Aberdeen Australia Equity Fund, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
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Investment Company Act file number: |
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811-04438 |
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Exact name of registrant as specified in charter: |
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Aberdeen Australia Equity Fund, Inc. |
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Address of principal executive offices: |
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1735 Market Street, 32nd Floor |
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Philadelphia, PA 19103 |
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Name and address of agent for service: |
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Ms. Andrea Melia |
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Aberdeen Asset Management Inc. |
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1735 Market Street 32nd Floor |
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Philadelphia, PA 19103 |
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Registrants telephone number, including area code: |
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866-839-5205 |
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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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April 30, 2014 |
Item 1 Reports to Stockholders
Aberdeen Australia Equity Fund, Inc.
Semi-Annual
Report
April 30, 2014
Managed Distribution Policy
(unaudited)
The Board of Directors of the Fund has authorized a managed distribution policy (MDP) of paying quarterly distributions at an annual rate, set once a year, that is a percentage of the rolling
average of the Funds prior four quarter-end net asset values. With each distribution, the Fund will issue a notice to shareholders and an accompanying press release which will provide detailed information regarding the amount and composition
of the distribution and other information required by the Funds MDP exemptive order. The Funds Board of Directors may amend or terminate the MDP at any time without prior notice to shareholders; however, at this time, there are no
reasonably foreseeable circumstances that might cause the termination of the MDP. You should not draw any conclusions about the Funds investment performance from the amount of distributions or from the terms of the Funds MDP.
Distribution Disclosure Classification (unaudited)
The Funds policy is to provide investors with a stable distribution rate. Each quarterly distribution will be paid out of current income, supplemented by realized capital gains and, to the extent
necessary, paid-in capital.
The Fund is subject to U.S. corporate, tax and securities laws. Under U.S. tax rules, the amount applicable to the
Fund and character of distributable income for each fiscal period depends on the actual exchange rates during the entire year between the U.S. Dollar and the currencies in which Fund assets are denominated and on the aggregate gains and losses
realized by the Fund during the entire year.
Therefore, the exact amount of distributable income for each fiscal year can only be determined as
of the end of the Funds fiscal year, October 31. Under Section 19 of the Investment Company Act of 1940, as amended (the 1940 Act), the Fund is required to indicate the sources of certain distributions to shareholders.
The estimated distribution composition may vary from quarter to quarter because it may be materially impacted by future income, expenses and realized gains and losses on securities and fluctuations in the value of the currencies in which Fund assets
are denominated.
Based on generally accepted accounting principles, the Fund estimates that distributions for the fiscal year commenced
November 1, 2013, through the distributions declared on June 10, 2014, consisted of 19% net investment income and 81% return of capital.
In January 2015, a Form 1099-DIV will be sent to shareholders, which will state the amount and composition of distributions and provide information with
respect to their appropriate tax treatment for the 2014 calendar year.
Dividend Reinvestment and Direct Stock Purchase Plan (unaudited)
Computershare Trust Company, N.A., the Funds
transfer agent, sponsors and administers a Dividend Reinvestment and Direct Stock Purchase Plan (the Plan), which is available to shareholders.
The Plan allows registered stockholders and first time investors to buy and sell shares and automatically reinvest dividends and capital gains through the transfer agent. This is a cost-effective way to
invest in the Fund.
Please note that for both purchases and reinvestment purposes, shares will be purchased in the open market at the current
share price and cannot be issued directly by the Fund.
For more information about the Plan and a brochure that includes the terms and conditions
of the Plan, please call Computershare at 1-800-647-0584 or visit www.computershare.com/buyaberdeen.
Letter to Shareholders
(unaudited)
Dear Shareholder,
We present this Semi-Annual Report which covers the activities of Aberdeen Australia Equity Fund, Inc. (the Fund) for the year ended April 30, 2014. The Funds principal investment
objective is long-term capital appreciation through investment primarily in equity securities of Australian companies listed on the Australian Stock Exchange Limited. Its secondary objective is current income, which is expected to be derived
primarily from dividends and interest on Australian corporate and governmental securities.
Total Return Performance
The Funds total return, based on net asset value (NAV) net of fees, was 0.9% for the six months ended
April 30, 2014 and 8.2% per annum since inception, assuming the reinvestment of dividends and distributions, compared to the April 30, 2014 six month period return of 1.1%, in U.S. Dollar terms, for the S&P/ASX 200
Accumulation Index (ASX 200),1 the Funds
benchmark. The Funds total return for the six months ended April 30, 2014 and per annum since inception is based on the reported NAV on each period end.
Share Price & NAV
For the six months ended April 30, 2014, based
on market price, the Funds total return was -11.0%, assuming reinvestment of dividends and distributions. The Funds share price decreased by 15.6% over the six months from $10.71 on October 31, 2013 to $9.04 on April 30, 2014.
The Funds share price on April 30, 2014 represented a premium of 0.1% to the NAV per share of $9.03 on that date, compared with a premium of 13.5% to the NAV per share of $9.44 on October 31, 2013.
Managed Distribution Policy
The Fund has a managed distribution policy of paying quarterly distributions at an annual rate, set once a year, that is a percentage of the rolling average
of the Funds prior four quarter-end net asset values. In March 2014, the Board of Directors of the Fund (the Board) determined the rolling distribution rate to be 10% for the 12-month period commencing with the distribution payable
in March 2014. This policy will be subject to regular review by the Board. The distributions will be made from current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital, which is a non-taxable return of
capital.
On June 10, 2014, the Fund announced that it will pay on June 30, 2014, a distribution of US $0.22
per share to all shareholders of record as of June 23, 2014.
Open Market Repurchase Program
The Funds policy is generally to buy back Fund shares on the open market when the Fund trades at certain discounts to NAV. During the six months ended
April 30, 2014, the Fund did not repurchase any shares.
Portfolio Holdings Disclosure
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds
Form N-Q filings are available on the SECs website at http://www.sec.gov and may be reviewed and copied at the SECs Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330. The Fund makes the information on Form N-Q available to shareholders on the Funds website or upon request and without charge by calling Investor Relations toll-free at 1-866-839-5205.
Proxy Voting
A description of
the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve months ended
June 30 is available by August 30 of the relevant year: (i) upon request and without charge by calling Investor Relations toll-free at 1-866-839-5205; and (ii) on the SECs website at http://www.sec.gov.
Investor Relations Information
As part of our ongoing commitment to provide information to our shareholders, I invite you to visit the Fund on the web at www.aberdeeniaf.com. From this page, you can view monthly fact sheets, portfolio
manager commentary, distribution and performance information, updated daily fact sheets courtesy of Morningstar®,
view portfolio charting and other timely data.
Please take a look at Aberdeens award-winning Closed-End Fund Talk Channel, where you can
watch fund manager web casts and view our latest short films. For replays of recent broadcasts or to register for upcoming events, please visit Aberdeens Closed-End Fund Talk Channel at www.aberdeen-asset.us/aam.nsf/usclosed/aberdeentv.
1 |
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The S&P/ASX 200
index is a market-capitalization weighted and float-adjusted stock market index of Australian stocks listed on the Australian Securities Exchange from Standard & Poors. Indexes are unmanaged and have been provided for comparison purposes
only. No fees or expenses are reflected. You cannot invest directly in an index. |
Aberdeen Australia Equity Fund, Inc.
1
Letter to Shareholders
(unaudited) (concluded)
Please ensure that you are enrolled in our email services, which feature timely news from Aberdeen portfolio
managers located around the world. Enroll today at www.aberdeen-asset.us/aam.nsf/usclosed/email and be among the first to receive the latest closed-end fund news, announcements of upcoming fund manager web casts, films and other information.
Please contact Aberdeen Asset Management Inc. by:
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calling toll free at 1-800-522-5465 in the United States, or |
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emailing InvestorRelations@aberdeen-asset.com |
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visiting Aberdeen Closed-End Fund Center at http://www.aberdeen-asset.us/aam.nsf/usclosed/home; |
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visiting www.aberdeeniaf.com
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Yours sincerely,
Christian Pittard
President
All amounts are U.S Dollars unless otherwise stated.
Aberdeen Australia Equity Fund, Inc.
2
Report of the Investment Manager (unaudited)
Market/economic review
Australian equities rose during the sixmonth period ended April 30, 2014. Initial concerns over the U.S. Federal Reserves (Fed) tapering of quantitative easing gave way to hope that economic
recovery in the U.S. may become more sustainable. Subsequently, equity prices were hampered by worries of a hard economic landing in China, Russias incursion into Ukraine, as well as fears of an earlier-than-expected interest rate hike in the
U.S. Towards the end of the period falling iron ore prices and the appreciation of the Australian dollar weighed on market sentiment. Equities regained some poise after the Fed soothed frayed nerves.
Fund performance review
At
the stock level, detractors from the Funds relative performance for the period included soft drink bottler Coca-Cola Amatil Ltd. and QBE Insurance Group Ltd. Shares of Coca-Cola Amatil Ltd. declined amid the tough operating environment:
continued pressure in the Australian grocery channel; a weak economy in Papua New Guinea hurting sales; and high inflation in Indonesia, exacerbated by the depreciating Rupiah. Meanwhile, insurer QBE Insurance Group Ltd.s shares fell on the
back of managements forecast for a net loss of US$250 million for calendar year 2013. This followed a review of its North American operations, which resulted in additional provisions for claims, restructuring charges and a goodwill write-down.
Conversely, the Funds holdings in diversified energy infrastructure company SP Ausnet and investor services provider Computershare
Ltd. benefitted Fund performance. SP Ausnet contributed positively to performance in the period on the back of a favorable regulatory decision on its transmission network, whichdespite
coming in behind requested levelswas still better than what market analysts had anticipated. Computershare Ltd.s stock price moved higher as the strength of its results for the first half of its 2014 fiscal year were driven by
significant cost synergies in the U.S. derived from its Shareowner Services acquisition in 2012, as well as other cost initiatives throughout its business.
Outlook
We remain cautiously optimistic regarding the backdrop for Australian
equities. Given the Australian Dollars recent strength, we do not anticipate that the central bank will hike interest rates soon. In our view, businesses had appeared sidelined ahead of the federal budget proposal in mid-May. Building
approvals maintained the momentum they gained in late 2013, and there are early signs of a recovery in certain non-resource sectors, such as housing. We feel that consumer sentiment remains fragile, however, despite improving property prices in
capital cities. We will continue to seek to identify what we believe are good-quality companies at reasonable valuations that we can hold over the long term.
Aberdeen Asset Management Asia Limited
Aberdeen Australia Equity Fund, Inc.
3
Portfolio Composition
(unaudited)
The following chart summarizes the composition of the Funds portfolio, in Standard & Poors Global Industry Classification Standard (GICS) sectors, expressed as a percentage
of net assets. The GICS structure consists of 10 sectors, 24 industry groups, 68 industries and 154 subindustries. The Fund may invest between 25% and 35% of its total assets in the securities of any one industry group if, at the time of investment,
that industry group represents 20% or more of the ASX 200. As of April 30, 2014, the Fund did not have more than 25% of its assets invested in any industry group.
As of April 30, 2014, the Fund held 96.9% of its net assets in equities, 1.1% in a short-term investment and 2.0% in other assets in excess of liabilities.
Asset Allocation
Top Ten Equity Holdings
(unaudited)
The following were the Funds top ten holdings
as of April 30, 2014:
|
|
|
|
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Name of Security |
|
Percentage of Net Assets |
|
BHP Billiton PLC London Listing |
|
|
11.3% |
|
Rio Tinto PLC London Listing |
|
|
6.7% |
|
Australia & New Zealand Banking Group Ltd. |
|
|
6.6% |
|
Commonwealth Bank of Australia |
|
|
6.5% |
|
Woolworths Ltd. |
|
|
5.7% |
|
Westfield Group |
|
|
5.2% |
|
Singapore Telecommunications Ltd. |
|
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4.9% |
|
AMP Ltd. |
|
|
4.7% |
|
Australian Stock Exchange Ltd. |
|
|
4.5% |
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CSL Ltd. |
|
|
4.4% |
|
Aberdeen Australia Equity Fund, Inc.
4
Total Investment Returns
(unaudited)
The following table summarizes Fund performance compared to the S&P/ASX 200 Accumulation Index (ASX 200), the Funds benchmark, for the 1-year, 3-year, 5-year and 10-year periods
annualized as of April 30, 2014.
|
|
|
|
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|
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|
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|
|
|
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1 Year |
|
|
3 Years |
|
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5 Years |
|
|
10 Years |
|
Net Asset Value (NAV) |
|
|
-5.2% |
|
|
|
-0.7% |
|
|
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12.6% |
|
|
|
10.3% |
|
Market Value |
|
|
-7.3% |
|
|
|
-1.7% |
|
|
|
14.1% |
|
|
|
12.4% |
|
Benchmark |
|
|
-1.4% |
|
|
|
3.4% |
|
|
|
17.9% |
|
|
|
12.3% |
|
Returns represent past performance. Total investment return at net asset value is based on changes in the net asset value
of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Funds transfer agent. Total investment return at market value is based on changes
in the market price at which the Funds shares traded on the NYSE MKT during the period and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Funds
transfer agent. The Funds total return is based on the reported NAV on each period end. Because the Funds 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. The Funds total return for the year is based on the reported NAV on financial reporting period ends. 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 Funds yield,
return, market price and NAV will fluctuate. Performance information current to the most recent month-end is available at www.aberdeeniaf.com or by calling 866-839-5205.
The net operating expense ratio is 1.43%.
Aberdeen Australia Equity Fund, Inc.
5
Portfolio of Investments
(unaudited)
As of April 30, 2014
|
|
|
|
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|
|
|
Shares |
|
|
Description |
|
Value (US$) |
|
|
LONG-TERM INVESTMENTS96.9%* |
|
|
|
|
|
COMMON STOCKS96.9% |
|
|
|
|
|
CONSUMER DISCRETIONARY1.5% |
|
|
|
|
|
1,106,200 |
|
|
Tatts Group Ltd. |
|
$ |
3,111,269 |
|
|
CONSUMER STAPLES9.0% |
|
|
|
|
|
788,000 |
|
|
Coca-Cola Amatil Ltd. |
|
|
6,802,597 |
|
|
341,300 |
|
|
Woolworths Ltd. |
|
|
11,860,848 |
|
|
|
|
|
|
|
|
18,663,445 |
|
|
ENERGY7.1% |
|
|
|
|
|
138,600 |
|
|
Caltex Australia Ltd. |
|
|
2,877,110 |
|
|
211,200 |
|
|
Woodside Petroleum Ltd. |
|
|
8,027,948 |
|
|
235,000 |
|
|
WorleyParsons Ltd. |
|
|
3,685,165 |
|
|
|
|
|
|
|
|
14,590,223 |
|
|
FINANCIALS35.6% |
|
|
|
|
|
2,073,000 |
|
|
AMP Ltd. |
|
|
9,755,866 |
|
|
427,200 |
|
|
Australia & New Zealand Banking Group Ltd. |
|
|
13,737,801 |
|
|
278,400 |
|
|
Australian Stock Exchange Ltd. |
|
|
9,212,807 |
|
|
184,000 |
|
|
Commonwealth Bank of Australia |
|
|
13,535,204 |
|
|
791,000 |
|
|
QBE Insurance Group Ltd. |
|
|
8,536,974 |
|
|
1,056,600 |
|
|
Westfield Group |
|
|
10,781,821 |
|
|
250,000 |
|
|
Westpac Banking Corp. Ltd. |
|
|
8,188,628 |
|
|
|
|
|
|
|
|
73,749,101 |
|
|
HEALTH CARE5.9% |
|
|
|
|
|
55,400 |
|
|
Cochlear Ltd. |
|
|
3,028,332 |
|
|
144,300 |
|
|
CSL Ltd. |
|
|
9,199,170 |
|
|
|
|
|
|
|
|
12,227,502 |
|
|
INFORMATION TECHNOLOGY3.1% |
|
|
|
|
|
556,700 |
|
|
Computershare Ltd. |
|
|
6,416,919 |
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|
MATERIALS21.5% |
|
|
|
|
|
722,800 |
|
|
BHP Billiton PLC London Listing |
|
|
23,465,247 |
|
|
1,170,400 |
|
|
Incitec Pivot Ltd. |
|
|
3,141,668 |
|
|
199,500 |
|
|
Orica Ltd. |
|
|
4,071,496 |
|
|
255,600 |
|
|
Rio Tinto PLC London Listing |
|
|
13,896,379 |
|
|
|
|
|
|
|
|
44,574,790 |
|
|
TELECOMMUNICATION SERVICES4.9% |
|
|
|
|
|
3,347,000 |
|
|
Singapore Telecommunications Ltd. |
|
|
10,187,843 |
|
|
UTILITIES8.3% |
|
|
|
|
|
582,900 |
|
|
AGL Energy Ltd. |
|
|
8,556,955 |
|
|
6,571,300 |
|
|
SP AusNet |
|
|
8,563,417 |
|
|
|
|
|
|
|
|
17,120,372 |
|
|
|
|
|
Total Long-Term Investments96.9% (cost $177,532,264) |
|
|
200,641,464 |
|
See Notes to Financial Statements.
Aberdeen Australia Equity Fund, Inc.
6
Portfolio of Investments
(unaudited) (concluded)
As of April 30, 2014
|
|
|
|
|
|
|
|
|
Par Amount |
|
|
Description |
|
Value (US$) |
|
|
SHORT-TERM INVESTMENT1.1% |
|
|
|
|
|
$2,250,000 |
|
|
Repurchase Agreement, Fixed Income Clearing Corp., 0.00% dated 04/30/2014, due 05/01/2014
in the amount of $2,250,000 collateralized by a U.S. Treasury Note, 1.125%, maturing 04/30/2020; total market value of $2,297,865 |
|
$ |
2,250,000 |
|
|
|
|
|
Total Short-Term Investment1.1% (cost $2,250,000) |
|
|
2,250,000 |
|
|
|
|
|
Total Investments98.0% (cost $179,782,264) |
|
|
202,891,464 |
|
|
|
|
|
|
|
|
Other Assets in Excess of Liabilities2.0% |
|
|
4,064,312 |
|
|
|
|
|
Net Assets100.0% |
|
$ |
206,955,776 |
|
* |
|
Fair Valued Security. Fair Values are determined pursuant to procedures approved by the Board of Directors. See Note 2(a) of the accompanying notes to financial
statements. |
See Notes to Financial
Statements.
Aberdeen Australia Equity Fund, Inc.
7
Statement of Assets and Liabilities (unaudited)
As of April 30, 2014
|
|
|
|
|
Assets |
|
|
|
|
Investments, at value (cost $177,532,264) |
|
$ |
200,641,464 |
|
Repurchase agreement, at value (cost $2,250,000) |
|
|
2,250,000 |
|
Foreign currency, at value (cost $4,066,996) |
|
|
4,073,860 |
|
Cash |
|
|
228 |
|
Prepaid expenses in connection with the at-the-market stock offering |
|
|
175,447 |
|
Prepaid expenses |
|
|
697 |
|
Total assets |
|
|
207,141,696 |
|
|
|
Liabilities |
|
|
|
|
Investment management fees payable (Note 3) |
|
|
156,477 |
|
Administration fees (Note 3) |
|
|
14,783 |
|
Investor relations fees payable (Note 3) |
|
|
14,060 |
|
Other |
|
|
600 |
|
Total liabilities |
|
|
185,920 |
|
|
|
|
|
|
Net Assets |
|
$ |
206,955,776 |
|
|
|
Composition of Net Assets: |
|
|
|
|
Common stock (par value $.01 per share) |
|
$ |
229,253 |
|
Paid-in capital in excess of par |
|
|
162,444,405 |
|
Distributions in excess of net investment income |
|
|
(9,269,929 |
) |
Accumulated net realized loss from investment transactions |
|
|
(3,678,027 |
) |
Net unrealized appreciation on investments |
|
|
23,260,040 |
|
Accumulated net realized foreign exchange gains |
|
|
34,114,010 |
|
Net unrealized foreign exchange loss |
|
|
(143,976 |
) |
Net Assets |
|
$ |
206,955,776 |
|
Net asset value per common share based on 22,925,320 shares issued and
outstanding |
|
$ |
9.03 |
|
See Notes to Financial Statements.
Aberdeen Australia Equity Fund, Inc.
8
Statement of Operations
(unaudited)
For the Six Months Ended April 30, 2014
|
|
|
|
|
Net Investment Income |
|
|
|
|
|
|
Income |
|
|
|
|
Dividends (net of foreign withholding taxes of $46,455) |
|
$ |
4,108,201 |
|
Interest and other income |
|
|
38,754 |
|
|
|
|
4,146,955 |
|
|
|
Expenses |
|
|
|
|
Investment management fee (Note 3) |
|
|
838,917 |
|
Administration fee (Note 3) |
|
|
78,874 |
|
Directors fees and expenses |
|
|
151,744 |
|
Investor relations fees and expenses (Note 3) |
|
|
77,658 |
|
Reports to shareholders and proxy solicitation |
|
|
61,511 |
|
Independent auditors fees and expenses |
|
|
47,200 |
|
Insurance expense |
|
|
44,539 |
|
Legal fees and expenses |
|
|
40,739 |
|
Custodians fees and expenses |
|
|
22,997 |
|
Transfer agents fees and expenses |
|
|
14,160 |
|
Miscellaneous |
|
|
33,918 |
|
Net expenses |
|
|
1,412,257 |
|
|
|
|
|
|
Net Investment Income |
|
|
2,734,698 |
|
|
|
Realized and Unrealized Gains/(Losses) on Investments and Foreign Currency Related Transactions |
|
|
|
|
|
|
Net realized gain/(loss) from: |
|
|
|
|
Investment transactions |
|
|
(2,513,435 |
) |
Foreign currency transactions |
|
|
(137,553 |
) |
|
|
|
(2,650,988 |
) |
|
|
Net change in unrealized appreciation/(depreciation) on: |
|
|
|
|
Investments |
|
|
1,749,614 |
|
Foreign currency translation |
|
|
(69,002 |
) |
|
|
|
1,680,612 |
|
Net realized and unrealized loss from investments and foreign currency related
transactions |
|
|
(970,376 |
) |
Net Increase in Net Assets Resulting from Operations |
|
$ |
1,764,322 |
|
See Notes to Financial Statements.
Aberdeen Australia Equity Fund, Inc.
9
Statements of Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
For
the Six Months Ended
April 30, 2014 (unaudited) |
|
|
For the Year Ended October 31, 2013 |
|
|
|
|
Increase/(Decrease) in Net Assets |
|
|
|
|
|
|
|
|
|
|
|
Operations: |
|
|
|
|
|
|
|
|
Net investment income |
|
$ |
2,734,698 |
|
|
$ |
6,175,670 |
|
Net realized gain/(loss) from investment transactions |
|
|
(2,513,435 |
) |
|
|
13,714,088 |
|
Net realized loss from foreign currency transactions |
|
|
(137,553 |
) |
|
|
(75,226 |
) |
Net change in unrealized appreciation/depreciation on investments |
|
|
1,749,614 |
|
|
|
10,400,906 |
|
Net change in unrealized appreciation/depreciation on foreign currency
translation |
|
|
(69,002 |
) |
|
|
(19,547,470 |
) |
Net increase in net assets resulting from operations |
|
|
1,764,322 |
|
|
|
10,667,968 |
|
|
|
|
Distributions to Shareholders from: |
|
|
|
|
|
|
|
|
Net investment income |
|
|
(10,916,215 |
) |
|
|
(7,601,420 |
) |
Net realized gains |
|
|
|
|
|
|
(9,720,387 |
) |
Tax return of capital |
|
|
|
|
|
|
(5,478,055 |
) |
Net decrease in net assets from distributions |
|
|
(10,916,215 |
) |
|
|
(22,799,862 |
) |
|
|
|
Common Stock Transactions: |
|
|
|
|
|
|
|
|
Proceeds from the at-the-market stock offering (Note 5) |
|
|
3,026,117 |
|
|
|
|
|
Expenses in connection with the at-the-market stock offering (Note 5) |
|
|
(21,256 |
) |
|
|
|
|
Change in net assets from common stock transactions |
|
|
3,004,861 |
|
|
|
|
|
Change in net assets resulting from operations |
|
|
(6,147,032 |
) |
|
|
(12,131,894 |
) |
|
|
|
Net Assets: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
213,102,808 |
|
|
|
225,234,702 |
|
End of period (including distributions in excess of net investment income of ($9,269,929) and ($1,088,412),
respectively) |
|
$ |
206,955,776 |
|
|
$ |
213,102,808 |
|
Amounts listed as - are $0 or round to $0.
See Notes to Financial Statements.
Aberdeen Australia Equity Fund, Inc.
10
Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended April 30, 2014 (unaudited) |
|
|
For the Year Ended October 31, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Per Share Operating Performance(a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period |
|
|
$9.44 |
|
|
|
$9.98 |
|
|
|
$10.17 |
|
|
|
$11.58 |
|
|
|
$10.96 |
|
|
|
$8.37 |
|
Net investment income |
|
|
0.12 |
|
|
|
0.27 |
|
|
|
0.34 |
|
|
|
0.39 |
|
|
|
0.32 |
|
|
|
0.29 |
|
Net realized and unrealized gains/(losses) on investments and foreign currencies |
|
|
(0.05 |
) |
|
|
0.20 |
|
|
|
0.54 |
|
|
|
(0.68 |
) |
|
|
1.31 |
|
|
|
3.34 |
|
Total from investment operations |
|
|
0.07 |
|
|
|
0.47 |
|
|
|
0.88 |
|
|
|
(0.29 |
) |
|
|
1.63 |
|
|
|
3.63 |
|
Distributions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
(0.48 |
) |
|
|
(0.34 |
) |
|
|
(0.71 |
) |
|
|
(0.52 |
) |
|
|
(0.50 |
) |
|
|
(0.31 |
) |
Net realized gains |
|
|
|
|
|
|
(0.43 |
) |
|
|
(0.37 |
) |
|
|
(0.44 |
) |
|
|
(0.06 |
) |
|
|
|
|
Tax return of capital |
|
|
|
|
|
|
(0.24 |
) |
|
|
|
|
|
|
(0.18 |
) |
|
|
(0.45 |
) |
|
|
(0.73 |
) |
Total distributions |
|
|
(0.48 |
) |
|
|
(1.01 |
) |
|
|
(1.08 |
) |
|
|
(1.14 |
) |
|
|
(1.01 |
) |
|
|
(1.04 |
) |
Offering cost on common stock |
|
|
|
|
|
|
|
|
|
|
0.01 |
|
|
|
(0.09 |
) |
|
|
|
|
|
|
|
|
Impact of shelf offering |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.11 |
|
|
|
|
|
|
|
|
|
Net asset value, end of period |
|
|
$9.03 |
|
|
|
$9.44 |
|
|
|
$9.98 |
|
|
|
$10.17 |
|
|
|
$11.58 |
|
|
|
$10.96 |
|
Market value, end of period |
|
|
$9.04 |
|
|
|
$10.71 |
|
|
|
$10.38 |
|
|
|
$10.31 |
|
|
|
$12.70 |
|
|
|
$11.40 |
|
|
|
|
|
|
|
|
Total Investment Return Based
on(b): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
|
(10.95% |
) |
|
|
13.33% |
|
|
|
11.83% |
|
|
|
(10.51% |
) |
|
|
21.62% |
|
|
|
50.76% |
|
Net asset value |
|
|
0.92% |
|
|
|
3.89% |
(c) |
|
|
9.00% |
(c) |
|
|
(3.19% |
) |
|
|
15.35% |
|
|
|
48.92% |
|
|
|
|
|
|
|
|
Ratio to Average Net Assets/Supplementary Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted) |
|
|
$206,956 |
|
|
|
$213,103 |
|
|
|
$225,235 |
|
|
|
$229,616 |
|
|
|
$223,173 |
|
|
|
$210,866 |
|
Average net assets (000 omitted) |
|
|
$198,820 |
|
|
|
$220,475 |
|
|
|
$218,950 |
|
|
|
$244,946 |
|
|
|
$211,324 |
|
|
|
$163,795 |
|
Net operating expenses |
|
|
1.43% |
(d) |
|
|
1.41% |
|
|
|
1.33% |
|
|
|
1.34% |
|
|
|
1.39% |
|
|
|
1.73% |
|
Net investment income |
|
|
2.77% |
(d) |
|
|
2.80% |
|
|
|
3.46% |
|
|
|
3.43% |
|
|
|
2.91% |
|
|
|
3.41% |
|
Portfolio turnover |
|
|
6% |
|
|
|
15% |
|
|
|
21% |
|
|
|
30% |
|
|
|
11% |
|
|
|
16% |
|
(a) |
|
Based on average shares outstanding. |
(b) |
|
Total investment return based on market value is calculated assuming that shares of the Funds 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 Funds 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 Funds net asset value is
substituted for the closing market value. |
(c) |
|
The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments. |
Amounts listed as - are $0
or round to $0.
See Notes to Financial Statements.
Aberdeen Australia Equity Fund, Inc.
11
Notes to Financial Statements
(unaudited)
April 30, 2014
1. Organization
Aberdeen Australia Equity Fund, Inc. (the Fund) is a non-diversified closed-end management investment company incorporated in Maryland on September 30, 1985. The Funds principal
investment objective is long-term capital appreciation through investment primarily in equity securities of Australian companies listed on the Australian Stock Exchange Limited. Its secondary objective is current income, which is expected to be
derived primarily from dividends and interest on Australian corporate and governmental securities. The Fund normally invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities, consisting
of common stock, preferred stock and convertible stock, of companies tied economically to Australia (each an Australian Company). This 80% investment policy is a non-fundamental policy of the Fund and may be changed by the Funds
Board of Directors (the Board) upon 60 days prior written notice to shareholders. As a fundamental policy, at least 65% of the Funds total assets must be invested in companies listed on the Australian Stock Exchange Limited
(ASX). Aberdeen Asset Management Asia Limited, the Funds investment manager, uses the following criteria in determining if a company is tied economically to Australia: whether the company (i) is a constituent of
the ASX; (ii) has its headquarters located in Australia, (iii) pays dividends on its stock in Australian Dollars; (iv) has its accounts audited by Australian auditors; (v) is subject to Australian taxes levied by the Australian
Taxation Office; (vi) holds its annual general meeting in Australia; (vii) has common stock/ordinary shares and/or other principal class of securities registered with Australian regulatory authorities for sale in Australia; (viii) is
incorporated in Australia; or (ix) has a majority of its assets located in Australia or a majority of its revenues are derived from Australian sources. There can be no assurance that the Fund will achieve its investment objective.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to accounting principles generally accepted in the
United States of America (GAAP). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The accounting records of the Fund are maintained in U.S. Dollars and the U.S. Dollar is
used as both the functional and reporting currency. However, the Australian Dollar is the functional currency for U.S. federal tax purposes.
(a) Security Valuation:
The Fund values its securities at current market value or fair value consistent with regulatory requirements. Fair value is defined in the Funds valuation and liquidity procedures as the
price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to contract at the measurement date.
Equity securities that are traded on an exchange are valued at the last quoted sale price on the principal exchange on which the security is traded at the
Valuation Time, subject to application, when appropriate of valuation factors described in the paragraph below. The Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). In
the absence of a sale price, the security is valued at the mean of the bid/ask quoted at the close on the principal exchange on which the security is traded. Securities traded on the NASDAQ are valued at the NASDAQ official closing price. A security
using any of these pricing methodologies is determined to be a Level 1 investment.
Foreign equity securities that are traded on foreign exchanges
that close prior to the Valuation Time are valued by applying valuation factors to the last sale price or the mean price as noted above. Valuation factors are provided by an independent pricing service provider. These valuation factors are used when
pricing the Funds portfolio holdings to estimate market movements between the time foreign markets close and the time the Fund values such foreign securities. These valuation factors are based on inputs such as depositary receipts, indices,
futures, sector indices/ETFs, exchange rates, and local exchange opening and closing prices of each security. When prices with the application of valuation factors are utilized, the value assigned to the foreign securities may not be the same as
quoted or published prices of the securities on their primary markets. A security that applies a valuation factor is determined to be a Level 2 investment because the exchange-traded price has been adjusted. Valuation factors are not utilized if the
independent pricing service provider is unable to provide a valuation factor or if the valuation factor falls below a predetermined threshold; in such case, the security is determined to be a Level 1 investment.
In the event that a securitys market quotations are not readily available or are deemed unreliable (for reasons other than because the foreign exchange
on which they trade closes before the Valuation Time), the security is valued at fair value as determined by the Funds Pricing Committee, taking into account the relevant factors and surrounding circumstances using valuation policies and
procedures approved and established by the Board. A security that has been fair valued by the Pricing Committee may be classified as Level 2 or 3 depending on the nature of the inputs.
Aberdeen Australia Equity Fund,
Inc.
12
Notes to Financial Statements
(unaudited) (continued)
April 30, 2014
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Fund
discloses the fair value of its investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1 measurements to valuations based upon unadjusted quoted prices
in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for identical assets, and Level 3 measurements to valuations based upon
unobservable inputs that are significant to the valuation. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of
the reporting entity. Unobservable inputs are inputs that reflect the reporting entitys 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 instruments level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The three-tier hierarchy of inputs is summarized below:
Level 1 quoted prices in active markets for identical investments;
Level 2 other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or
Level 3 significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments).
The following is a summary of the inputs used as of April 30, 2014 in valuing the Funds investments at fair value. The inputs or methodologies
used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Please refer to the Portfolio of Investments for a detailed breakout of the security types:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Long-Term Investments |
|
$ |
|
|
|
$ |
200,641,464 |
|
|
$ |
|
|
|
$ |
200,641,464 |
|
Short-Term Investment |
|
|
|
|
|
|
2,250,000 |
|
|
|
|
|
|
|
2,250,000 |
|
Total Investments |
|
$ |
|
|
|
$ |
202,891,464 |
|
|
$ |
|
|
|
$ |
202,891,464 |
|
Amounts listed as are $0 or round to $0.
For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing transfers at the end of each period. During the period ended April 30, 2014, there were no
transfers between Levels 1, 2 or 3. For the period ended April 30, 2014, there have been no significant changes to the fair valuation methodologies.
(b) Repurchase Agreements:
The Fund may enter into repurchase agreements under the terms of a Master Repurchase Agreement. It is the Funds policy that its custodian/counterparty
segregate the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. The repurchase price generally equals the price paid by the Fund plus interest negotiated on
the basis of current short-term rates. To the extent that any repurchase transaction exceeds one business day, the collateral is valued on a daily basis to determine its adequacy. Under the Master Repurchase Agreement, if the counterparty defaults
and the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the counterparty of the security, realization of the collateral by the Fund may be delayed or limited. Repurchase agreements are subject to
contractual netting arrangements with the counterparty, Fixed Income Clearing Corp. For additional information on individual repurchase agreements, see the schedules of investments. The Fund held a repurchase agreement of $2,250,000 as of
April 30, 2014. The value of the related collateral exceeded the value of the repurchase agreement at April 30, 2014.
(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 exchange rates at the current daily rates of exchange; and |
(ii) |
|
purchases and sales of investment securities, income and expenses at the rate of exchange prevailing on the respective dates of such transactions.
|
The Fund isolates that portion of the results of operations arising from changes in the foreign exchange rates due to the
fluctuations in the market prices of the securities held at the end of the reporting period. Similarly, the Fund isolates the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of portfolio
securities sold during the reporting period.
Aberdeen Australia
Equity Fund, Inc.
13
Notes to Financial Statements
(unaudited) (continued)
April 30, 2014
Net exchange gain/(loss) is realized from sales and maturities of portfolio securities, sales of foreign
currencies, settlement of securities transactions, dividends, interest and foreign withholding taxes recorded on the Funds books. Net unrealized foreign exchange appreciation/(depreciation) includes changes in the value of portfolio securities
and other assets and liabilities arising as a result of changes in the exchange rate. The net realized and unrealized foreign exchange gain/(loss) shown in the composition of net assets represents foreign exchange gain/(loss) for book purposes that
may not have been recognized for tax purposes.
Foreign security and currency transactions may involve certain considerations and risks not
typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. Dollar. Generally, when the U.S. Dollar rises in value against foreign currency, the Funds
investments denominated in that currency will lose value because its currency is worth fewer U.S. Dollars; the opposite effect occurs if the U.S. Dollar falls in relative value.
(d) Security Transactions, Investment Income and Expenses:
Security transactions
are recorded on the trade date. Realized and unrealized gains/(losses) from security and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date except for certain dividends on foreign
securities, which are recorded as soon as the Fund is informed after the ex-dividend date. Interest income and expenses are recorded on an accrual basis.
(e) Distributions:
The Fund has a managed distribution policy to pay
distributions from net investment income supplemented by net realized foreign exchange gains, net realized short-term capital gains and return of capital distributions, if necessary, on a quarterly basis. The managed distribution policy is subject
to regular review by the Board. The Fund will also declare and pay distributions at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
Dividends and distributions to shareholders are determined in accordance with federal income tax regulations,
which may differ from GAAP. These differences are primarily due to differing treatments for foreign currencies, loss deferrals and recognition of market discount and premium.
(f) Federal Income Taxes:
For federal income and excise tax purposes,
substantially all of the Funds transactions are accounted for using the Australian Dollar as
the functional currency. Accordingly, realized currency gains/(losses) are realized from changes in the foreign exchange rates against the Australian Dollar or are a result of the repatriation of
Australian Dollars into U.S. Dollars. This may differ substantially from the realized currency gains recognized under GAAP within the financial statements. Furthermore, the Funds distribution requirements are calculated on a federal tax basis
whereby currency gains/(losses) are considered income and distributed out as such.
The Fund intends to continue to qualify as a regulated
investment company by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code of 1986, as amended, and to make distributions of net investment income and net realized
capital gains sufficient to relieve the Fund from all, or substantially all, federal income taxes. Therefore, no federal income tax provision is required. Since tax authorities can examine previously filed tax returns, the Funds U.S. federal
and state tax returns for each of the four fiscal years up to the most recent fiscal year ended October 31, 2013 are subject to such review.
3. Agreements and Transactions with Affiliates
(a)
Investment Manager and Investment Adviser:
Aberdeen Asset Management Asia Limited (the Investment Manager) serves as investment
manager to the Fund and Aberdeen Asset Management Limited (the Investment Adviser) serves as investment adviser to the Fund, pursuant to a management agreement and an advisory agreement, respectively. The Investment Manager and the
Investment Adviser are wholly-owned subsidiaries of Aberdeen Asset Management PLC.
The Investment Manager makes investment decisions on behalf of
the Fund on the basis of recommendations and information furnished to it by the Investment Adviser, including the selection of, and responsibility for the placement of orders with, brokers and dealers to execute portfolio transactions on behalf of
the Fund.
Pursuant to the management agreement, the Fund pays the Investment Manager a fee, payable monthly by the Fund, at the following annual
rates: 1.10% of the Funds average weekly Managed Assets up to $50 million, 0.90% of the Funds average weekly Managed Assets between $50 million and $100 million and 0.70% of the Funds average weekly Managed Assets in excess of
$100 million. Managed Assets is defined in the management agreement as net assets plus the amount of any borrowings for investment purposes.
The
Investment Manager pays fees to the Investment Adviser for its services rendered. The Investment Manager informed the Fund that it
Aberdeen Australia Equity Fund,
Inc.
14
Notes to Financial Statements
(unaudited) (continued)
April 30, 2014
paid $202,708 to the Investment Adviser, with respect to the Fund, during the six months ended April 30, 2014.
(b) Fund Administration:
Aberdeen Asset Management Inc. (AAMI), an
affiliate of the Investment Manager and the Investment Adviser, is the Funds Administrator, pursuant to an agreement under which AAMI receives a fee, payable monthly by the Fund, at an annual fee rate of 0.08% of the Funds average weekly
Managed Assets up to $500 million, 0.07% of the Funds average weekly Managed Assets between $500 million and $1.5 billion, and 0.06% of the Funds average weekly Managed Assets in excess of $1.5 billion. For the six months ended
April 30, 2014, AAMI earned $78,874 from the Fund for administration services.
(c) Investor Relations:
Under the terms of an Investor Relations Services Agreement, AAMI serves as the Funds investor relations services provider.
Pursuant to the terms of the Investor Relations Services Agreement, AAMI provides, among other things, objective and timely information to shareholders based
on publicly-available information; provides information efficiently through the use of technology while offering shareholders immediate access to knowledgeable investor relations representatives; develops and maintains effective communications with
investment professionals from a wide variety of firms; creates and maintains investor relations communication materials such as fund manager interviews, films and webcasts, published white papers, magazine and articles and other relevant materials
discussing the Funds investment results, portfolio positioning and outlook; develops and maintains effective communications with large institutional shareholders; responds to specific shareholder questions; and reports activities and results
to the Board and management detailing insight into general shareholder sentiment.
For the six months ended April 30, 2014, the Fund incurred
fees of approximately $76,193 for investor relations services. Investor relations fees and expenses in the Statement of Operations include certain out-of-pocket expenses.
4. Investment Transactions
Purchases and sales of investment securities
(excluding short-term securities) for the six months ended April 30, 2014, were $11,985,751 and $17,421,870, respectively.
5. Capital
The authorized capital of the Fund is 30 million shares of $0.01 par value common stock. As of April 30, 2014, there were 22,925,320 shares of common stock issued and outstanding.
In October 2013, the Fund filed a shelf registration statement with the SEC, which permits the Fund to issue up to $130 million in shares of
common stock through one or more public offerings, including at-the-market offerings (ATM offerings), provided that the registration statement is updated and certain performance conditions are met. Shares are offered through ATM
offerings only when market conditions are considered favorable. Such shares would only be issued when the premium to net asset value is greater than the costs associated with the transaction. Any proceeds raised would be used for investment
purposes. In accordance with the terms of a sales agreement, the Fund may offer and sell up to 3,250,000 of its shares, par value $0.01 per share, from time to time through JonesTrading Institutional LLC as its agent for the offer and sale of the
shares. For the six months ended April 30, 2014, there were 351,201 shares sold through ATM offerings. Offering costs are capitalized as a prepaid expense. When shares are sold, a portion of the cost attributed to those shares will be charged
to paid-in capital. For the six months ended April 30, 2014 these costs were $21,256. These costs are noted on the Statement of Changes in Net Assets.
6. Open Market Repurchase Program
On March 1, 2001, the Board approved a
stock repurchase program. The Board amended the program on December 12, 2007. The stock repurchase program allows the Fund to repurchase up to 10% of its outstanding common stock in the open market during any 12-month period, if and when the
discount to NAV is at least 8%. For the six months ended April 30, 2014 and fiscal year ended October 31, 2013, the Fund did not repurchase any shares through this program.
7. Portfolio Investment Risks
(a) Risks Associated with
Foreign Securities and Currencies:
Investments in securities of foreign issuers carry certain risks not ordinarily associated with
investments in securities of U.S. issuers. These risks include future political and economic developments, and the possible imposition of exchange controls or other foreign governmental laws and restrictions. In addition, with respect to certain
countries, there is the possibility of expropriation of assets, confiscatory taxation, and political or social instability or diplomatic developments, which could adversely affect investments in those countries.
Aberdeen Australia
Equity Fund, Inc.
15
Notes to Financial Statements
(unaudited) (concluded)
April 30, 2014
Certain countries also may impose substantial restrictions on investments in their capital markets by foreign
entities, including restrictions on investments in issuers of industries deemed sensitive to relevant national interests. These factors may limit the investment opportunities available and result in a lack of liquidity and high price volatility with
respect to securities of issuers from developing countries. Foreign securities may also be harder to price than U.S. securities.
(b) Focus Risk:
The Fund may
have elements of risk not typically associated with investments in the United States due to focused investments in a limited number of countries or regions subject to foreign securities or currencies risks. Such focused investments may subject the
Fund to additional risks resulting from political or economic conditions in such countries or regions and the possible imposition of adverse governmental laws or currency exchange restrictions could cause the securities and their markets to be less
liquid and their prices to be more volatile than those of comparable U.S. securities.
8. Contingencies
In the normal course of business, the Fund may provide general indemnifications pursuant to certain contracts and organizational documents. The Funds
maximum exposure under these arrangements is dependent on future claims that may be made against the Fund, and therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.
9. Tax Information:
The U.S. federal income tax basis of the Funds investments and the net unrealized appreciation as of April 30, 2014 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
Appreciation |
|
|
Depreciation |
|
|
Net Unrealized Appreciation |
|
|
$179,631,424 |
|
|
$ |
31,687,304 |
|
|
$ |
(8,427,264) |
|
|
$ |
23,260,040 |
|
10. Subsequent Events
Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the Financial Statements were issued. Based on this evaluation, no disclosures or
adjustments were required to the Financial Statements as of April 30, 2014.
On June 10, 2014, the Fund announced that it will pay on
June 30, 2014 a distribution of $0.22 per share to all shareholders of record as of June 23, 2014.
Aberdeen Australia Equity Fund,
Inc.
16
Supplemental Information
(unaudited)
Results of Annual Meeting of Shareholders
The Annual
Meeting of Shareholders was held on Thursday, March 27, 2014 at 712 Fifth Avenue, 49th Floor, New York, New York. The description of the proposals and number of shares voted at the meeting are as follows:
1. To elect three directors to serve as Class II directors for three year terms or until their successors are duly elected and qualify:
|
|
|
|
|
|
|
|
|
|
|
Votes For |
|
|
Votes Withheld |
|
P. Gerald Malone |
|
|
19,376,228 |
|
|
|
615,189 |
|
Peter D. Sacks |
|
|
19,357,494 |
|
|
|
633,922 |
|
Hugh Young |
|
|
19,384,561 |
|
|
|
606,856 |
|
Directors whose term of office continued beyond this meeting are as follows: Neville J. Miles, William J. Potter, John
T. Sheehy and Moritz Sell.
Aberdeen Australia Equity
Fund, Inc.
17
Corporate Information
Directors
Neville J. Miles, Chairman
P. Gerald Malone
William J. Potter
Peter D. Sacks
Moritz Sell
John T. Sheehy
Hugh Young
Officers
Christian Pittard, President
Jeffrey Cotton, Chief Compliance Officer and Vice President, Compliance
Megan Kennedy, Vice President and Secretary
Andrea Melia, Treasurer and Principal Accounting
Officer
Mark Daniels, Vice President
Martin J. Gilbert, Vice President
Alan Goodson, Vice President
Jennifer Nichols, Vice President
Lucia Sitar,
Vice President
Sharon Ferrari, Assistant Treasurer
Matthew Keener, Assistant Secretary
Sofia Rosala, Deputy Chief Compliance Officer and Vice
President
Investment Manager
Aberdeen Asset Management Asia Limited
21 Church Street
#01-01 Capital Square Two
Singapore 049480
Investment Adviser
Aberdeen Asset Management Limited
Level 6, 201 Kent
Street
Sydney, NSW 2000, Australia
Administrator
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Computershare
Trust Company, N.A.
P.O. Box 30170
College Station, TX 77842-3170
Independent Registered Public Accounting Firm
KPMG LLP
1601 Market Street
Philadelphia, PA 19103
Legal Counsel
Willkie Farr & Gallagher LLP
787 Seventh Ave
New York, NY 10019
Investor Relations
Aberdeen
Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
1-866-839-5205
InvestorRelations@aberdeen-asset.com
Aberdeen Asset Management Asia Limited
The accompanying Financial Statements as of April 30, 2014, were not audited and accordingly, no opinion is expressed thereon.
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may purchase, from time to time, shares of its common stock in the open market.
Shares of Aberdeen Australia Equity Fund, Inc. are traded on the NYSE MKT Equities Exchange under the symbol IAF. Information about
the Funds net asset value and market price is available at www.aberdeeniaf.com.
This report, including the financial information herein, is
transmitted to the shareholders of Aberdeen Australia Equity Fund, Inc. for their general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person. Past
performance is no guarantee of future returns.
Aberdeens Investor Relations Services
We
invite you to enroll today.
As part of Aberdeens commitment to shareholders, we invite you to visit the Fund on the web at www.aberdeeniaf.com. From this
page, you can view monthly fact sheets, portfolio manager commentary, distribution and performance information, updated daily fact sheets courtesy of Morningstar®, portfolio charting, and other timely data.
Enroll today
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Enroll in our e-mail services and be among the first to receive information regarding your investments. Complete the enclosed card and return in the postage-paid
envelope or sign-up today online.
Please visit Aberdeens award-winning Closed-End Fund Talk Channel, where a series of fund manager webcasts and short films
are posted. Visit Aberdeens Closed-End Fund Talk Channel at www.aberdeen-asset.us/aam.nsf/usClosed/aberdeentv.
Contact us:
1. Enroll in Investor Relations services at: http://www.aberdeen-asset.us/aam.nsf/usclosed/email
2. Call us toll free at 1-866-839-5205 in the U.S.,
3. Email us at
InvestorRelations@aberdeen-asset.com
4. Visit www.aberdeen-asset.us/cef
Stop
the paper
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By enrolling in this convenient service, you will receive electronic versions of important Fund documents including annual reports, semi-annual reports,
prospectuses, and proxy statements.
Theres never been a faster, simple or more environmentally-friendly way to receive your investment information.
To enroll in electronic delivery, follow these simple steps:
1. Go to
http://www.aberdeen-asset.us/cef
2. Click on the link for Email Services which takes you to http://www.aberdeen-asset.us/aam.nsf/usclosed/email
3. Click Sign-up
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We explore further.
Aberdeen Closed-End Funds
At Aberdeen, we believe theres no substitute for getting to know your investments face-to-face. Thats why we make it our goal to visit companies
wherever they are before our equity teams ever invest in their shares and again when we hold them.
With 13 U.S. closed-end funds investing around the world
thats an awfully big commitment. But its just one of the ways we seek out what we believe are the best investment opportunities on your behalf.
Speak with your financial advisor or wealth manager today about diversifying* your portfolio with Aberdeens global and emerging market closed-end funds.
For more information, contact our Investor Relations team at 866-839-5233 or e-mail us at InvestorRelations@aberdeen-asset.com.
www.aberdeen-asset.us/cef
*Diversification does not necessarily ensure return or protect
against a loss.
Closed-end funds are traded on the secondary market through one of the stock exchanges. The Funds investment return and principal value will
fluctuate so that an investors shares may be worth more or less than the original cost. Shares of closed-end funds may trade above (a premium) or below (a discount) the net asset value (NAV) of the funds portfolio. There is no assurance
that the Fund will achieve its investment objective. Past performance does not guarantee future results. Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and
regulatory standards, and political and economic risks. These risks may be enhanced in emerging market countries.
Aberdeen Asset Management (AAM) is the marketing
name in the U.S. for the following affiliated, registered investment advisers: Aberdeen Asset Management Inc., Aberdeen Asset Managers Ltd, Aberdeen Asset Management Ltd and Aberdeen Asset Management Asia Ltd, each of which is wholly owned by
Aberdeen Asset Management PLC. Aberdeen is a U.S. registered service trademark of Aberdeen Asset Management PLC.
IAF SEMI-ANNUAL
Item 2 Code of Ethics.
Not applicable to semi-annual report on Form N-CSR.
Item 3 Audit Committee Financial Expert.
Not applicable to semi-annual report on Form N-CSR.
Item 4 Principal Accountant Fees and Services.
Not applicable to semi-annual report on Form N-CSR.
Item 5 Audit Committee of Listed Registrants.
Not applicable to semi-annual report on Form N-CSR.
Item 6 Investments.
|
(a) |
Schedule of Investments in securities of unaffiliated issuers as of close of the reporting period is included as part of the Report to Stockholders filed under Item 1 of this Form N-CSR. |
Item 7 Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to semi-annual report on Form N-CSR.
Item 8 Portfolio Managers of Closed-End Management Investment Companies.
|
(a) |
Not applicable to semi-annual report on Form N-CSR. |
|
(b) |
During the period ended April 30, 2014, there were no changes in any of the Portfolio Managers. |
Item 9 Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated
Purchasers.
REGISTRANT PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
Period |
|
(a) Total Number of Shares Purchased |
|
(b) Average Price Paid per Share |
|
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 1 |
|
(d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
1 |
November 1 through November 30, 2013 |
|
None |
|
None |
|
None |
|
2,257,412 |
December 1 through December 31, 2013 |
|
None |
|
None |
|
None |
|
2,257,412 |
January 1 through January 31, 2014 |
|
None |
|
None |
|
None |
|
2,272,326 |
February 1 through February 28, 2014 |
|
None |
|
None |
|
None |
|
2,292,472 |
March 1 through March 31, 2014 |
|
None |
|
None |
|
None |
|
2,292,472 |
April 1 through April 30, 2014 |
|
None |
|
None |
|
None |
|
2,292,532 |
Total |
|
None |
|
None |
|
|
|
|
1 |
The Registrants stock repurchase program was announced on March 19, 2001 and further amended by the Registrants Board of Directors on December 12, 2007. Under the terms of the current program, the
Registrant is permitted to repurchase up to 10% of its outstanding shares of common stock, par value $.01 per share, on the open market during any 12 month period if and when the discount to net asset value is at least 8%. |
Item 10 Submission of Matters to a Vote of Security Holders.
During the period ended April 30, 2014, there were no material changes to the policies by which stockholders may recommend nominees to the Funds
Board.
Item 11 Controls and Procedures.
|
(a) |
The Registrants principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrants 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 Registrants 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 Registrants last fiscal
half-year that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting. |
Item 12 Exhibits.
|
|
|
|
|
(a)(2) |
|
Certifications pursuant to Rule 30a-2(a) under the Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
|
|
(a)(3) |
|
Not applicable. |
|
|
(b) |
|
Certifications pursuant to Rule 30a-2(b) under the Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
|
|
(c) |
|
A copy of the Registrants notices to stockholders, which accompanied distributions paid, pursuant to the Registrants Managed Distribution Policy since the Registrants last filed N-CSR, are filed herewith as
Exhibits (c)(1) and (c)(2), as required by the terms of the Registrants SEC exemptive order. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Aberdeen Australia Equity Fund, Inc.
|
|
|
By: |
|
/s/ Christian Pittard |
|
|
Christian Pittard, |
|
|
Principal Executive Officer of |
|
|
Aberdeen Australia Equity Fund, Inc. |
Date: July 3, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
|
|
By: |
|
/s/ Christian Pittard |
|
|
Christian Pittard, |
|
|
Principal Executive Officer of |
|
|
Aberdeen Australia Equity Fund, Inc. |
Date: July 3, 2014
|
|
|
By: |
|
/s/ Andrea Melia |
|
|
Andrea Melia, |
|
|
Principal Financial Officer of |
|
|
Aberdeen Australia Equity Fund, Inc. |
Date: July 3, 2014
Exhibit List
12(a)(2) Rule 30a-2(a) Certifications
12(b) Rule
30a-2(b) Certifications
12(c)(1) and 12(c)(2) Distribution notice to stockholders