative of future performance.
On December 26, 2023, the Fund’s NAV was $4.04 and the last reported sale price of a Common Share on the NYSE was $6.63, representing a premium to NAV of 64.11%.
abrdn Global Income Fund, Inc. |
73 |
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Directors
P. Gerald Malone, Chair
Radhika Ajmera
Stephen Bird
William J. Potter
Moritz Sell
Investment Manager
abrdn Asia Limited
7 Straits View
#23-04 Marina One East Tower
Singapore 018936
Investment Sub-Adviser
abrdn Investments Limited
10 Queen's Terrace
Aberdeen, AB10 1XL
Scotland, United Kingdom
Administrator
abrdn Inc.
1900 Market Street, Suite 200
Philadelphia, PA 19103
Custodian
State Street Bank and Trust Company
One Congress Street, Suite 1
Boston, MA 02114-2016
Transfer Agent
Computershare Trust Company, N.A.
P.O. Box 43006
Providence, RI 02940-3078
Independent Registered Public Accounting Firm
KPMG LLP
1601 Market Street
Philadelphia, PA 19103
Legal Counsel
Dechert LLP
1900 K Street N.W.
Washington D.C. 20006
Investor Relations
abrdn Inc.
1900 Market Street, Suite 200
Philadelphia, PA 19103
1-800-522-5465
Investor.Relations@abrdn.com
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may purchase, from time to time, shares of its common stock in the open market.
Shares of abrdn Global Income Fund, Inc. are traded on the NYSE American under the symbol “FCO”. Information about the Fund’s net asset value and market price is available at www.abrdnfco.com.
This report, including the financial information herein, is transmitted to the shareholders of abrdn Global Income Fund, Inc. for their general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person. Past performance is no guarantee of future results.
Item 2. Code of Ethics.
(a) |
As of October 31, 2023, abrdn Global Income Fund, Inc. (the “Fund” or the “Registrant”) had adopted a Code of Ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party (the “Code of Ethics”). |
(c) |
There have been no amendments, during the period covered by this report, to a provision of
the Code of Ethics. |
(d) |
During the period covered by this report, there were no waivers to the provisions of the
Code of Ethics. |
(f) |
A copy of the Code of Ethics has been filed as an exhibit to this Form N-CSR. |
Item 3. Audit Committee Financial Expert.
The Registrant's Board of Directors has determined
that Moritz Sell, a member of the Board of Directors’ Audit Committee, possesses the attributes, and has acquired such attributes
through means, identified in instruction 2 of Item 3 to Form N-CSR to qualify as an “audit committee financial expert,”
and has designated Mr. Sell as the Audit Committee’s financial expert. Mr. Sell is considered to be an “independent”
director, as such term is defined in paragraph (a)(2) of Item 3 to Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) –
(d) Below is a table reflecting the fee information requested in Items 4(a) through (d):
Fiscal
Year Ended | |
(a)
Audit Fees1 | | |
(b)
Audit-Related Fees2 | | |
(c)
Tax Fees3 | | |
(d)
All Other Fees4 | |
October 31,
2023 | |
$ | 90,500 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
Percentage
approved pursuant to pre-approval exception5 | |
| 0 | % | |
| 0 | % | |
| 0 | % | |
| 0 | % |
October 31, 2022 | |
$ | 125,780 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
Percentage
approved pursuant to pre-approval exception5 | |
| 0 | % | |
| 0 | % | |
| 0 | % | |
| 0 | % |
1
“Audit Fees” are the aggregate fees billed for professional services for the audit of the Fund’s annual financial statements
and services provided in connection with statutory and regulatory filings or engagements.
2
“Audit Related Fees” are the aggregate fees billed for assurance and related services reasonably related to the performance
of the audit or review of financial statements that are not reported under “Audit Fees”. These fees include offerings related
to the Fund’s common shares.
3
“Tax Fees” are the aggregate fees billed for professional services for tax advice, tax compliance, and tax planning. These
fees include: federal and state income tax returns, review of excise tax distribution calculations and federal excise tax return.
4
“All Other Fees” are the aggregate fees billed for products and services other than “Audit Fees”, “Audit-Related
Fees” and “Tax Fees”.
5
Pre-approval exception under Rule 2-01 of Regulation S-X. The pre-approval exception for services provided directly to the Fund waives
the pre-approval requirement for services other than audit, review or attest services if: (A) the aggregate amount of all such services
provided constitutes no more than 5% of the total amount of revenues paid by the Fund to its accountant during the fiscal year in which
the services are provided; (B) the Fund did not recognize the services as non-audit services at the time of the engagement; and (C) the
services are promptly brought to the Audit Committee’s attention, and the Committee (or its delegate) approves the services before
the audit is completed.
(e)(1) |
The Registrant’s Audit Committee (the “Committee”) has adopted a Charter that provides that the Committee shall annually select, retain or terminate, and recommend to the Independent Trustees for their ratification, the selection, retention or termination, the Registrant’s independent auditor and, in connection therewith, to evaluate the terms of the engagement (including compensation of the independent auditor) and the qualifications and independence of the independent auditor, including whether the independent auditor provides any consulting, auditing or tax services to the Registrant’s investment adviser (the “Adviser”) or any sub-adviser, and to receive the independent auditor’s specific representations as to their independence, delineating all relationships that may affect the independent auditor’s independence, including the disclosures required by PCAOB Rule 3526 or any other applicable auditing standard. PCAOB Rule 3526 requires that, at least annually, the auditor: (1) disclose to the Committee in writing all relationships between the auditor and its related entities and the Registrant and its related entities that in the auditor’s professional judgment may reasonably be thought to bear on independence; (2) confirm in the letter that, in its professional judgment, it is independent of the Registrant within the meaning of the Securities Acts administered by the SEC; and (3) discuss the auditor’s independence with the audit committee. The Committee is responsible for actively engaging in a dialogue with the independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditor and for taking, or recommending that the full Board take, appropriate action to oversee the independence of the independent auditor. The Committee Charter also provides that the Committee shall review in advance, and consider approval of, any and all proposals by Management or the Adviser that the Registrant, the Adviser or their affiliated persons, employ the independent auditor to render “permissible non-audit services” to the Registrant and to consider whether such services are consistent with the independent auditor’s independence. “Permissible non-audit services” include any professional services, including tax services, provided to the Registrant by the independent auditor, other than those provided to the Registrant in connection with an audit or a review of the financial statements of the Registrant. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Registrant; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the PCAOB determines, by regulation, is impermissible. Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Registrant constitutes not more than 5% of the total amount of revenues paid by the Registrant to its auditor during the fiscal year in which the permissible non-audit services are provided; (ii) the permissible non-audit services were not recognized by the Registrant at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee or its Delegate(s) prior to the completion of the audit.
The Committee may delegate to one or more of its members (“Delegates”) authority to pre-approve permissible non-audit services to be provided to the Registrant. Any pre-approval determination of a Delegate shall be presented to the full Committee at its next meeting. Any pre-approval determination of a Delegate shall be presented to the full Committee at its next meeting. Pursuant to this authority, the Registrant’s Committee delegates to the Committee Chair, subject to subsequent ratification by the full Committee, up to a maximum amount of $25,000, which includes any professional services, including tax services, provided to the Registrant by its independent registered public accounting firm other than those provided to the Registrant in connection with an audit or a review of the financial statements of the Registrant. The Committee shall communicate any pre-approval made by it or a Delegate to the Adviser, who will ensure that the appropriate disclosure is made in the Registrant’s periodic reports required by Section 30 of the Investment Company Act of 1940, as amended, and other documents as required under the federal securities laws. |
(e)(2) |
None of the services described in each of paragraphs (b) through (d) of this Item involved a waiver of the pre-approval requirement by the Audit Committee pursuant to Rule 2-01 (c)(7)(i)(C) of Regulation S-X. |
The following table shows the amount of fees that KPMG LLP
billed during the Fund’s last two fiscal years for non-audit services to the Registrant, and to the Adviser, and any entity controlling,
controlled by or under common control with the Adviser that provides ongoing services to the Fund (“Affiliated Fund Service Provider”):
Fiscal Year
Ended | |
Total Non-Audit Fees
Billed to Fund | | |
Total Non-Audit Fees
billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations
and financial reporting of the Fund) | | |
Total Non-Audit Fees
billed to Adviser and Affiliated Fund Service
Providers (all other engagements) | | |
Total | |
October 31,
2023 | |
$ | 0 | | |
$ | 0 | | |
$ | 1,171,994 | | |
$ | 1,171,994 | |
October 31,
2022 | |
$ | 0 | | |
$ | 0 | | |
$ | 1,108,929 | | |
$ | 1,108,929 | |
“Non-Audit Fees billed to Fund” for both fiscal years represent
“Tax Fees” and “All Other Fees” billed to Fund in their respective amounts from the previous table.
Item 5. Audit Committee of Listed Registrants.
(a) |
The Registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). |
As of the fiscal year ended October 31,
2023, the Audit Committee members were:
Radhika Ajmera
P. Gerald Malone
William J. Potter
Moritz Sell
Item 6. Schedule of Investments.
(a) Included as part of the Report to Shareholders
filed under Item 1 of this Form N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Pursuant to the Registrant's Proxy Voting Policy
and Procedures, the Registrant has delegated responsibility for its proxy voting to its Adviser, provided that the Registrant's Board
of Directors has the opportunity to periodically review the Adviser's proxy voting policies and material amendments thereto.
The proxy voting policies of the Registrant are
included herewith as Exhibit (c) and policies of the Adviser are included as Exhibit (d).
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) PORTFOLIO MANAGER BIOGRAPHIES
The Fund is managed by abrdn’s Asia-Pacific fixed income team
which also draws on the expertise of abrdn’s fixed income team globally. The Asia-Pacific fixed income team works in a collaborative
fashion; all team members have both portfolio management and research responsibilities. The team is responsible for the day-to-day management
of the Fund. As of the date of filing this report, the following individuals have primary responsibility for the day-to-day management
of the Fund’s portfolio:
Individual & Position |
Past Business Experience |
Kenneth Akintewe
Head of Asian Sovereign Debt |
Kenneth Akintewe is the Head of Asian Sovereign Debt on the Asia-Pacific fixed income team. Kenneth is responsible for coordinating Asian interest rate and foreign exchange strategy. He is also a Vice President and Officer for the abrdn Asia-Pacific Income Fund, abrdn Global Income Fund and abrdn Asia-Pacific Income Investment Company Limited. Following a graduate traineeship in 2002 with the Global Equities team in Glasgow, Kenneth joined the Global Fixed Income team in London in 2003. In his role as assistant fund manager he transferred to abrdn's Singapore office in 2004, in order to facilitate the incorporation of Asian fixed income into global bond portfolios, before joining the Asia-Pacific fixed income team in 2005 to focus on Asian local currency interest rate and foreign exchange strategy. Kenneth graduated with an MA in Economics and an MSc in International Banking and Financial Studies from Heriot-Watt University, Edinburgh, UK. |
Adam McCabe
Head of Fixed Income Asia Pacific |
Adam McCabe is the Head of Fixed Income - Asia Pacific at abrdn. Adam joined abrdn via the acquisition of certain asset management businesses from Credit Suisse in 2009. Adam worked for Credit Suisse since 2001, where he was a director/investment manager responsible for the development and implementation of its Asian currency and interest rate strategies. Before that, he was a member of Credit Suisse's Australian fixed income team, where he was responsible for interest rate and currency strategies. Adam was also Head of Fixed Income for Woori Credit Suisse Asset Management, Korea, where he was responsible for the fixed income and money market portfolio management, investment strategy and processes. Adam graduated with a BComm (First Class Honours and University Medal) from the University of Sydney, Australia and a Diploma in Global Finance from the Chinese University of Hong Kong. |
Max Wolman
Investment Director – Fixed Income – Emerging Markets Debt |
Max Wolman is an Investment Director on the Emerging Markets Debt team at abrdn. Max joined abrdn in 2001, from Liontrust Asset Management, initially covering FX dealing at abrdn. In 2003 he joined the Emerging Markets Debt team bringing his knowledge of currencies to help analyze local emerging markets. He has since covered emerging market corporates and helped launch abrdn’s emerging markets corporate strategy, offering a top down view when investing in the asset class. He graduated with a BA (Hons) in Hospitality Business Management from Leeds Metropolitan University and he has a Graduate Diploma in Finance from the University of London. He is a CFA charterholder. |
(a)(2) OTHER ACCOUNTS
MANAGED BY PORTFOLIO MANAGERS.
The following chart summarizes information regarding
other accounts for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into the following three
categories: (1) registered investment companies; (2) other pooled investment vehicles; and (3) other accounts. To the extent
that any of these accounts pay advisory fees that are based on account performance (“performance-based fees”), information
on those accounts is provided separately. The figures in the chart below for the category of “registered investment companies”
include the Fund. The “Other Accounts Managed” represents the accounts managed by the teams of which the portfolio manager
is a member. The information in the table below is as of October 31, 2023.
Name of
Portfolio Manager |
|
Type of Accounts |
|
Other Accounts
Managed |
|
Total Assets ($M) |
|
Number of
Accounts
Managed for
Which
Advisory
Fee is Based
on
Performance |
|
Total Assets for
Which
Advisory Fee is
Based on
Performance ($M) |
|
Kenneth Akintewe1 |
|
Registered Investment Companies |
|
4 |
|
$ |
1,360.78 |
|
0 |
|
$ |
0 |
|
|
|
Pooled Investment Vehicles |
|
31 |
|
$ |
4,076.39 |
|
0 |
|
$ |
0 |
|
|
|
Other Accounts |
|
32 |
|
$ |
10,870.14 |
|
0 |
|
$ |
0 |
|
Adam McCabe1 |
|
Registered Investment Companies |
|
4 |
|
$ |
1,360.78 |
|
0 |
|
$ |
0 |
|
|
|
Pooled Investment Vehicles |
|
31 |
|
$ |
4,076.39 |
|
0 |
|
$ |
0 |
|
|
|
Other Accounts |
|
32 |
|
$ |
10,870.14 |
|
0 |
|
$ |
0 |
|
Max Wolman1 |
|
Registered Investment Companies |
|
4 |
|
$ |
1,360.78 |
|
0 |
|
$ |
0 |
|
|
|
Pooled Investment Vehicles |
|
31 |
|
$ |
4,076.39 |
|
0 |
|
$ |
0 |
|
|
|
Other Accounts |
|
32 |
|
$ |
10,870.14 |
|
0 |
|
$ |
0 |
|
1 Includes
accounts managed by the Global Emerging Markets Debt, Asian Fixed Income and Australian Fixed Income teams, of which the portfolio manager
is a member.
POTENTIAL CONFLICTS OF INTEREST
The Adviser and its affiliates (collectively referred
to herein as “abrdn”) serve as investment advisers for multiple clients, including the Registrant and other investment companies
registered under the 1940 Act and private funds (such clients are also referred to below as “accounts”). The portfolio managers’
management of “other accounts” may give rise to potential conflicts of interest in connection with their management of the
Registrant’s investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have
the same investment objective as the Registrant. Therefore, a potential conflict of interest may arise as a result of the identical investment
objectives, whereby the portfolio manager could favor one account over another. However, the Adviser believes that these risks are mitigated
by the fact that: (i) accounts with like investment strategies managed by a particular portfolio manager are generally managed in
a similar fashion, subject to exceptions to account for particular investment restrictions or policies applicable only to certain accounts,
differences in cash flows and account sizes, and similar factors; and (ii) portfolio manager personal trading is monitored to avoid
potential conflicts. In addition, the Adviser has adopted trade allocation procedures that require equitable allocation of trade orders
for a particular security among participating accounts.
In some cases, another account managed by the
same portfolio manager may compensate Aberdeen based on the performance-based fees with qualified clients. The existence of such a performance-based
fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment
opportunities.
Another potential conflict could include instances
in which securities considered as investments for the Registrant also may be appropriate for other investment accounts managed by the
Adviser or its affiliates. Whenever decisions are made to buy or sell securities for the Registrant and one or more of the other accounts
simultaneously, the Adviser may aggregate the purchases and sales of the securities and will allocate the securities transactions in a
manner that it believes to be equitable under the circumstances. As a result of the allocations, there may be instances where the Registrant
will not participate in a transaction that is allocated among other accounts. While these aggregation and allocation policies could have
a detrimental effect on the price or amount of the securities available to the Registrant from time to time, it is the opinion of the
Adviser that the benefits from the policies outweigh any disadvantage that may arise from exposure to simultaneous transactions. The Registrant
has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures
adopted under such policies will detect each and every situation in which a conflict arises.
With respect to non-discretionary model delivery
accounts (including UMA accounts) and discretionary SMA accounts, abrdn Inc. will utilize a third party service provider to deliver model
portfolio recommendations and model changes to the Sponsors. abrdn Inc. seeks to treat clients fairly and equitably over time, by delivering
model changes to our service provider and investment instructions for our other discretionary accounts to our trading desk, simultaneously
or approximately at the same time. The service provider will then deliver the model changes to each Sponsor on a when-traded, randomized
full rotation schedule. All Sponsors will be included in the rotation schedule, including SMA and UMA.
UMA Sponsors will be responsible for determining
how and whether to implement the model portfolio or model changes and implementation of any client specific investment restrictions. The
Sponsors are solely responsible for determining the suitability of the model portfolio for each model delivery client, executing trades
and seeking best execution for such clients.
As it relates to SMA accounts, abrdn Inc. will
be responsible for managing the account on the basis of each client’s financial situation and objectives, the day to day investment
decisions, best execution, accepting or rejecting client specific investment restrictions and performance. The SMA Sponsors will collect
suitability information and will provide a summary questionnaire for our review and approval or rejection. For dual contract SMAs, abrdn
Inc. will collect a suitability assessment from the client, along with the Sponsor suitability assessment. Our third party service provider
will monitor client specific investment restrictions on a day to day basis. For SMA accounts, model trades will be traded by the Sponsor
or may be executed through a “step-out transaction,”- or traded away- from the client’s Sponsor if doing so is consistent
with abrdn’s obligation to obtain best execution. When placing trades through Sponsor Firms (instead of stepping them out), we will
generally aggregate orders where it is possible and in the client’s best interests. In the event we are not comfortable that a Sponsor
can obtain best execution for a specific security and trading away is infeasible, we may exclude the security from the model.
Trading costs are not covered by the Wrap Program
fee and may result in additional costs to the client. In some instances, step-out trades are executed without any additional commission,
mark-up, or mark-down, but in many instances, the executing broker-dealer may impose a commission or a mark-up or mark-down on the trade.
Typically, the executing broker will embed the added costs into the price of the trade execution, making it difficult to determine and
disclose the exact added cost to clients. In this instance, these additional trading costs will be reflected in the price received for
the security, not as a separate commission, on trade confirmations or on account statements. In determining best execution for SMA accounts,
abrdn Inc. takes into consideration that the client will not pay additional trading costs or commission if executing with the Sponsor.
While UMA accounts are invested in the same strategies
as and may perform similarly to SMA accounts, there are expected to be performance differences between them. There will be performance
dispersions between UMAs and other types of accounts because abrdn does not have discretion over trading and there may be client specific
restrictions for SMA accounts.
abrdn may have already commenced trading for its
discretionary client accounts before the model delivery accounts have executed abrdn's recommendations. In this event, trades placed by
the model delivery clients may be subject to price movements, particularly with large orders or where securities are thinly traded, that
may result in model delivery clients receiving less favorable prices than our discretionary clients. abrdn has no discretion over transactions
executed by model delivery clients and is unable to control the market impact of those transactions.
Timing delays or other operational factors associated
with the implementation of trades may result in non-discretionary and model delivery clients receiving materially different prices relative
to other client accounts. In addition, the constitution and weights of stocks within model portfolios may not always be exactly aligned
with similar discretionary accounts. This may create performance dispersions within accounts with the same or similar investment mandate.
(a)(3)
DESCRIPTION OF COMPENSATION STRUCTURE
abrdn’s remuneration policies are designed
to support its business strategy as a leading international asset manager. The objective is to attract, retain and reward talented
individuals for the delivery of sustained, superior returns for abrdn’s clients and shareholders. abrdn operates in a highly
competitive international employment market, and aims to maintain its strong track record of success in developing and retaining talent.
abrdn’s policy is to recognize corporate
and individual achievements each year through an appropriate annual bonus scheme. The bonus is a single, fully discretionary variable
pay award. The aggregate value of awards in any year is dependent on the group’s overall performance and profitability. Consideration
is also given to the levels of bonuses paid in the market. Individual awards, which are payable to all members of staff, are determined
by a rigorous assessment of achievement against defined objectives.
The variable pay award is composed of a mixture
of cash and a deferred award, the portion of which varies based on the size of the award. Deferred awards are by default abrdn plc
shares, with an option to put up to 50% of the deferred award into funds managed by abrdn. Overall compensation packages are designed
to be competitive relative to the investment management industry.
Base Salary
abrdn’s policy is to pay a fair salary commensurate
with the individual’s role, responsibilities and experience, and having regard to the market rates being offered for similar roles
in the asset management sector and other comparable companies. Any increase is generally to reflect inflation and is applied in a manner
consistent with other abrdn employees; any other increases must be justified by reference to promotion or changes in responsibilities.
Annual Bonus
The Remuneration Committee determines the key performance
indicators that will be applied in considering the overall size of the bonus pool. In line with practices amongst other asset management
companies, individual bonuses are not subject to an absolute cap. However, the aggregate size of the bonus pool is dependent on
the group’s overall performance and profitability. Consideration is also given to the levels of bonuses paid in the market.
Individual awards are determined by a rigorous assessment of achievement against defined objectives, and are reviewed and approved by
the Remuneration Committee.
abrdn has a deferral policy which is intended to
assist in the retention of talent and to create additional alignment of executives’ interests with abrdn’s sustained performance
and, in respect of the deferral into funds managed by abrdn, to align the interest of portfolio managers with our clients.
Staff performance is reviewed formally at least
once a year. The review process evaluates the various aspects that the individual has contributed to abrdn, and specifically, in the case
of portfolio managers, to the relevant investment team. Discretionary bonuses are based on client service, asset growth and the performance
of the respective portfolio manager. Overall participation in team meetings, generation of original research ideas and contribution to
presenting the team externally are also evaluated.
In the calculation of a portfolio management team’s
bonus, abrdn takes into consideration investment matters (which include the performance of funds, adherence to the company investment
process, and quality of company meetings) as well as more subjective issues such as team participation and effectiveness at client presentations
through key performance indicator scorecards. To the extent performance is factored in, such performance is not judged against any
specific benchmark and is evaluated over the period of a year - January to December. The pre- or after-tax performance of an individual
account is not considered in the determination of a portfolio manager’s discretionary bonus; rather the review process evaluates
the overall performance of the team for all of the accounts the team manages.
Portfolio manager performance on investment matters
is judged over all of the accounts the portfolio manager contributes to and is documented in the appraisal process. A combination
of the team’s and individual’s performance is considered and evaluated.
Although performance is not a substantial portion
of a portfolio manager’s compensation, abrdn also recognizes that fund performance can often be driven by factors outside one’s
control, such as (irrational) markets, and as such pays attention to the effort by portfolio managers to ensure integrity of our core
process by sticking to disciplines and processes set, regardless of momentum and ‘hot’ themes. Short-terming is thus
discouraged and trading-oriented managers will thus find it difficult to thrive in the abrdn environment. Additionally, if any of
the aforementioned undue risks were to be taken by a portfolio manager, such trend would be identified via abrdn’s dynamic compliance
monitoring system.
In rendering investment management
services, the Adviser may use the resources of additional investment adviser subsidiaries of abrdn plc. These affiliates have entered
into a memorandum of understanding (“MOU”) pursuant to which investment professionals from each affiliate may render portfolio
management, research or trading services to abrdn clients. Each investment professional who renders portfolio management, research or
trading services under a MOU or personnel sharing arrangement (“Participating Affiliate”) must comply with the provisions
of the Advisers Act, the 1940 Act, the Securities Act of 1933, the Exchange Act, and the Employee Retirement Income Security Act of 1974,
and the laws of states or countries in which the Adviser does business or has clients. No remuneration is paid by the Fund with respect
to the MOU/personnel sharing arrangements.
(a)(4)
Dollar Range of Equity Securities in the
Registrant Beneficially Owned by the Portfolio
Manager as of October 31, 2023 |
|
Kenneth Akintewe |
|
None |
Adam McCabe |
|
None |
Max Wolman |
|
None |
(b) Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers.
No such purchases were made by or on behalf of the Registrant during
the period covered by the report.
Item 10. Submission of Matters to a Vote of Security Holders.
During the period ended October 31, 2023, there were no material
changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Directors.
Item 11. Controls and Procedures.
|
(a) |
The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”) (17 CFR 270.30a-3(c)) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a3(b)) and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d15(b)). |
|
(b) |
There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End
Management Investment Companies
Not applicable
Item 13. Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
abrdn Global Income Fund, Inc.
By: |
/s/ Christian Pittard |
|
|
Christian Pittard, |
|
|
Principal Executive Officer of |
|
|
abrdn Global Income Fund, Inc. |
|
|
|
Date: January 8, 2024 |
|
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: |
/s/ Christian Pittard |
|
|
Christian Pittard, |
|
|
Principal Executive Officer of |
|
|
abrdn Global Income Fund, Inc. |
|
|
|
Date: January 8, 2024 |
|
By: |
/s/ Sharon Ferrari |
|
|
Sharon Ferrari, |
|
|
Principal Financial Officer of |
|
|
abrdn Global Income Fund, Inc. |
|
|
|
Date: January 8, 2024 |
|
Exhibit 99.CODEETH
CODE OF ETHICS (SOX)
(Principal Executive Officer/President and Principal
Financial Officer/Treasurer)
I. |
Purpose of the Code/Covered Officers |
Pursuant to Section 406
of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission (“SEC”) has adopted rules requiring annual
disclosure of an investment company’s code of ethics applicable to its principal executive, principal financial and principal accounting
officers. The Funds have adopted this Code of Ethics (the “Code”) pursuant to these rules. The Code applies to the series
(each a “Fund”). The Code specifically applies to each Fund’s President/Principal Executive Officer and Treasurer/Principal
Financial Officer (“Covered Officers”) for the purpose of promoting:
|
· |
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
|
· |
full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submits to, the SEC and in other public communications made by the Funds; |
|
· |
compliance with applicable laws, rules and regulations; |
|
· |
an environment that encourages disclosure of ethical and compliance related concerns; |
|
· |
the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code without fear of reprisal; and |
|
· |
accountability for adherence to the Code. |
The Covered Officers are integral
to the Funds’ goal of creating a culture of high ethical standards and commitment to compliance. In their roles, the Covered Officers
will refrain from engaging in any activity that may compromise their professional ethics or otherwise prejudice their ability to carry
out their duties to the Funds.’ They will act in good faith, with due care, competence and diligence, without misrepresenting material
facts or allowing their independent judgment to be subordinated.
II. |
Actual and Apparent Conflicts of Interest |
Overview: A “conflict
of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or service to, the Funds.
For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper benefits as
a result of his or her position with the Funds.
Certain conflicts of interest
arise out of the relationship between Covered Officers and each Fund and already are subject to conflict of interest provisions in the
Investment Company Act of 1940 (the “1940 Act”) and the Investment Advisers Act of 1940 (the “Advisers Act”).
For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other
property) with the Funds because of their status as “affiliated persons” of the Funds. Each Fund’s Adviser and Sub-adviser
(the “adviser(s)”) have adopted and implemented respective compliance programs and procedures that are designed to prevent,
or identify and correct, violations of these provisions. This Code does not, and is not intended to repeat or replace these programs and
procedures, and such conflicts fall outside of the parameters of this Code. Each Covered Officer should be sensitive to situations that
may give rise to actual as well as apparent conflicts of interest and should encourage his or her colleagues who provide service to the
Funds, whether directly or indirectly, to do the same.
Although typically not presenting
an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between each Fund
and the investment adviser (and distributor to the Aberdeen open-end funds) of which the Covered Officers are also officers or employees.
As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund
or the investment adviser or for both), be involved in establishing policies and implementing decisions that will have different effects
on the investment adviser, distributor and the Funds. The participation of the Covered Officers in such activities is inherent in the
contractual relationship between the Funds and the Adviser and is consistent with the performance by the Covered Officers of their duties
as officers of each Fund. Thus, if performed in conformity with the provisions of the 1940 Act and the Advisers Act, such activities will
be deemed to have been handled ethically. In addition, it is recognized by the Funds’ Board that the Covered Officers may also be
officers or employees of the Funds.
Other conflicts of interest
are covered by this Code, even if such conflicts of interest are not subject to provisions in the 1940 Act and the Advisers Act. The overarching
principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds. A defining
question is, “What is the long term interest of current shareholders?” The following list provides examples of conflicts of
interest under this Code, but Covered Officers should keep in mind that these examples are not exhaustive.
Each Covered Officer must:
|
· |
not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would directly or indirectly benefit personally to the detriment of the Funds; |
|
· |
not cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Funds; |
|
· |
not use material non-public knowledge of Fund transactions made or contemplated for the Funds to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; |
|
· |
report at least annually affiliations or other relationships related to conflicts of interest covered by the Funds’ Directors and Officers Questionnaire. |
Any activity or relationship
that would present a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if a member of the Covered
Officer’s family engages in such activity or has such a relationship. There are some conflict of interest situations that should
always be discussed with the Compliance Officer prior to their occurrence, or if foreseen, as soon as reasonably possible after discovery.
Examples of these include:
|
· |
service on the board of any public company; |
|
· |
any outside business activity that detracts from the ability of a Covered Officer to devote appropriate time and attention to his or her responsibilities as a Covered Officer of the Funds; |
|
· |
the receipt of any non-nominal gifts in excess of $100.00; |
|
· |
the receipt of any entertainment from any company with which the Funds has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; |
|
· |
any ownership interest in, or any consulting or employment relationship with any of the Funds’ service providers, other than its investment adviser, investment sub-adviser, principal underwriter, administrator or any affiliated person thereof; |
|
· |
a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Funds for effecting Fund transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership. |
(A) “Covered
Officer” with respect to a Fund means the principal executive officer of the Fund and senior financial officers of the Fund,
including the principal financial officer, controller or principal accounting officer, or persons performing similar functions, regardless
of whether these persons are employed by the Fund or a third party.
(B) “Executive
Officer” of a Fund has the same meaning as set forth in Rule 3b-7 under the Securities Exchange Act of 1934, as amended.
Subject to any changes in that rule, the term “executive officer,” when used in the Code, means the president, any vice president,
any officer who performs a policy making function, or any other person who performs similar policy making functions for a Fund.
(C) “Waiver”
means the approval by a Fund’s CCO of a material departure from a provision of the Code. “Waiver” includes
an “Implicit Waiver,” which is a Fund’s failure to take action within a reasonable period of time regarding
a material departure from a provision of this Code that has been made known to an Executive Officer of the Fund.
IV. |
Disclosure and Compliance |
Each Covered Officer:
|
· |
should familiarize himself with the disclosure requirements generally applicable to the Funds; |
|
· |
should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including the Funds’ Board and auditors, and to governmental regulators and self-regulatory organizations; |
|
· |
should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and the Advisers with the goal of promoting comprehensive, fair, accurate, timely and understandable disclosure in reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; |
|
· |
should cooperate with the each Fund’s independent accountants, regulatory agencies, and internal auditors in their review of the Funds and its operations; |
|
· |
should ensure the establishment of appropriate policies and procedures for the protection and retention of accounting records and information as required by applicable law, regulation, or regulatory guidelines and establish and administer financial controls that are appropriate to ensure the integrity of the financial reporting process and the availability of timely, relevant information for the Funds’ safe and sound operation; and |
|
· |
has the responsibility to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. |
V. |
Reporting and Accountability |
Each Covered Officer must:
|
· |
upon adoption of this Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing that he has received, read, and understands this Code; |
|
· |
annually thereafter affirm that he has complied with the requirements of this Code; |
|
· |
not retaliate against any other Covered Officer or any employee of the Adviser, or their affiliated persons, or any other employee of a private contractor that provides service to the Funds, for reports of potential violations that are made in good faith; and |
|
· |
notify the Funds’ CCO promptly if he or she knows or suspects that a violation of applicable laws, regulations, or of this Code has occurred, is occurring, or is about to occur. Failure to do so is itself a violation of this Code. |
See Exhibit A for
the form of PEO/PFO certification.
The Funds’ CCO is responsible
for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in
any particular situation. However, any approvals or Waivers sought by the President will be considered by the Funds’ Audit Committee.
The Funds will follow these
procedures in investigating and enforcing this Code.
|
· |
The Funds’ Compliance Officer will take all appropriate action to investigate any potential violations reported to him/her. |
|
· |
If, after such investigation, the Compliance Officer believes that no violation has occurred, he or she is not required to take any further action. The Compliance Officer is authorized to consult, as appropriate, with the chair of the Audit Committee and Counsel to the Independent Board, and is encouraged to do so after consultation with each Fund’s President when, in the Compliance Officer’s opinion such consultation will not increase the risk to shareholders. |
|
· |
Any matter that the Compliance Officer believes is a violation will be reported to the Audit Committee (the “Committee”). |
|
· |
If the Committee concurs that a violation has occurred, it will inform and make a recommendation to the full Board, which will consider appropriate action, which may include review of and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Adviser or its Board; or a recommendation to dismiss the Covered Officer. |
|
· |
Each Fund’s Board will be responsible for granting Waivers, as appropriate. |
|
· |
Any changes to or Waivers of this Code will, to the extent required, be disclosed as provided by the SEC rules. |
The matters covered in the
Code are of the utmost importance to the Funds and their stockholders and are essential to each Fund’s ability to conduct its business
in accordance with its stated values. Each Covered Officer and each Executive Officer is expected to adhere to these rules (to the
extent applicable) in carrying out his or her duties for the Funds. The conduct of each Covered Officer and each Executive Officer can
reinforce an ethical atmosphere and positively influence the conduct of all officers, employees and agents of the Funds. A Fund will,
if appropriate, take action against any Covered Officer whose actions are found to violate the Code. Appropriate sanctions for violations
of the Code will depend on the materiality of the violation to the Fund.
Sanctions may include, among
other things, a requirement that the violator undergo training related to the violation, a letter or sanction or written censure by the
Board, the imposition of a monetary penalty, suspension of the violator as an officer of a Fund or termination of the employment of the
violator. If a Fund has suffered a loss because of violations of the Code, the Fund may pursue remedies against the individuals or entities
responsible.
VII. |
Other Policies and Procedures |
This Code shall be the sole
code of ethics adopted by the Funds for the purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable
to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Adviser, principal underwriter,
or other service providers govern or purport to govern the behavior or activities if the Covered Officers who are subject to this Code,
they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds’ and Adviser’s
code of ethics under Rule 17j-1 under the Investment Company Act of 1940 are not part of this Code.
Any amendments to this Code
must be approved or ratified by a majority vote of the each Fund’s Board, including a majority of Independent Board members.
All reports and records prepared
or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise
required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and its Counsel.
This Code is intended solely
for internal use by the Funds and does not constitute an admission, by or on behalf of the Funds, as to any fact, circumstance, or legal
conclusion. This Code is a statement of certain fundamental principles, policies, and procedures that govern the Covered Officers in the
conduct of each Fund’s business. It is not intended and does not create any rights in any employee, investor, supplier, creditor,
shareholder or any other person.
Exhibit A
CODE OF ETHICS
PURSUANT TO THE SARBANES-OXLEY ACT OF 2002
Initial and Annual Certification of Compliance
________________________________
Name (please print)
This is to certify that I have received a copy
of the Code of Ethics Pursuant to the Sarbanes-Oxley Act of 2002 (“Code”) for the following Funds:
List of Funds
I have read and understand the Code. Moreover, I
agree to promptly report to the Chief Compliance Officer any violation or possible violation of this Code of which I become aware. I
understand that violation of the Code will be grounds for disciplinary action or dismissal.
Check one:
Initial
¨ I
further certify that I am subject to the Code and will comply with each of the Code’s provisions to which I am subject.
Annual
¨ I
further certify that I have complied with and will continue to comply with each of the provisions of the Code to which I am subject.
|
|
Signature |
Date |
|
|
Received by (name and title): |
Date |
Exhibit 99.CERT
Certification
Pursuant to Rule 30a-2(a) under
the 1940 Act and Section 302 of the Sarbanes-Oxley Act
I, Sharon Ferrari, certify that:
| 1. | I have reviewed this report on Form N-CSR of abrdn Global Income Fund, Inc. (the “Registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this
report; |
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to
the filing date of this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the
Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer(s) and I have disclosed to the Registrant’s
auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and
report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the Registrant’s internal control over financial reporting. |
/s/ Sharon Ferrari |
|
Sharon Ferrari |
|
Principal Financial Officer |
|
Certification
Pursuant to Rule 30a-2(a) under
the 1940 Act and Section 302 of the Sarbanes-Oxley Act
I, Christian Pittard, certify that:
| 1. | I have reviewed this report on Form N-CSR of abrdn Global Income Fund, Inc. (the “Registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this
report; |
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to
the filing date of this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the
Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer(s) and I have disclosed to the Registrant’s
auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and
report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the Registrant’s internal control over financial reporting. |
/s/ Christian Pittard |
|
Christian Pittard |
|
Principal Executive Officer |
|
Exhibit 99.906CERT
Certification
Pursuant to Rule 30a-2(b) under
the 1940 Act and Section 906 of the Sarbanes-Oxley Act
Christian Pittard, Principal Executive Officer,
and Sharon Ferrari, Principal Financial Officer, of abrdn Global Income Fund, Inc. (the “Registrant”), each certify that:
| 1. | The Registrant’s periodic report on Form N-CSR for the period ended October 31, 2023 (the
“Form N-CSR”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934, as amended, as applicable; and |
| 2. | The information contained in the Form N-CSR fairly presents, in all material respects, the financial
condition and results of operations of the Registrant. |
PRINCIPAL EXECUTIVE OFFICER
abrdn Global Income Fund, Inc.
/s/ Christian Pittard |
|
|
|
Christian Pittard |
|
Date: January 8, 2024 |
|
PRINCIPAL FINANCIAL OFFICER
abrdn Global Income Fund, Inc.
/s/ Sharon Ferrari |
|
|
|
Sharon Ferrari |
|
Date: January 8, 2024 |
|
This certification is being furnished solely pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of Form N-CSR or as a separate disclosure document.
A signed original of this written statement, or other document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Registrant
and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 99.13c
PROXY VOTING POLICY
I. Generally
Rules adopted by the
Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”)
require the Funds to disclose publicly its proxy voting policies and procedures, as well as its actual proxy votes. The SEC rules also
permit the Funds to delegate its proxy voting responsibilities to the Funds’ Investment Manager, Investment Adviser, and Sub-advisers
(collectively “the Advisers”). In connection with this ability to delegate proxy voting responsibilities, the SEC has adopted
rules under the Investment Advisers Act of 1940, as amended, that require the Advisers to adopt and implement written proxy voting
policies and procedures that are reasonably designed to ensure that it votes proxies on behalf of its clients, when given such authority,
in the best interests of those clients.
Consistent with the SEC’s
requirements, the Funds have delegated responsibility for voting its proxy to the Funds’ Investment Manager, Investment Adviser
and Sub-advisers. The Advisers have adopted proxy voting policies and procedures to ensure the proper, and timely, voting of the proxies
on behalf of the Funds. Moreover, the Advisers will assist the Funds in the preparation of each Fund’s complete proxy voting record
on Form N-PX for the twelve-month period ended June 30, by no later than August 31 of each year.
II. Procedures
Each Fund shall ensure that
its investment manager, investment adviser and sub-advisers are compliant with applicable rules and regulations. These rules and
regulations require, in part, that each Fund disclose how it votes each proxy. The rules and regulations also require that the Advisers
disclose that they have (1) adopted and implemented proxy voting policies; and (2) adopted procedures regarding how each portfolio
security is voted in relation to each Fund. The Adviser must disclose that the procedures are the following:
| 2. | are reasonably designed to ensure that the adviser votes proxies in the best interest of the adviser’s
clients; |
| 3. | describe the adviser’s proxy voting procedures to the adviser’s clients and provides copies
of the adviser’s proxy voting procedures on request; |
| 4. | set forth the process by which the adviser evaluates the issues presented by a proxy and records the adviser’s
decision about how the proxy will be voted; |
| 5. | establish procedures for the identification and handling of proxies that involve material conflicts of
interest with the adviser’s clients; and |
| 6. | disclose to the adviser’s clients how the clients may obtain information on how the adviser voted
the clients’ proxies. |
The Funds also shall disclose
to shareholders the policies and procedures that are used to determine how to vote proxies. The Funds include in the Funds’ statement
of additional information appropriate summary disclosure regarding the proxy voting policies and procedures of the Funds’ adviser
and sub-advisers, and any third party retained by the Funds’ investment adviser or sub-adviser to determine how to vote proxies.
In addition, as required by the financial statements’ requirements of Form N-1A and N-2, the Funds’ financial statements
must include a statement that a description of the policies and procedures that the Funds use to vote proxies relating to portfolio securities
is available, without charge: (i) upon request, by calling a specified toll-free (or collect) telephone number; or (ii) on the
Funds’ website; and (iii) on the SEC website at www.sec.gov.
The Funds also shall file
with the SEC, on an annual basis, the complete proxy voting record of each Fund on Form N-PX for the twelve-month period ending June 30th,
by no later than August 31st of each year, which Report on Form N-PX shall be executed by the principal executive
officer of the each Fund. Each Fund’s proxy voting record on the Form N-PX Report shall be made available by each Fund, without
charge, upon request, by calling specified toll-free (or collect) telephone number (but is not available on the Funds’ website).
If a Fund receives a telephonic request for a proxy voting record, the Fund shall send the requested information disclosed in the Fund’s
most-recently filed Report on Form N-PX within three (3) business days of the receipt of the request for this information, by
first-class mail or other means designed to ensure equally prompt delivery.
Sub-advisers to the Funds
must have procedures and internal controls to ensure compliance with proxy voting regulations. Specifically, the sub-advisers must have
procedures for the reporting of proxy voting, and communicating changes in proxy voting policies to the Funds. Prior to Board approval
of new advisers, the Chief Compliance Officer (“CCO”) reviews the proxy voting policies and procedures of the sub-adviser.
The CCO ensures that any inadequate procedures or controls of a sub-adviser are reported to the Board and must be corrected in a timely
manner.
Exhibit 99.13d
U.S. Registered Advisers
Summary of Proxy Voting Guidelines
as
of October 26, 2022
Where clients appoint abrdn Inc. to vote proxies on their behalf,
policies have been established to vote these proxies in the best interests of our clients.
We employ ISS as a service provider to facilitate electronic voting.
We require ISS to provide recommendations based on our own set of parameters
tailored to abrdn’s assessment and approach, but remain conscious
that all voting decisions are our own on behalf of our clients. We consider ISS’s recommendations and those based on our custom
parameters as input to our voting decisions. We make use of the ISS standard research and recommendations and those based on our own
custom policy as input to our voting decisions. Where our analysts make a voting decision that is different from the recommendations
based on our custom policy they will provide a rationale for such a decisions which will be made publicly available in our voting disclosures.
In order to make proxy voting decisions, an abrdn analyst assesses
the resolutions at general meetings in our active investment portfolios. This analysis will be based on our knowledge of the company,
but will also make use of the custom and standard recommendations provided by ISS as described above. The product of this analysis will
be a final voting decision instructed through ISS and applied to all funds for which abrdn have been appointed to vote. For funds managed
by a sub-adviser, we may delegate to the sub-adviser the authority to vote proxies; however, the sub-adviser will be required to either
follow our policies and procedures or to demonstrate that their policies and procedures are consistent with ours, or otherwise implemented
in the best interest of clients.
There may be certain circumstances where abrdn Inc. may take a more
limited role in voting proxies. We will not vote proxies for client accounts in which the client contract specifies that abrdn Inc. will
not vote. We may abstain from voting a client proxy if the voting is uneconomic
or otherwise not in clients’ best interests. For companies held
only in passively managed portfolios, abrdn Inc. custom recommendations provided by ISS will be used to automatically apply our voting
approach; we have scope to intervene to test that this delivers appropriate results, and will on occasions intrude to apply a vote more
fully in clients’ best interests. If voting securities are part of a securities lending program, we may be unable to vote while
the securities are on loan. However, we have the ability to recall shares on loan or to restrict lending when required, in order to ensure
all shares have voted. In addition, certain jurisdictions may impose share-blocking restrictions at various times which may prevent abrdn
Inc. from exercising our voting authority.
We recognize that there may be situations in which we vote at a company
meeting where we encounter a conflict of interest. Such situations include:
| · | Where
a portfolio manager owns the holding in a personal account. |
| · | An
investee company that is also a segregated client. |
| · | An
investee company where an Executive Director or Officer of our company or that of abrdn plc
or another affiliate is also a Director of that company. |
| · | An
investee company where an employee of abrdn plc or an affiliate or subsidiary is a Director
of that company. |
| · | A
significant distributor of our products. |
| · | Any
other companies which may be relevant from time to time. |
We have adopted procedures within our proxy voting process to
identify where a conflict exists. These procedures are designed to ensure
that our voting decisions are based on our client’s best
interests and are not impacted by any conflict.
The implementation of this policy, along with conflicts of
interest, will be reviewed periodically by the Active Ownership team.
abrdn’s Global ESG Principles &
Voting Policies are published on our website.
Clients
may obtain a free copy of abrdn Inc.’s proxy voting policies
and procedures and/or proxy voting records for their account by contacting us at (215) 405-5700. abrdn publishes ESG
Principles & Voting Policies, which describe our approach to investment analysis, shareholder engagement and proxy voting
across companies worldwide. There are published on our website.
Clients that have not granted abrdn Inc. voting authority over
securities held in their accounts will receive their proxies in accordance with the arrangements they have made with their service
providers.
Listed
Company ESG Principles & Voting Policies
February 2023
Introduction
Active Ownership
and Environmental, Social & Governance (ESG) considerations
are a driver of our investment process, our investment activity, our client journey and our corporate influence.
Through engagement with the companies in which we invest, and by exercising
votes on behalf of our clients, we seek to improve the financial resilience
and performance of our clients’ investments. Where we believe change
is needed, we endeavour to catalyse this through our stewardship capabilities.
Our expectations
As global investors, we are particularly aware that ESG structures
and frameworks vary across regions. Furthermore, what we expect of the companies in which we invest varies between different stages of
business development and the underlying history and nature of the company in
question. We seek to understand each company’s individual circumstances
and so evaluate how it can best be governed and overseen. As such, we strive to apply the principles and policies set out on these pages in
response to the needs of that individual company at that particular time. Our heritage as a predominantly active fund manager helps drive
this bespoke approach to understanding good governance and risk management.
We have a
clear perception of what we consider to be best practice globally – as
set out in this document. However we will reflect the nature of the business, our close understanding of individual companies and regional
considerations, where appropriate, in our approach to applying these policies, which are not exhaustive.
This document
has received approval from the Head of Public Markets and the Investment Vector’s
Chief Sustainability Officer following consultation with various internal stakeholders.
Our approach to stewardship
We seek to integrate and appraise environmental, social and
governance factors in our investment process. Our aim is to generate the best long-term outcomes for our clients and we will
actively take steps as stewards and owners to protect and enhance the value
of our clients’ assets.
Stewardship is a reflection of this bespoke approach to good governance
and risk management. We seek to understand each company’s
specific approach to governance, how value is created through business success and how investors’ interests are protected
through the management of risks that materially impact business success. This requires us to play our part in the governance process
by being active stewards of companies, involved in dialogue with management and non-executive
directors where appropriate, understanding the material risks and opportunities – including
those relating to environmental and social factors and helping to shape the future success of the business.
We will:
| · | Take
into consideration, in our investment process, the policies and practices on environmental,
social and governance matters of the companies in which we invest. |
| · | Seek
to enhance long-term shareholder value through constructive engagement with the companies
in which we invest. |
| · | Actively
engage with the companies and assets in which we invest where we believe we can influence
or gain insight. |
| · | Seek
to exercise voting rights, where held, in a manner consistent with our clients’
long-term best interests. |
| · | Seek
to influence the development of high standards of corporate governance and corporate responsibility
in relation to environmental and social factors for the benefit of our clients. |
| · | Communicate
our Listed Company ESG Principles and Voting Policies to clients, companies and other interested
parties. |
| · | Be
accountable to clients within the constraints of professional confidentiality and legislative
and regulatory requirements. |
| · | Be
transparent in reporting our engagement and voting activities. |
abrdn is committed to exercising responsible ownership with a
conviction that companies adopting improving practices in corporate governance and risk management will be more successful in their
core activities and deliver enhanced returns to shareholders. As owners of companies, the process of stewardship is a natural part
of our investment approach as we seek to benefit from their long-term
success on our clients’ behalf.
Engagement
It is a central tenet of our active investment approach that we strive
to meet with the management and directors of our investee companies on a regular basis. The discussions we have cover a wide range of
topics, including: strategic, operational, and ESG issues and consider the long-term drivers of value. Engagement with companies on ESG
risks and opportunities is a fundamental part of our investment process. It is a process by which we can discuss how a company identifies,
prioritises and mitigates its key risks and optimises its most significant opportunities. As such, we regard engagement as:
| · | Important
to understanding investee companies as a whole. |
| · | Helpful
when conducting proper ESG analysis. |
| · | Useful
to maintaining open dialogue and solid relationships with companies. |
| · | An
opportunity to inflect positive change on a company’s
holistic risk management programme – be
active with our holdings rather than activist. |
Proxy Voting
Proxy voting is an integral part of our active stewardship approach
and we seek to exercise voting rights in a manner in line with our clients’
best interests. We seek to ensure that voting reflects our understanding of
the companies in which we invest on behalf of our clients. We believe that voting is a vital mechanism for holding boards and management
teams to account, and is an important tool for escalation and shareholder action.
This document includes our process and overarching policy
guidelines which we apply when voting at general meetings. These policies are not exhaustive and we evaluate our voting on a case by
case basis. As a global investment firm we recognise the importance of adopting a regional approach, taking into account differing
and developing market practices. Where a policy is specific to one region this is denoted.
We endeavour to engage with companies regarding our voting decisions
to maintain a dialogue on matters of concern.
Voting Process
In line with our active ownership approach, we review the
majority of general meeting agendas convened by companies which are held in our active equity portfolios. Analysis is undertaken by
a member of our regional investment teams or our Active Ownership team and votes instructed following consideration of our policies,
our views of the company and our investment insights. To enhance our analysis we may engage with a company prior to voting to
understand additional context and explanations, particularly where there is deviation from what we believe to be best practice.
To supplement our own analysis we make use of the benchmark research
and recommendations provided by ISS, a provider of proxy voting services. In
the UK we also make use of the Investment Association’s (IA) Institutional
Voting Information Service. We have implemented regional voting policy guidelines with ISS which ISS applies to all meetings in order
to produce customised vote recommendations. These custom recommendations help identify resolutions which deviate from our expectations.
They are also used to determine votes where a company is held only in passive funds. Within our custom policies, however, we do specify
numerous resolutions which should be referred to us for active review. For example we will analyse all proposals marked by ISS as environmental
or social proposals.
While it
is most common for us to vote in line with a board’s voting recommendation
we will vote our clients’ shares against resolutions which are
not consistent with their best interests. We may also vote against resolutions which conflict with local governance guidelines, such
as the IA in the UK. Although we seek to vote either in favour or against a resolution we do make use of an abstain vote where this is
considered appropriate. For example we may use an abstention to acknowledge some improvement, but as a means to reserve our position
in expectation that further improvement is needed before we can vote in favour. Where we vote against a resolution we endeavour to inform
companies of our rationale.
In exceptional circumstances we may attend and speak at a
shareholder meeting to reinforce our views to the company’s
board.
We endeavour to vote all shares for which we have voting authority.
We may not vote when there are obstacles to do so, for example those impacting liquidity, such as share- blocking, or where there is
a significant conflict of interest. We use the voting platform of ISS to instruct our votes. Where we lend stock on behalf of clients,
and subject to the terms of client agreements, we hold the right to recall shares
where it is in clients’ interests and we take the view that it
will impact the final vote to maintain full voting weight on a particular meeting or resolution.
Our votes are disclosed publicly on our website one day after a general
meeting has taken place.
Strategy
We invest in companies to create the best outcome for our
clients. Companies must be clear about the drivers of their business success and their strategy for maintaining and enhancing it.
Investment is a forward-looking process; we seek to understand the opportunity for a business and its scope for future
value-creation over the long term. In order to do this, we need clarity on past business delivery and its drivers, and on the
effective track record of management; we require honest and open reporting to build confidence in that track record. We seek
confidence that companies and their management can maintain their competitive positioning and operational performance and
subsequently enhance returns for investors. A clear strategy and clarity about the drivers of operational success provides the lens
through which we will consider most corporate issues, not least assessing performance and risk management.
| · | We
will consider voting against executive or non-executive directors if we have serious concerns
regarding the oversight or implementation of strategy. |
Board of Directors
We believe effective board governance promotes the long-term
success and value creation of the company. The board should be responsible
for establishing the company’s purpose and strategy,
overseeing management in their implementation of strategy and performance against objectives. The board should ensure a strong
framework of control and risk oversight, including material ESG risks. The board should assess and monitor culture and be engaged
with the workforce, shareholders and wider society.
Board Composition
Effective decision making requires a mix of skills around the
table and constructive debate between diverse and different-minded individuals. A range of skills, experience and perspectives
should be drawn together on the board. These include industry knowledge, experience from other sectors and relevant geographical
knowledge. Independence of thought plays a crucial role in the ability of a board to generate the debate and discussion that will
challenge management, help enhance business performance and improve decision-making. Board assessments will help the board ensure it
has the necessary mix of skills, diversity and quality of individuals to address the current risks and opportunities the company
faces. Unitary boards should comprise an appropriate combination of executive and non-executive directors such that no group of
individuals dominates decision-making. We expect the size of the board to reflect the size, nature and complexity of the business.
We also expect regular internal and external board evaluations which include an assessment of board composition and
effectiveness.
Leadership
Running businesses effectively for the long term requires
effective collaboration and cooperation, with no individual or small group having unfettered powers. Nor should they have dominant
influence over the way a business is run or over major decisions about its operations or future. There should be a division of
responsibility between board leadership and executive leadership of the business. We believe that there should be a division of
roles at the top of the organisation, typically between a Chief Executive Officer (CEO) and an independent Chair.
| · | We
will consider supporting the re-election of an existing Chair &
CEO role combination, recognising that this remains common in certain geographies. In reviewing
on a case by case basis we will take account of the particular circumstances of the company
and consider what checks and balances are in place, such as the presence of a strong Senior
Independent Director with a clear scope of responsibility. |
| · | We
will generally oppose any re-combination of the roles of CEO and Chair, unless the move is
on a temporary basis due to exceptional circumstances or other mitigating factors. |
| · | We
will generally oppose any move of a retiring CEO to the role of Chair. |
Independence
Companies should be led and overseen by genuinely independent
boards. When looking at board composition we generally expect to see a majority of independent directors, with boards identifying
their independence classifications in the Annual Report. It is preferable to see an identified Senior Independent Director (SID) on
the board, who will lead the appraisal of and succession planning for the Chair. We expect SIDs to meet with investors and be a
point of contact for escalating concerns if required.
In assessing
a director’s independence we will have due regard for whether a
director:
(I) | Has been an employee of the company within the last five years. |
| |
(II) | Has had within the last three years a material business relationship
with the company. |
| |
(III) | Has
received remuneration in addition to director fees or participates in the company’s
option or variable incentive schemes, or is a member of the company’s
pension scheme. |
| |
(IV) | Has
close family ties with any of the company’s
advisers, directors or senior employees. |
| |
(V) | Holds cross-directorships or has significant links with other directors
through involvement in other companies or bodies. |
| |
(VI) | Represents a significant shareholder. |
| |
(VII) | Has served on the board for more than 12 years (or 9 for UK companies). |
| · | We
will consider voting against the re-election of non-independent directors if the board is
not majority independent (excluding employee representatives). In doing so we will have regard
for whether a company is controlled and the nature of the non-independence –
for example, we are unlikely to
vote against shareholder representatives unless their representation is disproportionate
to their shareholding. |
Succession
Planning & Refreshment
Regular refreshment of the non-executive portion of a board helps
draw in fresh perspectives, not least in the context of changes to business and emerging opportunities and risks. It also helps limit
the danger of group-think. Thoughtful and proactive succession planning is therefore needed for board continuity, to ensure that a board
is populated by individuals with an appropriate mix of skills, experience and perspective. We expect the board to implement a formal
process for the recruitment and appointment of new directors, and to provide transparency of this in the Annual Report.
| · | We
will vote against non-executive directors where there are concerns regarding board refreshment
or excessive tenure. Where there are directors who have served for over 12 years on a board
which has seen no refreshment in 3 years (2 in UK), we will generally vote against their
re-election. If a director has served for over 15 years we will generally vote against their
re-election. We will, however, consider the impact on board continuity and the company’s
succession planning efforts prior to doing so. We may not apply the tenure limit to directors
who are founders or shareholder representatives. |
Diversity
We believe that companies that make progress in diversity and inclusion
(D&I) are better positioned for long-term sustainability and outperformance. Diversity of thought, paired with a culture of inclusion,
can help companies to tackle increasingly complex challenges and markets. We expect boards to report on how they promote D&I throughout
the business and believe that setting targets is important to addressing imbalances. We recognise the importance of adopting a regional
approach to diversity and inclusion, allowing us to press for progress with appropriate consideration for the starting point. We have
for several years, actively encouraged progress in gender diversity at all levels, and have expanded our scope in relation to diversity
and inclusion across geographies. In respect of ethnic diversity, this is coming increasingly into focus as we encourage boards to progress
in ensuring that their composition reflects their employee and customer bases. Our regional specific policies are below. In determining
our votes we will take account of mitigating factors, such as the sudden departure of a female board member. We will also consider any
clear progress being made by the company on diversity and any assurance that diversity shortfalls will soon be addressed.
Gender Diversity
| · | UK:
We will generally vote against the Nomination Committee Chair of FTSE 350 companies if the
board is not comprised of at least one third female directors. For smaller companies, we
will take this action if the board does not include at least one female director. |
| · | Europe:
We will generally vote against the Nomination Committee Chair of LargeCap companies if the
supervisory board is not comprised of at least 30% female directors, or is not in line with
the local standard if higher. For smaller companies, we will take this action if the supervisory
board does not include at least one female director. |
| · | Australia:
We will generally vote against the Nomination Committee Chair of ASX300 companies if the
board is not comprised of at least 30% female directors. |
| · | North
America: We will generally vote against the Nomination Committee Chair of LargeCap companies
if the board is not comprised of at least 30% female directors. For smaller companies, we
will take this action if the board does not include at least one female director |
Ethnic Diversity
| · | UK:
We will generally vote against the Nomination Committee Chair at the boards of FTSE 100 companies,
if the board does not include at least one member from an ethnic minority background. This
is in line with targets set up by the Parker Review. |
| · | US:
We will generally vote against the Nomination Committee Chair at the boards of S&P 1500 &
Russell 3000 companies if the board does not include at least one member from a racial or
ethnic minority background. |
Directors’
Time Commitment
Individual directors need sufficient time to carry out their role
effectively and therefore we seek to ensure that all directors maintain an appropriate level of overall commitments such that allows
them to be properly diligent.
| · | We
will consider opposing the election or re-election of any director where there is a concern
regarding their ability to dedicate sufficient time to the role. In making this assessment
we will have regard for the ISS classification of ‘overboarding’. |
| · | We
will generally oppose the re-election of any director who has attended fewer than 75% of
board meetings in two consecutive years. |
Board Committees
Boards should establish committees, populated by independent and
appropriately skilled non-executive directors, to oversee (as a minimum) the nomination, audit and remuneration processes. It may
also be appropriate for additional committees to be established, such as a risk or sustainability committee. These committees should
report openly on an annual basis about their activities and key decisions taken.
| · | We
will consider voting against committee members if we have concerns regarding the composition
of a committee. |
Nomination Committee
This committee has responsibility for leading the process for
orderly non-executive and senior management succession planning and recruitment, and for overseeing the composition of the board
including skillset, experience and diversity.
We expect the committee to be comprised of a majority of independent
directors with an independent Chair.
| · | We
will consider voting against the re-election of the Nomination Committee Chair if we have
concerns regarding the composition of the board or concerns regarding poor succession planning. |
Audit Committee
This
committee has responsibility for monitoring the integrity of the financial statements, reviewing the company’s
internal financial controls and risk management systems, reviewing the effectiveness of the company’s internal audit function
and appointing auditors. While we prefer the committee to be wholly independent, at minimum we expect the committee to be comprised
of a majority of independent directors with an independent Chair and at least one member having recent and relevant financial
experience.
| · | We
will generally vote against the re-election of the Audit Committee Chair if at least one
member of the Committee does not have recent and relevant financial experience. |
Remuneration Committee
This committee is responsible for determining the policy and setting
remuneration for executive and non-executive directors. The committee should ensure that remuneration is aligned with strategy and company
performance and should clearly demonstrate regard for the company’s
employees, for wider society and be cognisant of the company’s
licence to operate when considering policy and the overall level of remuneration. We expect remuneration committees to be robust in their
approach to developing and implementing remuneration policies, with formal and transparent procedures for developing policies and for
determining remuneration packages. Remuneration committees should be comprised of a majority of independent directors with an independent
Chair and we expect members to have appropriate experience and knowledge of the business. No executive should be involved in setting
their own remuneration.
| · | Where
we have significant concerns regarding the company’s
remuneration policy or reward outcomes we may escalate these concerns through a vote against
the Chair or members of the Remuneration Committee. |
Director Accountability
We expect to be able to hold boards to account through engagement
and regular director re-elections and directors should feel that they are accountable to investors. We encourage individual, rather
than bundled, director elections.
While our preference is for directors to be subject to
re-election annually, we expect re-elections to take place at least every three years. Lengthier board mandates, while not uncommon
in some markets, risk divorcing directors from an appropriate sense of accountability. Directors and management should make
themselves available for discussions with major shareholders as we expect to have open dialogue to share our perspectives and gain
confidence that the individuals are carrying out their roles with appropriate vigour and diligence. A further important element of
director accountability to shareholders is that investors should have the right, both formal and informal, to propose and promote
individual directors to be considered for election to the board by all shareholders.
| · | We
will generally oppose the re-election of non- independent NEDs who are proposed for a term
exceeding three years. We may not apply this to directors who are shareholder representatives. |
| · | Where
we have significant concerns regarding a board member’s
performance, actions or inaction to address issues raised we may vote against their re-election. |
| · | We
may vote against directors who decline appropriate requests for meeting without a clear justification. |
| · | Where
a director has held a position of responsibility at a company which has suffered a material
governance failure, we will consider whether we are comfortable to support their re-election
at other listed companies. |
| · | We
will generally support resolutions to discharge the supervisory board or management board
members unless we have serious concerns regarding actions taken during the year under review.
Where there is insufficient information regarding allegations of misconduct, we may prefer
to abstain. In exceptional circumstances we may vote against the discharge resolution to
reflect serious ESG concerns if there is not another appropriate resolution. |
| · | We
will not support the election of directors who are not personally identified but are proposed
as corporations. |
Reporting
A company’s
board should present a fair, balanced and understandable assessment of the company’s
position and prospects – financial and non-financial – and of how it has fulfilled its responsibilities. We support the principle
of full disclosure of relevant and useful information, subject to issues of commercial confidentiality and prejudice. Boilerplate disclosure
should be avoided. We encourage companies to consider using the appropriate globally developed standards and would particularly encourage
the use of those created by the Taskforce for Climate related Financial Disclosure (TCFD), the International Integrated Reporting Council
(IIRC), the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI). Audited reporting and financial
numbers should be published ahead of any relevant shareholder meetings. We continue to monitor the evolving reporting landscape and consider
new reporting developments as they emerge, either voluntary or regulatory.
| · | We
may consider voting against a company’s
Annual Report &
Accounts if we have concerns regarding timely provision or disclosure. |
Political
Donations & Lobbying
Companies should be consistent in their public statements and not
undermine these in private commentary to market participants or to politicians and regulators. We welcome transparency from companies
about their lobbying activities and believe that good companies have nothing to hide in this respect. Similarly we encourage transparency
of any political donations that companies deem appropriate – and
we expect a clear explanation of why such donations are an appropriate use of corporate funds.
Risk &
Audit
The board
is responsible for determining the company’s risk appetite, establishing
procedures to manage risk and for monitoring the company’s internal controls. We expect boards to conduct robust assessments of
the company’s material risks and report to shareholders on risks, controls and effectiveness. The introduction of global accounting
standards has led to much greater investor confidence in the accounts produced by companies around the world. It has also assisted in
creating consistency of reporting across companies, enabling fairer comparisons between different operating businesses. We therefore
encourage companies seeking international investment to report under International Financial Reporting Standards (IFRS) or US GAAP. As
a firm abrdn supports the continued development of high quality global accounting standards.
An independent audit, delivered by a respected audit firm, is a
required element for investor confidence in reporting by companies. We strongly favour meaningful, transparent and informative
auditor reports, giving us additional insights into the audit process and accounting outcomes. Audit fees must be sufficient to pay
for an appropriately in-depth assurance process. We would be concerned if a company sought to make savings in this respect as the
cost in terms of damage to audit effectiveness and confidence in the
company’s accounts would be much more substantial.
The independence of the auditor and the standard of their work,
particularly in challenging management, should be subject to regular assessment that is appropriately disclosed. Even when
individuals carrying out the audit are refreshed, we believe that the independence of the audit firm erodes over time and we will
encourage a tender process and change of audit firm where an engagement has lasted for an extended period. In order to demonstrate
the level of independence, companies should not have the same audit firm in place for more than 20 years.
The relationship with the auditor should be mediated through the audit
committee. Where we are significant shareholders, we expect to be consulted on plans to tender and replace auditors.
| · | We
will generally vote against the re-election of an auditor which has a tenure of 20 years
or over, if there are no plans for rotation in the near term. |
| · | We
will consider voting against the auditors if we have concerns regarding the accounts presented
or the audit procedures used. |
| · | We
will vote against the approval of auditor fees if we have concerns regarding the level of
fees or the balance of non-audit and audit fees. |
Remuneration
Remuneration policies and the overall levels of pay should be
aligned with strategy, attracting and retaining talent and incentivising the decisions and behaviours needed to create long-term
value. The component parts of remuneration should be structured so as to link rewards to corporate and individual performance and
they should be considered in the context of the remuneration policies when taken as a whole. We recognise the benefits of simplicity
in forming the policy, which should clearly link outcomes and expectations for those receiving the remuneration, as well as external
stakeholders. The structure should be transparent and understandable.
A
company’s annual report should contain an informative
statement of remuneration policy which communicates clearly to stakeholders how it has developed and evolved. This should include
details of any stress testing that may have been undertaken to understand the policy outcomes for different business scenarios. The
remuneration committee should provide a clear description of the application of policy and the outcomes achieved.
Base salary should be set at a level appropriate for the role and
responsibility of the executive. We discourage increases which are driven by peer benchmarking, and expect increases to be aligned with
the wider workforce. Consideration should also be given to the knock on impact to variable remuneration potential. Pension arrangements
and benefits should be clearly disclosed. We generally expect pension structures to be aligned with the wider workforce.
A company should structure variable, performance- related pay to
incentivise and reward management in a manner that is aligned with the
company’s sustainable performance and risk appetite over the
long term. We expect all variable pay to be capped, preferably as a proportion of base salary. In the UK we expect variable pay to
be capped as a proportion of salary. In other markets, if variable pay is capped at a number of shares, we expect the value of
grants to be kept under review annually to ensure the value remains appropriate and is not excessive.
Performance
metrics used to determine variable pay should be clearly disclosed and aligned with the company’s
strategy. A significant portion of performance metrics should seek to measure significant improvements in the underlying financial performance
of the company. We also encourage the inclusion of non-financial metrics linked to targets which are aligned with the company’s
progress on its ESG strategy. Where possible we expect these targets to be quantifiable and disclosed.
Variable pay arrangements should incentivise participants to
achieve above-average performance through the use of challenging targets. We encourage sliding-scale performance measures and expect
performance target ranges to be disclosed to enable shareholders to assess the level of challenge and pay for performance alignment.
We expect annual bonus targets to be disclosed retrospectively and encourage the disclosure of long term incentive (LTI) targets at
the beginning of the performance period, but at minimum we expect retrospective disclosure. Where bonus or LTI targets are not
disclosed due to commercial sensitivity we expect an explanation of why the targets continue to be considered sensitive
retrospectively and expect some detail regarding the level of achievement vs target. Where a share price metric is being used, we
expect this to be underpinned by a challenging measure of underlying performance.
We encourage settlement of a portion of the annual bonus in shares
which are deferred for at least one year.
We expect settlement of long term incentives to be in shares, with
rationale provided for any awards settled in cash. Long term incentives should have a performance period of no less than three years.
In the UK we expect a further holding period of two years to be applied, and we encourage this in other markets.
We do not generally support restricted share schemes or value
creation plans. We will consider supporting the use of restricted share plans which have been structured consistent with the
guidelines of the Investment Association.
We expect appropriate malus and clawback provisions to be applied
to variable remuneration plans.
We expect shareholding guidelines to be adopted for executive directors
and encourage the adoption of post-departure shareholding guidelines.
We expect details of any use of discretion to be disclosed and its
use should be justifiable, appropriate and clearly explained. We would expect policies to be sufficiently robust so that discretion is
only necessary in exceptional circumstances. We do not generally support exceptional awards, and are particularly sensitive to such awards
being granted to reward a corporate transaction.
We expect executive service contracts to provide for a maximum notice
period of 12 months. We will consider local best practice provisions related to severance arrangements when voting.
Non-executive
fees should reflect the role’s level of responsibility and time
commitment. We do not support NED’s participation in option or
performance-related arrangements. However we do support the payment of fees in shares, particularly where conservation of cash
is an issue.
In the UK
our expectations of companies are aligned with the Investment Association’s
Principles of Remuneration.
Where significant changes to remuneration arrangements are being
considered, we would expect remuneration committees to consult with their largest shareholders prior to finalising any changes.
Where any increase to variable remuneration is proposed, we would expect this to be accompanied by a demonstrable increase in the
stretch of the targets. Furthermore we expect any increases to remuneration to be subject to shareholder approval.
In response to the issues arising from the cost of living crisis
being experienced by many people in the UK, we expect companies to focus any additional help towards those members of the workforce
who need it most. We expect Remuneration Committees to take into account factors arising from the cost of living crisis when
deliberating over executive pay outcomes. We would be concerned by reputational issues arising from decisions made in these unusual
circumstances and may make this a factor in our voting decisions at relevant AGMs.
In line with
the expectations set out above we will generally vote against the appropriate resolution(s) where:
| · | We
consider the overall reward potential or outcome to be excessive. |
| · | A
significant increase to salary has been granted which is not aligned with the workforce or
is not sufficiently justified. |
| · | A
significant increase to performance-related pay has been granted which is not sufficiently
justified, is not accompanied by an increase in the level of stretch required for achievement
or results in the potential for excessive reward. |
| · | There
is no appropriate cap on variable incentive schemes. |
| · | Performance
targets for annual bonus awards are not disclosed retrospectively and the absence of disclosure
is not explained. |
| · | Performance
targets for long term incentive awards are not disclosed up front and there is no compelling
explanation regarding the absence of disclosure or a commitment to disclose retrospectively. |
| · | Performance
targets are not considered sufficiently challenging, either at threshold, target or maximum. |
| · | Relative
performance targets allow vesting of awards for below median performance. |
| · | Retesting
provisions apply. |
| · | Incentives
that have been conditionally awarded have been repriced or performance conditions changed
part way through a performance period. |
| · | We
have concerns regarding the use of discretion or the grant of exceptional awards. |
| · | Pension
arrangements are excessive. |
| · | Pension
arrangements are not aligned with the wider workforce (UK). |
Investor Rights
The interests of minority shareholders must be protected and any major,
or majority, investor should not enjoy preferential treatment. The structure of ownership or control should minimise the potential for
abuse of public shareholders.
Corporate Transactions
Companies should not make significant changes to their structure
or nature without being fully transparent to their investors. Shareholders should have the opportunity to vote on significant
corporate activity, such as mergers and acquisitions. Where a transaction is with a related party, only independent shareholders
should have a vote. Even in markets where no vote is given to shareholders in these circumstances, investors need transparent
disclosure of the reasons for any such major change. Companies should expect that shareholders may want to discuss and debate
proposed developments Diversification beyond the core skills of the business needs to be justified as it is more often than not a
distraction from operational performance. All major deals need to be clearly explained and justified in the context of the pre-
existing strategy and be subject to shareholder approval.
We will vote on corporate transactions on a case by case basis.
Dividends
We will generally support the payment of dividends but will
scrutinise the proposed level where it appears excessive given the
company’s financial position.
Share Capital
The board carries responsibility for prudent capital management and
allocation.
Share Issuance
We will consider capital raises which are proposed for a specific
purpose on a case by case basis but recognise that it can be beneficial for companies to have some general flexibility to issue
shares to raise capital. However we expect issuances to be limited to the needs of the business and companies should not issue
significant portions of shares unless offering these on a pro-rata basis to existing shareholders to protect against inappropriate
dilution of investments.
| · | Where
a company seeks a general authority to issue shares we generally expect this to be limited
to 25% of the company’s
share capital for pre- emptive issuances. In the UK we are aligned with the guidance of the
Investment Association Share Capital Management Guidelines. |
| · | Where
a company seeks a general authority to issue shares we generally expect this to be limited
to 10% of the company’s
share capital for non-pre-emptive issuances. In the UK we are aligned with the guidance of
the Investment Association Share Capital Management Guidelines and those of the Pre-Emption
Group. |
| · | We
will not generally support share issuances at investment trusts unless there is a commitment
that shares would only be issued at a price at or above net asset value. |
When considering
our votes we will, however, take account of the company’s circumstances
and any further detail regarding proposed capital issuance authorities prior to voting.
Following
changes to the UK’s Pre-Emption Group Guidelines in November 2022,
which reflect an increase on previous limits, we will hold the Chair of the company accountable for any perceived misuse of the increased
flexibility through a vote against their re-election.
Buyback
We recognise that share buybacks can be a flexible means of returning
cash to shareholders.
| · | We
will generally support buyback authorities of up to 10% of the issued share capital. |
Related Party Transactions
The
nature of relations – particularly any related party
transactions (RPTs) – with parent or related companies, or
other major investors, must be disclosed fully. Related party transactions must be agreed on arm’s length terms and be made
fully transparent. Where they are material, they should be subject to the approval of independent shareholders.
| · | We
will vote against RPTs where there is insufficient transparency of the nature of the transaction,
the rationale, the terms or the views and assessment of directors and advisors. |
Article/Bylaw amendments
While it is standard to see proposals from companies to amend
their articles of association or bylaws, we will review these on a case by case basis. When doing so we expect full transparency of
the proposed changes to be disclosed.
| · | We
will vote against amendments which will reduce shareholder rights. |
Anti-Takeover Defences
There should be no artificial structures put in place to entrench
management and protect companies from takeover. The best defence from hostile takeover is strong operational delivery.
| · | We
will generally vote against anti-takeover/‘poison
pill’ proposals. |
Voting Rights
We are strong
supporters of the principle of ‘one share, one vote’
and therefore favour equal voting rights for all shareholders.
| · | We
will generally vote against proposals which seek to introduce or continue capital structures
with multiple voting rights. |
| · | We
will consider voting against proposals to raise new capital at companies with multiple share
classes and voting rights. |
General Meetings
Shareholder meetings provide an important opportunity to hold
boards to account not only through voting on the proposed resolutions but also by enabling investors the opportunity to raise
questions, express views and emphasise concerns to the entire board. We may
make a statement at a company’s AGM as a means of escalation
to reinforce our views to a company’s board.
We welcome the opportunity to attend meetings virtually, being of
the view that this can increase participation given obstacles such as location or meeting concentration. However we are not supportive
of companies adopting virtual-only meetings as we believe this format reduces accountability. Our preference is for a hybrid meeting
format to balance the flexibility of remote attendance with the accountability of an in-person meeting.
| · | We
will generally support resolutions seeking approval to shorten the EGM notice period to minimum
14 days, unless we have concerns regarding previous inappropriate use of this flexibility. |
| · | We
will generally support proposals to enable virtual meetings to take place as long as there
is confirmation that the format will be hybrid, with physical meetings continuing to take
place (unless prohibited by law). We expect virtual attendees to have the same rights to
speak and raise questions as those attending in-person. |
As part of strategic planning, boards need to have oversight
of, and clearly articulate, the key opportunities and risks affecting the sustainability of the business model. This includes having
a process for, and transparent disclosure of, potential and emerging opportunities and risks and the actions being taken to address
them.
The effective management of risks extends to long-term issues that
are hard to measure and whose timeframe is uncertain and will include the management
of environmental and social issues. We use the UN Global Compact’s
four areas of focus in assessing how companies are performing in this area.
Specifically we expect companies to be able to demonstrate how they
manage their exposures under the following headings.
The Environment
It is generally accepted that companies are responsible for the
effects of their operations and products on the environment. The steps they take to assess and reduce those impacts can lead to cost
savings and reduce potential reputational damage. Companies are responsible for their impact on the climate and they face increased
regulation from world governments on activities that contribute to climate change.
We expect that companies will
| · | Identify,
manage and reduce their environmental impacts. |
| · | Understand
the impact of climate change along the company value chain. |
| · | Develop
group-level climate policies and, where relevant, set targets to manage the impact, report
on policies, practices and actions taken to reduce carbon and other environmental risks within
their operations. |
| · | Comply
with all environmental laws and regulations, or recognised international best practice as
a minimum. |
Where we
have serious concerns regarding a board’s actions, or inaction,
in relation to the environment we will consider taking voting action on an appropriate resolution.
We will use the indicators within the Carbon Disclosure Project to
identify companies which are not fulfilling their climate commitments. Where appropriate we will take voting action to encourage better
practice among companies which we deem to be laggards.
Labour and employment
Companies that respect internationally recognised labour rights
and provide safe and healthy working environments for employees are likely to reap the benefits. This approach is likely to foster a
more committed and productive workforce, and help reduce damage to
reputation and a company’s license to operate. We expect
companies to comply with all employment laws and regulations and adopt practices in line with the International Labour
Organization’s core labour standards. a minimum.
In particular, companies will:
| · | Take
affirmative steps to ensure that they uphold decent labour standards. |
| · | Adopt
strong health and safety policies and programmes to implement such policies. |
| · | Adopt
equal employment opportunity and diversity policies and a programme for ensuring compliance
with such policies. |
| · | Adopt
policies and programmes for investing in employee training and development. |
| · | Adopt
initiatives to attract and retain talented employees, foster higher productivity and quality,
and encourage in their workforce a commitment to achieving the company’s
purpose. |
| · | Ensure
policies are in place for a company’s
suppliers that promote decent labour standards, and programmes are in place to ensure high
standards of labour along supply chains. |
| · | Report
regularly on its policy and implementation of managing human capital. |
Where we
have serious concerns regarding a board’s actions, or inaction,
in relation to labour and employment we will consider taking voting action on an appropriate resolution.
Human rights
We recognise the impact that human-rights issues can have on our
investments and the role we can play in stimulating progress. We draw upon a number of international, legal and voluntary agreements
for guidance on human-rights responsibilities and compliance. Our primary sources are the International Bill of Rights and the core
conventions of the International Labour Organisation (ILO), which form the list of internationally agreed human rights, and the UN
Guiding Principles on Business and Human Rights (UNGPs), which clarifies the roles of states and businesses. We encourage companies
to use the UNGPs Reporting Framework and encourage disclosure in line with this guidance.
We expect companies to:
| · | Continually
work to understand their actual and potential impacts on human rights. |
| · | Establish
systems that actively ensure respect for human rights. |
| · | Take
appropriate action to remedy any infringements on human rights. |
Where we
have serious concerns regarding a board’s actions, or inaction,
in relation to human rights we will consider taking voting action on an appropriate resolution.
Business ethics
As institutions of wealth and influence, companies have a
significant impact on the prosperity of their local communities and the wider world. Having a robust code of ethics and ensuring
professional conduct mean companies operate more effectively, particularly
when it comes to ethical principles governing decision- making. A company’s
failure to conform to internationally recognised standards of business ethics on matters such as bribery and corruption, can
increase its risk of facing investigation, litigation and fines. This could undermine its license to operate, and affect its
reputation and image.
We expect companies to have policies in place to support the following:
| · | Ethics
at the heart of the organisation’s
governance. |
| · | A
zero-tolerance policy on bribery and corruption.. How people are rewarded, as pay can influence
behaviour. |
| · | Respect
for human rights. |
| · | Ethical
training for employees. |
Where we
have serious concerns regarding a board’s actions, or inaction,
related to business ethics we will consider taking voting action on an appropriate resolution.
We will review any resolution at company meetings which ISS has
identified as covering environmental and social factors.
The following will detail our overarching approach and expectations.
Our approach to vote analysis is consistent across active and quantitative
investment strategies
Review the resolution, proponent and board statements, existing
disclosures, and external research.
Engage with the company, proponents, and other stakeholders
as required.
Involve thematic experts, regional specialists, and investment
analysts in decision-making to harness a wide range of expertise and include all material factors in our analysis.
Ensure consistency by using our own in-house guidance to frame
case-by-case analysis.
Monitor the outcomes of votes.
Follow-up with on-going engagement as required.
Given the nature of the topics covered by these resolutions we do
not apply binary voting policies. We adopt a nuanced approach to our voting research and outcomes and will consider the specific
circumstances of the company concerned. Our objective is not to vote in favour of all shareholder resolutions but to determine the
best outcome for the company in the context of the best outcome for our clients. There are instances where we are supportive of the
spirit of a resolution however there may be a reason which prevents our support for the proposal. For example, where the purpose of
the resolution is unclear, where the wording is overly prescriptive, when suggested implementation is overly burdensome or where
the proposal strays too closely to the board’s responsibility
for setting the company’s strategy.
Management Proposals
We are supportive of the steps being taken by companies to
provide transparent, detailed reporting of their ESG strategies and targets. While shareholder proposals on environmental and social
topics have been common on AGM agenda for several years, an increasing number of companies are presenting management proposals, such
as so called ‘say on climate’ votes,
for shareholder approval. While we welcome the intention of accountability behind these votes, we have reservations about the
potential for them to limit the scope for subsequent investor challenge and diminish the direct responsibility and accountability of
the board and individual directors. We believe it is the role of the board and the executive to develop and apply strategy,
including ESG strategies, and we will continue to use existing voting items to hold boards to account on the implementation of these
strategies. As active investors we also regularly engage with investee companies on ESG topics and find this dialogue to be the best
opportunity to provide feedback.
We will review
the appropriateness of ‘say on climate’ votes
and consider if other voting mechanisms should be applied to ensure both Boards and Executives apply the appropriate rigour to initiate
and deliver strategies to support the climate transition.
Shareholder Proposals
The number of resolutions focused on environmental and social (E&S)
issues filed by shareholders continues to grow rapidly. The following provides an overview of some of the factors we consider when assessing
the most prevalent themes for shareholder proposals.
Climate Change
We are members of the Net Zero Asset Manager Initiatives and this
is reflected in our Active Ownership approach. We encourage the companies in which we invest to demonstrate a robust methodology
underpinning Paris aligned goals and targets and are supportive of resolutions that will help companies to achieve this. Once a
credible climate strategy is in place, we prioritise evidence of implementation over requests to re-draft strategies and targets
after only a year or two.
A growing number of resolutions call on companies to increase the
transparency of their reporting on climate- related lobbying. These proposals typically encompass direct lobbying undertaken by the
company and indirect lobbying undertaken by trade associations and other organisations of which it is a member or supporter.
Lobbying contrary to the objectives of the Paris Agreement is effective in creating climate policy inertia and impeding the
transition to net zero economies.
We do not evaluate resolutions in isolation. Our approach recognises
the links between corporate governance, strategy and climate approach. Where
a company’s operational response to climate change is inadequate,
the effectiveness of board oversight and corporate governance may also be called into question.
We expect and encourage companies to:
| · | Demonstrate
that a robust methodology underpins Paris aligned, net zero goals and targets. |
| · | Set
targets for absolute emission reduction, not just carbon intensity, to show a clear pathway
to net zero. |
| · | Report in alignment with the TCFD framework. |
| · | Link
targets to remuneration and ensure they are reflected in capital expenditure and R&D
plans. |
| · | Carefully
manage climate-related lobbying by ensuring appropriate oversight, transparent disclosure
of activities, and alignment of activities with the company’s
strategy and publicly stated positions. |
Diversity &
Inclusion
Diversity &
Inclusion (D&I) is an important and growing theme for shareholder resolutions. In recent years resolutions have focussed on
racial equity audits, pay gap reporting, transparent disclosure of D&I metrics and assessments of the efficacy of D&I
programmes.
A racial
equity audit is an independent analysis of a company’s
business practices designed to identify practices that may have a discriminatory effect. We are supportive of racial equity audits
in relation to internal and external D&I programmes. It is appropriate that these programmes should have KPIs and audit
mechanisms in place to measure and evaluate outcomes. Some proposals request racial equity audits of provision of services. We are
aware that measuring provision of service is challenging and gathering racial data on customers can be difficult and inappropriate.
There are also multiple different factors that can influence service provision and which could be misconstrued as being racially
motivated. We will however, support resolutions which are not unduly prescriptive and allow companies to carry out audits within a
reasonable timeframe, at a reasonable cost, and excluding confidential or proprietary information.
We consider standardised gender pay gap disclosure to be an important
tool for assessing how companies are addressing gender inequality. Reporting on gender pay gaps across global operations can help companies
to remain ahead of the regulatory curve. It also enables them to offer better opportunities and remuneration for women around the world.
We are therefore supportive of resolutions which are likely to deliver these benefits. Proposals must be carefully drafted to achieve
these outcomes. For instance, in the past we have been unable to support resolutions which called for global median gender and racial
pay gap reporting as it was unclear how this would reveal potential pay disparities at a local level and how it could be implemented
by companies with operations in jurisdictions where collection of racial identity data is illegal.
In the US market we support public disclosure of EEO-1 forms by
companies. The EEO-1 form details a comprehensive breakdown of workforce by race and gender according to ten employment categories.
The form is submitted privately to the US Equal Employment Opportunity Commission on an annual basis. When publicly disclosed, it
offers investors and other stakeholders data in a standardised and comparable form. We have used our engagement programme to ask the
companies in which we invest to disclose this form for their US operations while making it central to our D&I voting approach
and supporting resolutions that request it.
Human rights
As a supporter of the UN Guiding Principles on Business and Human
Rights (UNGPs), we expect companies to demonstrate how human rights due diligence is conducted across operations, services, product
use and the supply chain. Companies can have a significant impact on human rights directly through operations and provision of
services, and indirectly through product use and the supply chain. In recent years the sale and end-use of controversial
technologies, such as facial recognition software, has emerged as a prominent theme.
We expect and encourage companies to:
| · | Have
robust due diligence processes to assess the actual and potential human rights impacts of
their operations, services, product use and supply chain. |
| · | Conduct
customer and supplier vetting processes commensurate with the risk of human rights abuse. |
| · | Publicly
disclose information about the operation of these processes and utilise the UNGPs’
Reporting Framework. This will improve
the standard and consistency of human rights reporting and enable more informed investment
decision making. |
Corporate
Lobbying & Political Contributions
Corporate lobbying and political contributions are a recurrent theme
of shareholder resolutions, particularly in the US. These proposals typically encompass direct lobbying undertaken by the company and
indirect lobbying undertaken by trade associations and other organisations of which it is a member or supporter. Proposals may also request
the disclosure of more information regarding the process and rationale for political contributions. We expect companies to make transparent,
consolidated disclosures of direct and indirect lobbying and political expenditure. This disclosure should be underpinned by a coherent
policy that: explains public policy priorities and the rationale for associated expenditure, identifies the management positions responsible
for public policy engagement, and provides appropriate mechanisms for board oversight. These measures should mitigate the risks associated
with corporate lobbying and political contributions, protecting the interest of shareholders and other stakeholders.
Nuclear Energy
In the Japanese market nuclear energy is a recurrent theme of shareholder
resolutions. The Japanese government is seeking to reduce the nation’s
reliance on coal and its energy strategy presents safe nuclear power generation as an important source of base-load power. In this context,
resolutions which seek to limit or cease the nuclear operations of an individual company do not appear to be in the best interests of
shareholders and other stakeholders. The health & safety risks associated with nuclear energy are high, must be managed carefully
across the industry, and are an important consideration in our voting.
Important Information
This document is strictly for information purposes only and
should not be considered as an offer, investment recommendation, or solicitation, to deal in any of the investments or funds
mentioned herein and does not constitute investment research. abrdn does not warrant the accuracy, adequacy or completeness of the
information and materials contained in this document and expressly disclaims liability for errors or omissions in such information
and materials.
Any research or analysis used in the preparation of this document
has been procured by abrdn for its own use and may have been acted on for its own purpose. The results thus obtained are made
available only coincidentally and the information is not guaranteed as to its accuracy. Some of the information in this document may
contain projections or other forward looking statements regarding future events or future financial performance of countries,
markets or companies. These statements are only predictions and actual events or results may differ materially. The reader must make
their own assessment of the relevance, accuracy and adequacy of the information contained in this document and make such independent
investigations, as they may consider necessary or appropriate for the purpose of such assessment. This material serves to provide
general information and is not meant to be investment, legal or tax advice for any particular investor. No warranty whatsoever is
given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the reader, any
person or group of persons acting on any information, opinion or estimate contained in this document. abrdn reserves the right to
make changes and corrections to any information in this document at any time, without notice. This material is not to be reproduced
in whole or in part without the prior written consent of abrdn.
Applying ESG and sustainability criteria in the investment process
may result in the exclusion of securities within the universe of potential investments. The interpretation of ESG and sustainability
criteria is subjective meaning that products may invest in companies which similar products do not (and thus perform differently) and
which do not align with the personal views of any individual investor. Furthermore, the lack of common or harmonized definitions and
labels regarding ESG and sustainability criteria may result in different approaches by managers when integrating ESG and sustainability
criteria into investment decisions. This means that it may be difficult to compare strategies within ostensibly similar objectives and
that these strategies will employ different security selection and exclusion criteria. Consequently, the performance profile of otherwise
similar vehicles may deviate more substantially than might otherwise be expected. Additionally, in the absence of common or harmonized
definitions and labels, a degree of subjectivity is required and this will mean that a product may invest in a security that another
manager or an investor would not. abrdn plc is registered in Scotland (SC286832) at 1 George Street, Edinburgh EH2 2LL.
Exhibit 99.13(e)
![](https://www.sec.gov/Archives/edgar/data/876717/000110465924002209/tm2327714d15_ex99-13xeimg1.jpg) |
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KPMG LLP
1601 Market Street Philadelphia, PA 19103-2499 |
Consent of Independent
Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statement
(No. 333-254439) on Form N-2 of our report dated December 28, 2023, with respect to the financial statements and financial
highlights of abrdn Global Income Fund, Inc.
Philadelphia, Pennsylvania
January 8, 2024
|
KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. |
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v3.23.4
N-2 - USD ($)
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3 Months Ended |
12 Months Ended |
Dec. 26, 2023 |
Oct. 31, 2023 |
Jul. 31, 2023 |
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Apr. 30, 2023 |
[7],[8] |
Jan. 31, 2023 |
[7],[8] |
Oct. 31, 2022 |
Jul. 31, 2022 |
[7],[8] |
Apr. 30, 2022 |
[7],[8] |
Jan. 31, 2022 |
[7],[8] |
Oct. 31, 2021 |
Jul. 31, 2021 |
[7],[8] |
Apr. 30, 2021 |
[7],[8] |
Jan. 31, 2021 |
[7],[8] |
Jan. 31, 2020 |
[7],[8] |
Oct. 31, 2023 |
Oct. 31, 2022 |
Oct. 31, 2021 |
Oct. 31, 2020 |
Oct. 31, 2019 |
Oct. 31, 2018 |
Oct. 31, 2017 |
Oct. 31, 2016 |
Oct. 31, 2015 |
Oct. 31, 2014 |
Cover [Abstract] |
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Entity Central Index Key |
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0000876717
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Amendment Flag |
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false
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N-CSR
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Entity Registrant Name |
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abrdn Global Income Fund, Inc.
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Document Period End Date |
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Oct. 31, 2023
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Fee Table [Abstract] |
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Shareholder Transaction Expenses [Table Text Block] |
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Common Shareholder transaction expenses |
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Sales load (as a percentage of offering price)(1) |
1.50% |
Offering expenses (as a percentage of offering price)(2) |
1.55% |
Dividend reinvestment and optional cash purchase plan fees (per share for open-market purchases of common shares)(3) |
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Fee for Open Market Purchases of Common Shares |
$0.02 (per share) |
Fee for Optional Shares Purchases |
$5.00 (max) |
Sales of Shares Held in a Dividend Reinvestment Account |
$0.12 (per share) and $25.00 (max) |
(1) Represents the estimated commission with respect to the Common Shares being sold in the Offering. Jones Trading will be entitled to compensation of 1.00% to 3.00% of the gross proceeds of the sale of any Common Shares under the Sales Agreement, with the exact amount of such compensation to be mutually agreed upon in writing by the Fund and Jones Trading from time to time. The Fund has assumed that Jones Trading will receive a commission of 1.50% of the gross sale proceeds of the Common Shares sold in the Offering. This is the only sales load to be paid in connection with the Offering.
(2) Offering expenses payable by the Fund will be deducted from the proceeds, before expenses, to the Fund.
(3) Shareholders who participate in the Fund’s Dividend Reinvestment and Optional Cash Purchase Plan (the “Plan”) may be subject to fees on certain transactions. The Plan Agent’s (as defined under “Dividend Reinvestment and Optional Cash Purchase Plan” in the Fund’s Prospectus) fees for the handling of the reinvestment of dividends will be paid by the Fund; however, participating shareholders will pay a $0.02 per share fee incurred in connection with open-market purchases in connection with the reinvestment of dividends, capital gains distributions and voluntary cash payments made by the participant, which will be deducted from the value of the dividend. For optional share purchases, shareholders will also be charged a $2.50 fee for automatic debits from a checking/savings account, a $5.00 one-time fee for online bank debit and/or $5.00 for check. Shareholders will be subject to $0.12 per share fee and either a $10.00 fee (for batch orders) or $25.00 fee (for market orders) for sales of shares held in a dividend reinvestment account. Per share fees include any applicable brokerage commissions the Plan agent is required to pay. For more details about the Plan, see “Dividend Reinvestment and Optional Cash Purchase Plan” in the Fund’s Prospectus.
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Sales Load [Percent] |
[1] |
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Underwriters Compensation [Percent] |
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1.55%
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Other Transaction Expenses [Abstract] |
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Annual Expenses [Table Text Block] |
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Annual expenses (as a percentage of net assets attributable to Common Shares) |
Advisory fee(4) |
0.88% |
Interest expenses on bank borrowings(5) |
2.15% |
Other expenses |
1.50% |
Total annual expenses |
4.53% |
(4) The Investment Manager receives a monthly fee 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. The advisory fee percentage calculation assumes the use of leverage by the Fund as discussed in note (5). To derive the annual advisory fee as a percentage of the Fund’s net assets (which are the Fund’s total assets less all of the Fund’s liabilities), the Fund’s average Managed Assets for the year ended October 31, 2023 (which includes the use of leverage discussed in note (5)) were multiplied by the annual advisory fee rate and then divided by the Fund’s average net assets for the same period.(5) The percentage in the table is based on total borrowings of $20,350,000 (the balance outstanding under the Fund’s credit facility as of October 31, 2023), representing approximately 28.87% of the Fund’s Managed Assets and an average interest rate during the year ended October 31, 2023 of 5.94%. There can be no assurances that the Fund will be able to obtain such level of borrowing (or to maintain its current level of borrowing), that the terms under which the Fund borrows will not change, or that the Fund’s use of leverage will be profitable. The expenses shown under “Interest expense on bank borrowings” in the table above reflect the cost to the Fund of borrowings, expressed as a percentage of the Fund’s net assets as of October 31, 2022, based on interest rates in effect as of October 31, 2023. The Fund currently intends during the next twelve months to maintain a similar proportionate amount of borrowings but may increase such amount to 33 1/3% of the average daily value of the Fund’s total assets.
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Management Fees [Percent] |
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0.88%
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Interest Expenses on Borrowings [Percent] |
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2.15%
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Other Annual Expenses [Abstract] |
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Other Annual Expenses [Percent] |
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1.50%
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Total Annual Expenses [Percent] |
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4.53%
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Expense Example [Table Text Block] |
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Example
The following examples illustrate the expenses you would pay on a $1,000 investment in common shares assuming that (i) all dividends and other distributions are reinvested at NAV (ii) the percentage amounts listed under “Total annual expenses” above remain the same in the years shown and (iii) a 5% annual portfolio total return.(1)
The following example does not include the sales load:
1 Year |
3 Years |
5 Years |
10 Years |
$ 45 |
$ 137 |
$ 229 |
$ 464 |
The following example assumes a transaction fee of 3.05%, as a percentage of the offering price, as if it were borne solely by you, as purchaser(2):
1 Year |
3 Years |
5 Years |
10 Years |
$ 75 |
$ 163 |
$ 253 |
$ 480 |
(1) The examples above should not be considered representations of future expenses. Actual expenses may be higher or lower than those shown. The examples assume that all dividends and distributions are reinvested at net asset value. The Fund’s actual rate of return may be greater or less than the hypothetical 5% return shown in the examples. For more complete descriptions of certain of the Fund’s costs and expenses, see “Management of the Fund — Advisory Agreements” in the Fund’s Prospectus.
(2) Notwithstanding this assumption, in actuality, these fees will be indirectly borne by all holders of Common Shares.
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Expense Example, Year 01 |
[5] |
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$ 45
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Expense Example, Years 1 to 3 |
[5] |
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137
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Expense Example, Years 1 to 5 |
[5] |
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229
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Expense Example, Years 1 to 10 |
[5] |
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$ 464
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Purpose of Fee Table , Note [Text Block] |
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The purpose of the following table and the example below is to help you understand the fees and expenses that holders of Common Shares (“Common Shareholders”) would bear directly or indirectly. The table and example below are based on the Fund’s capital structure as of October 31, 2023. The expenses shown in the table under “Other expenses,” “Interest expenses on bank borrowings” and “Total annual expenses” are based on the Fund’s annual report dated October 31, 2023. As of October 31, 2023, the Fund had $20,350,000 of leverage outstanding through bank borrowings which represented 28.87% of the Managed Assets as of October 31, 2023. The table reflects Fund expenses as a percentage of net assets attributable to Common Shares. The following table should not be considered a representation of the Fund’s future expenses. Actual expenses may be greater or less than those shown below.
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Basis of Transaction Fees, Note [Text Block] |
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as a percentage of offering price
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Financial Highlights [Abstract] |
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Senior Securities [Table Text Block] |
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Fiscal Period Ended) |
Title of Security |
Total Principal Amount Outstanding |
Asset Coverage Per $1,000 of Principal Amount |
October 31, 2023 |
Senior Securities |
$ 20,350,000 |
$ 3,463 |
October 31, 2022 |
Senior Securities |
$ 17,350,000 |
$ 3,523 |
October 31, 2021 |
Senior Securities |
$ 21,900,000 |
$ 3,542 |
October 31, 2020 |
Senior Securities |
$ 20,300,000 |
$ 3,815 |
October 31, 2019 |
Senior Securities |
$ 29,300,000 |
$ 3,332 |
October 31, 2018 |
Senior Securities |
$ 28,600,000 |
$ 3,437 |
October 31, 2017 |
Senior Securities |
$ 31,500,000 |
$ 3,540 |
October 31, 2016 |
Senior Securities |
$ 31,500,000 |
$ 3,559 |
October 31, 2015 |
Senior Securities |
$ 31,500,000 |
$ 3,633 |
October 31, 2014 |
Senior Securities |
$ 40,000,000 |
$ 3,641 |
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Senior Securities Amount |
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$ 20,350,000
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$ 17,350,000
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$ 21,900,000
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$ 20,350,000
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$ 17,350,000
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$ 21,900,000
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$ 20,300,000
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$ 29,300,000
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$ 28,600,000
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$ 31,500,000
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$ 31,500,000
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$ 31,500,000
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$ 40,000,000
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Senior Securities Coverage per Unit |
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$ 3,463
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$ 3,523
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$ 3,542
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$ 3,463
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$ 3,523
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$ 3,542
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$ 3,815
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$ 3,332
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$ 3,437
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$ 3,540
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$ 3,559
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$ 3,633
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$ 3,641
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Senior Securities, Note [Text Block] |
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Senior Securities
The following table sets forth information about the Fund’s outstanding senior securities as of the end of each of the Fund’s last ten fiscal years. The Fund’s senior securities during this time period are comprised of borrowings which constitutes a “senior security” as defined in the 1940 Act. The information in this table for the fiscal years ended 2023, 2022, 2021, 2020, 2019 and 2018 has been audited by KPMG LLP, independent registered public accounting firm. The Fund’s audited financial statements, including the report of KPMG LLP thereon, and accompanying notes thereto, are included in this Annual Report.
Fiscal Period Ended) |
Title of Security |
Total Principal Amount Outstanding |
Asset Coverage Per $1,000 of Principal Amount |
October 31, 2023 |
Senior Securities |
$ 20,350,000 |
$ 3,463 |
October 31, 2022 |
Senior Securities |
$ 17,350,000 |
$ 3,523 |
October 31, 2021 |
Senior Securities |
$ 21,900,000 |
$ 3,542 |
October 31, 2020 |
Senior Securities |
$ 20,300,000 |
$ 3,815 |
October 31, 2019 |
Senior Securities |
$ 29,300,000 |
$ 3,332 |
October 31, 2018 |
Senior Securities |
$ 28,600,000 |
$ 3,437 |
October 31, 2017 |
Senior Securities |
$ 31,500,000 |
$ 3,540 |
October 31, 2016 |
Senior Securities |
$ 31,500,000 |
$ 3,559 |
October 31, 2015 |
Senior Securities |
$ 31,500,000 |
$ 3,633 |
October 31, 2014 |
Senior Securities |
$ 40,000,000 |
$ 3,641 |
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General Description of Registrant [Abstract] |
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Investment Objectives and Practices [Text Block] |
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INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES
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 objective. There is no assurance that the Fund will achieve its investment objectives. The Fund's investment objectives may not be changed without the approval of the holders of a majority of the outstanding voting securities.
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. If the Fund
changes its 80% policy, it will notify shareholders at least 60 days before the change and the name of the Fund may need to be changed.
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 (as defined below), 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 (as defined below), whether or not denominated in the currency of such country. Fixed income securities of issuers in Sub-Investment Grade Developing Markets may be rated below investment grade, as described below, at the time of investment (sometimes referred to as "junk bonds"). Below investment grade securities are considered to be speculative with respect to the issuer's ability to pay interest and principal when due.
The following will be deemed to be "issuers in" a particular market:
• |
governmental entities of the particular country; |
• |
banks, companies and other entities which are located in the particular country; |
• |
banks, companies and other entities which are organized under the laws of the particular country; |
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banks, companies and other entities for which the principal securities trading market is in the particular country; |
• |
entities which, although not located in the particular country, derive at least 50% of their revenues from that country or have at least 50% of their assets located in that country; and |
• |
wholly-owned subsidiaries of an entity whose principal place of business is located in the particular country, provided that the debt securities are guaranteed by a parent entity whose principal place of business is located in the particular country. |
The Fund may also consider, among other criteria, the currency that securities are denominated in, or linked to, in determining whether the issuer of such securities is deemed to be an "issuer in" a particular market.
"Developed Markets" are those countries and/or regions contained in the FTSE World Government Bond Index, New Zealand, Luxembourg and the Hong Kong Special Administrative Region. As of October 31, 2023, securities of the following countries comprised the FTSE World Government Bond Index: Australia, Austria, Belgium, Canada, China, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New Zealand, Norway, Poland, Singapore, Spain, Sweden, United Kingdom and the United States. New Zealand was added to the FTSE World Government Bond Index in November 2022
"Investment Grade Developing Markets" are those countries and /or regions that are not Developed Markets, and whose sovereign debt is rated not less than Baa3 by Moody's Investor Services ("Moody's") or BBB- by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or comparably rated by another appropriate nationally or internationally recognized rating agency. As of October 31, 2023, "Investment Grade Developing Markets" are comprised of the following countries and/or regions: Andorra, Aruba, Bermuda, Botswana, Bulgaria, Cayman Islands, Chile, Colombia, Croatia, Curacao, Cyprus, Czech Republic, Estonia, Hungary, Iceland, India, Indonesia, Isle of Man, Jersey, Kazakhstan, Republic of Korea (South Korea), Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Macao, Malta, Mauritius, Montserrat, Panama, Peru, Philippines, Portugal, Qatar, Romania, Saudi Arabia, Slovakia, Slovenia, Switzerland, Taiwan, Thailand, Trinidad & Tobago, United Arab Emirates (U.A.E.), and Uruguay.
"Sub-Investment Grade Developing Markets" are those countries that are not Developed Markets or Investment Grade Developing Markets (Sub-Investment Grade Developing Markets, together with Investment Grade Developing Markets are referred to herein as "Developing Markets"). Securities of issuers in Sub-Investment Grade Developing Markets may be rated below investment grade at the time of investment.
While the credit quality of a market is reviewed at the time of the Fund's investment in that market, classification of a market may be amended by the Investment Manager as ratings and/or circumstances change over time.
The Fund will invest in debt securities that are economically tied to a number of countries throughout the world and will, under normal circumstances, be invested in three or more different non-U.S. countries. The maximum exposure to issuers in any one Developed Market is up to 25% of the Fund's total assets; provided, however, that no more than 40% may be invested in issuers in the U.S. The maximum exposure to issuers in any one Investment Grade Developing Market is up to 20% of the Fund's total assets. The maximum exposure to issuers in any one Sub-Investment Grade Developing Market is up to 15% of the Fund's total assets. Such exposure limits are applied at the time of investment, although classification of a market or an issuer in a market may be amended by the Investment Manager as ratings and/or circumstances change over time.
The maximum exposure to the currency of any one Developed Market is up to 25% of the Fund's total assets; provided, however, the Fund may exceed this limitation with respect to the U.S. dollar. The maximum exposure to the currency of any one Investment Grade Developing Market is up to 20% of the Fund's total assets. The maximum exposure to the currency of any one Sub-Investment Grade Developing Market is up to 15% of the Fund's total assets. Such exposure limits are applied at the time of investment, although, as stated above, classification of a market may be amended by the Investment Manager as ratings and/or circumstances change over time.
Up to 75% of the Fund's investments (or the issuers of those investments) may be rated below investment grade at the time of investment; that is rated below Baa3 by Moody's or BBB- 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. Up to 10% 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. Before purchasing an unrated security, the Investment Manager or Sub-Adviser analyzes the creditworthiness of the issuer of the security and of any financial institution or other party responsible for payments on the security in order to assign a rating to the security. In the event that a security receives different ratings from different rating agencies (Fitch, Moody's and S&P), the Investment Manager or Sub-Adviser will apply the highest rating received from the rating agencies in determining compliance with these guidelines. While the
credit quality of each of the Fund's investments is evaluated at the time of investment, the credit quality of the Fund's portfolio may be reviewed from time to time and adjusted accordingly.
The Investment Manager and Sub-Adviser consider external credit assessments available from international rating agencies such as Moody's and S&P, as well as any reports on the issuer which may be available from brokers or other sources. In some Developing Markets, where issues are often unrated or are at the lower end of the credit risk spectrum, the Investment Manager and the Sub-Adviser believe that opportunities exist for skilled analysts to add value through extensive company research and detailed credit assessment.
Low-credit debt can sometimes become equity. Due to the conversion of convertible notes and warrants, the Fund may from time to time become an (often) involuntary holder of equities until such stock can be sold as and when an optimal price can be achieved, given market conditions. It may be in the interests of shareholders for the Fund to hold such stock for short term periods.
Similarly, distressed companies can sometimes restructure via debt-for-equity swaps in order to stay solvent and viable. In this case, the investor becomes an involuntary equity holder and, once again, it may be in the best interests of shareholders that the Fund holds such securities for short periods of time, especially in extreme market conditions, until optimal prices can be obtained.
The Fund currently utilizes and in the future expects to continue to utilize leverage through borrowings or through other transactions, such as reverse repurchase agreements, which have the effect of leverage. The Fund may also utilize leverage through the issuance of debt securities or preferred stock, although it has no current intention to do so. The 1940 Act generally prohibits the Fund from engaging in most forms of leverage representing indebtedness other than preferred shares unless immediately after such incurrence the Fund's total assets less all liabilities and indebtedness not represented by senior securities (for these purposes, "total net assets") is at least 300% of the aggregate senior securities representing indebtedness (i.e., the use of leverage through senior securities representing indebtedness may not exceed 33 1/3% of the Fund's total net assets (including the proceeds from leverage)). Additionally, under the 1940 Act, the Fund generally may not declare any dividend or other distribution upon any class of its capital shares, or purchase any such capital shares, unless at the time of such declaration or purchase, this asset coverage test is satisfied. The Fund generally will not utilize leverage if it anticipates that the Fund's leveraged capital structure would result in a lower return to shareholders than that obtainable over time with an unleveraged capital structure. Use of leverage creates an opportunity for increased income and capital appreciation for shareholders but, at the same time, creates special risks, and there
can be no assurance that a leveraging strategy will be successful during any period in which it is employed.
Consistent with its investment objectives, the Fund may invest in a broad array of financial instruments and securities in which the value of the instrument or security is "derived" from the performance of an underlying asset or a "benchmark" such as a security index, an interest rate or a foreign currency ("derivatives"). The Fund may use derivatives to manage currency risk, credit risk and interest rate risk and to replicate or as a substitute for physical securities. The Fund may use interest rate swaps to hedge the Fund's liability with respect to its leverage. There is no limit on the amount of interest rate swap transactions that may be entered into by the Fund.
Derivative debt securities that replicate, or substitute for, the currency of a particular country will be counted toward the limitations applicable with respect to issuers in that country. The Fund may invest in over-the-counter or exchange traded derivatives. The Fund may invest in derivatives up to the limits allowed under the 1940 Act.
The Fund may invest in securities issued by investment companies registered as such under the 1940 Act and unregistered, private funds (each, an "acquired company"), subject to the limitations of the 1940 Act (which are to be applied immediately after the acquisition of such securities).
In response to adverse market, political or economic conditions, or in other circumstances when warranted in the Investment Manager's judgment, the Fund may invest without limit in U.S. Government securities and short-term debt obligations of U.S. banks and corporations rated not less than Aa or Prime-2 by Moody's or AA or A-2 by S&P at the time of purchase for temporary defensive purposes. The Fund also may invest in these instruments on a temporary basis to meet liquidity or distribution requirements. To the extent the Fund invests in these securities, it may not achieve its investment objectives. The yield on these securities may be lower than the yields on lower rated debt securities Although Prime-2 and A-2 ratings denote issuers with a strong (Moody's) or satisfactory (S&P) ability to repay short-term debt in a timely manner, the relative degree of safety is not as high as the very highest rating categories. In addition, the Fund may enter into repurchase agreements and lending agreements involving these securities.
As a general matter and subject to applicable law, if a percentage limitation is satisfied at the time of investment, a later increase or decrease in such percentage resulting from a change in the value of the Fund's investments will not constitute a violation of such limitation, except that any borrowing by the Fund that exceeds the corresponding fundamental investment limitation stated in the "Fundamental Investment Restrictions” section of this annual report must be reduced to meet such limitation within the period required
by the 1940 Act (currently three days). Otherwise, the Fund may continue to hold a security even though it causes the Fund to exceed a percentage limitation because of fluctuation in the value of the Fund's assets.
Unless otherwise indicated, the investment policies described above are not "fundamental" and may be changed by the Fund at any time.
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Risk Factors [Table Text Block] |
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RISK FACTORS
The Fund is a non-diversified, closed-end investment company designed primarily as a long-term investment vehicle and not as a trading tool. The Fund invests generally in a portfolio of fixed income securities. An investment in the Fund's Common Stock may be speculative and involves a high degree of risk. The Fund should not be considered a complete investment vehicle program. Due to the uncertainty in all investments, there can be no assurance that the Fund will achieve its investment objectives. The value of an investment in the Fund's common shares could decline substantially and cause you to lose some or all of your investment. Before investing in the Fund's common shares you should consider carefully the following principal risks of investing in the Fund.
Management Risk
The Fund's ability to achieve its investment objectives is directly related to the Advisers' investment strategies for the Fund. The value of your investment in the Fund's common shares may vary with the effectiveness of the research and analysis conducted by the Advisers and their ability to identify and take advantage of attractive investment opportunities. If the investment strategies of the Advisers do not produce the expected results, the value of your investment could be diminished or even lost entirely, and the Fund could underperform the market or other funds with similar investment objectives. Additionally, there can be no assurance that all of the personnel of the Advisers will continue to be associated with the Advisers for any length of time. The loss of the services of one or more key employees of the Advisers could have an adverse impact on the Fund's ability to realize its investment objectives.
Investment and Capital Market Risk
An investment in the Fund's Shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. Your investment in Shares represents an indirect investment in the securities owned by the Fund. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably, and these fluctuations are likely to have a greater impact on the value of the Shares during periods in which the Fund utilizes a leveraged capital structure. If the current global economic downturn continues into a prolonged recession or deteriorates further, the ability of issuers of the corporate fixed-income securities
and other securities in which the Fund invests to service their obligations could be materially and adversely affected.
The value of the securities in which the Fund invests will affect the value of the Shares. Your Shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
Credit Risk
Investments in debt securities expose the Fund to credit risk. Credit risk is the risk that one or more of the Fund's investments in debt securities or other instruments will decline in price, or fail to pay interest, liquidation value or principal when due, because the issuer of the obligation or the issuer of a reference security experiences an actual or perceived decline in its financial status. Credit risk is influenced by changes in general economic and political conditions and changes in the financial condition of the issuers. During periods of economic downturn or rising interest rates, issuers of securities with a low credit rating may experience financial weakness that could affect their ability to make payments of interest and principal.
Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the value and liquidity of securities with low credit ratings, especially in markets characterized by a low volume of trading.
Interest Rate and Pre-Payment Risk
Generally, when market interest rates rise, the prices of debt obligations fall, and vice versa. Interest rate risk is the risk that debt obligations and other instruments in the Fund's portfolio will decline in value because of increases in market interest rates. This risk may be particularly acute when market interest rates are at low levels. The prices of long-term debt obligations generally fluctuate more than prices of short-term debt obligations as interest rates change. During periods of rising interest rates, the average life of certain types of securities may be extended due to slower than expected payments. This may lock in a below market yield, increase the security's duration and reduce the security's value.
Investments in floating rate debt instruments, although generally less sensitive to interest rate changes than longer duration fixed rate instruments, may nevertheless decline in value in response to rising interest rates if, for example, the rates at which they pay interest do not rise as much, or as quickly, as market interest rates in general. Conversely, floating rate instruments will not generally increase in value if interest rates decline. Inverse floating rate debt securities may also exhibit greater price volatility than a fixed rate debt obligation with similar credit quality. To the extent the Fund holds floating rate instruments, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect
the income received from such securities and the net asset value of the Fund's common shares.
Pre-payment risk refers to the risk that a debt obligations are prepaid ahead of schedule. In this event, the proceeds from the prepaid securities would likely be reinvested by the Fund in securities bearing a lower interest rate. Pre-payment rates usually increase when interest rates are falling.
Private Placements and Other Restricted Securities Risk
Private placement and other restricted securities include securities that have been privately placed and are not registered under the Securities Act, such as unregistered securities eligible for resale without registration pursuant to Rule 144A ("Rule 144A Securities") and privately placed securities of U.S. and non-U.S. issuers offered outside of the
United States without registration with the SEC pursuant to Regulation S ("Regulation S Securities"). Private placements may offer attractive opportunities for investment not otherwise available on the open market.
Private placements securities typically may be sold only to qualified institutional buyers (or, in the case of the initial sale of certain securities, such as those issued in collateralized debt obligations or collateralized loan obligations, to accredited investors (as defined in Rule 501(a) under the Securities Act)), or in a privately negotiated transaction or to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration. Rule 144A Securities and Regulation S Securities may be freely traded among certain qualified institutional investors, such as the Fund, but their resale in the U.S. is permitted only in limited circumstances. Issuers of restricted securities may not be subject to the disclosure and other investor protection requirements that would be applicable if their securities were publicly traded. Where a registration statement is required for the resale of restricted securities, the Fund may be required to bear all or part of the registration expenses. The Fund may be deemed to be an "underwriter" for purposes of the Securities Act when selling restricted securities to the public and, in such event, the Fund may be liable to purchasers of such securities if the registration statement prepared by the issuer is materially inaccurate or misleading. Private placements typically are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such securities, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the Fund could find it more difficult to sell such securities when it may be advisable to do so or it may be able to sell such securities only at prices lower than if such securities were more widely held. At times, it also may be more difficult to
determine the fair value of such securities for purposes of computing the Fund's net asset value NAV due to the absence of a trading market.
Private placements and restricted securities may be considered illiquid securities, which could have the effect of increasing the level of the Fund's illiquidity. Additionally, a restricted security that was liquid at the time of purchase may subsequently become illiquid. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the Fund to sell them promptly at an acceptable price. The Fund may have to bear the extra expense of registering the securities for resale and the risk of substantial delay in effecting the registration. In addition, market quotations typically are less readily available for these securities.
Foreign Securities Risk
Investing in foreign securities involves certain special considerations that are not typically associated with investments in the securities of U.S. issuers. Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards and may have policies that are not comparable to those of domestic issuers. As a result, there may be less information available about foreign issuers than about domestic issuers. Securities of some foreign issuers may be less liquid and more volatile than securities of comparable domestic issuers. There is generally less government supervision and regulation of securities markets, brokers and issuers than in the United States. In addition, with respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, political and social instability, or diplomatic developments, which could affect the value of investments in those countries. These risks are heightened under adverse economic, market, geopolitical and other conditions. The costs of investing in foreign countries frequently are higher than the costs of investing in the United States. Although the Advisers endeavor to achieve the most favorable execution costs in portfolio transactions, trading costs in non-U.S. securities markets are generally higher than trading costs in the United States.
Investments in securities of foreign issuers often will be denominated in foreign currencies. Accordingly, the value of the Fund's assets, as measured in U.S. dollars, may be affected favorably or unfavorably by changes in currency exchange rates and in exchange control regulations. The Fund may incur costs in connection with conversions between various currencies.
The Fund generally holds its foreign securities and cash in foreign banks and securities depositories approved by State Street Bank and Trust Company, the Fund's Foreign Custody Manager (as that term is defined in Rule 17f-5 under the 1940 Act). Some foreign banks and securities depositories may be recently organized or new to the foreign custody business. There may be limited or no regulatory
oversight over their operations. Also, the laws of certain countries may put limits on the Fund's ability to recover its assets if a foreign bank, depository or issuer of a security, or any of their agents, goes bankrupt. In addition, it is often more expensive for the Fund to buy, sell and hold securities in certain foreign markets than in the United States. The increased expense of investing in foreign markets reduces the amount the Fund can earn on its investments and typically results in a higher operating expense ratio for the Fund than for investment companies invested only in the United States.
Certain foreign governments levy withholding or other taxes on dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion of foreign withholding taxes will reduce the income received from investments in such countries.
From time to time, the Fund may have invested in certain sovereign debt obligations that are issued by, or certain companies that operate in or have dealings with, countries that become subject to sanctions or embargoes imposed by the U.S. government and the United Nations and/or countries identified by the U.S. government as state sponsors of terrorism. Investments in such countries may be adversely affected because, for example, the credit rating of the sovereign debt security may be lowered due to the country's instability or unreliability or the company may suffer damage to its reputation if it is identified as a company which operates in, or has dealings with, such countries. As an investor in such companies, the Fund will be indirectly subject to those risks.
Developing and Emerging Markets Risk
Investing in the securities of issuers located in developing and emerging market countries (and to a certain extent non-U.S. developed market countries) involves a high degree of risk and special considerations not typically associated with investing in the securities of U.S. issuers and other developed market issuers. Compared to the United States and other developed countries, emerging market countries may have relatively unstable governments, economies which may be more likely to take extra-legal action with respect to companies, industries, assets, or foreign ownership than those in more developed markets and therefore issuers of such emerging markets may be more affected by the performance of such industries or sectors. Emerging market economies may be based on only a few industries and securities markets that trade a small number of securities. Securities issued by companies or governments located in emerging market countries tend to be especially volatile (particularly during market closures due to local market holidays or other reasons) and may be less liquid than securities traded in developed countries. Securities in these countries have been characterized by greater potential loss than securities of companies and governments located in developed countries. Investments in the securities of issuers
located in emerging markets could be affected by risks associated with expropriation and/or nationalization, political or social instability, pervasiveness of corruption and crime, armed conflict, the impact on the economy of civil war, religious or ethnic unrest and the withdrawal or non-renewal of any license enabling the Fund to trade in securities of a particular country, confiscatory taxation, restrictions on transfers of assets, lack of uniform accounting and auditing standards, less publicly available financial and other information, diplomatic development which could affect U.S. investments in those countries, and potential difficulties in enforcing contractual obligations. International trade barriers or economic sanctions against foreign countries, organizations, entities and/or individuals in response to geopolitical tensions or conflicts may adversely affect the value of the Fund's foreign holdings. The type and severity of sanctions and other similar measures are difficult to measure or predict. Emerging market countries generally have less developed legal, accounting and financial reporting systems than those in more developed markets, which may reduce the scope or quality of financial information available to investors. Moreover, it can be more difficult for investors to bring litigation or enforce judgments against issuers in emerging markets or for U.S. regulators to bring enforcement actions against such issuers.
Countries in emerging markets are also more likely to experience high levels of inflation, deflation or currency devaluation, which could also hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative.
The economies of individual developing and emerging market countries may differ favourably or unfavorably from the United States economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, capital reinvestment, resource self-sufficiency and balance of payments position. Governments of many developing and emerging market countries have exercised and continue to exercise substantial influence over many aspects of the private sector. In some cases, the government owns or controls many companies, including some of the largest in the country.
Accordingly, government actions could have a significant effect on economic conditions in a developing or emerging market country and on market conditions, prices and yields of securities in the Fund's portfolio. Moreover, the economies of developing and emerging market countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. Many developing and emerging market economies are considered to be
more politically volatile than the developed markets. Investments in securities of issuers in countries other than the U.S. may involve greater political risk, including in some countries, the possibility of nationalization of assets, expropriation or confiscatory taxation, restrictions on repatriation, and the establishment of foreign exchange controls, political changes, government regulation, overburdened and obsolete or unseasoned financial systems, environmental problems, less developed legal systems, economic or social instability or diplomatic developments (including war) which could affect adversely the economies of such countries or the value of the Fund's investments in those countries. Central authorities also tend to exercise a high degree of control over the economies and in many cases have ownership over core productive assets.
The legal systems in many developing and emerging market countries are less developed than those in more developed countries, with the administration of laws and regulations often subject to considerable discretion. Non-U.S. markets may offer less protection to investors than U.S. or other developed markets. It also may be difficult to obtain and enforce a judgment in a court outside of the United States.
Adequate public information on non-U.S. issuers may not be available, and it may be difficult to secure information regarding corporate actions on a timely basis. In general, there is less overall governmental supervision and regulation of securities exchanges, brokers, and listed companies than in the United States or other developed market countries.
Due to their strong reliance on international trade, most developing and emerging market economies tend to be sensitive both to economic changes in their own region and to changes affecting their major trading partners. These include changes in growth, inflation, foreign exchange rates, current account positions, government policies, taxation and tariffs.
Investments in developing and emerging market countries may entail purchasing securities issued by or on behalf of entities that are insolvent, bankrupt, in default or otherwise engaged in an attempt to reorganize or reschedule their obligations or in entities that have little or no proven credit rating or credit history. In any such case, the issuer's poor or deteriorating financial condition may increase the likelihood that the Fund will experience losses or diminution in available gains due to bankruptcy, insolvency or fraud.
Foreign Currency Risk
The Fund may invest all of its assets in debt securities which are denominated in currencies other than the U.S. dollar. Currency exchange rates can fluctuate significantly over short periods and can be subject to unpredictable changes based on a variety of factors including political developments and currency controls by governments. A change in the value of a currency in which a security is
denominated against the U.S. dollar will generally result in a change in the U.S. dollar value of the Fund's assets. If the exchange rate for a non-U.S. currency declines compared to the U.S. dollar, the Fund's NAV would decline. In addition, although much of the Fund's income will be received or realized in non-U.S. currencies, the Fund is required to compute and distribute its income in U.S. dollars. Therefore, for example, if the exchange rate for a non-U.S. currency declines after the Fund's income has been accrued and translated into U.S. dollars, but before the income has been received or converted into U.S. dollars, the Fund could be required to liquidate securities to make distributions. Similarly, if the exchange rate declines between the time the Fund incurs expenses in U.S. dollars and the time expenses are paid, the amount of non-U.S. currency required to be converted into U.S. dollars in order to pay such U.S. dollar expenses will be greater than the non-U.S. currency equivalent of the expenses at the time they were incurred.
The currencies of Developing Markets, in particular, have experienced periods of steady declines or even sudden devaluations relative to the U.S. dollar. Some Developing Market currencies may not be internationally traded or may be subject to strict controls by local governments, resulting in undervalued or overvalued currencies. Some Developing Markets have experienced balance of payment deficits and shortages in foreign exchange reserves. Governments have responded by restricting currency conversions. Future restrictive exchange controls could prevent or restrict a company's ability to make dividend or interest payments in the original currency of an obligation (often U.S. dollars). In addition, even though the currencies of some Developing Markets may be convertible into U.S. dollars, the conversion rates may be artificial to their actual market values.
Sovereign Debt Obligations Risk
Investments in Developing Market countries' government debt obligations involve special risks. Certain Developing Market countries have historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. The issuer or governmental authority that controls the repayment of a Developing Market country's debt may not be able or willing to repay the principal and/or interest when due in accordance with the terms of such debt. A debtor's willingness or ability to repay principal and interest due in a timely manner may be affected by, among other factors, its cash flow situation and, in the case of a government debtor, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the government debtor's policy towards the International Monetary Fund and the political constraints to which a government debtor may be subject. Government debtors may default on their debt and may also be dependent on expected disbursements
from foreign governments, multilateral agencies and others abroad to reduce principal and interest arrearages on their debt. The commitment on the part of these governments, agencies and others to make such disbursements may be conditioned on a debtor's implementation of economic reforms and/or economic performance and the timely service of such debtor's obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third parties' commitments to lend funds to the government debtor, which may further impair such debtor's ability or willingness to service its debts on a timely basis. Holders of government debt, including the Fund, may be requested to participate in the rescheduling of such debt and to extend further loans to government debtors.
As a result of the foregoing, a government obligor may default on its obligations. If such an event occurs, the Fund may have limited legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting party itself, and the ability of the holder of foreign government debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the holders of more senior fixed income securities, such as commercial bank debt, will not contest payments to the holders of other foreign government debt securities in the event of default under their commercial bank loan agreements.
Government obligors in Developing Market countries are among the world's largest debtors to commercial banks, other governments, international financial organizations and other financial institutions. The issuers of the government debt securities in which the Fund may invest have in the past experienced substantial difficulties in servicing their external debt obligations, which led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements, and obtaining new credit to finance interest payments. Holders of certain foreign government debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the foreign government debt securities in which the Fund may invest will not be subject to similar restructuring arrangements or to requests for new credit, which may adversely affect the Fund's holdings. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants. Investments in Developing Market countries' government debt securities involve currency risk. See "Foreign Currency Risk" above.
Corporate Debt Risk
The Fund may invest in debt securities of non-governmental issuers. Like all debt securities, corporate debt securities generally represent an issuer's obligation to repay to the investor (or lender) the amount borrowed plus interest over a specified time period. A typical corporate bond specifies a fixed date when the amount borrowed (principal) is due in full, known as the maturity date, and specifies dates when periodic interest (coupon) payments will be made over the life of the security.
Corporate debt securities come in many varieties and may differ in the way that interest is calculated, the amount and frequency of payments, the type of collateral, if any, and the presence of special features (e.g., conversion rights). The Fund's investments in corporate debt securities may include, but are not limited to, senior, junior, secured and unsecured bonds, notes and other debt securities, and may be fixed rate, floating rate, zero coupon and inflation linked, among other things.
Prices of corporate debt securities fluctuate and, in particular, are subject to several key risks including, but not limited to, interest rate risk (which may be heightened in a market environment where interest rates are high or rising), credit risk, prepayment risk and spread risk. The market value of a corporate bond may be affected by the financial condition or the credit rating of the corporation, the corporation's performance and perceptions of the corporation in the market place and government regulations impacting the industry in which the corporation operates. There is a risk that the issuers of the corporate debt securities in which the Fund may invest may not be able to meet their obligations on interest or principal payments at the time called for by an instrument.
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. The Fund's investments in lower rated securities may involve the following specific risks: greater risk of loss due to default because of the increased likelihood that adverse economic or company specific events will make the issuer unable to pay interest and/or principal when due; wider price fluctuations due to changing interest rates and/or adverse economic and business developments; and greater risk of loss due to declining credit quality.
Leverage Risk
The Fund generally seeks to enhance its total returns through the use of leverage. The Fund currently has a bank loan to finance investments as a form of leverage.
The Fund also has authority to issue preferred stock to finance investments. Leverage entails particular risks for holders of the Fund's common stock. The issuance of preferred stock would affect the amount of income available for distribution on the Fund's common stock as well as the net asset value of the common stock and the voting rights of holders of common stock. Leverage would exaggerate the effects of both currency fluctuations and of market downturns or upturns on the net asset value and market value of the Fund's common stock, as well as on distributions to holders of common stock. Leverage can also increase the volatility of the Fund's net asset value, and expenses related to leverage can reduce the Fund's income. In the case of leverage, if Fund assets decline in value so that legal asset coverage requirements for any borrowings or preferred stock would not be met, the Fund may be prevented from paying distributions, which could jeopardize its qualification for pass-through tax treatment, make it liable for excise taxes and/ or force it to sell portfolio securities at an inopportune time. Holders of preferred stock have the right to elect two directors, and such holders, as well as Fund creditors, have the right under certain circumstances to elect a majority of the Fund's directors.
As noted above, the Fund currently leverages through borrowings from a credit facility. The Fund has entered into a revolving Credit Agreement with The Bank of Nova Scotia to borrow up to $25 million. Such borrowings constitute financial leverage. The Credit Agreement contains customary covenant, negative covenant and default provisions, including covenants that limit the Fund's ability to incur additional debt or consolidate or merge into or with any person, other than as permitted, or sell, lease or otherwise transfer, directly or indirectly, all or substantially all of its assets. The covenants also 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. In addition, the Fund agreed not to purchase assets not contemplated by the investment policies and restrictions in effect when the Credit Agreement became effective. The covenants or guidelines could impede the Investment Manager or Sub-Adviser from fully managing the Fund's portfolio in accordance with the Fund's investment objectives and policies. Furthermore, non-compliance with such covenants or the occurrence of other events could lead to the cancellation of the loan facility. The Fund may not incur additional debt from any other party, except for in limited circumstances (e.g., in the ordinary course of business). The covenants include a requirement that the Fund maintain net assets of
no less than $25 million. Such restrictions shall apply only so long as the Credit Agreement remains in effect.
Indebtedness issued under the Credit Agreement is not convertible into any other securities of the Fund. Outstanding amounts would be payable at maturity or such earlier times as required by the Credit Agreement. The Fund may be required to prepay outstanding amounts under the Credit Agreement in the event of the occurrence of certain events of default. The Fund is expected to indemnify the lenders under the Credit Agreement against certain liabilities they may incur in connection with the Credit Agreement. The Fund is required to pay commitment fees under the terms of the Credit Agreement. With the use of borrowings, there is a risk that the interest rates paid by the Fund on the amount it borrows will be higher than the return on the Fund's investments. The credit facility with The Bank of Nova Scotia may in the future be replaced or refinanced by one or more credit facilities having substantially different terms, or the Fund may be unable to renew or replace its credit facility upon the termination of the current facility, possibly requiring it to sell portfolio securities at times or prices that are disadvantageous. Any of these situations could adversely impact income or total return to shareholders.
The Fund must comply with investment quality, diversification and other guidelines established by the credit facility. The Fund does not anticipate that such guidelines will have a material adverse effect on the Fund's common stockholders or its ability to achieve its investment objectives.
Successful use of a leveraging strategy may depend on the Investment Manager's ability to predict correctly interest rates and market movements, and there is no assurance that a leveraging strategy will be successful during any period in which it is employed.
Liquidity Risk
While the Fund ordinarily invests in debt securities for which there is an active secondary market, the Fund may invest in debt securities for which there is no established secondary market. The securities markets that exist in developing and emerging market countries are substantially smaller, less developed, less liquid and more volatile than the securities markets of the United States and other more developed countries. Settlement and custodial practices (including those involving securities settlement where fund assets may be released prior to receipt of payment) are also often less developed than those in U.S. or other developed markets, and may result in increased risk or substantial delays in the event of a failed trade or the insolvency of, or breach of duty by, a non-U.S. broker-dealer, securities depository or non-U.S. subcustodian.
Liquidity in developing markets may be low and transaction costs high. Reduced liquidity often creates higher volatility, as well as
difficulties in obtaining accurate market quotations for financial reporting purposes and for calculating net asset values, and sometimes also an inability to buy and sell securities. Market quotations on many non-U.S. debt securities may only be available from a limited number of dealers and may not necessarily represent firm bids from those dealers or prices for actual sales.
In addition, the markets for below investment grade securities may be substantially smaller, less developed, less liquid and more volatile than the markets for prime rated securities, which may make obtaining accurate market quotations for financial reporting purposes and for calculating net asset values more difficult. Market quotations on many sub-investment grade securities may only be available from a limited number of dealers and may not necessarily represent firm bids from those dealers or prices for actual sales.
The Fund may not be able readily to dispose of illiquid securities at prices that approximate those at which the Fund could sell such securities if they were more widely traded and, as result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. Illiquid securities generally trade at a discount.
Bank Loan Risk
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.
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. To the extent the extended settlement process gives rise to short-term liquidity needs, the Fund may hold additional cash or sell investments.
Convertible Securities Risk
The Fund may invest in convertible securities, which include bonds, debentures, notes, preferred stocks and other securities that entitle the holder to acquire common stock or other equity securities of the same or a different issuer. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. As with all debt securities, the market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. Convertible securities also tend to reflect the market price of the underlying stock in varying degrees, depending on the relationship of such market price to the conversion price in the terms of the convertible security, and, therefore, is also subject to the same types of market and issuer risks that may negatively affect the underlying common stock. Convertible securities rank senior to common stock in an issuer's capital structure and consequently entail less risk than the issuer's common stock.
Asset-Backed Securities Risk
Payment of interest and repayment of principal on asset-backed securities is largely dependent upon the cash flows generated by the assets backing the securities and, in certain cases, supported by letters of credit, surety bonds or other credit enhancements. Asset-backed security values may also be affected by the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables and any entities providing the credit enhancement. In addition, the underlying assets are subject to prepayments that shorten the securities' weighted average maturity and may lower their return. Asset-backed securities are in particular subject to interest rate risk. Generally, asset-backed securities increase in value to a lesser extent when interest rates decline and generally decline in value to a similar or greater extent when interest rates rise. Asset-backed securities are also subject to liquidity and valuation risk.
Derivatives Risk
Consistent with its investment objectives, the Fund may invest in a broad array of financial instruments and securities in which the value of the instrument or security is "derived" from the performance of an underlying asset or a "benchmark" such as a security index, an interest rate or a foreign currency ("derivatives"). Derivatives are most often used to manage interest rate, currency and credit risk, to increase or decrease exposure to an asset class or benchmark (as a hedge or to enhance return), or to create an investment position directly (often because it is more efficient or less costly than direct investment). There is no guarantee that these results can be achieved through the
use of derivatives and any success in their use depends on a variety of factors including the ability of the Advisers to predict correctly the direction of interest rates, securities prices, currency exchange rates and other factors.
The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may increase or decrease. Adverse movements in the value of the underlying asset can expose the Fund to losses, which can be increased if derivatives are used to obtain leverage. In addition, risks in the use of derivatives include:
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an imperfect correlation between the price of derivatives and the movement of the securities prices, interest rates or currency exchange rates being hedged or replicated; |
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the possible absence of a liquid secondary market for any particular derivatives contract at any time and the need to continue making margin and settlement payments thereunder; |
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the potential loss if the counterparty to the transaction does not perform as promised; |
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the possible need to defer closing out certain positions to avoid adverse tax consequences, as well as the possibility that derivative transactions may result in acceleration of gain, deferral of losses or a change in the character of gain realized; |
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the risk that the financial intermediary "manufacturing" the over-the-counter derivative, being the most active market maker and offering the best price for repurchase, will not continue to create a credible market in the derivative; |
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because certain derivatives are "manufactured" by financial institutions, the risk that the Fund may develop a substantial exposure to financial institution counterparties; |
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the risk that a full and complete appreciation of the complexity of derivatives and how future value is affected by various factors including changing interest rates, exchange rates and credit quality is not attained; and |
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the risk that the Fund would need additional liquidity to meet the payment obligations created by the derivatives contract. |
Derivatives also may create operational and legal risks for the Fund. There is no guarantee that derivatives will provide successful results and any success in their use depends on a variety of factors including the ability of the Advisers to predict correctly the direction of interest rates, securities prices, currency exchange rates and other factors. Recent legislation calls for new and/or expanded regulation of the derivatives markets. The extent and impact of the regulation are not yet completely known and may not be known for some time. New and/or expanded regulation of derivatives may make them more costly, may limit their availability, or may otherwise adversely affect their value or performance.
The Fund may use interest rate swaps to hedge the Fund's liability with respect to its leverage. A significant type of 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 agreement. 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 its leverage.
Rule 18f-4 under the 1940 Act governs a registered investment company's use of derivatives, short sales, reverse repurchase agreements, and certain other instruments. Under Rule 18f-4, the fund's must limit its derivatives exposure through a value-at-risk test, adopt and implement a derivatives risk management program and comply with certain reporting requirements. However, subject to certain conditions, funds that do not invest heavily in derivatives may be deemed limited derivatives users and would not be subject to the full requirements of Rule 18f-4. Under the rule, when the Fund trades reverse repurchase agreements or similar financing transactions, including certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the Fund’s asset coverage ratio or treat all such transactions as derivatives transactions. In addition, under the rule, the Fund is permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security (as defined under Section 18(g) of the 1940 Act), provided that, (i) the Fund intends to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the “Delayed-Settlement Securities Provision”). The Fund may otherwise engage in when-issued, forward-settling and non-standard settlement cycle securities transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the Fund treats any such transaction as a “derivatives transaction” for purposes of compliance with the rule. Furthermore, under the rule, the Fund is permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if the Fund reasonably believes, at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all such agreements as they come due. These requirements may limit the ability of the Fund to use derivatives, reverse repurchase agreements and similar financing transactions, and other relevant transaction as part of its investment strategies. These requirements may increase the cost of the Fund’s investments and cost of doing business, which could adversely affect investors.
Hedging Strategy Risk
Certain of the investment techniques that the Fund may employ for hedging will expose the Fund to additional or increased risks.
There may be an imperfect correlation between changes in the value of the Fund's portfolio holdings and hedging positions entered into by the Fund, which may prevent the Fund from achieving the intended hedge or expose the Fund to risk of loss. In addition, the Fund's success in using hedge instruments is subject to the Advisers’ ability to predict correctly changes in the relationships of such hedge instruments to the Fund's portfolio holdings, and there can be no assurance that the Advisers’ judgment in this respect will be accurate. Consequently, the use of hedging transactions might result in a poorer overall performance for the Fund, whether or not adjusted for risk, than if the Fund had not hedged its portfolio holdings.
The Advisers are under no obligation to engage in any hedging strategies, and may, in its discretion, choose not to engage in hedging strategies. Even if the Advisers desire to hedge some of the Fund's risks, suitable hedging transactions may not be available or, if available, attractive. A failure to hedge may result in losses to the value of the Fund's investments.
Counterparty Risk
The Fund will be subject to credit risk with respect to the counterparties to the derivative contracts purchased or sold by the Fund. Although the Advisers monitor the creditworthiness of the Fund's counterparties, there can be no assurance that the Fund's counterparties will not experience difficulties, possibly resulting in losses to the Fund. Counterparty risk also encompasses the risk of having concentrated exposure to one or more counterparties. If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances. Such risk is heightened in a market environment where interest rates are either high or rising.
Inflation Risk
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. To the extent that inflation occurs, it will reduce the real value of dividends paid by the Fund and the Fund’s Common Shares. Most emerging market countries, in particular, have experienced substantial, and in some periods extremely high and volatile, rates of inflation. Inflation and rapid fluctuations in inflation rates have had and may continue to have very negative effects on the economies and securities markets globally. In an attempt to control inflation, wage and price controls have been imposed at times in certain countries.
Market Events Risk
The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, investor sentiment and other factors that may or may not be related to the issuer of the security or other asset. Economies and financial markets throughout the world are increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, arrangements, actual or threatened wars or other armed conflicts (such as the Russia/Ukraine and Israel/Hamas conflicts), terrorism, natural disasters and other circumstances in one country or region could have profound impacts on global economies or markets. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund's investments may be negatively affected. In addition, any spread of an infectious illness, public health threat or similar issue could reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines, and generally have a significant impact on the world economy, which in turn could adversely affect the Fund's investments.
Russia/Ukraine Risk. In February 2022, Russia commenced a military attack on Ukraine. The outbreak of hostilities between the two countries and the threat of wider spread hostilities could have a severe adverse effect on the region and global economies, including significant negative impacts on the markets for certain securities and commodities, such as oil and natural gas. In addition, sanctions imposed on Russia by the United States and other countries, and any sanctions imposed in the future, could have a significant adverse impact on the Russian economy and related markets. The price and liquidity of investments may fluctuate widely as a result of the conflict and related events. How long the armed conflict and related events will last cannot be predicted. These tensions and any related events could have a significant impact on Fund performance and the value of the Funds’ investments.
Europe Related Risk. A number of countries in Europe have experienced severe economic and financial difficulties. Many non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts; many other issuers have faced difficulties obtaining credit or refinancing existing obligations; financial institutions have in many cases required government or central bank support, have needed to raise capital, and/or have been impaired in their ability to extend credit; and financial markets in Europe and elsewhere have experienced extreme volatility and declines in asset values and liquidity. These difficulties may continue, worsen or spread within and outside Europe.
Responses to the financial problems by European governments, central banks and others, including austerity measures and reforms, may not work, may result in social unrest and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and others of their debt could have additional adverse effects on economies, financial markets and asset valuations around the world.
Government Intervention in Financial Markets Risk
U.S. federal and state governments and foreign governments, their regulatory agencies or self-regulatory organizations may take additional actions that affect the regulation of the securities in which the Fund invests, or the issuers of such securities, in ways that are unforeseeable. Under certain circumstances, the withdrawal of U.S. government and foreign government support could negatively affect financial markets generally as well as reduce the value and liquidity of certain securities.
Additionally, issuers of corporate fixed income securities might seek protection under the bankruptcy laws. Legislation or regulation may also change the way in which the Fund itself is regulated. Such legislation or regulation could limit or preclude the Fund's ability to achieve its investment objectives. The Investment Manager will monitor developments and seek to manage the Fund's portfolio in a manner consistent with achieving the Fund's investment objectives, but there can be no assurance that it will be successful in doing so.
In addition, policy and legislative changes in the United States and in other countries are affecting many aspects of financial regulation. New or revised laws or regulations may be imposed by the Security and Exchange Commission (“SEC”), the CFTC, the Internal Revenue Services (“IRS”), the U.S. Federal Reserve or other governmental regulatory authorities or self-regulatory organizations that could adversely affect the Fund’s performance. The Fund may also be adversely impacted by changes in the enforcement or interpretation of existing statutes and rules by governmental regulatory authorities or self-regulatory organizations. The impact of these changes on the markets, and the practical implications for market participants, may not be fully known for some time. Furthermore, volatile financial markets can expose the Fund to greater market and liquidity risk and potential difficulty in valuing portfolio instruments held by the Fund. The value of the Fund's holdings is also generally subject to the risk of future local, national, or global economic disturbances based on unknown weaknesses in the markets in which the Fund invests. In addition, it is not certain that the U.S. Government will intervene in response to a future market disturbance and the effect of any such future intervention cannot be predicted.
Cybersecurity Risk
The Fund is subject to direct cybersecurity risk. Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder information), or proprietary information, or cause the Fund, the Advisers and/or the Fund's service providers (including, but not limited to, Fund accountants, custodians, sub-custodians and transfer agents) to suffer data breaches, data corruption or lose operational functionality. Furthermore, the Fund may be an appealing target for cybersecurity threats such as hackers and malware.
Net Asset Value Discount
Shares of closed-end investment companies frequently trade at a discount from net asset value. This characteristic is a risk separate and distinct from the risk that net asset value will decrease. The Fund cannot predict whether its Shares in the future will trade at, below or above net asset value. This risk that shares of a closed-end fund might trade at a discount is more significant for investors who wish to sell their shares in a relatively short period of time. For those investors, realization of gain or loss on their investment is likely to be more dependent upon the existence of a premium or discount than upon portfolio performance.
Distribution Rate
It is the Fund's current policy to pay distributions on a monthly basis. If the Fund's investments do not generate sufficient income, the Fund may be required to liquidate a portion of its portfolio to fund these distributions, and therefore a portion or all of such distributions may represent a reduction of the shareholders' principal investment. Such liquidation might be at a time when independent investment judgment would not dictate such action, increasing the Fund's overall portfolio turnover (and related transaction costs) and making it more difficult for the Fund to achieve its investment objectives.
Non-Diversification Risk
The Fund is classified as a "non-diversified" management investment company under the 1940 Act. This means that the Fund is not subject to limits under the 1940 Act as to the proportion of its assets that may be invested in the securities of a single issuer. As a non-diversified investment company, the Fund may therefore invest its assets in securities of a smaller number of issuers or may invest a larger proportion of its assets in a single issuer than a diversified fund, and, as a result, would be more susceptible than a diversified fund to any single corporate, political, geographic or regulatory occurrence. Although the Fund must comply with certain diversification requirements in order to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended ("Code"), the Fund may be more susceptible to any single economic, political or regulatory occurrence than would be the case if it had elected to
diversify its holding sufficiently to be classified as a "diversified" management investment company under the 1940 Act. The Fund, however, intends to comply with the diversification requirements imposed by the Code for qualification as a regulated investment company.
Conflicts of Interest Risk
The Advisers’ advisory fees are based on net assets plus the amount of any borrowings for investment purposes. Consequently, the Advisers will benefit from an increase in the Fund's net assets resulting from an offering.
Additionally, the portfolio managers' management of "other accounts" may give rise to potential conflicts of interest in connection with their management of the Fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objectives as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby the portfolio manager could favor one account over another. However, the Advisers believe that these risks are mitigated by the fact that: (i) accounts with like investment strategies managed by a particular portfolio manager are generally managed in a similar fashion, subject to exceptions to account for particular investment restrictions or policies applicable only to certain accounts, differences in cash flows and account sizes, and similar factors; and (ii) portfolio manager personal trading is monitored to avoid potential conflicts. In addition, the Advisers have adopted trade allocation procedures that require equitable allocation of trade orders for a particular security among participating accounts.
In some cases, another account managed by the same portfolio manager may compensate the Advisers based on the performance of the portfolio held by that account. The existence of such a performance-based fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities.
Another potential conflict could include instances in which securities considered as investments for the Fund also may be appropriate for other investment accounts managed by the Advisers or their affiliates. Whenever decisions are made to buy or sell securities by the Fund and one or more of the other accounts simultaneously, the Advisers may aggregate the purchases and sales of the securities and will allocate the securities transactions in a manner that it believes to be equitable under the circumstances. As a result of the allocations, there may be instances where the Fund will not participate in a transaction that is allocated among other accounts. While these aggregation and allocation policies could have a detrimental effect on the price or amount of the securities available to the Fund from time to time, it is the opinion of the Advisers that the benefits from the policies outweigh any disadvantage that may arise from exposure to
simultaneous transactions. The Advisers has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures adopted under such policies will detect each and every situation in which a conflict arises.
From time to time, the Advisers may seed proprietary accounts for the purpose of evaluating a new investment strategy that eventually may be available to clients through one or more product structures. Such accounts also may serve the purpose of establishing a performance record for the strategy. The management by the Advisers of accounts with proprietary interests and nonproprietary client accounts may create an incentive to favor the proprietary accounts in the allocation of investment opportunities, and the timing and aggregation of investments. The Advisers' proprietary seed accounts may include long-short strategies, and certain client strategies may permit short sales. A conflict of interest arises if a security is sold short at the same time as a long position, and continuous short selling in a security may adversely affect the stock price of the same security held long in client accounts. The Advisers have adopted various policies to mitigate these conflicts.
In addition, the 1940 Act limits the Fund’s ability to enter into certain transactions with certain affiliates of the Advisers. As a result of these restrictions, the Fund may be prohibited from buying or selling any security directly from or to any portfolio company of a fund managed by the Advisers or one of their affiliates. Nonetheless, the Fund may under certain circumstances purchase any such portfolio company’s loans or securities in the secondary market, which could create a conflict for the Advisers between the interests of the Fund and the portfolio company, in that the ability of the Advisers to recommend actions in the best interest of the Fund might be impaired. The 1940 Act also prohibits certain “joint” transactions with certain of the Fund’s affiliates (which could include other abrdn-managed Funds), which could be deemed to include certain types of investments, or restructuring of investments, in the same portfolio company (whether at the same or different times). These limitations may limit the scope of investment opportunities that would otherwise be available to the Fund. The Board has approved policies and procedures reasonably designed to monitor potential conflicts of interest. The Board will review these procedures and any conflicts that may arise.
The Advisers or their respective members, officers, directors, employees, principals or affiliates may come into possession of material, non-public information. The possession of such information may limit the ability of the Fund to buy or sell a security or otherwise to participate in an investment opportunity. Situations may occur where the Fund could be disadvantaged because of the investment activities conducted by the Advisers for other clients, and the Advisers will not employ information barriers with regard to its operations on behalf of its registered and private funds, or other accounts. In certain circumstances, employees of the Advisers may serve as board
members or in other capacities for portfolio or potential portfolio companies, which could restrict the Fund’s ability to trade in the securities of such companies.
Anti-Takeover Charter Provisions
The Fund's charter and by-laws contain several provisions that may be regarded as "anti-takeover" because they have the effect of maintaining continuity of management. Also, charter provisions subject the Fund to certain provisions of the Maryland General Corporation Law with respect to unsolicited takeovers.
Repurchase Agreement Risk
Repurchase agreements may involve risks in the event of default or insolvency of the seller, including possible delays or restrictions with respect to the Fund's ability to dispose of the underlying securities, and the possibility that the collateral might not be sufficient to cover any losses incurred by the Fund.
Securities Lending Risk
In connection with its loans of portfolio securities, the Fund may be exposed to the risk of delay in recovery of the loaned securities or possible loss of rights in the collateral should the borrower become insolvent. The Fund also bears the risk of loss on the investment of cash collateral. There is also the risk that, in the event of default by the borrower, the collateral might not be sufficient to cover any losses incurred by the Fund. There can be no assurance that the return to the Fund from a particular loan, or from its loans overall, will exceed the related costs and any related losses.
Tax Risk
The Fund may invest in securities of which the federal income tax treatment may not be clear or may be subject to recharacterization by the IRS. It could be more difficult for the Fund to comply with the United States tax requirements applicable to regulated investment companies, or with other tax requirements applicable to foreign investors, if the tax characterization of the Fund's investments or the tax treatment of the income from such investments were successfully challenged by the IRS.
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Effects of Leverage [Text Block] |
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EFFECTS OF LEVERAGE
The following table is furnished in response to requirements of the SEC. It is designed to, among other things, illustrate the effects of leverage through the use of senior securities, as that term is defined under Section 18 of the 1940 Act, on Common Share total return, assuming investment portfolio total returns (consisting of income and changes in the value of investments held in a Fund's portfolio) of -10%, -5%, 0%, 5% and 10%. The table below reflects the Fund's continued use of the revolving credit facility, as of October 31, 2023 as a percentage of total managed assets (including assets attributable to such leverage) and the annual return that the Fund's portfolio must experience (net of expenses) in order to cover such costs. The information below does not reflect the Fund's use of certain other forms of economic leverage achieved through the use of other instruments or transactions not considered to be senior securities under the 1940 Act, such as covered credit default swaps or other derivative instruments, if any.
The assumed investment portfolio returns in the table below are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced by the Fund. Your actual returns may be greater or less than those appearing below. In addition, actual borrowing expenses associated with reverse repurchase agreements (or dollar rolls or borrowings, if any) used by the Fund may vary frequently and may be significantly higher or lower than the rate used for the example below.
Assumed annual returns on the Fund's portfolio (net of expenses) |
(10%) |
(5%) |
0% |
5% |
10% |
Corresponding return of shareholder |
(16.7%) |
(9.7%) |
(2.7%) |
4.4% |
11.4% |
Based on estimated indebtedness of $20,350,000 (representing approximately 28.87% of the Fund's Managed Assets as of October 31, 2023), and an annual interest rate of 6.53% (effective interest rate as of October 31, 2023), the Fund's investment portfolio at fair value would have to produce an annual return of approximately 1.89% to cover annual interest payments on the estimated debt.
Share total return is composed of two elements – the distributions paid by the Fund to holders of Shares (the amount of which is largely determined by the net investment income of the Fund after paying dividend payments on any preferred shares issued by the Fund and expenses on any forms of leverage outstanding) and gains or losses on the value of the securities and other instruments the Fund owns. As required by SEC rules, the table assumes that a Fund is more likely to
suffer capital losses than to enjoy capital appreciation. For example, to assume a total return of 0%, a Fund must assume that the income it receives on its investments is entirely offset by losses in the value of those investments. This table reflects hypothetical performance of a Fund's portfolio and not the actual performance of the Fund's Shares, the value of which is determined by market forces and other factors.
Should the Fund elect to add additional leverage to its portfolio, any benefits of such additional leverage cannot be fully achieved until the
proceeds resulting from the use of such leverage have been received by the Fund and invested in accordance with the Fund's investment objective and policies. As noted above, the Fund's willingness to use additional leverage, and the extent to which leverage is used at any time, will depend on many factors, including, among other things, the Adviser's assessment of the yield curve environment, interest rate trends, market conditions and other factors.
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Annual Dividend Payment |
[6] |
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$ (0.84)
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(0.84)
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(0.84)
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(0.84)
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(0.84)
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Effects of Leverage [Table Text Block] |
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Assumed annual returns on the Fund's portfolio (net of expenses) |
(10%) |
(5%) |
0% |
5% |
10% |
Corresponding return of shareholder |
(16.7%) |
(9.7%) |
(2.7%) |
4.4% |
11.4% |
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Return at Minus Ten [Percent] |
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(16.70%)
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Return at Minus Five [Percent] |
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(9.70%)
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Return at Zero [Percent] |
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(2.70%)
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Return at Plus Five [Percent] |
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4.40%
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Return at Plus Ten [Percent] |
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11.40%
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Effects of Leverage, Purpose [Text Block] |
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The assumed investment portfolio returns in the table below are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced by the Fund. Your actual returns may be greater or less than those appearing below. In addition, actual borrowing expenses associated with reverse repurchase agreements (or dollar rolls or borrowings, if any) used by the Fund may vary frequently and may be significantly higher or lower than the rate used for the example below.
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Share Price [Table Text Block] |
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Net Asset Value and Market Price Information
Net Asset Value
The Fund’s currently outstanding Common Shares, and the Common Shares offered pursuant to the Prospectus Supplement and the accompanying Prospectus are listed on the NYSE American. The Common Shares commenced trading on the New York Stock Exchange (“NYSE”) on February 28, 1992. Effective November 4, 2002, the Fund transferred the listing of its Common Shares from the NYSE to the NYSE American (formerly, American Stock Exchange).
The Common Shares have traded both at a premium and at a discount to the Fund’s NAV per Common Share. Although the Common Shares recently have traded at a premium to NAV, there can be no assurance that this will continue after the Offering nor that the Common Shares will not trade at a discount in the future. Shares of closed-end investment companies frequently trade at a discount to NAV. The Fund’s NAV will be reduced immediately following an offering of the Common Shares due to the costs of such offering, which will be borne entirely by the Fund. The sale of Common Shares by the Fund (or the perception that such sales may occur) may have an adverse effect on prices of Common Shares in the secondary market. An increase in the number of Common Shares available may result in downward pressure on the market price for Common Shares.
As of December 26, 2023, 13,397,419 Common Shares were outstanding. The last reported sales price, NAV per Common Share and percentage premium to NAV per Common Share on December 26, 2023 was $6.63, $4.04 and 64.11%, respectively. The Fund cannot predict whether its Common Shares will trade in the future at a premium to or discount from NAV, or the level of any premium or discount. Shares of closed-end investment companies frequently trade at a discount from NAV.
Market Price Information
The Fund’s Common Shares are publicly held and are listed and traded on the NYSE American (trading symbol “FCO”). The following table sets forth for the fiscal quarters indicated the highest and lowest daily prices during the applicable quarter at the close of market on the NYSE American per Common Share along with (i) the highest and lowest closing NAV and (ii) the highest and lowest premium or discount from NAV represented by such prices at the close of the market on the NYSE American.
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NYSE Market Price(1) |
NAV at NYSE Market Price(1) |
Market Premium/(Discount) to NAV on Date of NYSE Market Price(1) |
Quarter Ended (2) |
High |
Low |
High |
Low |
High |
Low |
October 31, 2023 |
$ 6.47 |
$ 5.74 |
$ 4.13 |
$ 3.70 |
62.83 % |
40.49 % |
July 31, 2023 |
$ 6.38 |
$ 5.01 |
$ 4.18 |
$ 4.04 |
53.27 % |
21.31 % |
April 30, 2023 |
$ 5.79 |
$ 4.94 |
$ 4.43 |
$ 4.07 |
35.71 % |
20.19 % |
January 31, 2023 |
$ 5.69 |
$ 4.39 |
$ 4.39 |
$ 3.95 |
30.95 % |
7.06 % |
October 31, 2022 |
$ 5.35 |
$ 4.30 |
$ 4.59 |
$ 3.88 |
18.63 % |
8.04 % |
July 31,2022 |
$ 5.90 |
$ 4.95 |
$ 4.92 |
$ 4.23 |
21.62 % |
14.58 % |
April 30, 2022 |
$ 7.35 |
$ 5.55 |
$ 5.90 |
$ 4.91 |
25.64 % |
9.90 % |
January 31, 2022 |
$ 8.44 |
$ 6.78 |
$ 6.30 |
$ 5.84 |
34.82 % |
11.15 % |
October 31, 2021 |
$ 9.71 |
$ 7.70 |
$ 6.61 |
$ 6.28 |
48.50 % |
21.80 % |
July 31, 2021 |
$ 9.33 |
$ 8.36 |
$ 6.82 |
$ 6.53 |
42.90 % |
23.50 % |
April 30, 2021 |
$ 8.79 |
$ 7.98 |
$ 7.04 |
$ 6.67 |
29.26 % |
14.16 % |
January 31, 2021 |
$ 8.10 |
$ 7.45 |
$ 7.10 |
$ 6.55 |
14.08 % |
8.13 % |
January 31, 2020 |
$ 8.48 |
$ 7.78 |
$ 7.99 |
$ 7.70 |
7.61 % |
0.39 % |
(1) Source: Bloomberg L.P.
(2) Data presented are with respect to a short period of time and are not indicative of future performance.
On December 26, 2023, the Fund’s NAV was $4.04 and the last reported sale price of a Common Share on the NYSE was $6.63, representing a premium to NAV of 64.11%.
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Lowest Price or Bid |
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5.74
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[7],[8] |
$ 5.01
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$ 4.94
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$ 4.39
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4.3
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[7],[8] |
$ 4.95
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$ 5.55
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$ 6.78
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7.7
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[7],[8] |
$ 8.36
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$ 7.98
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$ 7.45
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$ 7.78
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$ 4.39
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Highest Price or Bid |
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6.47
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[7],[8] |
6.38
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5.79
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5.69
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5.35
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[7],[8] |
5.9
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7.35
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8.44
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9.71
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[7],[8] |
9.33
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8.79
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8.1
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8.48
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6.47
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Lowest Price or Bid, NAV |
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3.7
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[7],[8] |
4.04
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4.07
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3.95
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3.88
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[7],[8] |
4.23
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4.91
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5.84
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6.28
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[7],[8] |
6.53
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6.67
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6.55
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7.7
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3.7
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Highest Price or Bid, NAV |
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$ 4.13
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[7],[8] |
$ 4.18
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$ 4.43
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$ 4.39
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$ 4.59
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[7],[8] |
$ 4.92
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$ 5.9
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$ 6.3
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$ 6.61
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[7],[8] |
$ 6.82
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$ 7.04
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$ 7.1
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$ 7.99
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$ 4.43
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Highest Price or Bid, Premium (Discount) to NAV [Percent] |
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62.83%
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[7],[8] |
53.27%
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35.71%
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30.95%
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18.63%
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[7],[8] |
21.62%
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25.64%
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34.82%
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48.50%
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[7],[8] |
42.90%
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29.26%
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14.08%
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7.61%
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7.06%
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Lowest Price or Bid, Premium (Discount) to NAV [Percent] |
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40.49%
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[7],[8] |
21.31%
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20.19%
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7.06%
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8.04%
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[7],[8] |
14.58%
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9.90%
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11.15%
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21.80%
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[7],[8] |
23.50%
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14.16%
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8.13%
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0.39%
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62.83%
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Share Price |
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$ 6.63
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$ 6.09
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[6] |
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$ 4.5
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[6] |
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$ 8.35
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[6] |
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$ 6.09
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[6] |
4.5
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8.35
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6.8
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8.41
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NAV Per Share |
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$ 3.74
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$ 6.28
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$ 3.74
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$ 3.98
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$ 6.28
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$ 6.55
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$ 7.83
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$ 7.99
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Latest Premium (Discount) to NAV [Percent] |
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64.11%
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62.83%
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13.07%
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Capital Stock, Long-Term Debt, and Other Securities [Abstract] |
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Security Title [Text Block] |
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Senior Securities
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Senior Securities
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Senior Securities
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Senior Securities
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Senior Securities
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Senior Securities
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Senior Securities
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Senior Securities
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Senior Securities
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Senior Securities
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Management Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Management Risk
The Fund's ability to achieve its investment objectives is directly related to the Advisers' investment strategies for the Fund. The value of your investment in the Fund's common shares may vary with the effectiveness of the research and analysis conducted by the Advisers and their ability to identify and take advantage of attractive investment opportunities. If the investment strategies of the Advisers do not produce the expected results, the value of your investment could be diminished or even lost entirely, and the Fund could underperform the market or other funds with similar investment objectives. Additionally, there can be no assurance that all of the personnel of the Advisers will continue to be associated with the Advisers for any length of time. The loss of the services of one or more key employees of the Advisers could have an adverse impact on the Fund's ability to realize its investment objectives.
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Investment And Capital Market Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Investment and Capital Market Risk
An investment in the Fund's Shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. Your investment in Shares represents an indirect investment in the securities owned by the Fund. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably, and these fluctuations are likely to have a greater impact on the value of the Shares during periods in which the Fund utilizes a leveraged capital structure. If the current global economic downturn continues into a prolonged recession or deteriorates further, the ability of issuers of the corporate fixed-income securities
and other securities in which the Fund invests to service their obligations could be materially and adversely affected.
The value of the securities in which the Fund invests will affect the value of the Shares. Your Shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
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Credit Risks [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Credit Risk
Investments in debt securities expose the Fund to credit risk. Credit risk is the risk that one or more of the Fund's investments in debt securities or other instruments will decline in price, or fail to pay interest, liquidation value or principal when due, because the issuer of the obligation or the issuer of a reference security experiences an actual or perceived decline in its financial status. Credit risk is influenced by changes in general economic and political conditions and changes in the financial condition of the issuers. During periods of economic downturn or rising interest rates, issuers of securities with a low credit rating may experience financial weakness that could affect their ability to make payments of interest and principal.
Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the value and liquidity of securities with low credit ratings, especially in markets characterized by a low volume of trading.
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Interest Rate And Prepayment Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Interest Rate and Pre-Payment Risk
Generally, when market interest rates rise, the prices of debt obligations fall, and vice versa. Interest rate risk is the risk that debt obligations and other instruments in the Fund's portfolio will decline in value because of increases in market interest rates. This risk may be particularly acute when market interest rates are at low levels. The prices of long-term debt obligations generally fluctuate more than prices of short-term debt obligations as interest rates change. During periods of rising interest rates, the average life of certain types of securities may be extended due to slower than expected payments. This may lock in a below market yield, increase the security's duration and reduce the security's value.
Investments in floating rate debt instruments, although generally less sensitive to interest rate changes than longer duration fixed rate instruments, may nevertheless decline in value in response to rising interest rates if, for example, the rates at which they pay interest do not rise as much, or as quickly, as market interest rates in general. Conversely, floating rate instruments will not generally increase in value if interest rates decline. Inverse floating rate debt securities may also exhibit greater price volatility than a fixed rate debt obligation with similar credit quality. To the extent the Fund holds floating rate instruments, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect
the income received from such securities and the net asset value of the Fund's common shares.
Pre-payment risk refers to the risk that a debt obligations are prepaid ahead of schedule. In this event, the proceeds from the prepaid securities would likely be reinvested by the Fund in securities bearing a lower interest rate. Pre-payment rates usually increase when interest rates are falling.
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Private Placements And Other Restricted Securities Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Private Placements and Other Restricted Securities Risk
Private placement and other restricted securities include securities that have been privately placed and are not registered under the Securities Act, such as unregistered securities eligible for resale without registration pursuant to Rule 144A ("Rule 144A Securities") and privately placed securities of U.S. and non-U.S. issuers offered outside of the
United States without registration with the SEC pursuant to Regulation S ("Regulation S Securities"). Private placements may offer attractive opportunities for investment not otherwise available on the open market.
Private placements securities typically may be sold only to qualified institutional buyers (or, in the case of the initial sale of certain securities, such as those issued in collateralized debt obligations or collateralized loan obligations, to accredited investors (as defined in Rule 501(a) under the Securities Act)), or in a privately negotiated transaction or to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration. Rule 144A Securities and Regulation S Securities may be freely traded among certain qualified institutional investors, such as the Fund, but their resale in the U.S. is permitted only in limited circumstances. Issuers of restricted securities may not be subject to the disclosure and other investor protection requirements that would be applicable if their securities were publicly traded. Where a registration statement is required for the resale of restricted securities, the Fund may be required to bear all or part of the registration expenses. The Fund may be deemed to be an "underwriter" for purposes of the Securities Act when selling restricted securities to the public and, in such event, the Fund may be liable to purchasers of such securities if the registration statement prepared by the issuer is materially inaccurate or misleading. Private placements typically are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such securities, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the Fund could find it more difficult to sell such securities when it may be advisable to do so or it may be able to sell such securities only at prices lower than if such securities were more widely held. At times, it also may be more difficult to
determine the fair value of such securities for purposes of computing the Fund's net asset value NAV due to the absence of a trading market.
Private placements and restricted securities may be considered illiquid securities, which could have the effect of increasing the level of the Fund's illiquidity. Additionally, a restricted security that was liquid at the time of purchase may subsequently become illiquid. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the Fund to sell them promptly at an acceptable price. The Fund may have to bear the extra expense of registering the securities for resale and the risk of substantial delay in effecting the registration. In addition, market quotations typically are less readily available for these securities.
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Foreign Securities Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Foreign Securities Risk
Investing in foreign securities involves certain special considerations that are not typically associated with investments in the securities of U.S. issuers. Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards and may have policies that are not comparable to those of domestic issuers. As a result, there may be less information available about foreign issuers than about domestic issuers. Securities of some foreign issuers may be less liquid and more volatile than securities of comparable domestic issuers. There is generally less government supervision and regulation of securities markets, brokers and issuers than in the United States. In addition, with respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, political and social instability, or diplomatic developments, which could affect the value of investments in those countries. These risks are heightened under adverse economic, market, geopolitical and other conditions. The costs of investing in foreign countries frequently are higher than the costs of investing in the United States. Although the Advisers endeavor to achieve the most favorable execution costs in portfolio transactions, trading costs in non-U.S. securities markets are generally higher than trading costs in the United States.
Investments in securities of foreign issuers often will be denominated in foreign currencies. Accordingly, the value of the Fund's assets, as measured in U.S. dollars, may be affected favorably or unfavorably by changes in currency exchange rates and in exchange control regulations. The Fund may incur costs in connection with conversions between various currencies.
The Fund generally holds its foreign securities and cash in foreign banks and securities depositories approved by State Street Bank and Trust Company, the Fund's Foreign Custody Manager (as that term is defined in Rule 17f-5 under the 1940 Act). Some foreign banks and securities depositories may be recently organized or new to the foreign custody business. There may be limited or no regulatory
oversight over their operations. Also, the laws of certain countries may put limits on the Fund's ability to recover its assets if a foreign bank, depository or issuer of a security, or any of their agents, goes bankrupt. In addition, it is often more expensive for the Fund to buy, sell and hold securities in certain foreign markets than in the United States. The increased expense of investing in foreign markets reduces the amount the Fund can earn on its investments and typically results in a higher operating expense ratio for the Fund than for investment companies invested only in the United States.
Certain foreign governments levy withholding or other taxes on dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion of foreign withholding taxes will reduce the income received from investments in such countries.
From time to time, the Fund may have invested in certain sovereign debt obligations that are issued by, or certain companies that operate in or have dealings with, countries that become subject to sanctions or embargoes imposed by the U.S. government and the United Nations and/or countries identified by the U.S. government as state sponsors of terrorism. Investments in such countries may be adversely affected because, for example, the credit rating of the sovereign debt security may be lowered due to the country's instability or unreliability or the company may suffer damage to its reputation if it is identified as a company which operates in, or has dealings with, such countries. As an investor in such companies, the Fund will be indirectly subject to those risks.
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Developing And Emerging Markets Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Developing and Emerging Markets Risk
Investing in the securities of issuers located in developing and emerging market countries (and to a certain extent non-U.S. developed market countries) involves a high degree of risk and special considerations not typically associated with investing in the securities of U.S. issuers and other developed market issuers. Compared to the United States and other developed countries, emerging market countries may have relatively unstable governments, economies which may be more likely to take extra-legal action with respect to companies, industries, assets, or foreign ownership than those in more developed markets and therefore issuers of such emerging markets may be more affected by the performance of such industries or sectors. Emerging market economies may be based on only a few industries and securities markets that trade a small number of securities. Securities issued by companies or governments located in emerging market countries tend to be especially volatile (particularly during market closures due to local market holidays or other reasons) and may be less liquid than securities traded in developed countries. Securities in these countries have been characterized by greater potential loss than securities of companies and governments located in developed countries. Investments in the securities of issuers
located in emerging markets could be affected by risks associated with expropriation and/or nationalization, political or social instability, pervasiveness of corruption and crime, armed conflict, the impact on the economy of civil war, religious or ethnic unrest and the withdrawal or non-renewal of any license enabling the Fund to trade in securities of a particular country, confiscatory taxation, restrictions on transfers of assets, lack of uniform accounting and auditing standards, less publicly available financial and other information, diplomatic development which could affect U.S. investments in those countries, and potential difficulties in enforcing contractual obligations. International trade barriers or economic sanctions against foreign countries, organizations, entities and/or individuals in response to geopolitical tensions or conflicts may adversely affect the value of the Fund's foreign holdings. The type and severity of sanctions and other similar measures are difficult to measure or predict. Emerging market countries generally have less developed legal, accounting and financial reporting systems than those in more developed markets, which may reduce the scope or quality of financial information available to investors. Moreover, it can be more difficult for investors to bring litigation or enforce judgments against issuers in emerging markets or for U.S. regulators to bring enforcement actions against such issuers.
Countries in emerging markets are also more likely to experience high levels of inflation, deflation or currency devaluation, which could also hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative.
The economies of individual developing and emerging market countries may differ favourably or unfavorably from the United States economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, capital reinvestment, resource self-sufficiency and balance of payments position. Governments of many developing and emerging market countries have exercised and continue to exercise substantial influence over many aspects of the private sector. In some cases, the government owns or controls many companies, including some of the largest in the country.
Accordingly, government actions could have a significant effect on economic conditions in a developing or emerging market country and on market conditions, prices and yields of securities in the Fund's portfolio. Moreover, the economies of developing and emerging market countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. Many developing and emerging market economies are considered to be
more politically volatile than the developed markets. Investments in securities of issuers in countries other than the U.S. may involve greater political risk, including in some countries, the possibility of nationalization of assets, expropriation or confiscatory taxation, restrictions on repatriation, and the establishment of foreign exchange controls, political changes, government regulation, overburdened and obsolete or unseasoned financial systems, environmental problems, less developed legal systems, economic or social instability or diplomatic developments (including war) which could affect adversely the economies of such countries or the value of the Fund's investments in those countries. Central authorities also tend to exercise a high degree of control over the economies and in many cases have ownership over core productive assets.
The legal systems in many developing and emerging market countries are less developed than those in more developed countries, with the administration of laws and regulations often subject to considerable discretion. Non-U.S. markets may offer less protection to investors than U.S. or other developed markets. It also may be difficult to obtain and enforce a judgment in a court outside of the United States.
Adequate public information on non-U.S. issuers may not be available, and it may be difficult to secure information regarding corporate actions on a timely basis. In general, there is less overall governmental supervision and regulation of securities exchanges, brokers, and listed companies than in the United States or other developed market countries.
Due to their strong reliance on international trade, most developing and emerging market economies tend to be sensitive both to economic changes in their own region and to changes affecting their major trading partners. These include changes in growth, inflation, foreign exchange rates, current account positions, government policies, taxation and tariffs.
Investments in developing and emerging market countries may entail purchasing securities issued by or on behalf of entities that are insolvent, bankrupt, in default or otherwise engaged in an attempt to reorganize or reschedule their obligations or in entities that have little or no proven credit rating or credit history. In any such case, the issuer's poor or deteriorating financial condition may increase the likelihood that the Fund will experience losses or diminution in available gains due to bankruptcy, insolvency or fraud.
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Foreign Currency Risk [Member] |
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General Description of Registrant [Abstract] |
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Foreign Currency Risk
The Fund may invest all of its assets in debt securities which are denominated in currencies other than the U.S. dollar. Currency exchange rates can fluctuate significantly over short periods and can be subject to unpredictable changes based on a variety of factors including political developments and currency controls by governments. A change in the value of a currency in which a security is
denominated against the U.S. dollar will generally result in a change in the U.S. dollar value of the Fund's assets. If the exchange rate for a non-U.S. currency declines compared to the U.S. dollar, the Fund's NAV would decline. In addition, although much of the Fund's income will be received or realized in non-U.S. currencies, the Fund is required to compute and distribute its income in U.S. dollars. Therefore, for example, if the exchange rate for a non-U.S. currency declines after the Fund's income has been accrued and translated into U.S. dollars, but before the income has been received or converted into U.S. dollars, the Fund could be required to liquidate securities to make distributions. Similarly, if the exchange rate declines between the time the Fund incurs expenses in U.S. dollars and the time expenses are paid, the amount of non-U.S. currency required to be converted into U.S. dollars in order to pay such U.S. dollar expenses will be greater than the non-U.S. currency equivalent of the expenses at the time they were incurred.
The currencies of Developing Markets, in particular, have experienced periods of steady declines or even sudden devaluations relative to the U.S. dollar. Some Developing Market currencies may not be internationally traded or may be subject to strict controls by local governments, resulting in undervalued or overvalued currencies. Some Developing Markets have experienced balance of payment deficits and shortages in foreign exchange reserves. Governments have responded by restricting currency conversions. Future restrictive exchange controls could prevent or restrict a company's ability to make dividend or interest payments in the original currency of an obligation (often U.S. dollars). In addition, even though the currencies of some Developing Markets may be convertible into U.S. dollars, the conversion rates may be artificial to their actual market values.
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Sovereign Debt Obligations Risk [Member] |
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General Description of Registrant [Abstract] |
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Sovereign Debt Obligations Risk
Investments in Developing Market countries' government debt obligations involve special risks. Certain Developing Market countries have historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. The issuer or governmental authority that controls the repayment of a Developing Market country's debt may not be able or willing to repay the principal and/or interest when due in accordance with the terms of such debt. A debtor's willingness or ability to repay principal and interest due in a timely manner may be affected by, among other factors, its cash flow situation and, in the case of a government debtor, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the government debtor's policy towards the International Monetary Fund and the political constraints to which a government debtor may be subject. Government debtors may default on their debt and may also be dependent on expected disbursements
from foreign governments, multilateral agencies and others abroad to reduce principal and interest arrearages on their debt. The commitment on the part of these governments, agencies and others to make such disbursements may be conditioned on a debtor's implementation of economic reforms and/or economic performance and the timely service of such debtor's obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third parties' commitments to lend funds to the government debtor, which may further impair such debtor's ability or willingness to service its debts on a timely basis. Holders of government debt, including the Fund, may be requested to participate in the rescheduling of such debt and to extend further loans to government debtors.
As a result of the foregoing, a government obligor may default on its obligations. If such an event occurs, the Fund may have limited legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting party itself, and the ability of the holder of foreign government debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the holders of more senior fixed income securities, such as commercial bank debt, will not contest payments to the holders of other foreign government debt securities in the event of default under their commercial bank loan agreements.
Government obligors in Developing Market countries are among the world's largest debtors to commercial banks, other governments, international financial organizations and other financial institutions. The issuers of the government debt securities in which the Fund may invest have in the past experienced substantial difficulties in servicing their external debt obligations, which led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements, and obtaining new credit to finance interest payments. Holders of certain foreign government debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the foreign government debt securities in which the Fund may invest will not be subject to similar restructuring arrangements or to requests for new credit, which may adversely affect the Fund's holdings. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants. Investments in Developing Market countries' government debt securities involve currency risk. See "Foreign Currency Risk" above.
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Corporate Debt Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Corporate Debt Risk
The Fund may invest in debt securities of non-governmental issuers. Like all debt securities, corporate debt securities generally represent an issuer's obligation to repay to the investor (or lender) the amount borrowed plus interest over a specified time period. A typical corporate bond specifies a fixed date when the amount borrowed (principal) is due in full, known as the maturity date, and specifies dates when periodic interest (coupon) payments will be made over the life of the security.
Corporate debt securities come in many varieties and may differ in the way that interest is calculated, the amount and frequency of payments, the type of collateral, if any, and the presence of special features (e.g., conversion rights). The Fund's investments in corporate debt securities may include, but are not limited to, senior, junior, secured and unsecured bonds, notes and other debt securities, and may be fixed rate, floating rate, zero coupon and inflation linked, among other things.
Prices of corporate debt securities fluctuate and, in particular, are subject to several key risks including, but not limited to, interest rate risk (which may be heightened in a market environment where interest rates are high or rising), credit risk, prepayment risk and spread risk. The market value of a corporate bond may be affected by the financial condition or the credit rating of the corporation, the corporation's performance and perceptions of the corporation in the market place and government regulations impacting the industry in which the corporation operates. There is a risk that the issuers of the corporate debt securities in which the Fund may invest may not be able to meet their obligations on interest or principal payments at the time called for by an instrument.
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High Yield Bonds And Other Lower Rated Securities Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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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. The Fund's investments in lower rated securities may involve the following specific risks: greater risk of loss due to default because of the increased likelihood that adverse economic or company specific events will make the issuer unable to pay interest and/or principal when due; wider price fluctuations due to changing interest rates and/or adverse economic and business developments; and greater risk of loss due to declining credit quality.
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Leverage Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Leverage Risk
The Fund generally seeks to enhance its total returns through the use of leverage. The Fund currently has a bank loan to finance investments as a form of leverage.
The Fund also has authority to issue preferred stock to finance investments. Leverage entails particular risks for holders of the Fund's common stock. The issuance of preferred stock would affect the amount of income available for distribution on the Fund's common stock as well as the net asset value of the common stock and the voting rights of holders of common stock. Leverage would exaggerate the effects of both currency fluctuations and of market downturns or upturns on the net asset value and market value of the Fund's common stock, as well as on distributions to holders of common stock. Leverage can also increase the volatility of the Fund's net asset value, and expenses related to leverage can reduce the Fund's income. In the case of leverage, if Fund assets decline in value so that legal asset coverage requirements for any borrowings or preferred stock would not be met, the Fund may be prevented from paying distributions, which could jeopardize its qualification for pass-through tax treatment, make it liable for excise taxes and/ or force it to sell portfolio securities at an inopportune time. Holders of preferred stock have the right to elect two directors, and such holders, as well as Fund creditors, have the right under certain circumstances to elect a majority of the Fund's directors.
As noted above, the Fund currently leverages through borrowings from a credit facility. The Fund has entered into a revolving Credit Agreement with The Bank of Nova Scotia to borrow up to $25 million. Such borrowings constitute financial leverage. The Credit Agreement contains customary covenant, negative covenant and default provisions, including covenants that limit the Fund's ability to incur additional debt or consolidate or merge into or with any person, other than as permitted, or sell, lease or otherwise transfer, directly or indirectly, all or substantially all of its assets. The covenants also 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. In addition, the Fund agreed not to purchase assets not contemplated by the investment policies and restrictions in effect when the Credit Agreement became effective. The covenants or guidelines could impede the Investment Manager or Sub-Adviser from fully managing the Fund's portfolio in accordance with the Fund's investment objectives and policies. Furthermore, non-compliance with such covenants or the occurrence of other events could lead to the cancellation of the loan facility. The Fund may not incur additional debt from any other party, except for in limited circumstances (e.g., in the ordinary course of business). The covenants include a requirement that the Fund maintain net assets of
no less than $25 million. Such restrictions shall apply only so long as the Credit Agreement remains in effect.
Indebtedness issued under the Credit Agreement is not convertible into any other securities of the Fund. Outstanding amounts would be payable at maturity or such earlier times as required by the Credit Agreement. The Fund may be required to prepay outstanding amounts under the Credit Agreement in the event of the occurrence of certain events of default. The Fund is expected to indemnify the lenders under the Credit Agreement against certain liabilities they may incur in connection with the Credit Agreement. The Fund is required to pay commitment fees under the terms of the Credit Agreement. With the use of borrowings, there is a risk that the interest rates paid by the Fund on the amount it borrows will be higher than the return on the Fund's investments. The credit facility with The Bank of Nova Scotia may in the future be replaced or refinanced by one or more credit facilities having substantially different terms, or the Fund may be unable to renew or replace its credit facility upon the termination of the current facility, possibly requiring it to sell portfolio securities at times or prices that are disadvantageous. Any of these situations could adversely impact income or total return to shareholders.
The Fund must comply with investment quality, diversification and other guidelines established by the credit facility. The Fund does not anticipate that such guidelines will have a material adverse effect on the Fund's common stockholders or its ability to achieve its investment objectives.
Successful use of a leveraging strategy may depend on the Investment Manager's ability to predict correctly interest rates and market movements, and there is no assurance that a leveraging strategy will be successful during any period in which it is employed.
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Liquidity Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Liquidity Risk
While the Fund ordinarily invests in debt securities for which there is an active secondary market, the Fund may invest in debt securities for which there is no established secondary market. The securities markets that exist in developing and emerging market countries are substantially smaller, less developed, less liquid and more volatile than the securities markets of the United States and other more developed countries. Settlement and custodial practices (including those involving securities settlement where fund assets may be released prior to receipt of payment) are also often less developed than those in U.S. or other developed markets, and may result in increased risk or substantial delays in the event of a failed trade or the insolvency of, or breach of duty by, a non-U.S. broker-dealer, securities depository or non-U.S. subcustodian.
Liquidity in developing markets may be low and transaction costs high. Reduced liquidity often creates higher volatility, as well as
difficulties in obtaining accurate market quotations for financial reporting purposes and for calculating net asset values, and sometimes also an inability to buy and sell securities. Market quotations on many non-U.S. debt securities may only be available from a limited number of dealers and may not necessarily represent firm bids from those dealers or prices for actual sales.
In addition, the markets for below investment grade securities may be substantially smaller, less developed, less liquid and more volatile than the markets for prime rated securities, which may make obtaining accurate market quotations for financial reporting purposes and for calculating net asset values more difficult. Market quotations on many sub-investment grade securities may only be available from a limited number of dealers and may not necessarily represent firm bids from those dealers or prices for actual sales.
The Fund may not be able readily to dispose of illiquid securities at prices that approximate those at which the Fund could sell such securities if they were more widely traded and, as result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. Illiquid securities generally trade at a discount.
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Bank Loan Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Bank Loan Risk
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.
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. To the extent the extended settlement process gives rise to short-term liquidity needs, the Fund may hold additional cash or sell investments.
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Convertible Securities Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Convertible Securities Risk
The Fund may invest in convertible securities, which include bonds, debentures, notes, preferred stocks and other securities that entitle the holder to acquire common stock or other equity securities of the same or a different issuer. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. As with all debt securities, the market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. Convertible securities also tend to reflect the market price of the underlying stock in varying degrees, depending on the relationship of such market price to the conversion price in the terms of the convertible security, and, therefore, is also subject to the same types of market and issuer risks that may negatively affect the underlying common stock. Convertible securities rank senior to common stock in an issuer's capital structure and consequently entail less risk than the issuer's common stock.
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Asset Backed Securities Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Asset-Backed Securities Risk
Payment of interest and repayment of principal on asset-backed securities is largely dependent upon the cash flows generated by the assets backing the securities and, in certain cases, supported by letters of credit, surety bonds or other credit enhancements. Asset-backed security values may also be affected by the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables and any entities providing the credit enhancement. In addition, the underlying assets are subject to prepayments that shorten the securities' weighted average maturity and may lower their return. Asset-backed securities are in particular subject to interest rate risk. Generally, asset-backed securities increase in value to a lesser extent when interest rates decline and generally decline in value to a similar or greater extent when interest rates rise. Asset-backed securities are also subject to liquidity and valuation risk.
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Derivatives Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Derivatives Risk
Consistent with its investment objectives, the Fund may invest in a broad array of financial instruments and securities in which the value of the instrument or security is "derived" from the performance of an underlying asset or a "benchmark" such as a security index, an interest rate or a foreign currency ("derivatives"). Derivatives are most often used to manage interest rate, currency and credit risk, to increase or decrease exposure to an asset class or benchmark (as a hedge or to enhance return), or to create an investment position directly (often because it is more efficient or less costly than direct investment). There is no guarantee that these results can be achieved through the
use of derivatives and any success in their use depends on a variety of factors including the ability of the Advisers to predict correctly the direction of interest rates, securities prices, currency exchange rates and other factors.
The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may increase or decrease. Adverse movements in the value of the underlying asset can expose the Fund to losses, which can be increased if derivatives are used to obtain leverage. In addition, risks in the use of derivatives include:
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an imperfect correlation between the price of derivatives and the movement of the securities prices, interest rates or currency exchange rates being hedged or replicated; |
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the possible absence of a liquid secondary market for any particular derivatives contract at any time and the need to continue making margin and settlement payments thereunder; |
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the potential loss if the counterparty to the transaction does not perform as promised; |
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the possible need to defer closing out certain positions to avoid adverse tax consequences, as well as the possibility that derivative transactions may result in acceleration of gain, deferral of losses or a change in the character of gain realized; |
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the risk that the financial intermediary "manufacturing" the over-the-counter derivative, being the most active market maker and offering the best price for repurchase, will not continue to create a credible market in the derivative; |
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because certain derivatives are "manufactured" by financial institutions, the risk that the Fund may develop a substantial exposure to financial institution counterparties; |
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the risk that a full and complete appreciation of the complexity of derivatives and how future value is affected by various factors including changing interest rates, exchange rates and credit quality is not attained; and |
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the risk that the Fund would need additional liquidity to meet the payment obligations created by the derivatives contract. |
Derivatives also may create operational and legal risks for the Fund. There is no guarantee that derivatives will provide successful results and any success in their use depends on a variety of factors including the ability of the Advisers to predict correctly the direction of interest rates, securities prices, currency exchange rates and other factors. Recent legislation calls for new and/or expanded regulation of the derivatives markets. The extent and impact of the regulation are not yet completely known and may not be known for some time. New and/or expanded regulation of derivatives may make them more costly, may limit their availability, or may otherwise adversely affect their value or performance.
The Fund may use interest rate swaps to hedge the Fund's liability with respect to its leverage. A significant type of 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 agreement. 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 its leverage.
Rule 18f-4 under the 1940 Act governs a registered investment company's use of derivatives, short sales, reverse repurchase agreements, and certain other instruments. Under Rule 18f-4, the fund's must limit its derivatives exposure through a value-at-risk test, adopt and implement a derivatives risk management program and comply with certain reporting requirements. However, subject to certain conditions, funds that do not invest heavily in derivatives may be deemed limited derivatives users and would not be subject to the full requirements of Rule 18f-4. Under the rule, when the Fund trades reverse repurchase agreements or similar financing transactions, including certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the Fund’s asset coverage ratio or treat all such transactions as derivatives transactions. In addition, under the rule, the Fund is permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security (as defined under Section 18(g) of the 1940 Act), provided that, (i) the Fund intends to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the “Delayed-Settlement Securities Provision”). The Fund may otherwise engage in when-issued, forward-settling and non-standard settlement cycle securities transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the Fund treats any such transaction as a “derivatives transaction” for purposes of compliance with the rule. Furthermore, under the rule, the Fund is permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if the Fund reasonably believes, at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all such agreements as they come due. These requirements may limit the ability of the Fund to use derivatives, reverse repurchase agreements and similar financing transactions, and other relevant transaction as part of its investment strategies. These requirements may increase the cost of the Fund’s investments and cost of doing business, which could adversely affect investors.
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Hedging Strategy Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Hedging Strategy Risk
Certain of the investment techniques that the Fund may employ for hedging will expose the Fund to additional or increased risks.
There may be an imperfect correlation between changes in the value of the Fund's portfolio holdings and hedging positions entered into by the Fund, which may prevent the Fund from achieving the intended hedge or expose the Fund to risk of loss. In addition, the Fund's success in using hedge instruments is subject to the Advisers’ ability to predict correctly changes in the relationships of such hedge instruments to the Fund's portfolio holdings, and there can be no assurance that the Advisers’ judgment in this respect will be accurate. Consequently, the use of hedging transactions might result in a poorer overall performance for the Fund, whether or not adjusted for risk, than if the Fund had not hedged its portfolio holdings.
The Advisers are under no obligation to engage in any hedging strategies, and may, in its discretion, choose not to engage in hedging strategies. Even if the Advisers desire to hedge some of the Fund's risks, suitable hedging transactions may not be available or, if available, attractive. A failure to hedge may result in losses to the value of the Fund's investments.
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Counterparty Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Counterparty Risk
The Fund will be subject to credit risk with respect to the counterparties to the derivative contracts purchased or sold by the Fund. Although the Advisers monitor the creditworthiness of the Fund's counterparties, there can be no assurance that the Fund's counterparties will not experience difficulties, possibly resulting in losses to the Fund. Counterparty risk also encompasses the risk of having concentrated exposure to one or more counterparties. If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances. Such risk is heightened in a market environment where interest rates are either high or rising.
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Inflation Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Inflation Risk
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. To the extent that inflation occurs, it will reduce the real value of dividends paid by the Fund and the Fund’s Common Shares. Most emerging market countries, in particular, have experienced substantial, and in some periods extremely high and volatile, rates of inflation. Inflation and rapid fluctuations in inflation rates have had and may continue to have very negative effects on the economies and securities markets globally. In an attempt to control inflation, wage and price controls have been imposed at times in certain countries.
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Market Events Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Market Events Risk
The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, investor sentiment and other factors that may or may not be related to the issuer of the security or other asset. Economies and financial markets throughout the world are increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, arrangements, actual or threatened wars or other armed conflicts (such as the Russia/Ukraine and Israel/Hamas conflicts), terrorism, natural disasters and other circumstances in one country or region could have profound impacts on global economies or markets. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund's investments may be negatively affected. In addition, any spread of an infectious illness, public health threat or similar issue could reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines, and generally have a significant impact on the world economy, which in turn could adversely affect the Fund's investments.
Russia/Ukraine Risk. In February 2022, Russia commenced a military attack on Ukraine. The outbreak of hostilities between the two countries and the threat of wider spread hostilities could have a severe adverse effect on the region and global economies, including significant negative impacts on the markets for certain securities and commodities, such as oil and natural gas. In addition, sanctions imposed on Russia by the United States and other countries, and any sanctions imposed in the future, could have a significant adverse impact on the Russian economy and related markets. The price and liquidity of investments may fluctuate widely as a result of the conflict and related events. How long the armed conflict and related events will last cannot be predicted. These tensions and any related events could have a significant impact on Fund performance and the value of the Funds’ investments.
Europe Related Risk. A number of countries in Europe have experienced severe economic and financial difficulties. Many non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts; many other issuers have faced difficulties obtaining credit or refinancing existing obligations; financial institutions have in many cases required government or central bank support, have needed to raise capital, and/or have been impaired in their ability to extend credit; and financial markets in Europe and elsewhere have experienced extreme volatility and declines in asset values and liquidity. These difficulties may continue, worsen or spread within and outside Europe.
Responses to the financial problems by European governments, central banks and others, including austerity measures and reforms, may not work, may result in social unrest and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and others of their debt could have additional adverse effects on economies, financial markets and asset valuations around the world.
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Government Intervention In Financial Markets Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Government Intervention in Financial Markets Risk
U.S. federal and state governments and foreign governments, their regulatory agencies or self-regulatory organizations may take additional actions that affect the regulation of the securities in which the Fund invests, or the issuers of such securities, in ways that are unforeseeable. Under certain circumstances, the withdrawal of U.S. government and foreign government support could negatively affect financial markets generally as well as reduce the value and liquidity of certain securities.
Additionally, issuers of corporate fixed income securities might seek protection under the bankruptcy laws. Legislation or regulation may also change the way in which the Fund itself is regulated. Such legislation or regulation could limit or preclude the Fund's ability to achieve its investment objectives. The Investment Manager will monitor developments and seek to manage the Fund's portfolio in a manner consistent with achieving the Fund's investment objectives, but there can be no assurance that it will be successful in doing so.
In addition, policy and legislative changes in the United States and in other countries are affecting many aspects of financial regulation. New or revised laws or regulations may be imposed by the Security and Exchange Commission (“SEC”), the CFTC, the Internal Revenue Services (“IRS”), the U.S. Federal Reserve or other governmental regulatory authorities or self-regulatory organizations that could adversely affect the Fund’s performance. The Fund may also be adversely impacted by changes in the enforcement or interpretation of existing statutes and rules by governmental regulatory authorities or self-regulatory organizations. The impact of these changes on the markets, and the practical implications for market participants, may not be fully known for some time. Furthermore, volatile financial markets can expose the Fund to greater market and liquidity risk and potential difficulty in valuing portfolio instruments held by the Fund. The value of the Fund's holdings is also generally subject to the risk of future local, national, or global economic disturbances based on unknown weaknesses in the markets in which the Fund invests. In addition, it is not certain that the U.S. Government will intervene in response to a future market disturbance and the effect of any such future intervention cannot be predicted.
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Cybersecurity Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Cybersecurity Risk
The Fund is subject to direct cybersecurity risk. Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder information), or proprietary information, or cause the Fund, the Advisers and/or the Fund's service providers (including, but not limited to, Fund accountants, custodians, sub-custodians and transfer agents) to suffer data breaches, data corruption or lose operational functionality. Furthermore, the Fund may be an appealing target for cybersecurity threats such as hackers and malware.
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Net Asset Value Discount [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Net Asset Value Discount
Shares of closed-end investment companies frequently trade at a discount from net asset value. This characteristic is a risk separate and distinct from the risk that net asset value will decrease. The Fund cannot predict whether its Shares in the future will trade at, below or above net asset value. This risk that shares of a closed-end fund might trade at a discount is more significant for investors who wish to sell their shares in a relatively short period of time. For those investors, realization of gain or loss on their investment is likely to be more dependent upon the existence of a premium or discount than upon portfolio performance.
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Distribution Rate [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Distribution Rate
It is the Fund's current policy to pay distributions on a monthly basis. If the Fund's investments do not generate sufficient income, the Fund may be required to liquidate a portion of its portfolio to fund these distributions, and therefore a portion or all of such distributions may represent a reduction of the shareholders' principal investment. Such liquidation might be at a time when independent investment judgment would not dictate such action, increasing the Fund's overall portfolio turnover (and related transaction costs) and making it more difficult for the Fund to achieve its investment objectives.
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Non Diversification Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Non-Diversification Risk
The Fund is classified as a "non-diversified" management investment company under the 1940 Act. This means that the Fund is not subject to limits under the 1940 Act as to the proportion of its assets that may be invested in the securities of a single issuer. As a non-diversified investment company, the Fund may therefore invest its assets in securities of a smaller number of issuers or may invest a larger proportion of its assets in a single issuer than a diversified fund, and, as a result, would be more susceptible than a diversified fund to any single corporate, political, geographic or regulatory occurrence. Although the Fund must comply with certain diversification requirements in order to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended ("Code"), the Fund may be more susceptible to any single economic, political or regulatory occurrence than would be the case if it had elected to
diversify its holding sufficiently to be classified as a "diversified" management investment company under the 1940 Act. The Fund, however, intends to comply with the diversification requirements imposed by the Code for qualification as a regulated investment company.
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Conflicts Of Interest Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Conflicts of Interest Risk
The Advisers’ advisory fees are based on net assets plus the amount of any borrowings for investment purposes. Consequently, the Advisers will benefit from an increase in the Fund's net assets resulting from an offering.
Additionally, the portfolio managers' management of "other accounts" may give rise to potential conflicts of interest in connection with their management of the Fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objectives as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby the portfolio manager could favor one account over another. However, the Advisers believe that these risks are mitigated by the fact that: (i) accounts with like investment strategies managed by a particular portfolio manager are generally managed in a similar fashion, subject to exceptions to account for particular investment restrictions or policies applicable only to certain accounts, differences in cash flows and account sizes, and similar factors; and (ii) portfolio manager personal trading is monitored to avoid potential conflicts. In addition, the Advisers have adopted trade allocation procedures that require equitable allocation of trade orders for a particular security among participating accounts.
In some cases, another account managed by the same portfolio manager may compensate the Advisers based on the performance of the portfolio held by that account. The existence of such a performance-based fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities.
Another potential conflict could include instances in which securities considered as investments for the Fund also may be appropriate for other investment accounts managed by the Advisers or their affiliates. Whenever decisions are made to buy or sell securities by the Fund and one or more of the other accounts simultaneously, the Advisers may aggregate the purchases and sales of the securities and will allocate the securities transactions in a manner that it believes to be equitable under the circumstances. As a result of the allocations, there may be instances where the Fund will not participate in a transaction that is allocated among other accounts. While these aggregation and allocation policies could have a detrimental effect on the price or amount of the securities available to the Fund from time to time, it is the opinion of the Advisers that the benefits from the policies outweigh any disadvantage that may arise from exposure to
simultaneous transactions. The Advisers has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures adopted under such policies will detect each and every situation in which a conflict arises.
From time to time, the Advisers may seed proprietary accounts for the purpose of evaluating a new investment strategy that eventually may be available to clients through one or more product structures. Such accounts also may serve the purpose of establishing a performance record for the strategy. The management by the Advisers of accounts with proprietary interests and nonproprietary client accounts may create an incentive to favor the proprietary accounts in the allocation of investment opportunities, and the timing and aggregation of investments. The Advisers' proprietary seed accounts may include long-short strategies, and certain client strategies may permit short sales. A conflict of interest arises if a security is sold short at the same time as a long position, and continuous short selling in a security may adversely affect the stock price of the same security held long in client accounts. The Advisers have adopted various policies to mitigate these conflicts.
In addition, the 1940 Act limits the Fund’s ability to enter into certain transactions with certain affiliates of the Advisers. As a result of these restrictions, the Fund may be prohibited from buying or selling any security directly from or to any portfolio company of a fund managed by the Advisers or one of their affiliates. Nonetheless, the Fund may under certain circumstances purchase any such portfolio company’s loans or securities in the secondary market, which could create a conflict for the Advisers between the interests of the Fund and the portfolio company, in that the ability of the Advisers to recommend actions in the best interest of the Fund might be impaired. The 1940 Act also prohibits certain “joint” transactions with certain of the Fund’s affiliates (which could include other abrdn-managed Funds), which could be deemed to include certain types of investments, or restructuring of investments, in the same portfolio company (whether at the same or different times). These limitations may limit the scope of investment opportunities that would otherwise be available to the Fund. The Board has approved policies and procedures reasonably designed to monitor potential conflicts of interest. The Board will review these procedures and any conflicts that may arise.
The Advisers or their respective members, officers, directors, employees, principals or affiliates may come into possession of material, non-public information. The possession of such information may limit the ability of the Fund to buy or sell a security or otherwise to participate in an investment opportunity. Situations may occur where the Fund could be disadvantaged because of the investment activities conducted by the Advisers for other clients, and the Advisers will not employ information barriers with regard to its operations on behalf of its registered and private funds, or other accounts. In certain circumstances, employees of the Advisers may serve as board
members or in other capacities for portfolio or potential portfolio companies, which could restrict the Fund’s ability to trade in the securities of such companies.
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Anti Takeover Charter Provisions [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Anti-Takeover Charter Provisions
The Fund's charter and by-laws contain several provisions that may be regarded as "anti-takeover" because they have the effect of maintaining continuity of management. Also, charter provisions subject the Fund to certain provisions of the Maryland General Corporation Law with respect to unsolicited takeovers.
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Repurchase Agreement Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Repurchase Agreement Risk
Repurchase agreements may involve risks in the event of default or insolvency of the seller, including possible delays or restrictions with respect to the Fund's ability to dispose of the underlying securities, and the possibility that the collateral might not be sufficient to cover any losses incurred by the Fund.
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Securities Lending Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Securities Lending Risk
In connection with its loans of portfolio securities, the Fund may be exposed to the risk of delay in recovery of the loaned securities or possible loss of rights in the collateral should the borrower become insolvent. The Fund also bears the risk of loss on the investment of cash collateral. There is also the risk that, in the event of default by the borrower, the collateral might not be sufficient to cover any losses incurred by the Fund. There can be no assurance that the return to the Fund from a particular loan, or from its loans overall, will exceed the related costs and any related losses.
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Tax Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
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Tax Risk
The Fund may invest in securities of which the federal income tax treatment may not be clear or may be subject to recharacterization by the IRS. It could be more difficult for the Fund to comply with the United States tax requirements applicable to regulated investment companies, or with other tax requirements applicable to foreign investors, if the tax characterization of the Fund's investments or the tax treatment of the income from such investments were successfully challenged by the IRS.
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Common Share [Member] |
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Capital Stock, Long-Term Debt, and Other Securities [Abstract] |
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Outstanding Security, Title [Text Block] |
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Common Shares
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common stock
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Outstanding Security, Held [Shares] |
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13,397,419
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13,392,080
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Fee For Open Market Purchases Of Common Shares [Member] |
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Fee Table [Abstract] |
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Dividend Reinvestment and Cash Purchase Fees |
[9] |
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$ 0.02
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Fee For Optional Shares Purchases [Member] |
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Fee Table [Abstract] |
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Dividend Reinvestment and Cash Purchase Fees |
[9] |
|
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|
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5
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Sales Of Shares Held In Dividend Reinvestment Account [Member] |
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|
Fee Table [Abstract] |
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Dividend Reinvestment and Cash Purchase Fees |
[9] |
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0.12
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Other Annual Expenses [Abstract] |
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Other Transaction Fees Basis, Maximum |
[9] |
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25
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Transaction Fee Of Three Zero Five Percent Of Offering Price [Member] |
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Other Annual Expenses [Abstract] |
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Expense Example, Year 01 |
[10] |
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75
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Expense Example, Years 1 to 3 |
[10] |
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163
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Expense Example, Years 1 to 5 |
[10] |
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253
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Expense Example, Years 1 to 10 |
[10] |
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$ 480
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