Washington, D.C. 20549
Item 1 – Reports to Stockholders –
(a) A copy of the report transmitted
to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 (the “1940 Act”) is filed herewith.
(b) Not applicable.
Letter to Shareholders (unaudited)
Dear Shareholder,
We present this Semi-Annual Report, which covers the activities of Aberdeen
Income Credit Strategies Fund (the "Fund"), for the six-month period ended April 30, 2021. The Fund's primary investment
objective is to seek a high level of current income, with a secondary objective of capital appreciation.
Total Investment Return1
For the six-month period ended April 30, 2021, the total return
to shareholders of the Fund based on the net asset value ("NAV") and market price of the Fund, respectively, are as follows:
NAV2,3
|
|
20.9%
|
Market
Price2
|
|
43.9%
|
For more information about Fund performance, please visit the Fund on
the web at www.aberdeenacp.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 Discount
The below table represents comparison from current six-month period end
to prior fiscal year end of Market Price to NAV and associated Premium/Discount.
|
|
NAV
|
|
Closing
Market
Price
|
|
Premium/
Discount
|
4/30/2021
|
|
$11.63
|
|
$12.52
|
|
7.7%
|
10/31/2020
|
|
$10.15
|
|
$ 9.18
|
|
-9.6%
|
During the six-month period ended April 30, 2021, the Fund's NAV
was within a range of $10.16 to $11.70 and the Fund's market price was within a range of $9.29 to $12.56. During the six-month period
ended April 30, 2021, the Fund's shares traded within a range of a discount of 8.6% to a premium of 7.7%.
Series A Perpetual Preferred Shares
On May 10, 2021, the Fund closed
on its offering of 1,600,000 shares of 5.25% Series A Perpetual Preferred Shares. The offering, priced at $25 per share, resulted
in net proceeds to the Fund of approximately $38.2 million after payment of underwriting discounts and commissions and estimated offering
expenses payable by the Fund. The Fund applied to list the Preferred Shares on the New York Stock Exchange ("NYSE") under the
ticker symbol "ACP PRA". The Fund
intends to use the net proceeds from the offering to invest in accordance
with its investment objective and policies, for general working capital purposes and/or to pay down outstanding borrowings under its credit
facility.
Rights Offering
On May 10, 2021, the Fund commenced a transferable rights offering
to shareholders of record on May 20, 2021 (" Rights Offer") to subscribe for up to an aggregate of 5,812,247 common shares.
The Rights Offer expired on June 16, 2021 (expiration date). Each record date shareholder received one right for each outstanding
common share held, which entitled such shareholder to purchase one new Fund common share for every three rights held. The Rights Offer
was oversubscribed. The subscription price on the expiration date pursuant to the Rights Offer was $10.20 per common share of the Fund,
and was calculated based on a formula equal to 92.5% of the average of the last reported sales price of a common share of the Fund on
the New York Stock Exchange on the expiration date of the Rights Offer and on each of the four preceding trading days. Rights holders
exercised their rights to purchase of 5,812,247 common shares. Gross proceeds from the Rights Offer were approximately $60million.
Revolving Credit Facility
On November 25, 2020, the Fund's senior secured 364-day revolving
credit facility with BNP Paribas was amended to extend the schedule commitment termination date to November 24, 2021 with a committed
facility amount of $90,000,000. The Fund's outstanding balance as of October 31, 2020 was $81,200,000 on the Revolving Credit Facility.
During the period between November 9, 2020 and January 14, 2021, the Fund drew down $8,800,000. The Fund's outstanding balance
as of April 30, 2021 was $90,000,000. Under the terms of the loan facility and applicable regulations, the Fund is required to maintain
certain asset coverage ratios for the amount of its outstanding borrowings. The Board of Trustees (the "Board") regularly reviews
the use of leverage by the Fund. A more detailed description of the Fund's leverage can be found in the Notes to Financial Statements.
Distributions
Distributions to common shareholders for the twelve
months ended April 30, 2021 totaled $1.28 per share. Based on the market price as of the period ended April 30, 2021 of $12.52,
the distribution rate over the twelve-month period ended April 30, 2021 was 10.2%. Based on
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.
|
2.
|
Assuming the reinvestment of dividends and distributions.
|
3.
|
The Fund's total return is based on the reported net asset
value ("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.
|
|
Aberdeen Income Credit Strategies Fund
|
1
|
Letter to Shareholders (unaudited)
(continued)
the NAV of $11.63 on April 30, 2021, the distribution rate over
the twelve month period ended April 30, 2021 was 11.0%. 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.
As announced on May 11, 2021, the Fund distributed $0.10 per share
with a record date of May 21, 2021 and pay date of May 27, 2021. As announced on May 25, 2021, the Fund will distribute
$0.10 per share with a record date of June 4, 2021 and pay date of June 30, 2021.
The Fund's policy is to provide investors with a stable monthly distribution
out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital, which is a non-taxable return
of capital. This policy is subject to an annual review as well as regular review at the Board's quarterly meetings, unless market conditions
require an earlier evaluation.
For tax reporting purposes, not all components of the Fund's earnings
can be used to support the monthly dividend distributions such as realized and unrealized gains on investments. Therefore, differences
may exist between the distributable earnings of the Fund and the earnings from a total return perspective. We recommend reviewing both
the composition of the distributions and the net asset value total return of the Fund when one is evaluating the current distribution
rate and its sustainability.
Open Market Repurchase Program
On June 12, 2018, the Board approved a share repurchase program
("Program") for the Fund. 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 adviser and subject to market conditions and
investment considerations. The Fund reports activity on the Fund's website on a monthly basis. For the six-month period ended April 30,
2021, the Fund did not repurchase any shares through the Program. In light of the Rights Offer announced by the Board on May 10,
2021, and certain considerations under applicable law, the Board approved a temporary suspension of the Program which had prevented the
Fund from repurchasing shares for a portion of the reporting period close in time to the Rights Offer.
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") 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 www.sec.gov. The Fund makes this 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) without charge,
upon request, by calling Investor Relations toll-free at 1-800-522-5465; and (2) on the SEC's website at www.sec.gov.
Unclaimed Share Accounts
Please be advised that abandoned or unclaimed property laws for certain
states require financial organizations to transfer (escheat) unclaimed property (including Fund shares) to the state. Each state has its
own definition of unclaimed property, and Fund shares could be considered "unclaimed property" due to account inactivity (e.g.,
no owner-generated activity for a certain period), returned mail (e.g., when mail sent to a shareholder is returned to the Fund's transfer
agent as undeliverable), or a combination of both. If your Fund shares are categorized as unclaimed, your financial advisor or the Fund's
transfer agent will follow the applicable state's statutory 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.
COVID-19
The illness COVID-19 caused by a novel coronavirus
has resulted in a global pandemic and major disruption to economies and markets around the world, including the United States. Financial
markets have experienced extreme volatility and severe losses, and trading in many instruments has been disrupted. Liquidity for many
instruments has been greatly reduced for periods of time. Some interest rates are very low and in some cases yields are negative. Some
sectors of the economy and individual issuers have experienced particularly large losses. Although some markets have rebounded, others
have not. These circumstances may continue for an extended period of time, and may recur or continue to affect adversely the value and
liquidity of the Fund's investments. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets,
industries and individual issuers, including the Fund, are not known.
2
|
Aberdeen Income Credit Strategies Fund
|
|
Letter to Shareholders (unaudited)
(concluded)
Governments and central banks, including the Federal Reserve in the U.S.,
have taken extraordinary and unprecedented actions to support local and global economies and the financial markets. The impact of these
measures, and whether they will be effective to mitigate the economic and market disruption, will vary from market to market and, in some
cases, may not be known for some time.
LIBOR
Under the revolving credit facility, the Fund is charged interest on
amounts borrowed at a variable rate, which may be based on the London Interbank Offered Rate ("LIBOR") plus a spread. Additionally,
the Fund may invest in certain debt securities, derivatives or other financial instruments that utilize LIBOR as a "benchmark"
or "reference rate" for various interest rate calculations. In 2017, the head of the United Kingdom's Financial Conduct Authority
("FCA") announced a desire to phase out the use of LIBOR by the end of 2021. However, subsequent announcements by the FCA, the
LIBOR administrator and other regulators indicate that it is possible that the most widely used LIBOR rates may continue until mid-2023.
It is anticipated that LIBOR ultimately will be discontinued or the regulator will announce that it is no longer sufficiently robust to
be representative of its underlying market around that time. There remains uncertainty regarding the future utilization of LIBOR and the
nature of any replacement reference rate. As such, the potential effect of a transition away from LIBOR on the Fund's payment obligations
under the revolving credit facility and on the Fund's investments that reference LIBOR cannot yet be determined.
Investor Relations Information
As part of Aberdeen Standard's commitment to shareholders, we invite
you to visit the Fund on the web at www.aberdeenacp.com. Here, you can view monthly fact sheets, quarterly commentary, distribution and
performance information, and other Fund literature.
Enroll in Aberdeen Standard'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.aberdeenstandard.com/en-us/cefinvestorcenter/contact-us/preferences
Contact Us:
•
|
Visit: https://www.aberdeenstandard.com/en-us/cefinvestorcenter;
|
•
|
Email: Investor.Relations@aberdeenstandard.com; or
|
•
|
Call: 1-800-522-5465 (toll free in the U.S.).
|
Yours sincerely,
/s/ Christian Pittard
Christian Pittard
President
All amounts are U.S. Dollars unless otherwise
stated.
|
Aberdeen Income Credit Strategies Fund
|
3
|
Total Investment Returns (unaudited)
The following table summarizes the average annual Fund performance for
the six-month, 1-year, 3-year, 5-year and 10-year periods ended April 30, 2021.
|
|
6
Months
|
|
1
Year
|
|
3
Years
|
|
5 Years
|
|
10 Years
|
|
Net
Asset Value (NAV)
|
|
20.9%
|
|
55.5%
|
|
3.6%
|
|
9.1%
|
|
5.8%
|
|
Market
Price
|
|
43.9%
|
|
88.3%
|
|
9.3%
|
|
14.0%
|
|
6.5%
|
|
Aberdeen Asset Managers Limited and Aberdeen Standard Investments
Inc. assumed responsibility for the management of the Fund as investment adviser and sub-adviser, respectively, on December 1, 2017.
Performance prior to this date reflects the performance of an unaffiliated investment adviser. The performance above reflects fee waivers
and/or expense reimbursements made by the Fund's current and/or former investment adviser. Absent such waivers and/or reimbursements,
the Fund's returns would be lower. See Note 3 in the Notes to Financial Statements.
Returns represent past performance. Total investment return at NAV
is based on changes in the NAV of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant
to the dividend reinvestment program. All return data at NAV includes fees charged to the Fund, which are listed in the Fund's Statement
of Operations under "Expenses". Total investment return at market value is based on changes in the market price at which the
Fund's shares traded on the NYSE during the period and assumes reinvestment of dividends and distributions, if any, at market prices pursuant
to the dividend reinvestment program. The Fund's total investment return is based on the reported NAV or market price, as applicable,
at the financial reporting period ended April 30, 2021. 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.aberdeenacp.com or by calling 800-522-5465.
The Fund's annualized net operating expense ratio, excluding fee waivers,
based on the six-month period ended April 30, 2021, was 2.98%. The annualized net operating expense ratio, net of fee waivers, based
on the six-month period ended April 30, 2021, was 2.82%. The annualized net operating expense ratio, excluding interest expense,
commitment fee and loan servicing fees and net of fee waivers, based on the six-month period ended April 30, 2021, was 2.16%
4
|
Aberdeen Income Credit Strategies Fund
|
|
Portfolio Summary (unaudited)
Quality of Investments(1)
The table below shows the asset quality of the Fund's portfolio as of
April 30, 2021 compared to October 31, 2020 and April 30, 2020:
Date
|
BBB/Baa*
%
|
|
BB/Ba*
%
|
|
B*
%
|
|
CCC*
%
|
|
C*
%
|
|
D*
%
|
|
NR**
%
|
|
April 30, 2021
|
1
|
|
10
|
|
41
|
|
42
|
|
0
|
|
0
|
|
6
|
|
October 31, 2020
|
0
|
|
14
|
|
37
|
|
41
|
|
0
|
|
1
|
|
7
|
|
April 30, 2020
|
0
|
|
17
|
|
49
|
|
30
|
|
2
|
|
0
|
|
2
|
|
*
|
Below investment grade
|
**
|
Not Rated
|
(1)
|
For financial reporting purposes, credit quality ratings shown
above reflect the lowest rating assigned by either S & P Global Ratings, Fitch Ratings or Moody's Investors Service, Inc.,
if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used.
Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower.
Investments designated NR are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality.
Credit quality ratings are subject to change. The Investment Adviser evaluates the credit quality of unrated investments based upon,
but not limited to, credit ratings for similar investments.
|
Geographic Composition
The table below shows the geographical composition (with U.S. Dollar-denominated
bonds issued by foreign issuers allocated into country of issuance) of the Fund's total investments as of April 30, 2021 compared
to October 31, 2020 and April 30, 2020:
Date
|
|
United States
%
|
|
Europe
%
|
|
United Kingdom
%
|
|
Latin America
%
|
|
Africa
%
|
|
Canada
%
|
|
Caribbean
%
|
|
South America
%
|
|
Middle East
%
|
|
Australia
%
|
|
April 30, 2021
|
|
33
|
|
32
|
|
26
|
|
3
|
|
2
|
|
2
|
|
2
|
|
0
|
|
0
|
|
0
|
|
October 31, 2020
|
|
28
|
|
34
|
|
25
|
|
3
|
|
5
|
|
1
|
|
2
|
|
1
|
|
1
|
|
0
|
|
April 30, 2020
|
|
18
|
|
39
|
|
29
|
|
3
|
|
6
|
|
0
|
|
1
|
|
2
|
|
1
|
|
1
|
|
Maturity Composition
As of April 30, 2021, the average maturity of the Fund's total investments
was 4.9 years, compared with 7.3 years at October 31, 2020 and 7.3 years at April 30, 2020. The table below shows the maturity
composition of the Fund's investments as of April 30, 2021 compared to October 31, 2020 and April 30, 2020:
Date
|
|
Under 3 Years
%
|
|
3 to 5 Years
%
|
|
5 to 10 Years
%
|
|
10 Years & Over
%
|
|
April 30, 2021
|
|
49
|
|
25
|
|
18
|
|
8
|
|
October 31, 2020
|
|
37
|
|
24
|
|
26
|
|
13
|
|
April 30, 2020
|
|
25
|
|
25
|
|
40
|
|
10
|
|
|
Aberdeen Income Credit Strategies Fund
|
5
|
Portfolio of Investments (unaudited)
As of
April 30, 2021
Principal
Amount
(000) or Shares
|
Description
|
|
Value
(US$)
|
|
BANK LOANS—1.1%
|
|
NORWAY—1.1%
|
|
EUR
|
2,000
|
Silk Bidco AS, Zero Coupon, 06/11/2023
|
|
$ 2,314,330
|
|
UNITED STATES—0.0%
|
|
USD
|
4,000
|
La Paloma Generating Co., LLC, Zero Coupon, 02/20/2022(a)(b)(c)(d)
|
|
–
|
|
|
|
Total Bank Loans—1.1% (cost $6,040,609)
|
|
2,314,330
|
|
CORPORATE BONDS—133.6%
|
|
ARGENTINA—0.8%
|
|
USD
|
1,000
|
Telecom Argentina SA, 6.50%, 05/31/2021(e)(f)
|
|
992,510
|
|
USD
|
620
|
Telecom Argentina SA, 8.00%, 07/18/2023(e)(f)
|
|
551,800
|
|
|
|
1,544,310
|
|
AUSTRALIA—0.5%
|
|
USD
|
972
|
Mineral Resources Ltd., 8.13%, 05/01/2022(e)(f)
|
|
1,076,568
|
|
BERMUDA—1.2%
|
|
USD
|
2,379
|
Highlands Holdings Bond Issuer Ltd. / Highlands Holdings Bond Co-Issuer, Inc., 7.63%, 10/15/2022(e)(f)(g)
|
|
2,539,385
|
|
CANADA—2.6%
|
|
USD
|
2,995
|
Husky III Holding Ltd., 13.00%, 06/01/2021(e)(f)(g)
|
|
3,264,550
|
|
USD
|
1,875
|
Titan Acquisition Ltd. / Titan Co-Borrower LLC, 7.75%, 06/01/2021(e)(f)
|
|
1,947,656
|
|
|
|
5,212,206
|
|
CHINA—5.0%
|
|
USD
|
3,655
|
China Evergrande Group, 9.50%, 04/11/2022(e)
|
|
3,583,728
|
|
USD
|
856
|
Huarong Finance II Co. Ltd., 5.00%, 11/19/2025(e)
|
|
663,400
|
|
USD
|
296
|
Huarong Finance II Co. Ltd., 5.50%, 01/16/2025(e)
|
|
230,140
|
|
USD
|
1,510
|
Kaisa Group Holdings Ltd., 9.38%, 06/30/2021(e)(f)
|
|
1,499,430
|
|
GBP
|
3,031
|
Kingdee International Software Group Co. Ltd., 11.00%, 12/06/2023
|
|
4,195,855
|
|
|
|
10,172,553
|
|
DENMARK—1.0%
|
|
USD
|
2,000
|
DKT Finance ApS, 9.38%, 05/11/2021(e)(f)
|
|
2,057,000
|
|
|
|
2,057,000
|
|
FRANCE—6.1%
|
|
EUR
|
650
|
Constantin Investissement 3 SASU, 5.38%, 05/10/2021(e)(f)
|
|
788,104
|
|
EUR
|
3,017
|
La Financiere Atalian SASU, 5.13%, 05/15/2021(e)(f)
|
|
3,610,292
|
|
GBP
|
2,000
|
La Financiere Atalian SASU, 6.63%, 05/15/2021(e)(f)
|
|
2,755,194
|
|
EUR
|
2,894
|
Newco GB SAS, 8.00%, 05/10/2021(e)(f)(g)
|
|
3,551,047
|
|
EUR
|
1,500
|
Novafives SAS, 5.00%, 06/15/2021(e)(f)
|
|
1,655,029
|
|
|
|
12,359,666
|
|
GEORGIA—0.3%
|
|
USD
|
526
|
Bank of Georgia JSC, (fixed rate to 06/28/2024, variable rate thereafter), 11.13%, 06/28/2024(e)(h)
|
|
567,444
|
|
GERMANY—4.0%
|
|
EUR
|
1,800
|
Aareal Bank AG, 6.67%, 04/30/2022(e)(h)(i)
|
|
2,207,482
|
|
EUR
|
324
|
BK LC Lux Finco1 Sarl, 5.25%, 04/30/2024(e)(f)
|
|
396,540
|
|
EUR
|
1,082
|
CT Investment GmbH, 5.50%, 04/15/2023(e)(f)
|
|
1,316,970
|
|
GBP
|
1,600
|
Deutsche Bank AG, (fixed rate to 04/30/2026, variable rate thereafter), 7.13%, 04/30/2026(e)(h)
|
|
2,392,596
|
|
EUR
|
1,320
|
HT Troplast GmbH, 9.25%, 07/15/2022(e)(f)
|
|
1,737,732
|
|
|
|
8,051,320
|
|
6
|
Aberdeen Income Credit
Strategies Fund
|
|
Portfolio of Investments (unaudited)
(continued)
As of
April 30, 2021
Principal
Amount
(000) or Shares
|
Description
|
|
Value
(US$)
|
|
CORPORATE BONDS (continued)
|
|
IRELAND—0.9%
|
|
USD
|
1,730
|
Cimpress PLC, 7.00%, 06/15/2021(e)(f)
|
|
$ 1,820,825
|
|
|
|
1,820,825
|
|
ITALY—2.5%
|
|
EUR
|
2,000
|
Banca Monte dei Paschi di Siena SpA, 10.50%, 07/23/2029(e)
|
|
2,946,046
|
|
EUR
|
1,972
|
Banca Monte dei Paschi di Siena SpA, (fixed rate to 01/18/2023, variable rate thereafter), 5.38%, 01/18/2023(e)(f)
|
|
2,127,351
|
|
|
|
5,073,397
|
|
JAMAICA—1.0%
|
|
USD
|
2,115
|
Digicel Group 0.5 Ltd., 10.00%, 05/17/2021(f)(g)
|
|
2,067,248
|
|
JAPAN—2.4%
|
|
USD
|
4,750
|
SoftBank Group Corp., (fixed rate to 07/19/2023, variable rate thereafter), 6.00%, 07/19/2023(e)(h)
|
|
4,821,250
|
|
LUXEMBOURG—16.9%
|
|
USD
|
5,000
|
Altice France Holding SA, 10.50%, 05/15/2022(e)(f)
|
|
5,632,300
|
|
GBP
|
2,918
|
Cidron Aida Finco SARL, 6.25%, 04/01/2024(e)(f)
|
|
4,116,425
|
|
GBP
|
4,214
|
Garfunkelux Holdco 3 SA, 7.75%, 11/01/2022(e)(f)
|
|
6,037,867
|
|
EUR
|
1,918
|
Kleopatra Holdings 2 SCA, 6.50%, 03/01/2023(e)(f)
|
|
2,147,683
|
|
EUR
|
2,734
|
LHMC Finco 2 Sarl, 7.25%, 05/31/2021(e)(f)(g)
|
|
3,021,910
|
|
EUR
|
5,150
|
Monitchem HoldCo 2 SA, 9.50%, 09/15/2022(e)(f)
|
|
6,748,828
|
|
EUR
|
5,226
|
Summer BC Holdco A Sarl, 9.25%, 10/31/2022(e)(f)
|
|
6,644,360
|
|
|
|
34,349,373
|
|
MEXICO—3.6%
|
|
USD
|
4,200
|
Petroleos Mexicanos, 6.49%, 11/23/2026(f)
|
|
4,441,500
|
|
USD
|
1,500
|
Sixsigma Networks Mexico SA de CV, 7.50%, 05/31/2021(e)(f)
|
|
1,310,625
|
|
USD
|
2,000
|
Unifin Financiera SAB de CV, (fixed rate to 01/29/2025, variable rate thereafter), 8.88%, 01/29/2025(e)(h)
|
|
1,564,560
|
|
|
|
7,316,685
|
|
NETHERLANDS —5.3%
|
|
EUR
|
2,450
|
Sigma Holdco BV, 5.75%, 05/15/2021(e)(f)
|
|
2,854,201
|
|
EUR
|
2,779
|
Summer BidCo BV, 9.00%, 05/31/2021(e)(f)(g)
|
|
3,410,709
|
|
EUR
|
3,594
|
Summer BidCo BV, 9.00%, 05/31/2021(e)(f)(g)
|
|
4,409,271
|
|
|
|
10,674,181
|
|
NIGERIA—1.5%
|
|
USD
|
2,860
|
IHS Netherlands Holdco BV, 8.00%, 09/18/2022(e)(f)
|
|
3,103,100
|
|
SPAIN—1.5%
|
|
EUR
|
2,600
|
Tendam Brands SAU, 5.00%, 05/10/2021(e)(f)
|
|
2,993,001
|
|
TURKEY—0.5%
|
|
USD
|
983
|
Yapi ve Kredi Bankasi AS, (fixed rate to 01/22/2026, variable rate thereafter), 7.88%, 01/22/2026(e)(f)
|
|
991,017
|
|
UKRAINE—3.1%
|
|
USD
|
3,000
|
Metinvest BV, 8.50%, 01/23/2026(e)(f)
|
|
3,315,000
|
|
USD
|
3,000
|
MHP Lux SA, 6.95%, 04/03/2026(e)
|
|
3,064,680
|
|
|
|
6,379,680
|
|
UNITED ARAB EMIRATES—0.1%
|
|
USD
|
200
|
Emirates Reit Sukuk Ltd., 5.13%, 12/12/2022(e)
|
|
124,000
|
|
|
Aberdeen Income Credit Strategies Fund
|
7
|
Portfolio of Investments (unaudited)
(continued)
As of
April 30, 2021
Principal
Amount
(000) or Shares
|
Description
|
|
Value
(US$)
|
|
CORPORATE BONDS (continued)
|
|
UNITED KINGDOM—31.9%
|
|
GBP
|
4,473
|
Bracken MidCo1 PLC, 8.88%, 06/01/2021(e)(f)(g)
|
|
$ 6,385,486
|
|
GBP
|
882
|
Cabot Financial Luxembourg SA, 7.50%, 05/10/2021(e)(f)
|
|
1,241,954
|
|
GBP
|
2,329
|
Co-Operative Group Ltd., 11.00%, 12/18/2025
|
|
3,989,072
|
|
EUR
|
1,500
|
EG Group Ltd., Zero Coupon, 04/10/2027
|
|
1,780,080
|
|
USD
|
11,287
|
EnQuest PLC, 7.00%, 05/10/2021(e)(g)
|
|
9,594,037
|
|
GBP
|
140
|
EnQuest PLC, 7.00%, 10/15/2023(e)(g)
|
|
161,899
|
|
GBP
|
2,500
|
Galaxy Finco Ltd., 9.25%, 07/17/2022(e)(f)
|
|
3,659,215
|
|
SEK
|
20,000
|
International Personal Finance PLC, 8.75%, 05/17/2021(e)(f)(i)
|
|
2,339,505
|
|
USD
|
1,700
|
Jaguar Land Rover Automotive PLC, 4.50%, 07/01/2027(e)(f)
|
|
1,621,783
|
|
GBP
|
4,500
|
Matalan Finance PLC, 6.75%, 06/01/2021(e)(f)
|
|
5,669,692
|
|
USD
|
4,000
|
Motion Bondco DAC, 6.63%, 11/15/2022(e)(f)
|
|
4,040,000
|
|
GBP
|
5,040
|
Very Group Funding PLC, 7.75%, 06/01/2021(e)(f)
|
|
7,050,642
|
|
GBP
|
7,000
|
Virgin Money UK PLC, (fixed rate to 12/08/2022, variable rate thereafter), 8.00%, 12/08/2022(e)(h)
|
|
10,256,823
|
|
GBP
|
4,900
|
Voyage Care BondCo PLC, 10.00%, 06/01/2021(e)(f)
|
|
6,861,556
|
|
|
|
64,651,744
|
|
UNITED STATES—39.8%
|
|
USD
|
3,805
|
99 Escrow Issuer, Inc., 7.50%, 01/15/2023(e)(f)
|
|
3,643,668
|
|
USD
|
2,023
|
Adams Homes, Inc., 7.50%, 02/15/2022(e)(f)
|
|
2,119,093
|
|
USD
|
1,087
|
Adient US LLC, 9.00%, 04/15/2022(e)(f)
|
|
1,204,668
|
|
USD
|
1,819
|
Aethon United BR LP / Aethon United Finance Corp., 8.25%, 02/15/2023(e)(f)
|
|
1,933,724
|
|
USD
|
2,139
|
Affinity Gaming, 6.88%, 12/01/2023(e)(f)
|
|
2,270,559
|
|
USD
|
2,581
|
Ascent Resources Utica Holdings LLC / ARU Finance Corp., 8.25%, 02/01/2024(e)(f)
|
|
2,770,742
|
|
USD
|
1,904
|
Austin BidCo, Inc., 7.13%, 12/15/2023(e)(f)
|
|
1,932,560
|
|
EUR
|
4,200
|
Banff Merger Sub, Inc., 8.38%, 09/01/2021(e)(f)
|
|
5,320,816
|
|
USD
|
324
|
Carnival Corp., 7.63%, 03/01/2024(e)(f)
|
|
354,780
|
|
EUR
|
2,340
|
Carnival Corp., 10.13%, 08/01/2023(e)(f)
|
|
3,287,547
|
|
USD
|
1,200
|
Colgate Energy Partners III LLC, 7.75%, 02/15/2024(e)(f)
|
|
1,212,000
|
|
USD
|
2,329
|
Crestwood Midstream Partners LP / Crestwood Midstream Finance Corp., 6.00%, 02/01/2024(e)(f)
|
|
2,407,604
|
|
USD
|
1,325
|
DISH Network Corp., 3.38%, 08/15/2026(j)
|
|
1,394,563
|
|
USD
|
2,000
|
Dresdner Funding Trust I, 8.15%, 06/30/2029(e)(f)
|
|
2,842,500
|
|
USD
|
691
|
Ford Motor Co., 9.00%, 03/22/2025(f)
|
|
843,884
|
|
USD
|
138
|
Ford Motor Co., 9.63%, 01/22/2030(f)
|
|
193,545
|
|
USD
|
1,375
|
FXI Holdings, Inc., 7.88%, 06/01/2021(e)(f)
|
|
1,419,688
|
|
USD
|
2,068
|
FXI Holdings, Inc., 12.25%, 11/15/2022(e)(f)
|
|
2,393,710
|
|
USD
|
2,213
|
LD Holdings Group LLC, 6.13%, 04/01/2024(e)(f)
|
|
2,218,532
|
|
USD
|
881
|
Macy's Retail Holdings LLC, 5.88%, 04/01/2024(e)(f)
|
|
904,082
|
|
USD
|
1,319
|
Macy's, Inc., 8.38%, 06/15/2022(e)(f)
|
|
1,455,160
|
|
USD
|
934
|
Magic Mergeco, Inc., 5.25%, 11/01/2023(e)(f)
|
|
945,675
|
|
USD
|
1,375
|
Moss Creek Resources Holdings, Inc., 7.50%, 06/01/2021(e)(f)
|
|
1,220,313
|
|
USD
|
548
|
Moss Creek Resources Holdings, Inc., 10.50%, 05/15/2022(e)(f)
|
|
515,120
|
|
USD
|
2,549
|
Nabors Industries, Inc., 5.10%, 06/15/2023(f)
|
|
2,389,687
|
|
USD
|
721
|
NCL Corp. Ltd., 5.88%, 12/15/2025(e)(f)
|
|
753,445
|
|
USD
|
1,181
|
NCL Corp. Ltd., 10.25%, 08/01/2023(e)(f)
|
|
1,389,387
|
|
USD
|
2,250
|
New Enterprise Stone & Lime Co., Inc., 9.75%, 07/15/2023(e)(f)
|
|
2,508,750
|
|
USD
|
1,449
|
New Fortress Energy, Inc., 6.50%, 03/31/2023(e)(f)
|
|
1,478,458
|
|
USD
|
3,736
|
Photo Holdings Merger Sub, Inc., 8.50%, 10/01/2022(e)(f)
|
|
4,090,920
|
|
USD
|
6,649
|
Qwest Capital Funding, Inc., 6.88%, 07/15/2028
|
|
7,247,410
|
|
8
|
Aberdeen
Income Credit Strategies Fund
|
|
Portfolio of Investments (unaudited)
(continued)
As of April 30, 2021
Principal
Amount
(000) or Shares
|
Description
|
Value
(US$)
|
|
CORPORATE
BONDS (continued)
|
|
UNITED
STATES (continued)
|
|
USD
|
1,070
|
Qwest Capital
Funding, Inc., 7.75%, 02/15/2031
|
$
|
1,211,679
|
|
USD
|
5,920
|
Staples, Inc.,
10.75%, 04/15/2022(e)(f)
|
|
6,125,424
|
|
USD
|
4,720
|
SunCoke Energy Partners
LP / SunCoke Energy Partners Finance Corp., 7.50%, 06/01/2021(e)(f)
|
|
4,915,974
|
|
USD
|
820
|
Townsquare Media, Inc.,
6.88%, 02/01/2023(e)(f)
|
|
854,850
|
|
USD
|
2,932
|
Vine
Energy Holdings LLC, 6.75%, 04/15/2024(e)(f)
|
|
2,933,261
|
|
|
|
80,703,778
|
|
ZAMBIA—1.1%
|
|
USD
|
2,151
|
First
Quantum Minerals Ltd., 6.88%, 05/11/2021(e)(f)
|
|
2,258,550
|
|
|
|
Total
Corporate Bonds—133.6% (cost $255,828,866)
|
|
270,908,281
|
|
COMMON
STOCK—0.1%
|
|
UNITED
STATES—0.1%
|
|
USD
|
9,723
|
California
Resources Corp.
|
|
230,435
|
|
|
|
230,435
|
|
|
|
Total
Common Stocks—0.1% (cost $145,845)
|
|
230,435
|
|
EXCHANGE-TRADED
FUND—4.3%
|
|
UNITED
STATES—4.3%
|
|
USD
|
100,000
|
iShares
iBoxx High Yield Corporate Bond ETF
|
|
8,744,000
|
|
|
|
8,744,000
|
|
|
|
Total
Exchange-Traded Funds—4.3% (cost $8,465,539)
|
|
8,744,000
|
|
WARRANT—0.1%
|
|
UNITED
STATES—0.1%
|
|
USD
|
22,363
|
California
Resources Corp.
|
|
89,452
|
|
|
|
89,452
|
|
|
|
Total
Warrants—0.1% (cost $—)
|
|
89,452
|
|
SHORT-TERM
INVESTMENT—1.9%
|
|
UNITED
STATES—1.9%
|
|
USD
|
3,791,841
|
State
Street Institutional U.S. Government Money Market Fund, Premier Class, 0.03%(k)
|
|
3,791,841
|
|
|
|
Total
Short-Term Investment—1.9% (cost $3,791,841)
|
|
3,791,841
|
|
|
|
Total
Investments—141.1% (cost $274,272,700)(l)
|
|
286,078,339
|
|
|
|
Liabilities
in Excess of Other Assets—(41.1)%
|
|
(83,336,478
|
)
|
|
|
Net
Assets—100.0%
|
|
$202,741,861
|
|
|
Aberdeen Income Credit Strategies Fund
|
9
|
Portfolio of Investments (unaudited)
(concluded)
As of April 30, 2021
|
(a)
|
Level
3 security. See Note 2(a) of the accompanying Notes to Financial Statements.
|
|
(b)
|
Security
is in default.
|
|
(d)
|
Non-income
producing security.
|
|
(e)
|
Denotes
a security issued under Regulation S or Rule 144A.
|
|
(f)
|
The
maturity date presented for these instruments represents the next call/put date.
|
|
(g)
|
Payment-in-kind.
This is a type of bond that pays interest in additional bonds rather than in cash.
|
|
(h)
|
Perpetual
bond. This is a bond that has no maturity date, is redeemable and pays a steady stream of
interest indefinitely. The maturity date presented for these instruments represents the next
call/put date.
|
|
(i)
|
Variable
Rate Instrument. The rate shown is based on the latest available information as of April 30,
2021. Certain variable rate securities are not based on a published reference rate and spread
but are determined by the issuer or agent and are based on current market conditions. These
securities do not indicate a reference rate and spread in their description.
|
|
(k)
|
Registered
investment company advised by State Street Global Advisors. The rate shown is the 7 day yield
as of April 30, 2021.
|
|
(l)
|
See
accompanying Notes to Financial Statements for tax unrealized appreciation/(depreciation)
of securities.
|
EUR—Euro
Currency
GBP—British
Pound Sterling
SEK—Swedish
Krona
USD—U.S.
Dollar
At
April 30, 2021, the Fund's open forward foreign currency exchange contracts were as follows:
Purchase
Contracts
Settlement Date*
|
Counterparty
|
Amount
Purchased
|
|
Amount
Sold
|
|
Fair
Value
|
|
Unrealized
Appreciation/
(Depreciation)
|
Euro/United
States Dollar
|
|
|
|
|
|
|
|
|
05/27/2021
|
Royal
Bank of Canada (UK)
|
EUR
|
659,000
|
|
USD
|
797,545
|
|
|
$ 792,639
|
|
|
$ (4,906
|
)
|
05/27/2021
|
Royal
Bank of Canada (UK)
|
EUR
|
3,079,000
|
|
USD
|
3,726,215
|
|
3,703,389
|
|
(22,826
|
)
|
05/27/2021
|
UBS
AG
|
EUR
|
1,292,000
|
|
USD
|
1,553,993
|
|
1,554,004
|
|
11
|
|
|
|
|
|
|
|
|
$6,050,032
|
|
|
$(27,721
|
)
|
Sale
Contracts
Settlement Date*
|
Counterparty
|
Amount
Purchased
|
|
Amount
Sold
|
|
Fair
Value
|
|
Unrealized
Appreciation
|
United
States Dollar/British Pound
|
05/27/2021
|
UBS
AG
|
USD
|
66,881,516
|
|
GBP
|
48,072,000
|
|
|
$ 66,392,715
|
|
|
$488,801
|
|
United
States Dollar/Euro
|
05/27/2021
|
Citibank N.A.
|
USD
|
69,288,689
|
|
EUR
|
57,441,000
|
|
|
69,089,437
|
|
|
199,252
|
|
05/27/2021
|
UBS
AG
|
USD
|
392,557
|
|
EUR
|
324,000
|
|
|
389,704
|
|
|
2,853
|
|
United
States Dollar/Swedish Krona
|
05/27/2021
|
UBS
AG
|
USD
|
2,387,954
|
|
SEK
|
20,064,000
|
|
|
2,370,541
|
|
|
17,413
|
|
|
|
|
|
|
|
|
|
|
$138,242,397
|
|
|
$708,319
|
|
* Certain contracts with
different trade dates and like characteristics have been shown net.
See Notes to Financial Statements.
10
|
Aberdeen Income Credit Strategies Fund
|
Statement of Assets and Liabilities
(unaudited)
As of April 30, 2021
Assets
|
Investments,
at value (cost $270,480,859)
|
|
$
|
282,286,498
|
|
Short-term
investments, at value (cost $3,791,841)
|
|
|
3,791,841
|
|
Foreign
currency, at value (cost $1,638,022)
|
|
|
1,633,874
|
|
Interest
and dividends receivable
|
|
|
5,800,792
|
|
Receivable
for investments sold
|
|
|
3,567,715
|
|
Unrealized
appreciation on forward foreign currency exchange contracts
|
|
|
708,330
|
|
Receivable
for reinvestment of common shares
|
|
|
26,119
|
|
Prepaid
expenses
|
|
|
72,351
|
|
Total
assets
|
|
|
297,887,520
|
|
Liabilities
|
|
Bank
loan payable
|
|
|
90,000,000
|
|
Payable
for investments purchased
|
|
|
4,581,195
|
|
Investment
advisory fees payable (Note 3)
|
|
|
277,273
|
|
Administration
fees payable (Note 3)
|
|
|
30,051
|
|
Unrealized
depreciation on forward foreign currency exchange contracts
|
|
|
27,732
|
|
Interest
payable on bank loan
|
|
|
22,437
|
|
Investor
relations fees payable (Note 3)
|
|
|
6,247
|
|
Other
accrued expenses
|
|
|
200,724
|
|
Total
liabilities
|
|
|
95,145,659
|
|
|
|
|
|
|
Net
Assets
|
|
$
|
202,741,861
|
|
Composition
of Net Assets:
|
|
Common
stock (par value $0.001 per share) (Note 5)
|
|
$
|
17,437
|
|
Paid-in
capital in excess of par
|
|
|
256,544,763
|
|
Distributable
accumulated loss
|
|
|
(53,820,339
|
)
|
Net
Assets
|
|
$
|
202,741,861
|
|
Net
asset value per share based on 17,436,741 shares issued and outstanding
|
|
$
|
11.63
|
|
See Notes to Financial Statements.
|
Aberdeen Income Credit Strategies Fund
|
11
|
Statement of Operations (unaudited)
For the Six-Month Period Ended April 30, 2021
Net
Investment Income:
|
Income
|
|
Dividends
and other income
|
|
$
|
254,498
|
|
Interest
income
|
|
|
10,076,191
|
|
Non-cash
income
|
|
|
1,038,005
|
|
Total
Investment Income
|
|
|
11,368,694
|
|
Expenses:
|
|
Investment
advisory fee (Note 3)
|
|
|
1,769,391
|
|
Administration
fee (Note 3)
|
|
|
176,939
|
|
Trustee
fees
|
|
|
113,065
|
|
Independent
auditors' fees and expenses
|
|
|
42,962
|
|
Investor
relations fees and expenses (Note 3)
|
|
|
37,854
|
|
Reports
to shareholders and proxy solicitation
|
|
|
37,262
|
|
Custodian's
fees and expenses
|
|
|
35,110
|
|
Legal
fees and expenses
|
|
|
22,323
|
|
Insurance
expense
|
|
|
15,176
|
|
Transfer
agent's fees and expenses
|
|
|
7,422
|
|
Miscellaneous
|
|
|
13,123
|
|
Total
expenses before reimbursed/waived expenses
|
|
|
2,270,627
|
|
Interest
expense and commitment fee on credit facility (Note 7)
|
|
|
641,904
|
|
Total
operating expenses before reimbursed/waived expenses
|
|
|
2,912,531
|
|
Investment
advisor waiver (Note 3)
|
|
|
(156,712
|
)
|
Net
expenses
|
|
|
2,755,819
|
|
|
|
|
|
|
Net
Investment Income
|
|
|
8,612,875
|
|
Net
Realized/Unrealized Gain/(Loss) from Investments and Foreign Currency Related Transactions:
|
|
Net
realized gain/(loss) from:
|
|
Investments
|
|
|
6,429,970
|
|
Forward
foreign currency exchange contracts
|
|
|
(5,267,047
|
)
|
Foreign
currency transactions
|
|
|
160,577
|
|
|
|
|
1,323,500
|
|
Net
change in unrealized appreciation/(depreciation) on:
|
|
Investment
transactions
|
|
|
27,391,696
|
|
Forward
foreign currency exchange rate contracts
|
|
|
(994,784
|
)
|
Foreign
currency translation
|
|
|
(57,467
|
)
|
|
|
|
26,339,445
|
|
Net
gain from investments and foreign currency transactions
|
|
|
27,662,945
|
|
Net
Increase in Net Assets Resulting from Operations
|
|
$
|
36,275,820
|
|
See Notes to Financial Statements.
12
|
Aberdeen Income Credit Strategies Fund
|
Statements of Changes in Net Assets
|
For
the
Six-Month Period
Ended April 30, 2021
(unaudited)
|
|
For
the
Year Ended
October 31, 2020
|
|
Increase/(Decrease)
in Net Assets
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
Net
investment income
|
|
$ 8,612,875
|
|
|
$ 14,958,061
|
|
Net
realized gain/(loss) from investments, forward foreign currency exchange contracts and foreign currency transactions
|
|
1,323,500
|
|
|
(21,643,121
|
)
|
Net
change in unrealized appreciation/(depreciation) on investments, forward foreign currency exchange contracts and foreign currency
transactions
|
|
26,339,445
|
|
|
2,584,419
|
|
Net
increase/(decrease) in net assets resulting from operations
|
|
36,275,820
|
|
|
(4,100,641
|
)
|
Distributions
to Shareholders From:
|
|
|
|
|
Distributable
earnings
|
|
(10,459,503
|
)
|
|
(12,978,424
|
)
|
Tax
return of capital
|
|
–
|
|
|
(10,903,548
|
)
|
Net
decrease in net assets from distributions
|
|
(10,459,503
|
)
|
|
(23,881,972
|
)
|
Proceeds
from the rights offering resulting in the issuance of 0 and 4,358,024 shares, respectively (net of offering costs of $792,502) (Note
5)
|
|
–
|
|
|
41,914,424
|
|
Reinvestment
of dividends resulting in the issuance of 4,645 and 0 shares of common stock, respectively
|
|
54,307
|
|
|
–
|
|
Change
in net assets from capital transactions
|
|
54,307
|
|
|
41,914,424
|
|
Change
in net assets resulting from operations
|
|
25,870,624
|
|
|
13,931,811
|
|
Net
Assets:
|
|
|
|
|
Beginning
of period
|
|
176,871,237
|
|
|
162,939,426
|
|
End
of period
|
|
$ 202,741,861
|
|
|
$ 176,871,237
|
|
Amounts listed as "–" are $0 or round to $0.
See Notes to Financial Statements.
|
Aberdeen Income Credit Strategies Fund
|
13
|
Statement of Cash Flows (unaudited)
For the Six-Month Period Ended April 30,
2021
Cash
Flows from Operating Activities
|
|
|
|
|
Net
increase in net assets resulting from operations
|
|
$
|
36,275,820
|
|
Adjustments
to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:
|
|
|
|
|
Investments
purchased
|
|
|
(103,189,516
|
)
|
Investments
sold and principal repayments
|
|
|
99,390,286
|
|
Decrease
in short-term investments, excluding foreign government securities
|
|
|
2,786,048
|
|
Net
amortization/accretion of premium (discount)
|
|
|
(467,487
|
)
|
Increase
in receivable for capital shares issued
|
|
|
(26,119
|
)
|
Increase
in interest and dividends receivable
|
|
|
(283,039
|
)
|
Net
change in unrealized (appreciation) depreciation on forward foreign currency exchange contracts
|
|
|
994,784
|
|
Increase
in prepaid expenses
|
|
|
(50,357
|
)
|
Decrease
in interest payable on bank loan
|
|
|
(9,486
|
)
|
Increase
in accrued investment advisory fees payable
|
|
|
18,574
|
|
Decrease
in other accrued expenses
|
|
|
(26,191
|
)
|
Net
change in unrealized depreciation from investments
|
|
|
(27,391,696
|
)
|
Net
change in unrealized appreciation from foreign currency translations
|
|
|
57,467
|
|
Net
realized gain on investments in securities
|
|
|
(6,429,970
|
)
|
Net
cash provided by operating activities
|
|
|
1,649,118
|
|
Cash
Flows from Financing Activities
|
|
|
|
|
Increase
bank loan payable
|
|
|
8,800,000
|
|
Distributions
paid to shareholders
|
|
|
(10,459,503
|
)
|
Proceeds
from reinvestment of dividends
|
|
|
54,370
|
|
Net
cash used in financing activities
|
|
|
(1,605,133
|
)
|
Effect
of exchange rate on cash
|
|
|
(4,101
|
)
|
Net
change in cash
|
|
|
39,884
|
|
Cash
at beginning of Period
|
|
|
1,593,990
|
|
Cash
at end of Period
|
|
$
|
1,633,874
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
Cash
paid for interest and fees on credit facility:
|
|
$
|
1,651,390
|
|
See Notes to Financial Statements.
14
|
Aberdeen
Income Credit Strategies Fund
|
|
Financial Highlights
|
|
For the
Six-Month Period
Ended
April 30, 2021
|
|
For the Fiscal Years Ended October 31,
|
|
|
|
(unaudited)
|
|
2020
|
|
2019
|
|
2018
|
|
2017(a)
|
|
2016
|
|
PER SHARE OPERATING PERFORMANCE(b):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per common share, beginning of period
|
|
$10.15
|
|
$12.46
|
|
$14.08
|
|
$15.25
|
|
$14.63
|
|
$14.91
|
|
Net investment income
|
|
0.49
|
|
0.87
|
|
1.05
|
|
1.55
|
|
1.49
|
|
1.46
|
|
Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions
|
|
1.59
|
|
(1.07
|
)
|
(1.23
|
)
|
(1.28
|
)
|
0.57
|
|
(0.30
|
)
|
Total from investment operations applicable to common shareholders
|
|
2.08
|
|
(0.20
|
)
|
(0.18
|
)
|
0.27
|
|
2.06
|
|
1.16
|
|
Distributions to common shareholders from:
|
Net investment income
|
|
(0.60
|
)
|
(0.77
|
)
|
(1.41
|
)
|
(1.44
|
)
|
(1.44
|
)
|
(1.31
|
)
|
Tax return of capital
|
|
–
|
|
(0.63
|
)
|
(0.03
|
)
|
–
|
|
–
|
|
(0.13
|
)
|
Total distributions
|
|
(0.60
|
)
|
(1.40
|
)
|
(1.44
|
)
|
(1.44
|
)
|
(1.44
|
)
|
(1.44
|
)
|
Capital Share Transactions:
|
Dilutive effect of rights offer (Note 5)
|
|
–
|
|
(0.71
|
)
|
–
|
|
–
|
|
–
|
|
–
|
|
Net asset value per common share, end of period
|
|
$11.63
|
|
$10.15
|
|
$12.46
|
|
$14.08
|
|
$15.25
|
|
$14.63
|
|
Market value, end of period
|
|
$12.52
|
|
$9.18
|
|
$11.33
|
|
$13.09
|
|
$14.62
|
|
$12.60
|
|
Total Investment Return Based on(c):
|
Market value
|
|
43.90%
|
|
(6.16%
|
)
|
(2.48%
|
)
|
(0.75%
|
)
|
28.39%
|
|
8.75%
|
|
Net asset value
|
|
20.89%
|
|
(5.65%
|
)
|
(0.29%
|
)
|
2.34%
|
|
15.34%
|
|
10.86%
|
|
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data:
|
Net assets applicable to common shareholders, end of period (000 omitted)
|
|
$202,742
|
|
$176,871
|
|
$162,939
|
|
$184,028
|
|
$199,375
|
|
$191,323
|
|
Average net assets applicable to common shareholders (000 omitted)
|
|
$197,156
|
|
$181,152
|
|
$167,303
|
|
$195,965
|
|
$198,723
|
|
$175,817
|
|
Net operating expenses, net of fee waivers/recoupments
|
|
2.82%
|
(d)
|
3.06%
|
|
3.89%
|
|
3.49%
|
|
3.15%
|
|
3.04%
|
|
Net operating expenses, excluding fee waivers/recoupments
|
|
2.98%
|
(d)
|
3.24%
|
|
4.05%
|
|
3.55%
|
|
3.13%
|
|
3.06%
|
|
Net operating expenses, net of fee waivers/recoupment, excluding interest expense, commitment fee and loan servicing fees
|
|
2.16%
|
(d)
|
2.15%
|
|
2.27%
|
|
2.24%
|
|
2.26%
|
|
2.33%
|
|
Net investment income
|
|
8.81%
|
(d)
|
8.26%
|
|
8.19%
|
|
10.34%
|
|
9.78%
|
|
10.88%
|
|
Portfolio turnover
|
|
38%
|
(e)
|
97%
|
|
93%
|
|
103%
|
|
95%
|
|
95%
|
|
Senior securities (loan facility) outstanding (000 omitted)
|
|
$90,000
|
|
$81,200
|
|
$72,000
|
|
$83,000
|
|
$83,000
|
|
$83,000
|
|
Asset coverage per $1,000 on revolving credit facility at period end(f)
|
|
$3,253
|
|
$3,178
|
|
$3,263
|
|
$3,217
|
|
$3,402
|
|
$3,305
|
|
|
(a)
|
Beginning
with year ended October 31, 2017, the Fund has been audited by KPMG LLP. Previous years
were audited by different independent registered public accounting firms.
|
|
(b)
|
Based
on average shares outstanding.
|
|
(c)
|
Total
investment return based on market value is calculated assuming that shares of the Fund's
common stock were purchased at the closing market price as of the beginning of the period,
dividends, capital gains and other distributions were reinvested as provided for in the Fund's
dividend reinvestment plan and then sold at the closing market price per share on the last
day of the period. The computation does not reflect any sales commission investors may incur
in purchasing or selling shares of the Fund. The total investment return based on the net
asset value is similarly computed except that the Fund's net asset value is substituted for
the closing market value.
|
|
(d)
|
Annualized.
|
|
(e)
|
Not
annualized.
|
|
(f)
|
Asset
coverage ratio is calculated by dividing net assets plus the amount of any borrowings, for
investment purposes by the amount of the Revolving Credit Facility.
|
Amounts listed as "–" are $0 or round to $0.
See Notes to Financial Statements.
|
Aberdeen
Income Credit Strategies Fund
|
15
|
Notes to Financial Statements (unaudited)
April 30, 2021
1. Organization
Aberdeen Income Credit Strategies Fund (the "Fund") is a Delaware
statutory trust registered under the 1940 Act, as a closed-end management investment company. The Fund is diversified for purposes of
1940 Act. Pursuant to guidance from the Securities and Exchange Commission, the Fund's classification changed from a non-diversified fund
to a diversified fund. As a result of this classification change, the Fund is limited in the proportion of its assets that may be invested
in the securities of a single issuer. The Fund's primary investment objective is to seek a high level of current income, with a secondary
objective of capital appreciation., The Fund commenced operations on January 27, 2011.
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.
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.
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, 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 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.
Long-term debt and other fixed-income securities are valued at the last
quoted or evaluated bid price on the valuation date provided by an independent pricing service provider approved by the Board. 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 Fund's investment adviser 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 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, which has an objective, which is not guaranteed, to maintain a $1.00 per share NAV. Registered investment companies are valued at
their net asset value as reported by such company. Generally, these investment types are categorized as Level 1 investments.
Senior loans are valued using an evaluated quote provided by an independent
pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may
reflect appropriate factors such as ratings, tranche type, industry, company performance, spread, individual trading characteristics,
institutional-size trading in similar groups of securities and other market data.
16
|
Aberdeen
Income Credit Strategies Fund
|
|
Notes to Financial Statements (unaudited)
(continued)
April 30, 2021
Derivative instruments are valued at fair value. Exchange traded futures
are generally Level 1 investments and centrally cleared swaps and forwards 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. Swap 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 they trade closed before the "Valuation
Time"), the
security is valued at fair value as determined by the Fund's Pricing
Committee, taking into account the relevant factors and surrounding circumstances using valuation policies and procedures approved by
the Board. 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 Fund's Pricing Committee may be classified as Level
2 or Level 3 depending on the nature of the inputs. The three-level hierarchy of inputs is summarized below:
Level 1 – quoted prices in active markets for identical investments;
Level 2 – other significant observable inputs
(including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or
Level 3 – significant unobservable inputs (including the Fund's
own assumptions in determining the fair value of investments).
A summary of standard inputs is listed below:
Security
Type
|
|
Standard
Inputs
|
Debt
and other fixed-income securities
|
|
Reported
trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, credit quality, yield, and
maturity.
|
Forward
foreign currency contracts
|
|
Forward
exchange rate quotations.
|
The following is a summary of the inputs used as of April 30, 2021
in valuing the Fund's investments and other financial instruments 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, at Value
|
|
Level 1 – Quoted
Prices ($)
|
|
Level 2 – Other Significant
Observable Inputs ($)
|
|
Level 3 – Significant
Unobservable Inputs ($)
|
|
Total ($)
|
|
Investments in Securities
|
|
Fixed Income Investments
|
|
Bank Loans
|
|
$–
|
|
$2,314,330
|
|
$–
|
|
$2,314,330
|
|
Corporate Bonds
|
|
–
|
|
270,908,281
|
|
–
|
|
270,908,281
|
|
Total Fixed Income Investments
|
|
–
|
|
273,222,611
|
|
–
|
|
273,222,611
|
|
Long-Term Investments
|
|
9,063,887
|
|
–
|
|
–
|
|
9,063,887
|
|
Short-Term Investment
|
|
3,791,841
|
|
–
|
|
–
|
|
3,791,841
|
|
Total Investments
|
|
$12,855,728
|
|
$273,222,611
|
|
$–
|
|
$286,078,339
|
|
Other Financial Instruments
|
|
Forward Foreign Currency Exchange Contracts
|
|
$–
|
|
$708,330
|
|
$–
|
|
$708,330
|
|
Total Assets
|
|
$12,855,728
|
|
$273,930,941
|
|
$0
|
|
$286,786,669
|
|
Liabilities
|
|
Other Financial Instruments
|
|
Forward Foreign Currency Exchange Contracts
|
|
$–
|
|
$(27,732
|
)
|
$–
|
|
$(27,732
|
)
|
Amounts listed as "–" are $0 or round to $0.
|
Aberdeen
Income Credit Strategies Fund
|
17
|
Notes to Financial Statements (unaudited)
(continued)
April 30, 2021
During the six-month period ended April 30, 2021, there were no
significant changes to the fair valuation methodologies. Level 3 investments held, at the beginning, during and at the end of the six-month
period in relation to net assets were not significant (0.0% of total net assets) and accordingly, a reconciliation determined of Level
3 assets for the six-month period ended April 30, 2021 is not presented.
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. 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
|
|
(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 does not isolate that portion of the results of operations arising
from changes in the foreign exchange rates due to the fluctuations in the market prices of the securities held at the end of the reporting
period. Similarly, the Fund isolates the effect of changes in foreign exchange rates from the fluctuations arising from changes in the
market prices of portfolio securities sold during the reporting period.
Net exchange gain/(loss) is realized from sales and maturities
of portfolio securities, sales of foreign currencies, settlement of securities transactions, dividends, interest and foreign withholding
taxes recorded on the Fund's books. Net unrealized foreign exchange appreciation/(depreciation) includes changes in the value of portfolio
securities and other assets and liabilities arising as a result of changes in the exchange rate. The net realized and unrealized foreign
exchange
gain/(loss) shown in the composition of net assets represents foreign
exchange gain/(loss) for book purposes that may not have been recognized for tax purposes.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency
relative to the U.S. Dollar. Generally, when the U.S. Dollar rises in value against foreign currency, the Fund's investments denominated
in that 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. 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 six-month period ended April 30, 2021, the Fund used forward contracts
to hedge its currency exposure.
18
|
Aberdeen
Income Credit Strategies Fund
|
|
Notes
to Financial Statements (unaudited) (continued)
April 30, 2021
While the Fund may enter into forward contracts to seek to
reduce currency exchange rate risks, transactions in such contracts involve certain risks. The Fund could be exposed to risks if the counterparties
to the contracts are unable to meet the terms of their contracts and from unanticipated movements in exchange rates. Thus, while the Fund
may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for the Fund than
if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between the Fund's portfolio holdings or
securities quoted or denominated in a particular currency and forward
contracts entered into by the Fund. Such imperfect correlation may prevent
the Fund from achieving a desired hedge, which will expose the Fund to the risk of foreign exchange loss.
Forward contracts are subject to the risk that a counterparty to such
contracts may default on its obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearing
house, a default on the contract would deprive the Fund of unrealized profits, transaction costs or the benefits of a currency hedge or
force the Fund to cover its purchase or sale commitments, if any, at the market price at the time of the default.
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 April 30, 2021:
|
Asset
Derivatives
|
Liability
Derivatives
|
Derivatives
Not Accounted For as
Hedging Instruments
and Risk Exposure
|
Statement
of Assets and
Liabilities Location
|
Fair
Value
|
Statement
of Assets and
Liabilities Location
|
Fair
Value
|
Forward
foreign currency exchange contracts (foreign exchange risk)
|
Unrealized
appreciation
on forward foreign currency
exchange contracts
|
$708,330
|
Unrealized
depreciation
on forward foreign currency
exchange contracts
|
$27,732
|
Total
|
|
$708,330
|
|
$27,732
|
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 April 30, 2021 to the net amounts
by broker and derivative type, including any collateral received or pledged, is included in the following tables:
|
|
Gross
Amounts Not Offset
in Statement of
Assets & Liabilities
|
|
|
Gross
Amounts Not Offset
in Statement of
Assets and Liabilities
|
Description
|
Gross
Amounts
of Assets
Presented in
Statement of
Financial Position
|
Financial
Instruments
|
Collateral
Received(1)
|
Net
Amount(3)
|
|
Gross
Amounts
of Liabilities
Presented in
Statement of
Financial Position
|
Financial
Instruments
|
Collateral
Pledged(1)
|
Net
Amount(3)
|
|
Assets
|
|
Liabilities
|
Forward
foreign
currency(2)
|
Citibank
N.A.
|
$199,252
|
$–
|
$–
|
$199,252
|
|
$–
|
$–
|
$–
|
$–
|
Royal
Bank of
Canada (UK)
|
–
|
–
|
–
|
–
|
|
4,906
|
–
|
–
|
4,906
|
Royal
Bank of
Canada (UK)
|
–
|
–
|
–
|
–
|
|
22,826
|
–
|
–
|
22,826
|
UBS
AG
|
509,078
|
–
|
–
|
509,078
|
|
–
|
–
|
–
|
–
|
(1)
|
In
some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization.
|
(2)
|
Includes financial instruments which are not subject to
a master netting arrangement across funds, or another similar arrangement.
|
(3)
|
Net amounts represent the net receivable/(payable) that
would be due from/to the counterparty in the event of default. Exposure from financial derivative instruments can only be netted across
transactions governed under the same master netting agreement with the same legal entity.
|
Aberdeen
Income Credit Strategies Fund 19
Notes to Financial
Statements (unaudited) (continued)
April 30, 2021
The effect of derivative instruments on the Statement of Operations for
the six-month period ended April 30, 2021:
|
|
Location
of Gain or (Loss) on
Derivatives
|
|
Realized
Gain
or (Loss) on
Derivatives
|
|
Change
in
Unrealized
Appreciation/
(Depreciation) on
Derivatives
|
Forward
foreign currency
exchange contracts
(foreign exchange risk)
|
|
Realized/Unrealized
Gain/(Loss) from
Investments and Foreign Currency
Transactions
|
|
$(5,267,047
|
)
|
$(994,784)
|
Total
|
|
|
|
$(5,267,047
|
)
|
$(994,784)
|
Information about derivatives reflected as of the date of this report
is generally indicative of the type of activity for the six-month period ended April 30, 2021. The table below summarizes the weighted
average values of derivatives holdings for the Fund during the six-month period ended April 30, 2021.
Derivative
|
|
Average
Notional Value
|
|
Purchase
Forward Foreign Currency Contracts
|
|
$3,910,937
|
|
Sale
Forward Foreign Currency Contracts
|
|
$140,425,890
|
|
The Fund values derivatives at fair value, as described in the Statement
of Operations. Accordingly, the Fund does not follow hedge accounting even for derivatives employed as economic hedges.
e.
Bank Loans:
The Fund may invest in bank loans. Bank loans include floating and fixed-rate
debt obligations. Floating rate loans are debt obligations issued by companies or other entities with floating interest rates that reset
periodically. Bank loans may include, but are not limited to, term loans, delayed funding loans, bridge loans and revolving credit facilities.
Loan interest will primarily take the form of assignments purchased in the primary or secondary market but may include 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 participations 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.
f.
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. Dividend income and corporate actions are recorded generally on the ex-date, except
for certain dividends and corporate actions which may be recorded after the ex-date, as soon as the Fund acquires information regarding
such dividends or corporate actions.
g.
Distributions:
The
Fund intends to make regular monthly distributions of net investment income to holders of Common Shares. The Fund expects to pay
its Common Shareholders annually all or substantially all of its investment company taxable income. In addition, at least annually,
the Fund intends to distribute all or substantially all of its net capital
20
Aberdeen Income Credit Strategies Fund
Notes
to Financial Statements (unaudited) (continued)
April 30, 2021
gains, if any. Distributions from net realized gains
for book purposes may
include short-term capital gains which are ordinary income for tax purposes. Distributions to Common 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 book basis/tax basis differences are either considered temporary or permanent in nature. To the extent these differences
are permanent in nature, such amounts are reclassified within the capital accounts based on their federal income tax treatment.
Temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net
realized capital gains for tax purposes are reported as return of capital.
h.
Federal Income Taxes:
The
Fund intends to continue to qualify as a "regulated investment company" ("RIC") by complying with the provisions available to
certain investment companies, as defined in Subchapter M of the IRC, and to make distributions of net investment income and net
realized capital gains sufficient to relieve the Fund from all federal income taxes. Therefore, no federal income tax provision
is required.
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, 2020 are subject to such review.
i.
Foreign Withholding Tax:
Dividend
and interest income from non-U.S. sources received by the Fund are generally subject to non-U.S. withholding taxes. In addition,
the Fund may be subject to capital gains tax in certain countries in which it invests. The above taxes may be reduced or eliminated
under the terms of applicable U.S. income tax treaties with some of these countries. The Fund accrues such taxes when the related
income is earned.
In
addition, when the Fund sells securities within certain countries in which it invests, the capital gains realized may be subject
to tax. Based on these market requirements and as required under GAAP, the Fund accrues deferred capital gains tax on securities
currently held that have unrealized appreciation within these countries. The amount of deferred capital gains tax accrued is reported
on the Statement of Operations as part of the Net Change in Unrealized Appreciation/Depreciation on Investments.
j.
Cash Flow Information:
The
Fund invests in securities and distributes dividends from net investment income and net realized gains on investment and currency
transactions which are paid in cash or are reinvested at the discretion of shareholders. These activities are reported in the
Statements of Changes in Net Assets and additional information on cash receipts and cash payments is presented in the Statement
of Cash Flows. Cash includes domestic and foreign currency as well as cash in segregated accounts for forward foreign currency
contracts which has been designated as collateral.
k.
Unfunded Loan Commitments:
The Fund may enter into certain credit agreements all or a portion of
which may be unfunded. The Fund is obligated to fund these commitments at the borrower's discretion. These commitments are disclosed in
the accompanying Schedule of Investments. At April 30, 2021 the Fund did not hold any unfunded loan commitments.
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. PIK interest income is reflected as non-cash income on the Statement of Operations.
3.
Agreements and Transactions with Affiliates
a.
Investment Adviser:
Aberdeen
Asset Managers Limited ("AAML" or the "Investment Adviser") serves as investment adviser to the Fund and Aberdeen Standard Investments,
Inc. ("ASII" or the "Sub-Adviser") serves as the sub-adviser, pursuant to an investment advisory agreement and a sub-advisory
agreement, respectively. The Investment Adviser and the Sub-Adviser (collectively, the "Advisers") are indirect wholly-owned subsidiaries
of Standard Life Aberdeen plc.
For its services, AAML receives fees at an annual rate of: (i) 1.25%
of the Fund's average daily Managed Assets. Managed Assets is defined in the investment advisory agreement as total assets of the Fund
(including any assets attributable to money borrowed for investment purposes, including proceeds from (and assets subject to) reverse
repurchase agreements, any credit facility and any issuance of preferred shares or notes) minus the sum of the Fund's accrued liabilities
(other than Fund liabilities incurred for the purpose of leverage). For the six-month
period ended April 30, 2021, AAML earned a gross advisory fee of $1,769,391.
Aberdeen
Income Credit Strategies Fund 21
Notes to Financial
Statements (unaudited) (continued)
April 30, 2021
Effective December 1, 2019, the Adviser has contractually
agreed to further limit total "Other Expenses" (excluding any interest, taxes, brokerage fees, short sale dividend and interest
expenses and non-routine expenses) as a percentage of net assets attributable to Common Shares of the Fund to 0.35% of the average daily
net assets of the Fund. This limit will be in effect at least through October 31, 2024. For the six-month period ended April 30,
2021, AAML waived and assumed a total of $156,712 of the Fund's other expenses. AAML may request and receive reimbursement of the advisory fees waived and other expenses reimbursed
pursuant to the Expense Limitation Agreement as of a date not more than three years after the date when AAML limited the fees or reimbursed
the expenses; provided that the following
requirements are met: the reimbursements do not cause the Fund to exceed the lesser of the applicable
expense limitation in the contract at the time the fees were limited or expenses are paid or the applicable expense limitation in effect
at the time the expenses are being recouped by AAML (the "Reimbursement Requirements").
As of April 30, 2021, to the extent the Reimbursement Requirements
are met, the cumulative potential reimbursements to AAML for the Fund, based on expenses reimbursed by AAML, including adjustments described
above, would be:
Fund
|
|
Amount
Fiscal
Year 2018
(Expires 10/31/21)
|
|
Amount
Fiscal
Year 2019
(Expires 10/31/22)
|
|
Amount
Fiscal
Year 2020
(Expires 10/31/23)
|
|
Amount
Six Months Ended
April 30, 2021
(Expires 4/30/24)
|
|
Total
|
|
|
$120,130
|
|
$268,509
|
|
$335,688
|
|
$156,712
|
|
$881,039
|
b.
Fund Administration:
ASII is the Fund's Administrator, pursuant to an agreement under which
ASII 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 six-month period ended April 30, 2021, ASII earned $176,939 from the Fund for administration
services.
c.
Investor Relations:
Under
the terms of the Investor Relations Services Agreement approved by the Fund's Board on June 12, 2018, ASII provides and pays third
parties to provide investor relations services to the Fund and certain other funds advised by AAML or its affiliates as part of
an Investor Relations Program. Under the Investor Relations Services Agreement, the Fund owes a portion of the fees related to
the Investor Relations Program (the "Fund's Portion"). However, investor relations services fees are limited by ASII 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 ASII.
Pursuant to the terms of the Investor Relations Services
Agreement, ASII (or third parties engaged by ASII), among other things, provides objective and timely information to stockholders
based on publicly available information; provides information efficiently through the use of technology while offering stockholders
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,
publishes white papers, magazine articles and other relevant materials discussing the Fund's investment results, portfolio positioning
and outlook; develops and maintains effective communications with large institutional shareholders; responds to specific shareholder questions;
and reports activities and results to the Board and management detailing insight into general shareholder sentiment.
During the six-month period ended April 30, 2021, the Fund incurred
investor relations fees of approximately $37,854. For the six-month period ended April 30, 2021, ASII did not contribute to the investor
relations fees for the Fund because the Fund's contribution was below 0.05% of the Fund's average weekly net assets on an annual basis.
d.
Purchase/Sale Transactions Between Affiliates:
The Fund is permitted to buy or sell securities with funds that have a common investment adviser (or investment advisers which are affiliates)
under specific procedures which have been approved by the Board. The procedures are designed to satisfy the requirements of Rule 17a-7
of the 1940 Act (“Rule 17a-7”). During the six-month period ended April 30, 2021, the Fund did not engage in any of these
trades.
4. Investment Transactions
Purchases and sales of investment securities (excluding short-term securities)
for the six-month period ended April 30, 2021, were $102,390,295 and $103,012,139, respectively.
5. Capital
The Fund is authorized to issue an unlimited number of common shares
of beneficial interest at par value $0.001 per common share. As of April 30, 2021, there were 17,436,741 shares of common stock issued
and outstanding.
22
Aberdeen Income Credit Strategies Fund
Notes to Financial
Statements (unaudited) (continued)
April 30, 2021
On
October 16, 2019, the Fund commenced a transferable rights offering to shareholders of record on October 16, 2019 ("Rights Offer")
to subscribe for up to an aggregate of 4,358,024 common shares. The Rights Offer expired on November 13, 2019 (expiration date).
Each record date shareholder received one right for each outstanding common share held, which entitled such shareholder to purchase
one new Fund common share for every three rights held. The Rights Offer was over-subscribed. The subscription price on the expiration
date pursuant to the Rights Offer was $10.17 per common share of the Fund, and was calculated based on a formula equal to 90%
of the average of the last reported sales price of a common share of the Fund on the New York Stock Exchange on the expiration
date of the Rights Offer and on each of the four preceding trading days. Rights holders exercised their rights to purchase 4,358,024
common shares. Gross proceeds from the Rights Offer were $44,370,854. The Fund received the proceeds of the Rights Offer minus
the dealer manager fee and other expenses of the Rights Offer totaling $41,914,424.
6.
Open Market Repurchase Program
On June 12, 2018, the Board approved a share repurchase program
("Program") for the Fund. 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 Adviser and subject to market conditions and
investment considerations. Pursuant to the Program, the Fund may repurchase up to 10% of its outstanding common stock in the open market
during any 12-month period. The Fund reports repurchase activity on the Fund's website on a monthly basis. For the six-month period ended
April 30, 2021, the Fund did not repurchase any shares through the Program, which had prevented the Fund from repurchasing shares
for a portion of the reporting period close in time to the Rights Offer.
7.
Revolving Credit Facility
On November 25, 2020, the Fund's senior secured 364-day
revolving credit facility with BNP Paribas was amended to extend the scheduled commitment termination date to November 24, 2021 and
increased the amount of the facility to $90,000,000. Under the terms of the loan facilities and applicable regulations, the Fund is required
to maintain certain asset coverage ratios for the amount of its outstanding borrowings.. The Fund's outstanding balance as of October 31,
2020 was $81,200,000 on the Revolving Credit Facility. During the period between November 9, 2020 and January 14, 2021, the
Fund drew down $8,800,000. The Fund's outstanding balance as of April 30, 2021 was $90,000,000. The average interest rate on the
loan facility was 1.45%. 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. A more detailed description of the Fund's leverage can be found in the Report of the Investment Adviser and
the Notes to Financial Statements. The average balance for the six-month period ended April 30, 2021 was $88,341,436. The interest
expense is accrued on a daily basis and is payable to The BNP Paribas on a monthly basis.
The amounts borrowed from the loan facility may be invested to return
higher rates than the rates in the Fund's portfolio. However, the cost of leverage could exceed the income earned by the Fund on the proceeds
of such leverage. To the extent that the Fund is unable to invest the proceeds from the use of leverage in assets which pay interest at
a rate which exceeds the rate paid on the leverage, the yield on the Fund's common stock will decrease. In addition, in the event of a
general market decline in the value of assets in which the Fund invests, the effect of that decline will be magnified in the Fund because
of the additional assets purchased with the proceeds of the leverage. Non-recurring expenses in connection with the implementation of
the loan facility will reduce the Fund's performance.
The Fund may use leverage to the maximum extent permitted by the 1940
Act, which permits leverage to exceed 33.33% of the Fund's total assets (including the amount obtained through leverage) in certain market
conditions. 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 364 days and is not a perpetual form of
leverage; there can be no assurance that the loan facility will be available for renewal on acceptable terms, if at all.
The credit agreement governing the loan facility includes usual and customary
covenants for this type of transaction. These covenants impose on the Fund asset coverage requirements, Fund composition requirements
and limits on certain investments, such as illiquid investments, which are more stringent than those imposed on the Fund by the Investment
Company Act of 1940. The covenants or guidelines
Aberdeen
Income Credit Strategies Fund 23
Notes to Financial Statements (unaudited)
(continued)
April 30, 2021
could impede the Adviser or Sub-Adviser from fully managing the Fund's
portfolio in accordance with the Fund's investment objective and policies. Furthermore, non-compliance with such covenants or the occurrence
of other events could lead to the cancellation of the loan facility. The covenants also include a requirement that the Fund maintain net
assets of no less than $70,000,000.
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.
c. 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.
d. 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 the current interest rate environment and the effect of potential government fiscal policy initiatives and resulting market reaction
to those initiatives.
e. Risks Associated with Foreign Securities and Currencies:
Investments in securities of foreign issuers carry certain risks not
ordinarily associated with investments in securities of U.S. issuers. These risks include future political and economic developments,
and the possible imposition of exchange controls or other foreign governmental laws and restrictions. In addition, with respect to certain
countries, there is the possibility of expropriation of assets, confiscatory taxation, and political or social instability or diplomatic
developments, which could adversely affect investments in those countries.
Certain countries also may impose substantial restrictions on investments
in their capital markets by foreign entities, including restrictions on investments in issuers of industries deemed sensitive to relevant
national interests. These factors may limit the investment opportunities available and result in a lack of liquidity and high price volatility
with respect to securities of issuers from developing countries. Foreign securities may also be harder to price than U.S. securities.
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 Investment Advisers are unsuccessful.
Investing in the securities of issuers operating in emerging markets
involves a high degree of risk and special considerations not typically associated with investing in the securities of other foreign or
U.S. issuers. Compared to the United States and other developed countries, emerging market countries may have relatively unstable governments,
economies 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 and may be less liquid than securities traded in developed
countries. Securities
24 Aberdeen
Income Credit Strategies Fund
Notes to Financial Statements (unaudited)
(concluded)
April 30, 2021
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.
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.
10. Tax Information
The U.S. federal income tax basis of the Fund's investments (including
derivatives, if applicable) and the net unrealized appreciation as of April 30, 2021, were as follows:
Tax Basis of Investments
|
|
Appreciation
|
|
Depreciation
|
|
Net Unrealized
Appreciation
|
$274,142,593
|
|
$17,714,912
|
|
$(5,779,166)
|
|
$11,935,746
|
11. Recent Accounting Pronouncements
In October 2020, the SEC adopted new regulations governing the use
of derivatives by registered investment companies. Rule 18f-4 will impose limits on the amount of derivatives a fund could enter
into, eliminate the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, and require funds
whose use of derivatives is more than a limited specified exposure to establish and maintain a derivatives risk management program and
appoint a derivatives risk manager. While the new rule became effective February 19, 2021, funds will not be required to fully
comply with the new rule until August 19, 2022. It is not currently clear what impact, if any, the new rule will have on
the availability, liquidity or performance of derivatives. Management is assessing the impact of Rule 18f-4 on the Fund.
12. Subsequent Events
Management has evaluated the need for disclosures and/or adjustments
resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no disclosures or adjustments
were required to the financial statements as of April 30, 2021 other than described below.
On May 10, 2021, the Fund closed on its offering of 1,600,000
shares of 5.25% Series A Perpetual Preferred Shares. The offering, priced at $25 per share, resulted in net proceeds to the Fund
of approximately $38.2 million after payment of underwriting discounts and commissions and estimated offering expenses payable by the
Fund. The Fund applied to list the Preferred Shares on the New York Stock
Exchange ("NYSE") under the ticker symbol "ACP PRA".
The Fund intends to use the net proceeds from the offering to invest in accordance with its investment objective and policies, for general
working capital purposes and/or to pay down outstanding borrowings under its credit facility.
On May 10, 2021, the Fund commenced a transferable rights offering
to shareholders of record on May 20, 2021 (" Rights Offer") to subscribe for up to an aggregate of 5,812,247 common shares.
The Rights Offer expired on June 16, 2021 (expiration date). Each record date shareholder received one right for each outstanding
common share held, which entitled such shareholder to purchase one new Fund common share for every three rights held. The Rights Offer
was oversubscribed. The subscription price on the expiration date pursuant to the Rights Offer was $10.20 per common share of the Fund,
and was calculated based on a formula equal to 92.5% of the average of the last reported sales price of a common share of the Fund on
the New York Stock Exchange on the expiration date of the Rights Offer and on each of the four preceding trading days. Rights holders
exercised their rights to purchase of 5,812,247 common shares. Gross proceeds from the Rights Offer were approximately $60million.
On May 11, 2021 and May 25, 2021, the Fund announced that it
will pay on May 27, 2021 and June 30, 2021 a distribution of $0.10 per share to all shareholders of record as of May 21,
2021 and June 4, 2021, respectively.
On May 10, 2021, the Fund paid down $10,000,000 on the revolving
credit facility leaving the outstanding balance at $80,000,000.
Aberdeen
Income Credit Strategies Fund 25
Supplemental Information (unaudited)
Results of Annual Meeting of Shareholders
The Annual Meeting of Shareholders was held virtually on April 29,
2021. The description of the proposal and number of shares voted at the meeting are as follows:
1. To elect one Class I Trustee to the Board of Trustees:
|
|
Votes For
|
|
Votes Withheld
|
|
John Sievwright
|
|
12,708,571
|
|
|
624,716
|
|
26
Aberdeen Income Credit Strategies Fund
Dividend Reinvestment and Optional
Cash Purchase Plan (unaudited)
The Fund intends to distribute to stockholders 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"), stockholders 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 stockholders elect to receive distributions in cash. Stockholders who elect to receive
distributions in cash will receive such distributions paid by check in U.S. Dollars mailed directly to the stockholder by the Plan Agent,
as dividend paying agent. In the case of stockholders 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 stockholders as
representing the total amount registered in such stockholders' 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 stockholders 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 New York Stock Exchange, 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 New York Stock Exchange 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 a 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 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 stockholder accounts in the Plan
and furnishes written confirmations of all transactions in an account, including information needed by stockholders 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 stockholder'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
Aberdeen
Income Credit Strategies Fund 27
Dividend Reinvestment and Optional
Cash Purchase Plan (unaudited) (concluded)
presented to complete this transaction. Market Order sales may only 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 505000,
Louisville, KY 40233-5000.
28
Aberdeen Income Credit Strategies Fund
Corporate Information
Trustees
P. Gerald Malone, Chairman
Stephen Bird
Nancy Yao Maasbach
John Sievwright
Randolph Takian
Investment Adviser
Aberdeen Asset Managers Limited
Bow Bells House
1 Bread Street
London, United Kingdom
EC4M 9HH
Investment Sub-Adviser
Aberdeen Standard Investments Inc.
1900 Market Street, Suite 200
Philadelphia, PA 19103
Administrator
Aberdeen Standard Investments Inc.
1900 Market Street, Suite 200
Philadelphia, PA 19103
Custodian and Transfer Agent
State Street Bank and Trust Company
1 Lincoln Street
Boston, MA 02111
Transfer Agent
Computershare
P.O. Box 505000
Louisville, KY 40233
Independent Registered Public Accounting Firm
KPMG LLP
1601 Market Street
Philadelphia, PA 19103
Legal Counsel
Dechert LLP
1900 K Street, N.W.
Washington, DC 20006
Investor Relations
Aberdeen Standard Investments Inc.
1900 Market Street, Suite 200
Philadelphia, PA 19103
1-800-522-5465
Investor.Relations@aberdeenstandard.com
Aberdeen Asset Managers Limited
The accompanying financial statements, as of April 30, 2021, were
not audited and accordingly, no opinion is expressed therein.
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 Income Credit Strategies Fund are traded on the NYSE
under the symbol "ACP". Information about the Fund's net asset value and market price is available at www.aberdeenacp.com.
This report, including the financial information herein, is transmitted
to the shareholders of Aberdeen Income Credit Strategies Fund 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.
ACP SEMI-ANNUAL