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Aberdeen
Commonwealth Income
Fund, Inc.
Semi-Annual Report
April 30, 2002
Letter to Shareholders
June 20, 2002
Dear Shareholder,
We present this Semi-Annual Report which covers the activities of Aberdeen
Commonwealth Income Fund, Inc. (the "Fund") for the six months ended April 30,
2002. Included in this report is a review of the Australian, Canadian, New
Zealand, United Kingdom and selected Asian economies and investment markets,
together with an overview of the Fund's investments prepared by the Investment
Manager, Aberdeen Asset Managers (C.I.) Limited.
Change of Name of Fund
Effective July 1, 2002, the new name of the Fund will be Aberdeen Global Income
Fund, Inc. This change is being made in accordance with a rule adopted by the
Securities and Exchange Commission under the Investment Company Act of 1940
regarding fund names. This rule requires funds with names suggesting an
investment focus to adopt a policy to invest at least 80% of the fund's assets
in investments suggested by its name. Since the Fund's principal investment
objective, investment policies and investment restrictions enable the Fund to
invest in global debt securities as well as Commonwealth debt securities, the
Board of Directors determined, at the June 19, 2002 Board meeting, that a change
of the Fund's name would be appropriate.
Fund Investment Policy
In order to comply with the above-described rule adopted by the Securities and
Exchange Commission, the Fund's directors adopted the following investment
policy, at the June 19, 2002 Board meeting:
For as long as the name of the Fund remains Aberdeen Global Income Fund,
Inc., it shall be the policy of the Fund normally to invest at least 80%
of its net assets plus the amount of any borrowings for investment
purposes, in debt securities. This 80% investment policy is a
non-fundamental policy of the Fund and may be changed by the Board of
Directors upon 60 days prior written notice to shareholders.
This policy is consistent with the investment policies of the Fund set forth in
the Fund's prospectus, as further amended by shareholders at the Annual Meeting
of Shareholders on March 26, 1999.
Aberdeen Commonwealth Income Fund, Inc. 1
Letter to Shareholders (continued)
High Credit Quality: 85.9% of Securities Rated or Deemed Equivalent to AA/Aa or
Better
The Fund's high credit quality has been maintained. Over 85.9% of assets are
rated AA/Aa or better, or are considered of equivalent quality by the Investment
Manager. An additional 11.2% is held in A rated securities.
Distributions: 9.0% Annual Cash Distribution Rate
Distributions to common shareholders for the 12 months ended April 30, 2002
totaled 81.0 cents per share. Based on the share price of $8.88 on April 30,
2002, the cash distribution rate over the 12 months then ended was 9.1%. Since
all distributions are paid after deducting applicable withholding taxes, the
effective distribution rate may be higher for those US investors who are able to
claim a tax credit.
On June 19, 2002, the Board of Directors declared a monthly distribution of 6.0
cents per share payable on July 12, 2002 to all shareholders of record as of
June 28, 2002 (ex-dividend date of April 26, 2002).
The Board'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. It is the Board's intention that the monthly
distribution of 6.0 cents per share be maintained for 12 months, having begun
with the February 2002 distribution payment. This policy is subject to regular
review at the Board's quarterly meetings, unless market conditions require an
earlier evaluation. The next review is scheduled to take place in September
2002.
Net Asset Value Performance: 5.6% Per Annum Return Since Inception
The Fund's total return based on Net Asset Value ("NAV") increased by 1.6% over
the six months ended April 30, 2002. Since inception, the Fund's total return
based on NAV has increased by 5.6% per annum to April 30, 2002. The Fund's share
price fell 1.3% over the six months, from $9.00 on October 31, 2001 to $8.88 on
April 30, 2002. The Fund's share price on April 30, 2002 represented a discount
of 8.3% to the NAV per share of $9.69. This represents a narrowing of the
discount to NAV of 9.9% on October 31, 2001.
Implementation of Global Investment Strategy
In March 1999, the Fund's shareholders approved amendments to the Fund's
principal investment objective, investment policies and investment restrictions
to enable the Fund to invest up to 35% of its total assets in Global Debt
Securities. This strategy was proposed to be implemented in two phases. The
first phase involved the immediate investment of up to 20% of the Fund's assets
in Asian debt markets. On September 3, 2001, the
2 Aberdeen Commonwealth Income Fund, Inc.
Letter to Shareholders (concluded)
Board of Directors authorized the Investment Manager, in its discretion, to
implement the second phase of the global investment strategy. This will now
allow the Fund to invest up to 35% of its total assets in Global Debt
Securities, with a view to enhancing yield.
Asian Investments: 6.3% of Total Assets Invested in Asian Debt Securities
As of April 30, 2002, 6.3% of the Fund's total assets were held in Asian debt
securities, a sector that presents attractive opportunities. The Fund's ability
to increase its investment in Asian markets remains constrained by the potential
realization of foreign exchange losses.
Shareholders Elect Class I Directors and Directors to Represent Holders of
Preferred Stock
At the Annual Meeting of Shareholders, Mr. David Lindsay Elsum, Mr. Laurence S.
Freedman, Mr. E. Duff Scott and Sir David Rowe-Ham were elected by the holders
of the Fund's common stock as Class I Directors to serve for a three-year term
expiring at the 2005 Annual Meeting of Shareholders. Dr. Anton E. Schrafl and
Mr. John T. Sheehy were elected by the holders of the Fund's preferred stock for
a one-year term expiring at the 2003 Annual Meeting of Shareholders.
For information about the Fund, including weekly updates of share price, NAV,
and details of recent distributions, contact Aberdeen Asset Management, Investor
Relations, by:
o calling toll free on 1-800-522-5465 or 1-212-968-8800 in the United
States,
o emailing to InvestorRelations@aberdeen-asset.com, or
o visiting the website at www.aberdeen-asset.us
For information about the Aberdeen group, visit the Aberdeen website at
www.aberdeen-asset.com
Yours sincerely,
/s/ Martin J. Gilbert
Martin J. Gilbert
Chairman
All amounts are U.S. dollars unless otherwise stated.
Aberdeen Commonwealth Income Fund, Inc. 3
Your Board's policy is to provide investors with a stable monthly distribution
out of current income, supplemented by realized capital gains and, to the extent
necessary, paid-in capital.
The Fund is subject to U.S. corporate, tax and securities laws. Under U.S. tax
accounting rules, the amount of distributable income for each fiscal period
depends on the actual exchange rates during the entire year between the U.S.
dollar and the currencies in which Fund assets are denominated and on the
aggregate gains and losses realized by the Fund during the entire year.
Therefore the exact amount of distributable income for each fiscal year can only
be determined as at the end of the Fund's fiscal year, October 31. However,
under the U.S. Investment Company Act of 1940, the Fund is required to indicate
the source of each distribution to shareholders. The Fund estimates that
distributions for the fiscal year commencing November 1, 2001, including the
distribution paid on June 7, 2002, are comprised of 16% net investment income
and 84% return of paid-in capital.
This estimated distribution composition may vary from month to month because it
may be materially impacted by future realized gains and losses on securities and
fluctuations in the value of the currencies in which Fund assets are
denominated.
In January 2003, a Form 1099 DIV will be sent to shareholders, which will state
the amount and composition of distributions and provide information with respect
to their appropriate tax treatment.
4 Aberdeen Commonwealth Income Fund, Inc.
Dividend Reinvestment and Cash Purchase Plan
We invite you to participate in the Fund's Dividend Reinvestment and Cash
Purchase Plan ("the Plan") which allows you to automatically reinvest your
distributions in shares of the Fund's common stock at favorable commission
rates. Distributions made under the Plan are taxable to the same extent as are
cash distributions. The Plan also enables you to make additional cash
investments in shares of at least $100 per month. Under this arrangement, the
Plan Agent will purchase shares for you on the stock exchange or otherwise on
the open market on or about the 15th of each month unless shares of the Fund are
trading at a premium, in which case, the Fund will issue additional shares. As a
participant in the Plan, you will have the convenience of:
Automatic reinvestment -- the Plan Agent will automatically reinvest your
distributions, allowing you to gradually grow your holdings in the Fund;
Lower costs -- shares purchased on your behalf under the Plan will be at reduced
brokerage rates. Brokerage on share purchases is currently 2 cents per share;
Convenience -- the Plan Agent will hold your shares in non-certificated form and
will provide a detailed record of your holdings at the end of each distribution
period.
To request a brochure containing information on the Plan, together with an
authorization form, please contact the Plan Agent, State Street Bank & Trust
Company, P.O. Box 8200 Boston, MA 02266 or call toll free on 1-800-426-5523.
Aberdeen Commonwealth Income Fund, Inc. 5
Report of the Investment Manager
Share Price Performance
On April 30, 2002, the Fund's share price was $8.88, which represented a
discount of 8.3% to the NAV of $9.69. At the date of this report, the share
price was $9.90 representing a discount of 4.3% to the NAV of $10.35.
Distributions
The Board reduced the Fund's monthly distribution from 7.0 cents per share to
6.0 cents per share beginning with the distribution paid on February 8, 2002.
The Investment Manager continues its efforts to reallocate the portfolio toward
higher yielding Global Debt Securities, in addition to fixed income securities
denominated in the Commonwealth Currencies. Further, with the expectation for an
improving global economy in mid to late 2002, the Investment Manager anticipates
improvement in the value of non-U.S. Dollar currencies. Together, these factors
may enhance the Fund's net investment income and ability to realize capital
gains. There can, however, be no assurance that the Investment Manager's
expectations will be met.
Auction Market Preferred Stock (AMPS)
The Fund's $30 million of AMPS continued to be well bid at the weekly auctions.
The average interest rate paid was 2.11% over the six months ended April 30,
2002, compared with 1.82% for 30-day U.S. commercial paper over the same period.
These rates have decreased over the period, due to the lowering of interest
rates by the U.S. Federal Reserve in the fourth quarter of 2001. The rates paid
to preferred shareholders have decreased further since April 30, 2002 to a level
of 2.05% as of the date of this report.
On September 3, 2001 the Board of Directors resolved to amend the Fund's
policies with respect to derivatives to enable the Investment Manager to use
interest rate swaps to hedge up to one third of the Fund's AMPS liabilities.
This gives the Investment Manager the flexibility to lock in historically low
U.S. dollar interest rates with respect to up to one third of the Fund's
outstanding AMPS.
A significant type of risk associated with interest rate swaps is the risk that
the counter-party may default or file for bankruptcy, in which case the Fund
would bear the risk of loss of the amount expected to be received under the swap
agreement. There can be no assurance that the Fund will have an interest rate
swap in place at any given time nor can there be any assurance that, if an
interest rate swap is in place, it will be successful in
6 Aberdeen Commonwealth Income Fund, Inc.
Report of the Investment Manager (concluded)
hedging the Fund's interest rate risk with respect to the AMPS. The
implementation of this strategy will be at the discretion of the Investment
Manager.
Over the past year, the impact of AMPS has been positive, largely as a result of
currency movements. The Australian dollar and most Asian currencies strengthened
against the U.S. dollar over the period. Further, with U.S. interest rates at
historic lows, the differential between the cost of AMPS and the rates at which
the Fund invests remains positive. Offsetting these impacts to some extent have
been capital losses as bond yields have risen in line with signs of global
recovery. Overall, the outlook over the medium-term for investment markets and
the portfolio in respect of these factors is considered by the Investment
Manager to be favorable, and therefore AMPS are seen as having the potential to
continue to enhance total shareholder returns in the medium term.
Aberdeen Commonwealth Income Fund, Inc. 7
Portfolio Composition
Geographic Composition
The table below shows the geographic composition of the Fund's total investments
as of April 30, 2002, compared with the previous six and twelve months.
TABLE 1: ABERDEEN COMMONWEALTH INCOME FUND, INC. --
GEOGRAPHIC ASSET ALLOCATION
================================================================================
April 30, 2002 October 31, 2001 April 30, 2001
% % %
--------------------------------------------------------------------------------
Australia 23.3 24.2 23.6
Canada 21.5 31.2 32.8
New Zealand 10.4 3.8 3.7
United Kingdom 30.4 31.3 30.5
United States* 7.4 3.8 3.8
Asia 7.0 5.7 5.6
--------------------------------------------------------------------------------
Total Portfolio 100.0 100.0 100.0
================================================================================
* It is a policy of the Investment Manager to maintain a portion of the
Fund's investments in U.S. short-term securities to cover distributions
and expenses.
Currency Composition
The table below shows the currency composition of the Fund's total investments
as of April 30, 2002, compared with the previous six and twelve months.
TABLE 2: ABERDEEN COMMONWEALTH INCOME FUND, INC. --
CURRENCY ALLOCATION
================================================================================
April 30, 2002 October 31, 2001 April 30, 2001
% % %
--------------------------------------------------------------------------------
Australian Dollar 23.2 24.2 23.6
Canadian Dollar 21.2 31.2 32.8
New Zealand Dollar 11.7 3.8 3.7
British Pound 29.5 31.3 30.5
United States Dollar* 8.1 3.8 3.8
Asia Currencies 6.3 5.7 5.6
--------------------------------------------------------------------------------
Total Portfolio 100.0 100.0 100.0
================================================================================
* Includes Asian Yankee bond investments.
8 Aberdeen Commonwealth Income Fund, Inc.
Portfolio Composition (continued)
Maturity Composition
On April 30, 2002, the average maturity of the Fund's assets was 7.4 years,
compared with 7.8 years on October 31, 2001. The Fund's modified duration was
4.7 years for the six months ended April 30, 2002, compared with 5.0 years on
October 31, 2001. The table below shows the maturity composition of the
Fund's investments as of April 30, 2002:
TABLE 3: ABERDEEN COMMONWEALTH INCOME FUND, INC. --
MATURITY ANALYSIS
================================================================================
Less than 1 year 1-5 years 5-10 years Over 10 years
% % % %
--------------------------------------------------------------------------------
Australia 25.0 25.1 37.4 12.5
Canada 16.6 8.7 17.7 57.0
New Zealand 26.0 57.6 16.4 --
United Kingdom 18.2 23.3 22.1 36.4
United States 100.0 -- -- --
Asia 32.6 48.5 16.5 2.4
--------------------------------------------------------------------------------
Total Portfolio 27.2 23.2 22.3 27.3
================================================================================
Sectoral Composition
The table below shows the sectoral composition of the Fund's total investments
as of April 30, 2002:
TABLE 4: ABERDEEN COMMONWEALTH INCOME FUND, INC. --
SECTORAL COMPOSITION
================================================================================
Sovereign Provincial/ Utilities/
Gov't. State Supranational Corporate Cash or
Bonds Bonds Bonds Bonds Equivalent
% % % % %
--------------------------------------------------------------------------------
Australia 6.6 9.0 1.8 2.2 3.7
Canada 12.7 5.4 0.3 0.5 2.6
New Zealand -- -- 0.8 6.5 3.1
United Kingdom 20.3 -- 2.0 5.3 2.8
United States -- -- -- -- 7.4
Asia 4.1 0.6 0.2 0.3 1.8
--------------------------------------------------------------------------------
Total Portfolio 43.7 15.0 5.1 14.8 21.4
================================================================================
Aberdeen Commonwealth Income Fund, Inc. 9
Portfolio Composition (concluded)
Quality of Investments
On April 30, 2002, 85.9% of the Fund's assets were invested in securities
where either the issue or the issuer was rated at least "AA" by Standard &
Poor's Corporation or "Aa" by Moody's Investors Service, Inc. or, if unrated,
were judged to be of equivalent quality by the Investment Manager. The table
below shows the asset quality of the Fund's portfolio as of April 30, 2002.
TABLE 5: ABERDEEN COMMONWEALTH INCOME FUND, INC. --
ASSET QUALITY
================================================================================
AAA/Aaa AA/Aa A BBB/Baa BB/Ba*
% % % % %
-------------------------------------------------------------------------------
Australia 73.9 25.7 0.4 -- --
Canada 12.1 73.8 14.1 -- --
New Zealand 65.7 9.1 25.2 -- --
United Kingdom 67.7 20.7 11.6 -- --
United States 100.0 -- -- -- --
Asia 21.7 -- 31.7 42.6 4.0
-------------------------------------------------------------------------------
Total Portfolio 56.0 29.9 11.2 2.6 0.3
================================================================================
* Below investment grade.
10 Aberdeen Commonwealth Income Fund, Inc.
Market Review and Outlook
AUSTRALIA
The benchmark 10-year bond yield rose to 6.08% from 5.23% over the six months
ended April 30, 2002. Bank bill yields also rose over the six months, closing at
4.63%. Recent data released has revealed a 1.3% increase in GDP in the fourth
quarter of 2001, well above the market consensus expectation of a 0.8% rise.
Importantly, a further run down in inventories throughout the period is expected
to lead to further solid growth.
The very low level of interest rates means that housing finance for construction
and building approvals could remain at relatively high levels for some time. The
increased leverage of the household sector to any interest rate move is
consistent with the Investment Manager's view that the monetary policy
tightening cycle this year will not need to be an aggressive one. Financial
conditions have already been tightened by a rising Australian dollar and fiscal
policy is also set to be less expansionary in 2002.
The Australian dollar rose over the six months, closing at $0.54.
CANADA
Canada's economy expanded 0.6% in January from December, the biggest one-month
gain in almost two years, and the largest monthly increase since May 2000.
Employment has continued on the strong side, with private sector jobs growth of
over 150,000 in the year to March. Encouraging in the March report were further
gains in manufacturing employment, with total year-to-date growth now at
100,000. As expected, the Bank of Canada eased monetary policy by a further 25
basis point in January, for a cumulative decline of 375 basis points over the
twelve months ended January 23, 2002. This took the interest rate to a low of
2%. The Investment Manager anticipates a 25 basis point tightening in the June
quarter and an interest rate of 3% by the year end.
The Canadian dollar rose over the six months, closing at $0.64.
NEW ZEALAND
After a strong first half of 2001, growth in the NZ economy moderated in the
second half, expanding by a smaller than expected 0.9%. First quarter 2002 data
to date, however, suggests positive momentum has been maintained into the start
of the new year, with dwelling consents, non-residential approvals, car
registrations and business and consumer sentiment all higher. Despite global
uncertainty, the confidence of New Zealand's consumers has remained relatively
robust, providing a solid base for retail spending in the near term. The
aggressive global policy response to the September 2001 terrorist attacks is now
suggesting a sharper rebound for the global economy in 2002 than previously
Aberdeen Commonwealth Income Fund, Inc. 11
Market Review and Outlook (concluded)
expected, and this is providing support to currencies with relatively strong
domestic economic fundamentals like the Australian and New Zealand dollars.
Being a small, open economy, New Zealand will benefit from stronger global
demand for its exports, particularly tourism.
The New Zealand dollar rose slightly over the six months, closing at $0.45.
UNITED KINGDOM
Over the six months UK data, outside manufacturing, continued to hold up well
despite some moderating of consumer activity. House price inflation eased back
very slightly in March but stayed well into double digits. UK inflation eased
back in February, supporting the view expressed by some Bank of England
officials that erratic items significantly contributed to January's high level.
Domestic pressures generally remain benign. The recent average earnings figure
showed wage growth down to an annual 2.7%, reflecting big cuts in bonuses by
financial firms. The Investment Manager maintains a growth forecast for the UK
in 2002 at 2.0%, in line with consensus. Given the improved world economic
outlook growth of 2.7% in 2003 is expected, a little below the consensus level
of 2.9%.
The pound rose over the six months, closing at $1.46.
ASIA
Domestic and Yankee (U.S.$ denominated) bonds
Among domestic bond markets, the Philippines posted strong gains on the back of
an accommodative monetary policy. South Korean bonds sold off on worries the
Bank of Korea may begin to hike interest rates as inflationary pressures emerge.
The yield curve in Thailand steepened as the market began to factor in large
amounts of new issuance of longer-dated bonds. South Korea remained the Fund's
favored market for investment.
Asian Yankees had a strong rally over the six months, with high-yield
outperforming high-grade by a large margin, as investors continued to favor
lower-rated credits in their quest for yield. Moody's upgraded South Korea's
debt ratings by two notches, to A3.
Currencies
The South Korean won depreciated against the U.S. dollar over the six months,
while the Singapore dollar, Philippine peso and Thai baht remained broadly
unchanged. The Malaysian ringgit remained pegged to the U.S. dollar. Strong
gains in local currency terms of most Asian bond markets were, for the most
part, neutralized by the relative strength of the Australian dollar, which
appreciated against most Asian currencies.
12 Aberdeen Commonwealth Income Fund, Inc.
Summary of Key Rates
The following table summarizes the movements of key interest rates and
currencies over the last six and twelve month periods.
================================================================================
April 30, 2002 October 31, 2001 April 30, 2001
--------------------------------------------------------------------------------
Australia
90 day bank bills 4.63% 4.29% 4.89%
10 year bonds 6.08% 5.23% 5.78%
Australian Dollar $ 0.54 $ 0.50 $ 0.51
Canada
90 day bank bills 2.40% 2.35% 4.44%
10 year bonds 5.62% 4.86% 5.79%
Canadian Dollar $ 0.64 $ 0.63 $ 0.65
New Zealand
90 day bank bills 5.73% 4.96% 5.84%
10 year bonds 6.72% 6.18% 6.59%
NZ Dollar $ 0.45 $ 0.41 $ 0.41
United Kingdom
90 day bank bills 4.05% 4.15% 5.58%
10 year bonds 5.19% 4.53% 5.12%
British Pound $ 1.46 $ 1.45 $ 1.43
South Korea
90 day T-bills 4.53% 4.37% 5.85%
10 year bonds 7.23% 6.85% 7.85%
South Korean Won* (Won)1294 (Won)1290 (Won)1315
Thailand
90 day deposits 2.00% 2.50% 2.50%
10 year bonds 5.62% 5.55% 5.05%
Thai Baht* (THB)43.3 (THB)44.7 (THB)45.6
Philippines
90 day T-bills 4.72% 11.07% 10.78%
10 year bonds 13.38% 17.80% 15.81%
Philippines Peso* (PHP)50.6 (PHP)52.0 (PHP)51.4
Malaysia
90 day T-bills 2.73% 2.73% 3.45%
10 year bonds 4.70% 3.30 4.50%
Malaysian Ringgit* (MYR)3.8 (MYR)3.8 (MYR)3.8
Singapore
90 day T-bills 0.78% 0.60% 4.44%
10 year bonds 3.91% 2.97% 4.14%
Singapore Dollar* S$ 1.81 S$ 1.82 S$ 1.82
US$ Yankee Bonds**
South Korea 5.52% 5.54% 7.08%
Malaysia 6.18% 6.57% 7.47%
Philippines 7.79% 10.19% 10.58%
================================================================================
* These currencies are quoted Asian currency per U.S. dollar. The
Australian, Canadian and New Zealand dollars and the British pound are
quoted U.S. dollars per currency.
** Sovereign issues.
Aberdeen Asset Managers (C.I.) Limited
June 2002
Aberdeen Commonwealth Income Fund, Inc. 13
Portfolio of Investments (unaudited)
As of April 30, 2002
Principal
Amount
Local
Currency (a) Value
(000) Description (US$)
--------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 107.0%
AUSTRALIA -- 26.6%
Government Bonds -- 7.9%
A$
Commonwealth of Australia,
3,000 10.00%, 10/15/02 ...................................... 1,650,634
2,000 9.50%, 8/15/03 ........................................ 1,132,994
1,000 10.00%, 10/15/07 ...................................... 640,812
500 8.75%, 8/15/08 ........................................ 307,762
2,500 7.50%, 9/15/09 ........................................ 1,458,050
1,500 6.50%, 5/15/13 ........................................ 823,937
Federal National Mortgage
Association, Series EMTN,
2,000 6.375%, 8/15/07 ....................................... 1,083,009
----------
Total government bonds
(cost US$8,211,062) ................................... 7,097,198
----------
Semi-Government Bonds -- 12.3%
New South Wales -- 3.6%
New South Wales Treasury Corporation,
1,500 7.00%, 4/01/04 ........................................ 828,087
4,200 7.00%, 12/01/10 ....................................... 2,347,420
----------
3,175,507
----------
Queensland -- 4.4%
Queensland Treasury Corporation,
2,000 8.00%, 5/14/03 (Global) ............................... 1,106,112
1,000 8.00%, 9/14/07 (Global) ............................... 585,928
3,000 6.00%, 6/14/11 ........................................ 1,571,228
1,250 6.00%, 6/14/21 ........................................ 629,532
----------
3,892,800
----------
Victoria -- 2.0%
State Electricity Commission of Victoria,
535 10.50%, 5/27/03 ....................................... 303,059
Treasury Corporation of Victoria,
1,000 9.00%, 6/27/05 ........................................ 583,202
1,500 10.25%, 11/15/06 ...................................... 939,516
----------
1,825,777
----------
Western Australia -- 2.3%
A$
Western Australia Treasury Corporation,
3,500 8.00%, 6/15/13 ........................................ 2,097,785
----------
Total Australian semi-government bonds
(cost US$11,942,572) .................................. 10,991,869
----------
Supranational -- 2.4%
Eurofima,
3,500 9.875%, 1/17/07 ....................................... 2,172,296
----------
Total Australian dollar supranational bonds
(cost US$2,129,711) ................................... 2,172,296
----------
Utilities -- 1.2%
Telstra Corp.,
2,000 11.50%, 10/15/02 ...................................... 1,105,259
----------
Total Australian utility bonds
(cost US$1,397,461) ................................... 1,105,259
----------
Corporate Non-Banks -- 2.8%
Brisbane Airport Corporation, Ltd.,
4,000 7.30%, 6/30/10 ........................................ 2,219,872
GE Capital Australia,
600 6.75%, 9/15/07 ........................................ 326,186
----------
Total Australian corporate non-bank bonds
(cost US$2,501,827) ................................... 2,546,058
----------
Total Australian long-term investments
(cost US$26,182,633) .................................. 23,912,680
----------
14 Aberdeen Commonwealth Income Fund, Inc.
Portfolio of Investments (unaudited) (continued)
As of April 30, 2002
Principal
Amount
Local
Currency (a) Value
(000) Description (US$)
--------------------------------------------------------------------------------
CANADA -- 25.2%
Government Bonds -- 16.8%
C$
Canadian Government,
2,500 7.25%, 6/01/07 ........................................... 1,737,530
3,000 10.25%, 3/15/14 .......................................... 2,651,742
4,000 8.00%, 6/01/23 ........................................... 3,171,740
8,000 9.00%, 6/01/25 ........................................... 7,018,360
Canada (Cayman),
750 7.25%, 6/01/08 ........................................... 515,799
-----------
Total Canadian government bonds
(cost US$16,354,692) ..................................... 15,095,171
-----------
Semi-Government Bonds -- 7.3%
British Columbia -- 1.8%
Province of British Columbia,
2,000 9.50%, 1/09/12 ........................................... 1,605,160
-----------
Ontario -- 1.2%
Ontario Hydro,
500 8.50%, 5/26/25 ........................................... 400,182
Province of Ontario,
1,000 8.75%, 4/22/03 ........................................... 669,752
-----------
1,069,934
-----------
Quebec -- 3.8%
Quebec Hydro,
1,500 7.00%, 6/01/04 ........................................... 1,006,541
1,000 2.857%, 1/28/05 (b) ...................................... 641,345
2,000 9.625%, 7/15/22 .......................................... 1,730,607
-----------
3,378,493
-----------
Toronto -- 0.5%
Metropolitan Municipality of Toronto,
750 9.625%, 5/14/02 .......................................... 478,824
-----------
Total Canadian semi-government bonds
(cost US$7,009,899) ...................................... 6,532,411
-----------
Utilities -- 0.4%
C$
Bell Telephone Company of Canada,
500 10.50%, 7/15/09 ............................................. 326,438
-----------
Total Canadian utility bonds
(cost US$428,832) ........................................... 326,438
-----------
Banking and Finance -- 0.7%
Credit Local de France,
1,000 6.75%, 3/21/06 ........................................... 667,479
-----------
Total Canadian banking and finance bonds
(cost US$710,755) ........................................ 667,479
-----------
Total Canadian long-term investments
(cost US$24,504,178) ..................................... 22,621,499
-----------
MALAYSIA -- 0.9%
Semi-Government Bonds -- 0.9%
MYR
Danamodal Nasional Berhad,
3,100 0.00%, 10/21/03 .......................................... 780,466
-----------
Total Malaysia long-term investments
(cost US$758,664) ........................................ 780,466
-----------
NEW ZEALAND -- 11.6%
Government Bonds -- 0.5%
NZ$
Canadian Government,
1,000 6.625%, 10/03/07 ......................................... 439,182
-----------
Total New Zealand government bonds
(cost US$553,653) ........................................ 439,182
-----------
Utilities -- 1.0%
Electricity Corporation of New Zealand Ltd.,
1,000 8.00%, 2/15/03 ........................................... 453,519
TCNZ Finance Limited,
1,000 9.25%, 7/01/02 ........................................... 449,401
-----------
Total New Zealand utility bonds
(cost US$1,150,172) ...................................... 902,920
-----------
Aberdeen Commonwealth Income Fund, Inc. 15
Portfolio of Investments (unaudited) (continued)
As of April 30, 2002
Principal
Amount
Local
Currency (a) Value
(000) Description (US$)
--------------------------------------------------------------------------------
Banking and Finance -- 9.3%
NZ$
Bayerische Hypo- und Vereinsbank AG,
2,000 7.00%, 9/14/05 ........................................... 892,279
Commerzbank AG,
3,500 8.00%, 2/07/05 ........................................... 1,600,939
Landesbank Baden-Wuerttemberg,
6,500 5.25%, 1/06/05 ........................................... 2,800,021
Landesbank Hessen-Thueringen Girozentrale,
4,000 7.00%, 12/17/07 .......................................... 1,779,994
Transpower Finance Ltd.,
500 8.00%, 6/15/05 ........................................... 230,020
WestPac Trust Securities
2,500 6.00%, 4/28/04 ........................................... 1,102,528
-----------
Total New Zealand banking and finance bonds
(cost US$8,271,258) ...................................... 8,405,781
-----------
Corporate Non-Banks -- 0.8%
Housing New Zealand,
1,500 8.00%, 11/15/06 .......................................... 696,663
-----------
Total New Zealand corporate non-bank bonds
(cost US$797,822) ........................................ 696,663
-----------
Total New Zealand long-term investments
(cost US$10,772,905) ..................................... 10,444,546
-----------
PHILIPPINES -- 0.2%
Government Bonds -- 0.2%
PHP
Philippine Government,
7,000 16.50%, 2/25/09 .......................................... 165,081
-----------
Total Philippine long-term investments
(cost US$201,468) ........................................ 165,081
-----------
SINGAPORE -- 0.7%
Government bonds -- 0.5%
SG$
Singapore Government,
100 3.00%, 11/01/02 .......................................... 55,729
50 4.00%, 3/01/07 ........................................... 28,893
700 4.625%, 7/01/10 .......................................... 408,641
-----------
Total Singapore government bonds
(cost US$502,841) ........................................ 493,263
-----------
Utilities -- 0.2%
Singapore Power,
250 4.60%, 9/21/07 ........................................... 145,595
-----------
Total Singapore corporate non-bank bonds
(cost US$143,812) ........................................ 145,595
-----------
Total Singapore long-term investments
(cost US$646,653) ........................................ 638,858
-----------
SOUTH KOREA -- 4.1%
Government Bonds -- 1.8%
US$
EMBARC Ltd. Linked Note
Series 1-9,
2,000 5.523%, 8/18/03 (b)(c) ................................... 1,601,320
-----------
Government Banks -- 2.3%
EMBARC Ltd. Linked Note
Series 1-7,
2,600 4.953%, 6/28/02 (b)(d) ................................... 2,026,882
-----------
Total Korean long-term investments
(cost US$4,404,297) ...................................... 3,628,202
-----------
THAILAND -- 0.6%
Government Bonds -- 0.4%
THB
Thailand Government,
550 8.25%, 10/14/03 (e) ...................................... 13,788
12,000 8.00%, 12/08/06 (e) ...................................... 328,890
-----------
Total Thailand government bonds
(cost US$342,477) ........................................ 342,678
-----------
16 Aberdeen Commonwealth Income Fund, Inc.
Portfolio of Investments (unaudited) (continued)
As of April 30, 2002
Principal
Amount
Local
Currency (a) Value
(000) Description (US$)
--------------------------------------------------------------------------------
Utilities -- 0.1%
THB
Eastern Water Resources Development and Management
Company Limited,
5,000 9.00%, 7/22/04 (e) ....................................... 128,563
-----------
Total Thailand utility bonds
(cost US$127,001) ........................................ 128,563
-----------
Corporate Non-Banks -- 0.1%
Advanced Info Service Public Company Limited,
2,600 6.50%, 3/20/03 (e) ....................................... 61,996
-----------
Total Thailand corporate non-bank bonds
(cost US$68,911) ......................................... 61,996
-----------
Total Thailand long-term investments
(cost US$538,389) ........................................ 533,237
-----------
UNITED KINGDOM -- 36.1%
Government Bonds -- 27.7%
(pound)
United Kingdom Treasury,
1,500 8.00%, 6/10/03 ........................................... 2,267,440
500 5.00%, 6/07/04 ........................................... 731,326
1,250 8.50%, 12/07/05 .......................................... 2,022,127
1,100 7.50%, 12/07/06 .......................................... 1,751,310
500 5.75%, 12/07/09 .......................................... 752,258
1,500 8.00%, 9/27/13 ........................................... 2,690,813
600 8.00%, 12/07/15 .......................................... 1,109,075
3,000 8.00%, 6/07/21 ........................................... 5,874,561
2,350 6.00%, 12/07/28 .......................................... 3,908,429
Republic of Finland,
1,000 8.00%, 4/07/03 ........................................... 1,495,904
1,250 10.125%, 6/22/08 ......................................... 2,225,510
-----------
Total United Kingdom government bonds
(cost US$27,188,019) ..................................... 24,828,753
-----------
Utilities -- 2.6%
British Gas PLC,
1,400 8.875%, 7/08/08 .......................................... 2,335,501
-----------
Total United Kingdom utility bonds
(cost US$2,201,821) ...................................... 2,335,501
-----------
Banking and Finance -- 5.8%
(pound)
Abbey National Treasury Services PLC,
1,250 8.00%, 4/02/03 ........................................... 1,867,984
Barclays Bank PLC,
1,000 9.875%, 5/29/49 .......................................... 1,731,943
Lloyds Bank PLC,
500 7.375%, 3/11/04 .......................................... 752,838
Prudential Finance B.V.,
500 9.375%, 6/04/07 .......................................... 840,523
-----------
Total United Kingdom banking and finance bonds
(cost US$5,046,140) ...................................... 5,193,288
-----------
Total United Kingdom long-term investments
(cost US$34,435,980) ..................................... 32,357,542
-----------
UNITED STATES -- 1.0%
Yankee Bonds -- 1.0%
US$
AES China Generating Company,
100 10.125%, 12/15/06 ........................................ 91,500
Cable & Wireless Optus Finance,
100 8.00%, 6/22/10 ........................................... 111,423
CNOOC Finance Ltd.,
50 6.375%, 3/08/12 .......................................... 49,798
Korea Development Bank
200 5.25%, 11/16/06 .......................................... 200,729
Malaysia Government,
50 7.50%, 7/15/11 ........................................... 53,095
PCCW-HKTC Capital Ltd.,
200 7.75%, 11/15/11 .......................................... 199,991
Republic of Philippines,
50 8.375%, 3/12/09 .......................................... 50,923
50 9.375%, 1/18/17 .......................................... 52,375
100 9.875%, 1/15/19 .......................................... 104,367
-----------
Total United States long-term bonds
(cost US$887,322) ........................................ 914,201
-----------
Total long-term investments
(cost US$103,332,489) .................................... 95,996,312
-----------
Aberdeen Commonwealth Income Fund, Inc. 17
Portfolio of Investments (unaudited) (concluded)
As of April 30, 2002
Principal
Amount
Local
Currency (a) Value
(000) Description (US$)
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 25.0%
Australia -- 5.0%
A$
Banque Nationale de Paris Fixed Deposit,
8,303 4.00%, 5/01/02
(cost US$4,458,545) ...................................... 4,458,544
-----------
Canada -- 3.6%
C$
State Street Bank and Trust Company Time Deposit,
2,572 1.75%, 5/01/02 ........................................... 1,638,530
2,544 1.75%, 5/08/02 ........................................... 1,620,692
-----------
(cost US$3,253,811) ...................................... 3,259,222
-----------
New Zealand -- 2.2%
NZ$
State Street Bank and Trust Company Fixed Deposit
4,338 4.25%, 5/08/02
(cost US$1,941,255) ...................................... 1,941,255
-----------
United Kingdom -- 4.0%
(pound)
State Street Bank and Trust Company Fixed Deposit
2,439 3.875%, 5/01/02
(cost US$3,533,623) ...................................... 3,554,355
-----------
United States -- 10.2%
US$
9,167 Repurchase Agreement, State Street Bank and Trust
Company, 1.77% dated 4/30/02, due 5/01/02 in the
amount of $9,167,451 (collateralized by $8,995,000
U.S. Treasury Notes, 5.625% due 5/15/08; value
$9,354,800)
(cost US$9,167,000) ...................................... 9,167,000
-----------
Total short-term investments
(cost US$22,354,234) ..................................... 22,380,376
-----------
--------------------------------------------------------------------------------
Total Investments -- 132.0% (cost US$125,686,723) 118,376,688
Net unrealized appreciation on forward foreign currency exchange
contracts -- 0.0% (f) 2,586
Other assets in excess of liabilities -- 1.5% 1,404,884
Liquidation value of preferred stock -- (33.5%) (30,000,000)
--------------------------------------------------------------------------------
Net Assets Applicable to Common Shareholders -- 100.0% $ 89,784,158
================================================================================
(a) Portfolio securities are listed based on currency in which they are
traded;
A$--Australian dollar
C$--Canadian dollar
MYR--Malaysian Ringgit
NZ$--New Zealand dollar
PHP--Philippine Peso
SG$--Singapore dollar
THB--Thailand Baht
(pound)--British pound
US$--United States dollar
(b) Coupon changes periodically upon a predetermined schedule. Stated interest
rate in effect at April 30, 2002.
(c) Value of security is linked to the value of Government of Korea 7.70%,
8/16/03 and the movement of the South Korean Won.
(d) Value of security is linked to the value of Korea Development Bank 7.01%,
6/26/02 and the movement of the South Korean Won.
(e) Securities, or a portion thereof, pledged as collateral for forward
currency exchange contracts.
(f) Forward foreign currency exchange contracts entered into as of April 30,
2002 were as follows:
---------------------------------------------------------------------------------------
Purchases
Unrealized
Contracts to Receive In exchange for Settlement Date Value Appreciation
---------------------------------------------------------------------------------------
CNY 828,800 US$ 100,000 07/24/02 US$ 100,064 $ 64
PHP 34,897,600 US$ 680,000 07/29/02 US$ 682,321 2,321
TWD 7,874,630 US$ 227,000 07/25/02 US$ 227,201 201
------
$2,586
======
18 Aberdeen Commonwealth Income Fund, Inc.
Statement of Assets and Liabilities (unaudited)
April 30, 2002
Assets
Investments, at value (cost $125,686,723) ............................ $ 118,376,688
Foreign currency, at value (cost $3,097,639) ......................... 3,123,663
Cash ................................................................. 112,287
Interest receivable .................................................. 2,465,958
Net unrealized appreciation on forward foreign exchange contracts .... 2,586
Prepaid expenses ..................................................... 12,700
-------------
Total assets ...................................................... 124,093,882
-------------
Liabilities
Payable for investments purchased .................................... 3,452,221
Dividends and distributions payable--common stock .................... 555,973
Investment management fee payable .................................... 68,093
Administration fee payable ........................................... 20,952
Accrued expenses and other liabilities ............................... 212,485
-------------
Total liabilities ................................................. 4,309,724
-------------
Preferred Stock
$.001 par value per share and $25,000 liquidation value per share .... 30,000,000
-------------
Net Assets Applicable to Common Shareholders ......................... $ 89,784,158
-------------
Composition of Net Assets Applicable to Common Shareholders
Common stock (par value $.001 per share) ............................. $ 9,266
Paid-in capital in excess of par ..................................... 122,910,705
Distributions in excess of investment income ......................... (5,652,726)
Accumulated net realized losses on investment transactions ........... (283,097)
Net unrealized depreciation on investments ........................... (440,797)
Accumulated net realized foreign exchange losses ..................... (19,963,767)
Net unrealized foreign exchange losses ............................... (6,795,426)
-------------
Net Assets Applicable to Common Shareholders ......................... $ 89,784,158
=============
Net asset value per common share based on (9,266,209 shares
issued and outstanding) ........................................... $ 9.69
=============
Aberdeen Commonwealth Income Fund, Inc. 19
Statement of Operations (unaudited)
For the Six Months Ended April 30, 2002
Net Investment Income
Income
Interest and discount earned (net of foreign withholding
taxes of $66,111) .................................................. $ 3,327,495
-------------
Expenses
Investment management fee ......................................... 385,889
Administration fee ................................................ 118,735
Directors' fees and expenses ...................................... 83,071
Reports to shareholders ........................................... 74,713
Independent accountant's fees and expenses ........................ 57,962
Custodian's fees and expenses ..................................... 48,338
Auction agent's fees and expenses ................................. 38,075
Legal fees and expenses ........................................... 33,517
Investor relations fees and expenses .............................. 30,313
Insurance expense ................................................. 26,481
Registration fees ................................................. 12,397
Transfer agent's fees and expenses ................................ 10,339
Miscellaneous ..................................................... 17,639
-------------
Total operating expenses ........................................ 937,469
-------------
Net investment income ................................................ 2,390,026
-------------
Realized and Unrealized Gains (Losses) on Investments and
Foreign Currencies
Net realized gains on investment transactions ..................... 165,533
Net realized foreign exchange losses .............................. (2,690,175)
-------------
(2,524,642)
-------------
Net change in unrealized depreciation of investments .............. (4,288,434)
Net change in unrealized foreign exchange losses .................. 5,496,367
-------------
1,207,933
-------------
Net loss on investments and foreign currencies ....................... (1,316,709)
-------------
Net increase in Net Assets from Operations ........................... 1,070,317
-------------
Dividends to Shareholders from Net Investment Income
Preferred Stock ................................................... (307,524)
-------------
Net Increase in Net Assets Applicable to Common Shareholders
Resulting from Operations ............................................ $ 765,793
=============
20 Aberdeen Commonwealth Income Fund, Inc.
Statement of Cash Flows (unaudited)
For the Six Months Ended April 30, 2002
Increase (Decrease) in Cash (Including Foreign Currency)
Cash flows provided from operating activities
Interest received ................................................. $ 3,571,389
Operating expenses paid ........................................... (905,277)
Purchases of short-term portfolio investments, net ................ (7,466,944)
Purchases of long-term portfolio investments ...................... (7,831,065)
Proceeds from sales of long-term portfolio investments ............ 18,711,105
Dividends paid to preferred shareholders .......................... (323,400)
Other ............................................................. 29,567
-------------
Net cash provided from operating activities ..................... 5,785,375
-------------
Cash flows used for financing activities
Dividends paid to common shareholders ............................. (3,613,454)
-------------
Net cash used for financing activities .......................... (3,613,454)
-------------
Effect of exchange rate on cash ...................................... 60,423
-------------
Net increase in cash ................................................. 2,232,344
Cash at beginning of period ....................................... 1,003,606
-------------
Cash at end of period ............................................. $ 3,235,950
-------------
Reconciliation of Net Increase in Net Assets Applicable to
Common Shareholders from Operations to Net Cash
(Including Foreign Currency) Provided from Operating Activities
Net increase in net assets applicable to common shareholders
resulting from operations ......................................... $ 765,793
-------------
Decrease in investments ........................................... 231,283
Net realized gains on investments ................................. (165,533)
Net realized foreign exchange losses .............................. 2,690,175
Net change in unrealized appreciation/depreciation on investments . 4,288,434
Net change in unrealized foreign exchange losses .................. (5,496,367)
Increase in interest receivable ................................... (26,514)
Net decrease in other assets ...................................... 29,567
Increase in payable for investments purchased ..................... 3,452,221
Decrease in payable for preferred dividends ....................... (15,876)
Increase in accrued expenses and other liabilities ................ 32,192
-------------
Total adjustments ................................................. 5,019,582
-------------
Net cash provided from operating activities .......................... $ 5,785,375
=============
Aberdeen Commonwealth Income Fund, Inc. 21
Statements of Changes in Net Assets
For the Six
Months Ended For the Year
April 30, 2002 Ended
(unaudited) Oct. 31, 2001
-----------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Applicable to
Common Shareholders
Operations
Net investment income ..................................... $ 2,390,026 $ 6,563,995
Net realized gains (losses) on investment transactions .... 165,533 (420,172)
Net realized foreign exchange losses ...................... (2,690,175) (4,541,817)
Net change in unrealized appreciation/depreciation
of investments .......................................... (4,288,434) 3,076,210
Net change in unrealized foreign exchange gains/losses .... 5,496,367 2,579,210
-------------- --------------
Net Increase in Net Assets from Operations ................ 1,070,317 7,257,426
-------------- --------------
Dividends to shareholders from net investment income
Preferred stock ........................................... (307,524) (1,429,668)
-------------- --------------
Net Increase in Net Assets Applicable to Common
Shareholders Resulting from Operations ....................... 765,793 5,827,758
-------------- --------------
Dividends and distributions to common shareholders from
net investment income .................................. (3,520,792) (3,178,810)
Tax return of capital ..................................... -- (4,604,057)
-------------- --------------
Net decrease in net assets applicable to common shareholders
resulting from dividends and distributions ................ (3,520,792) (7,782,867)
-------------- --------------
Total decrease in net assets applicable to common shareholders (2,754,999) (1,955,109)
Net Assets Applicable to Common Shareholders
Beginning of period .......................................... 92,539,157 94,494,266
-------------- --------------
End of period (including distributions in excess of net
investment income of ($5,652,726) and ($664,511),
respectively) ............................................. $ 89,784,158 $ 92,539,157
============== ==============
22 Aberdeen Commonwealth Income Fund, Inc.
Financial Highlights
For the Six For the Year Ended
Months Ended October 31,
April 30, 2002 --------------------------
(unaudited)(1) 2001 2000
-------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value per common share, beginning of period ........ $ 9.99 $ 10.20 $ 12.14
--------- --------- ---------
Net investment income ........................................ 0.26 0.71 0.81
Net realized and unrealized gains (losses) on investments and
foreign currencies ......................................... (0.15) 0.07 (1.68)
Dividends to preferred shareholders:
From net investment income ................................. (0.03) (0.15) (0.16)
From net realized gains on investment transactions ......... -- -- (0.04)
--------- --------- ---------
Total from investment operations applicable to
common shareholders ...................................... 0.08 0.63 (1.07)
--------- --------- ---------
Dividends and distributions to common shareholders:
From net investment income ................................. (0.38) (0.34) (0.71)
Tax return of Capital ...................................... -- (0.50) --
From net realized gains on investment transactions ......... -- -- (0.16)
--------- --------- ---------
Total dividends and distributions .......................... (0.38) (0.84) (0.87)
--------- --------- ---------
Net asset value per common share, end of period .............. $ 9.69 $ 9.99 $ 10.20
========= ========= =========
Market value, end of period .................................. $ 8.85 $ 9.00 $ 8.8750
========= ========= =========
Number of shares of common stock outstanding (000 omitted) ... 9,266 9,266 9,266
Total investment return based on:(2)
Market value ............................................... 3.46% 11.20% (6.11)%
Net asset value ............................................ 1.64% 7.40% (7.78)%
Ratio to Average Net Assets Applicable to Common
Shareholders(3)/Supplementary Data:
Net assets of common shareholders, end of period (000 omitted) $ 89,784 $ 92,539 $ 94,494
Average net assets of common shareholders (000 omitted) ...... 89,432 93,987 105,657
Operating expenses ........................................... 2.10% 2.11% 2.02%
Net investment income(3) ..................................... 4.66% 5.46% 5.39%
Portfolio turnover ........................................... 11% 17% 29%
Senior securities (preferred stock) outstanding (000 omitted) $ 30,000 $ 30,000 $ 30,000
Asset coverage on preferred stock at year end ................ 399% 408% 415%
------------------------------------------------------------------------------------------------------------
(1) As required, effective November 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities for financial
statement reporting purposes only. The effect of this change for the six
months ended April 30, 2002 was to decrease net investment income per
share by $0.05, decrease net realized and unrealized loss on investments
and foreign exchange losses by $0.05 and decrease the ratio of net
investment income to average net asset from 5.71% to 4.66% based on common
shareholders. Per share, ratios and supplemental data for periods prior to
November 1, 2001 have not been restated to reflect this change in
presentation.
(2) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Dividends and distributions, if any, are assumed
for the purposes of this calculation to be reinvested at prices obtained
under the Fund's dividend reinvestment plan. Total investment return does
not reflect brokerage commissions. Generally, total investment return
based on net asset value will be higher than total investment return based
on market value in years where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from
the beginning to the end of such years. Conversely, total investment
return based on net asset value will be lower than total investment return
based on market value in periods where there is a decrease in the discount
or an increase in the premium of the market value to the net asset value
from the beginning to the end of such years.
(3) Ratios are calculated on the basis of income and expenses applicable to
both the common and preferred shares relative to the average net assets of
common shareholders. Ratio of net investment income before preferred stock
dividends to average net assets of common shareholders is 5.34%, 6.98%,
7.12%, 6.76%, 7.50%, and 8.10%, respectively.
Aberdeen Commonwealth Income Fund, Inc. 23
Financial Highlights (concluded)
For the Year Ended
October 31,
-----------------------------------------
1999 1998 1997
------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value per common share, beginning of period ........ $ 13.07 $ 13.94 $ 14.32
--------- --------- ---------
Net investment income ........................................ 0.87 0.99 1.14
Net realized and unrealized gains (losses) on investments and
foreign currencies ......................................... (0.70) (0.73) (0.34)
Dividends to preferred shareholders:
From net investment income ................................. (0.11) (0.14) (0.17)
From net realized gains on investment transactions ......... (0.04) (0.04) --
--------- --------- ---------
Total from investment operations applicable to
common shareholders ...................................... 0.02 0.08 0.63
--------- --------- ---------
Dividends and distributions to common shareholders:
From net investment income ................................. (0.62) (0.87) (0.99)
Tax return of Capital ...................................... -- -- --
From net realized gains on investment transactions ......... (0.33) (0.08) (0.02)
--------- --------- ---------
Total dividends and distributions .......................... (0.95) (0.95) (1.01)
--------- --------- ---------
Net asset value per common share, end of period .............. $ 12.14 $ 13.07 $ 13.94
========= ========= =========
Market value, end of period .................................. $ 10.375 $ 10.8125 $ 12.4375
========= ========= =========
Number of shares of common stock outstanding (000 omitted) ... 9,266 9,266 9,266
Total investment return based on:(2)
Market value ............................................... 4.89% (5.59)% 13.78%
Net asset value ............................................ 1.53% 1.82% 5.76%
Ratio to Average Net Assets Applicable to Common
Shareholders(3)/Supplementary Data:
Net assets of common shareholders, end of period (000 omitted) $ 112,504 $ 121,096 $ 129,158
Average net assets of common shareholders (000 omitted) ...... 119,257 122,266 130,125
Operating expenses ........................................... 1.95% 1.70% 1.63%
Net investment income(3) ..................................... 5.53% 6.17% 6.88%
Portfolio turnover ........................................... 40% 36% 24%
Senior securities (preferred stock) outstanding (000 omitted) $ 30,000 $ 30,000 $ 30,000
Asset coverage on preferred stock at year end ................ 475% 504% 530%
------------------------------------------------------------------------------------------------------------
(1) As required, effective November 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities for financial
statement reporting purposes only. The effect of this change for the six
months ended April 30, 2002 was to decrease net investment income per
share by $0.05, decrease net realized and unrealized loss on investments
and foreign exchange losses by $0.05 and decrease the ratio of net
investment income to average net asset from 5.71% to 4.66% based on common
shareholders. Per share, ratios and supplemental data for periods prior to
November 1, 2001 have not been restated to reflect this change in
presentation.
(2) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Dividends and distributions, if any, are assumed
for the purposes of this calculation to be reinvested at prices obtained
under the Fund's dividend reinvestment plan. Total investment return does
not reflect brokerage commissions. Generally, total investment return
based on net asset value will be higher than total investment return based
on market value in years where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from
the beginning to the end of such years. Conversely, total investment
return based on net asset value will be lower than total investment return
based on market value in periods where there is a decrease in the discount
or an increase in the premium of the market value to the net asset value
from the beginning to the end of such years.
(3) Ratios are calculated on the basis of income and expenses applicable to
both the common and preferred shares relative to the average net assets of
common shareholders. Ratio of net investment income before preferred stock
dividends to average net assets of common shareholders is 5.34%, 6.98%,
7.12%, 6.76%, 7.50%, and 8.10%, respectively.
24 Aberdeen Commonwealth Income Fund, Inc.
Notes to Financial Statements
Note 1. Investment Objectives
Aberdeen Commonwealth Income Fund, Inc. (the "Fund") was incorporated in
Maryland on June 28, 1991, as a closed-end, non-diversified investment company.
The Fund's principal investment objective is to provide high current income by
investing primarily in fixed-income securities denominated in Commonwealth
Currencies. As a secondary investment objective, the Fund seeks capital
appreciation, but only when consistent with its principal investment objective.
The Fund will seek to achieve its investment objective through investment in
securities denominated in the Commonwealth Currencies and in Global Debt
Securities. The ability of issuers of debt securities held by the Fund to meet
their obligations may be affected by economic developments in a specific
industry, country or region.
Note 2. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Basis of Presentation: The financial statements of the Fund are prepared in
accordance with accounting principles generally accepted in the United States of
America using the United States dollar as both the functional and reporting
currency. However, the Commonwealth Currencies (excluding New Zealand) are the
functional currencies for Federal tax purposes (see Taxes below).
Foreign Currency Translation: Foreign currency amounts are translated into
United States dollars on the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing rates of exchange as reported by a major bank;
(ii) purchases and sales of investment securities, income and expenses--at
the rates of exchange prevailing on the respective dates of such
transactions.
The Fund isolates that portion of the results of operations arising as a result
of changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of the securities held at fiscal period end.
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 fiscal year.
Net realized foreign exchange losses includes realized foreign exchange gains
and losses from sales and maturities of portfolio securities, sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the amounts of
interest, discount and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar
Aberdeen Commonwealth Income Fund, Inc. 25
Notes to Financial Statements (continued)
equivalent amounts actually received or paid. Net unrealized foreign exchange
losses include changes in the value of portfolio securities and other assets and
liabilities arising as a result of changes in the exchange rate. Accumulated
realized and unrealized foreign exchange losses shown in the composition of net
assets represent foreign exchange losses for book purposes that have not yet
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.
The exchange rates of the Commonwealth Currencies utilized by the Fund at April
30, 2002 were US$.5370 to A$1.00, US$0.6371 to C$1.00, US$0.4475 to NZ$1.00,
US$1.4573 to (pound)1.00.
Security Valuation: Investments are stated at value. Investments for which
market quotations are readily available are valued at the last trade price on or
within one local business day of the date of determination as obtained from a
pricing source. If no such trade price is available, such investments are valued
at the quoted bid price or the mean between the quoted bid and asked price on
the date of determination as obtained from a pricing source. Securities for
which market quotations are not readily available are valued at fair value in
good faith using methods determined by or under the direction of the Fund's
Board of Directors.
Securities purchased with a maturity of less than 60 days are valued at
amortized cost. Securities purchased with a maturity of greater than 60 days are
valued at current market quotations until the 60th day prior to maturity. At
that time, the value of the security on the 61st day prior to maturity is
amortized on a straight-line basis to value the security for the remaining 60
days.
Repurchase Agreements: In connection with transactions in repurchase agreements
with U.S. financial institutions, it is the Fund's policy that its
custodian/counterparty segregates the underlying collateral securities, the
value of which exceeds the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the collateral is valued on a daily basis to determine
its adequacy. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or limited.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized
26 Aberdeen Commonwealth Income Fund, Inc.
Notes to Financial Statements (continued)
and unrealized gains and losses from security and currency transactions are
calculated on the identified cost basis. Interest income is recorded on an
accrual basis. Discounts on securities purchased are accreted on an effective
yield basis over the estimated lives of the respective securities. Expenses are
accrued on a daily basis.
Change in Accounting Principles:
As required, effective November 1, 2001, the Fund has adopted the provisions of
the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began
amortizing premium on debt securities for financial statement reporting purposes
only. This change has no impact on the net asset value of the Fund. Prior to
November 1, 2001, the Fund did not amortize premiums on debt securities.
The Fund determined that the adoption of premium amortization policy resulted in
a cumulative reduction of $3,549,925 in the recorded cost of investments (but
not their market value) and a corresponding $3,549,925 increase in net
unrealized appreciation on investments and foreign exchange losses, based on
investments owned by the Fund on November 1, 2001.
The effect of this change for the six-month period ended April 30, 2002, was to
decrease net investment income by $472,412, decrease net unrealized
appreciation/depreciation on investments and foreign exchange losses by $572,260
and increase net realized gains by $1,044,672. Because the Fund determines its
required distributions under Federal income tax laws, adoption of this principle
will not affect the amount or composition of distributions paid to shareholders.
The statements of changes in net assets and financial highlights for prior
periods have not been restated to reflect the change in accounting principle.
Derivative Financial Instruments: The Fund is authorized to use derivatives to
manage both currency and interest rate risk for global debt securities. With
respect to investments denominated in Commonwealth currencies, derivatives can
only be used to manage interest rate risk. Losses may arise due to changes in
the value of the contract if the counterparty does not perform under the
contract.
Forward Currency Contracts: A forward currency 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. The foreign currency contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the forward currency contract is closed, the
Fund records a realized gain or
Aberdeen Commonwealth Income Fund, Inc. 27
Notes to Financial Statements (continued)
loss equal to the difference between the value at the time it was opened and the
value at the time it was closed.
Financial futures contracts: A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future date. Upon
entering into a contract, the Fund deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed. As
of April 30, 2002, there were no open futures contracts.
Options: When the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market to reflect the current market
value of the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from (or added to)
the proceeds of the security sold. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the extent the
cost of the closing transaction exceeds the premium paid or received). As of
April 30, 2002, there were no open option contracts.
Dividends: Dividends and distributions to common shareholders are recorded on
the ex-dividend date. These are based upon net investment income and capital and
currency gains determined in accordance with income tax regulations which may
differ from accounting principles generally accepted in the United States of
America. These differences are primarily due to differing treatments for foreign
currencies and loss deferrals. Dividends and distributions to preferred
shareholders are accrued on a daily basis and are determined as described in
Note 6.
Taxes: For Federal income and excise tax purposes, substantially all of the
Fund's transactions are accounted for using the functional currencies.
Accordingly, only realized currency gains and losses resulting from the
repatriation of any of the Commonwealth Currencies into U.S. dollars or another
Commonwealth Currency and realized currency gains and
28 Aberdeen Commonwealth Income Fund, Inc.
Notes to Financial Statements (continued)
losses on non-Commonwealth currencies are recognized for tax purposes.
No provision has been made for United States of America Federal income taxes
because it is the Fund's policy to meet the requirements of the United States of
America Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income to shareholders. Under the
applicable foreign tax law, a withholding tax may be imposed on interest and
discounts earned at various rates.
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.
Use of Estimates: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Note 3. Agreements
The Fund has agreements with Aberdeen Asset Managers (C.I.) Limited (the
"Investment Manager"), Aberdeen Asset Management Limited (the "Investment
Adviser"), and Princeton Administrators, L.P. (the "Administrator"). The
Investment Manager and the Investment Adviser are wholly-owned subsidiaries of
Aberdeen Asset Management Plc. The Investment Manager has entered into an
agreement with CIBC World Markets, Inc. (the "Consultant").
The Investment Manager makes investment decisions on behalf of the Fund on the
basis of recommendations and information furnished to it by the Investment
Adviser and the Consultant, including the selection of and the placement of
orders with brokers and dealers to execute portfolio transactions on behalf of
the Fund.
The management agreement provides the Investment Manager with a fee, computed
weekly and payable monthly, at the following annual rates: 0.65% of the Fund's
average weekly net assets up to $200 million, 0.60% of such assets between $200
million and $500 million and 0.55% of such assets in excess of $500 million. The
administration agreement provides the Administrator with a fee computed and
payable monthly at
Aberdeen Commonwealth Income Fund, Inc. 29
Notes to Financial Statements (continued)
the annual rate of 0.20% of the Fund's average weekly net assets, subject to a
minimum annual payment of $150,000 ($12,500 per month). The Investment Manager
pays fees to the Investment Adviser and the Consultant for their services
rendered.
The Investment Manager informed the Fund that it paid $149,290 to the Investment
Adviser and $6,000 to the Consultant during the six months ended April 30, 2002.
Effective March 1, 2000, the Fund entered into an agreement with EquitiLink USA,
Inc. (doing business under the name Aberdeen Asset Management ("AAM"), an
affiliate, to provide investor relation services. This agreement provides AAM
with a monthly retainer of $4,000 plus out of pocket expenses. For the six
months ended April 30, 2002, the Fund paid AAM $27,328.
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended April 30, 2002 aggregated $11,283,286 and $18,711,105,
respectively.
The United States of America federal income tax basis of the Fund's investments
at April 30, 2002 was $121,687,808 and accordingly, net unrealized depreciation
for United States federal income tax purposes was $3,311,119 (gross unrealized
appreciation -- $1,179,921, gross unrealized depreciation -- $4,491,041.)
For federal income tax purposes, the Fund had a capital loss carryforward as of
October 31, 2001 of approximately $428,662 which expires in 2009. Accordingly,
no capital gains distributions are expected to be paid to shareholders until
future net gains have been realized in excess of such carryforward.
Note 5. Common Stock
There are 300 million shares of $.001 par value common stock authorized and
9,266,209 shares outstanding at April 30, 2002.
On March 1, 2001, the Board of Directors approved a stock repurchase program.
The stock repurchase program allows the Fund to repurchase up to 10% of its
outstanding common stock in the open market during any 12-month period, if and
when the discount to net asset value is at least 10%. Through April 30, 2002,
there have been no share repurchases through this program.
Note 6. Preferred Stock
There are 100 million shares of $.001 par value of Auction Market Preferred
Stock ("Preferred Stock") authorized. The preferred shares have rights as
determined by the Board of Directors. The 1,200 shares of Preferred Stock
outstanding
30 Aberdeen Commonwealth Income Fund, Inc.
Notes to Financial Statements (concluded)
consist of one series, W-7. The Preferred Stock has a liquidation value of
$25,000 per share plus any accumulated but unpaid dividends whether or not
declared.
Dividends on the Preferred Stock are cumulative at a rate typically reset every
seven days based on the results of an auction. Dividend rates ranged from 1.87%
to 2.70% during the six months ended April 30, 2002. Under the Investment
Company Act of 1940, the Fund may not declare dividends or make other
distributions on shares of common stock or purchase any such shares if, at the
time of the declaration, distribution or purchase, asset coverage with respect
to the outstanding Preferred Stock would be less than 200%.
The Preferred Stock is redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at $25,000 per share plus any accumulated but
unpaid dividends. The Preferred Stock is also subject to mandatory redemption at
$25,000 per share plus any accumulated but unpaid dividends, whether or not
declared, if certain requirements relating to the composition of the assets and
liabilities of the Fund as set forth in the Articles of Incorporation are not
satisfied.
The holders of Preferred Stock have voting rights equal to the holders of common
stock (one vote per share) and will vote together with holders of shares of
common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Fund's directors.
A recent Securities and Exchange Commission staff announcement, Emerging Issues
Task Force Discussion ("EITF D"-98), Classification and Measurement of
Redeemable Securities, was issued providing new guidance related to the
presentation of Preferred Shares in the financial statements. To conform with
this guidance, the Fund has reclassified its Preferred Stock outside of net
assets in the Statement of Assets and Liabilities and restated its Statement of
Changes in Net Assets to reflect only net assets applicable to common
shareholders.
Note 7. Subsequent Dividends
Subsequent to April 30, 2002, the Board of Directors of the Fund declared
distributions of $0.06 per common share payable on June 7, 2002 and July 12,
2002 to common shareholders of record on May 31, 2002 and June 28, 2002.
Subsequent to April 30, 2002, dividends and distributions declared and paid on
preferred shares totaled approximately $90,912 for the outstanding preferred
share series through June 20, 2002.
Aberdeen Commonwealth Income Fund, Inc. 31
Supplemental Proxy Information (unaudited)
The Annual Meeting of Shareholders of Aberdeen Commonwealth Income Fund, Inc.
was held on March 21, 2002 at the offices of Prudential Securities Incorporated,
One Seaport Plaza, New York, New York. The description of each proposal and
number of shares voted at the meeting are as follows:
---------------------------------------------------------------------------------
Votes For Votes Withheld
---------------------------------------------------------------------------------
1. To elect four directors to serve as Class I
directors for a three-year term expiring in 2005:
David L. Elsum 8,461,524 188,277
Laurence S. Freedman 8,462,198 187,603
E. Duff Scott 8,461,524 188,277
Sir David Rowe-Ham 8,461,524 188,277
---------------------------------------------------------------------------------
Votes For Votes Withheld
---------------------------------------------------------------------------------
2. To elect two directors to represent the interests
of the holders of the preferred stock for the
ensuing year:
Dr. Anton E. Schrafl 1146 2
John T. Sheehy 1146 2
---------------------------------------------------------------------------------
Directors whose term of office continued beyond this meeting are as follows:
Martin J. Gilbert, Neville J. Miles, William J. Potter, Peter D. Sacks, Warren
C. Smith and Hugh Young.
32 Aberdeen Commonwealth Income Fund, Inc.
Directors
Martin J. Gilbert, Chairman
David L. Elsum
Laurence S. Freedman
Neville J. Miles
William J. Potter
Sir David Rowe-Ham
Peter D. Sacks
Anton E. Schrafl
E. Duff Scott
John T. Sheehy
Warren C. Smith
Hugh Young
Officers
Hugh Young, President
Michael Karagianis, Vice President
Christian Pittard, Treasurer and Assistant Secretary
Roy M. Randall, Secretary
James Blair, Assistant Vice President
Beverley Hendry, Assistant Treasurer
Timothy Sullivan, Assistant Treasurer
Simon Bignell, Assistant Treasurer
Allan S. Mostoff, Assistant Secretary
Margaret A. Bancroft, Assistant Secretary
Sander M. Bieber, Assistant Secretary
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase, from time to time, shares of
its common stock in the open market.
[RECYCLED LOGO] Printed on post-consumer recycled paper
Aberdeen Commonwealth Income Fund, Inc. 33
Corporate Information
Investment Manager Aberdeen Asset Managers (C.I.) Limited
P.O. Box 578, 17 Bond Street
St. Helier, Jersey JE45XB
Channel Islands
Investment Advisor Aberdeen Asset Management Limited
Level 6, 201 Kent Street
Sydney, NSW 2000, Australia
Consultant CIBC World Markets, Inc.
BCE Place, Canada Trust Tower
P.O. Box 500
Toronto, Ontario, M5J 2S8
Canada
Administrator Princeton Administrators, L.P.
P.O. Box 9095
Princeton, New Jersey 08543-9095
Custodian & Transfer Agent State Street Bank and Trust Company
1 Heritage Drive
North Quincy, Massachusetts 02171
Auction Agent Deutsche Bank
Four Albany Street
New York, New York 10006
Independent Accountants PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
Legal Counsel Dechert
1775 Eye Street, N.W.
Washington, DC 20006
Stikeman Elliott
Level 40 Chifley Tower
2 Chifley Square
Sydney, NSW 2000, Australia
Investor Relations Aberdeen Asset Management
45 Broadway, 31st Floor
New York, New York 10006
1-800-522-5465 or 1-212-968-8800
InvestorRelations@aberdeen-asset.com
[LOGO]
Aberdeen
ASSET MANAGERS
Aberdeen Asset Managers (C.I.) Limited
The common shares of Aberdeen Commonwealth Income Fund, Inc. are traded on the
New York Stock Exchange under the symbol "FCO." Information about the Fund's net
asset value and market price is published weekly in Barron's and in the Monday
edition of The Wall Street Journal.
This report, including the financial information herein, is transmitted to the
shareholders of Aberdeen Commonwealth Income Fund, Inc. for their general
information only. It does not have regard to the specific investment objectives,
financial situation and the particular needs of any specific person. Past
performance is no guarantee of future returns.
[GRAPHIC]
Invests primarily in global fixed-income securities