TORONTO, May 9, 2019 /CNW/ -- Aberdeen Asia-Pacific
Income Investment Company Limited (TSX: FAP) (the
"Company"), a closed-end investment company trading on the Toronto
Stock Exchange, announced today that it will pay a monthly
distribution of CAD 2.25 cents per
ordinary share on May 31, 2019 to all
ordinary shareholders of record as of May
22, 2019 (ex-dividend date May 21,
2019). This month the Company's monthly distribution
was reduced by CAD 1.00 cents per
ordinary share from the prior monthly distribution per share.
The investment objective of the Company is to obtain current
income. The Company may also achieve incidental capital
appreciation. The Company has returned 6.4% annually since
inception, and 7.1% for the 10 years, to March 31, 2019,
respectively1.
The dividend policy of the Company's Board of Directors is to
provide investors with a stable monthly distribution out of net
investment income and realized capital gains supplemented with
paid-in capital as required. The current reduction in distribution
takes into account many factors, including, but not limited to, the
Company's current and expected earnings and the Investment
Manager's (as defined below) economic and market outlook.
For the 12 months to April 30,
2019, the Company has paid total distributions amounting to
CAD 39.00 cents per ordinary
share.
Shareholders with registered addresses in Canada will receive distributions in Canadian
dollars unless they have elected otherwise. Although a
portion of any distribution may be recorded as a return of capital
for financial statement purposes, the full amount of the
distribution (other than a return of capital out of par value, if
any) will be foreign income for Canadian income tax purposes.
The Company's portfolio is managed by Aberdeen Standard Investments
(Asia) Ltd. (the "Investment
Manager"), and it is further advised by Aberdeen Standard
Investments Australia Ltd. and sub-advised by Aberdeen Asset
Managers Ltd. The Company's Administrator is Aberdeen
Standard Investments Inc.
As of March 31, 2019, 74.3% of the
Company's portfolio is invested in bonds rated BBB or higher and,
despite the change in monthly distribution, the Company will
continue to pay a monthly distribution to shareholders at a level
which is competitive with that of the Bloomberg Barclays US
Corporate High Yield Bond Index2. The Investment Manager
believes the Company continues to offer a competitive level of
income by investing in a high quality and diversified portfolio of
securities, currently exposed to more than 25 countries and 9
currencies. As of March 31, 2019, the
largest currency exposure in the portfolio is US Dollar at 37.7%,
followed by the Australian Dollar at 21.2% and a basket of four
Asian currencies totalling 36.8%. The Investment Manager believes
the portfolio offers a differentiated source of income for
investors.
THE INVESTMENT MANAGER'S MARKET OUTLOOK
Today, Asia stands on the right
side of global imbalances. A greater proportion of global GDP has
shifted to Asia over the last two
decades since the Asian Financial Crisis in the late 1990s. Balance
of payments are mostly in surplus, foreign exchange reserves are
large, banking systems reflect the "old-fashioned way", with
deposits in excess of loans, while consumers are savings-rich with
low levels of debt, especially low levels of mortgage and credit
card debt. This contrasts with the considerations faced by the
indebted G8 countries. Countries such as Indonesia, Philippines, South
Korea and China, which had
S&P foreign currency ratings of CCC, BB, BBB+ and BBB+,
respectively, in the early 2000s, today are rated BBB-, BBB, AA and
A+, while the currency ratings of countries such as Italy, France, the UK and even the USA are rated the same or lower in many
cases.
Notwithstanding certain recent headwinds, the fundamentals of
broader emerging market economies have also improved strongly over
the past 30 years. In many cases, authorities have tightened
regulatory and financial controls and adopted orthodox monetary
policies allied to fiscal reform. Emerging market bond issuers have
delivered consistently lower default rates than developed market
peers. The JP Morgan GBI Emerging Market Global Diversified Index,
which tracks local currency sovereign bonds across 19 developing
nations, has an average yield to maturity of 6.1% with an average
credit rating of BBB. That's comfortably higher than the
comparative yield of developed market equivalents. It makes
emerging market debt the only mainstream asset class to offer
investors both strong relative yield and investment grade credit
quality. Brazil and Mexico for example have a sovereign rating of
BB- and A- with 10-year yields of 8.88% and 8.1% respectively.
Policy makers have also focused on improving capital market
conditions, which have seen significant improvements in terms of
the depth, liquidity and sophistication in Asia. This has opened up a wider range of
potential investment opportunities for the Company, such as onshore
access to bonds in China and
India and even some of the
frontier bond markets. It has also meant that global participation
in regional markets has increased, particularly as countries such
as Indonesia and, more recently,
China have joined emerging and/or
developed market bond indices, raising foreign demand but also
pushing down yields.
Today we also find ourselves in a relatively unusual
environment, as global policy makers struggle to stimulate growth
and the percentage of negatively yielding bonds rises once again
towards 20%, while global yields remain suppressed, particularly as
the US Federal Reserve's normalization cycle comes to an earlier
end than previously expected.
In such an environment, the Investment Manager believes that
exposure to Asia's higher quality
debt markets plays an increasingly important role in helping
investors pursue their investment objectives. Bond yields in some
markets like Australia, however,
are now below those of the US. While yields have declined, driven
by the factors discussed above, and will likely continue to remain
lower than historical levels as fundamentals continue to improve,
the level of yields versus developed markets, including US
Treasuries, has widened since the 2008 Global Financial Crisis and
are expected to continue to remain a source of better value.
Information in this press release that is not current or
historical factual information may constitute forward-looking
information within the meaning of securities laws. Such
forward-looking information reflects the Investment Manager's
beliefs, estimates and opinion regarding the Company's future
financial performance, projects and opportunities and market
conditions as at today's date. Implicit in this information,
particularly in respect of future financial performance and
condition of the Company, are factors and assumptions which,
although considered reasonable by the Company at the time of
preparation, may prove to be incorrect. Shareholders are cautioned
that actual results are subject to a number of risks and
uncertainties, including general economic and market factors,
including credit, currency, political and interest-rate risks and
could differ materially from what is currently expected. The
Company has no specific intention of updating any forward-looking
information whether as a result of new information, future events
or otherwise, except as required by law.
Aberdeen Standard Investments ("ASI") is the marketing name in
Canada for the following
affiliated entities: Aberdeen Standard Investments Inc. and
Aberdeen Standard Investments (Canada) Limited. Aberdeen Standard Investments
Inc. is registered as a Portfolio Manager in the Canadian provinces
of Ontario, New Brunswick, and Nova Scotia and as an Investment Fund Manager
in the provinces of Ontario,
Quebec, and Newfoundland and Labrador. Aberdeen
Standard Investments (Canada)
Limited, is registered as a Portfolio Manager and Exempt Market
Dealer in all provinces and territories of Canada as well as an Investment Fund Manager
in the provinces of Ontario,
Quebec, and Newfoundland and Labrador. Both entities are indirect wholly
owned subsidiaries of Standard Life Aberdeen PLC.
Closed-end funds are traded on the secondary market through one
of the stock exchanges. The Company's investment return and
principal value will fluctuate so that an investor's shares may be
worth more or less than the original cost. Shares of closed-end
funds may trade above (a premium) or below (a discount) the net
asset value (NAV) of the Company. There is no assurance that the
Company will achieve its investment objective. Past performance
does not guarantee future results.
Standard & Poor's credit ratings are expressed as letter
grades that range from "AAA" to "D" to communicate the agency's
opinion of relative level of credit risk. Ratings from 'AA' to
'CCC' may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within the major rating categories.
The investment grade category is a rating from AAA to BBB-.
In determining average credit rating, ratings from Moody's,
Standard & Poors, or Fitch will apply. Every security in
the representative account is assigned an average credit
rating. The higher rating will apply for split rated
securities. The average credit quality is a market-weighted
average of all the securities in the representative account.
International investing entails special risk considerations,
including currency fluctuations, lower liquidity, economic and
political risks, and differences in accounting methods; these risks
are generally heightened for emerging market investments.
Concentrating investments in the Asia-Pacific region subjects the Company to
more volatility and greater risk of loss than geographically
diverse funds. Fixed income securities are subject to certain risks
including, but not limited to: interest rate (changes in interest
rates may cause a decline in the market value of an investment),
credit (changes in the financial condition of the issuer, borrower,
counterparty, or underlying collateral), prepayment (debt issuers
may repay or refinance their loans or obligations earlier than
anticipated), and extension (principal repayments may not occur as
quickly as anticipated, causing the expected maturity of a security
to increase).Indexes are unmanaged and have been provided for
comparison purposes only. No fees or expenses are reflected. You
cannot invest directly in an index.
If you wish to receive this information electronically, please
contact Investor.Relations@aberdeenstandard.com
aberdeenfap.com
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 data
quoted. NAV return data includes investment management fees,
custodial charges, bank loan expenses and administrative fees (such
as Director and legal fees) and assumes the reinvestment of all
distributions. The Company is subject to investment risk, including
the possible loss of principal. [Returns for periods less than one
year are not annualized.]
2 Bloomberg Barclays US Corporate High Yield Bond
Index as of 5/8/19, Yield to Worst of : 6.21% with Average Credit
quality: B+
SOURCE Aberdeen Asia-Pacific Income Investment Company
Limited