UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS

OF REGISTERED MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number:		811-04438
Exact name of registrant as specified in charter:		Aberdeen Australia Equity Fund, Inc.
Address of principal executive offices:		1735 Market Street, 32nd Floor
		Philadelphia, PA 19103
Name and address of agent for service:		Ms. Andrea Melia
		Aberdeen Asset Management Inc.
		1735 Market Street 32nd Floor
		Philadelphia, PA 19103
Registrant’s telephone number, including area code:		800-522-5465
Date of fiscal year end:		October 31
Date of reporting period:		July 31, 2016

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Item 1 – Schedule of Investments – The Schedule of Investments for the three-month period ended July 31, 2016 is filed herewith.

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Portfolio of Investments (unaudited)

As of July 31, 2016

 

Shares				Description		Value (US$)
	LONG-TERM INVESTMENTS - 96.9%(a)
	COMMON STOCKS - 96.9%
	BANKS - 14.6%
	244,200			Australia & New Zealand Banking Group Ltd.		$	4,804,502
	143,100			Commonwealth Bank of Australia			8,423,811
	365,000			Westpac Banking Corp. Ltd.			8,636,752
							21,865,065
	BEVERAGES - 2.1%
	439,200			Coca-Cola Amatil Ltd.			3,072,433
	BIOTECHNOLOGY - 5.9%
	98,750			CSL Ltd.			8,855,371
	CAPITAL MARKETS - 1.1%
	46,700			Perpetual Ltd.			1,616,895
	CHEMICALS - 2.2%
	1,493,200			Incitec Pivot Ltd.			3,269,344
	COMMERCIAL SERVICES & SUPPLIES - 1.5%
	226,600			Brambles Ltd.			2,318,052
	CONSTRUCTION MATERIALS - 2.0%
	657,800			Adelaide Brighton Ltd.			2,956,218
	CONTAINERS & PACKAGING - 3.5%
	463,000			Amcor Ltd.			5,291,237
	DIVERSIFIED FINANCIAL SERVICES - 9.2%
	1,254,200			AMP Ltd.			5,549,000
	220,600			ASX Ltd.			8,343,170
							13,892,170
	DIVERSIFIED TELECOMMUNICATION SERVICES - 5.3%
	1,825,400			Telstra Corp. Ltd.			8,006,386
	ELECTRIC UTILITIES - 3.1%
	3,428,800			AusNet Services			4,613,721
	FOOD & STAPLES RETAILING - 1.3%
	109,100			Woolworths Ltd.			1,944,284
	HEALTH CARE - 6.7%
	53,800			Cochlear Ltd.			5,435,477
	665,800			ResMed, Inc.			4,629,300
							10,064,777
	HEALTH CARE PROVIDERS & SERVICES - 2.6%
	1,742,300			Healthscope Ltd.			3,924,060
	HOTELS, RESTAURANTS & LEISURE - 3.0%
	1,448,900			Tatts Group Ltd.			4,547,325
	INSURANCE - 4.3%
	927,500			Medibank Pvt Ltd.			2,165,004
	518,200			QBE Insurance Group Ltd.			4,325,189
							6,490,193
	METALS & MINING - 9.4%
	432,900			BHP Billiton PLC - London Listing			5,458,232
	228,572			Rio Tinto PLC - London Listing			7,417,666
	936,300			South32 Ltd. - London Listing(b)			1,308,542
							14,184,440

 

See Notes to Portfolio of Investments.

Aberdeen Australia Equity Fund, Inc.

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Portfolio of Investments (unaudited) (concluded)

As of July 31, 2016

 

Shares				Description		Value (US$)
	LONG-TERM INVESTMENTS (continued)
	COMMON STOCKS (continued)
	MULTI-UTILITIES - 4.6%
	444,700			AGL Energy Ltd.		$	6,962,128
	OIL, GAS & CONSUMABLE FUELS - 5.9%
	147,300			Caltex Australia Ltd.			3,725,077
	252,200			Woodside Petroleum Ltd.			5,151,791
							8,876,868
	REAL ESTATE INVESTMENT TRUSTS (REIT) - 8.6%
	1,596,700			Scentre Group			6,435,450
	794,600			Westfield Corp.			6,459,465
							12,894,915
	Total Long-Term Investments - 96.9% (cost $146,128,660)						145,645,882
	SHORT-TERM INVESTMENT - 1.5%
	UNITED STATES - 1.5%
	2,233,951			State Street Institutional U.S. Government Money Market Fund(c)			2,233,951
	Total Short-Term Investment - 1.5% (cost $2,233,951)						2,233,951
	Total Investments - 98.4% (cost $148,362,611)(d)						147,879,833
	Other Assets in Excess of Liabilities - 1.6%						2,412,064
	Net Assets - 100.0%					$	150,291,897

 

(a)	Fair Valued Security. Fair Values are determined pursuant to procedures approved by the Fund’s Board of Directors. See Note (a) of the accompanying Notes to Portfolio of Investments.

 

(b)	Non-income producing security.

 

(c)	Registered investment company advised by State Street Global Advisors.

 

(d)	See accompanying Notes to Portfolio of Investments for tax unrealized appreciation/depreciation of securities.

 

See Notes to Portfolio of Investments.

Aberdeen Australia Equity Fund, Inc.

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Notes to Portfolio of Investments (unaudited)

July 31, 2016

 

Summary of Significant Accounting Policies

 

a.	Security Valuation:

The Fund values its securities at current market value or fair value, consistent with regulatory requirements. “Fair value” is defined in the Fund’s valuation and liquidity procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to contract at the measurement date.

Equity securities that are traded on an exchange are valued at the last quoted sale price on the principal exchange on which the security is traded at the “Valuation Time” subject to application, when appropriate, of valuation factors described in the paragraph below. The Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). In the absence of a sale price, the security is valued at the mean of the bid/ask price quoted at the close on the principal exchange on which the security is traded. Securities traded on NASDAQ are valued at the NASDAQ official closing price. Closed-end funds and exchange-traded funds (“ETFs”) are valued at the market price of the security at the Valuation Time. A security using any of these pricing methodologies is determined to be a Level 1 investment.

Foreign equity securities that are traded on foreign exchanges that close prior to Valuation Time are valued by applying valuation factors to the last sale price or the mean price as noted above. Valuation factors are provided by an independent pricing service provider approved by the Fund’s Board of Directors (the “Board”). These valuation factors are used when pricing the Fund’s portfolio holdings to estimate market movements between the time foreign markets close and the time the Fund values such foreign securities. These valuation factors are based on inputs such as depositary receipts, indices, futures, sector indices/ETFs, exchange rates, and local exchange opening and closing prices of each security.

Short-term investments are comprised of cash and cash equivalents invested in short-term investment funds which are redeemable daily. The State Street Institutional U.S. Government Money Market Fund has an objective to maintain a $1.00 NAV, which is not guaranteed.

When prices with the application of valuation factors are utilized, the value assigned to the foreign securities may not be the same as quoted or published prices of the securities on their primary markets. A security that applies a valuation factor is determined to be a Level 2 investment because the exchange-traded price has been adjusted. Valuation factors are not utilized if the independent pricing service provider is unable to provide a valuation factor or if the valuation factor falls below a predetermined threshold; in such case, the security is determined to be a Level 1 investment.

In the event that a security’s market quotations are not readily available or are deemed unreliable (for reasons other than because the foreign exchange on which they trade closed before the Valuation Time), the security is valued at fair value as determined by the Fund’s Pricing Committee, taking into account the relevant factors and surrounding circumstances using valuation policies and procedures approved and established by the Board. A security that has been fair valued by the Fund’s Pricing Committee may be classified as Level 2 or 3 depending on the nature of the inputs.

 

Aberdeen Australia Equity Fund, Inc.

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Notes to Portfolio of Investments (unaudited) (concluded)

July 31, 2016

 

In accordance with the authoritative guidance on fair value measurements and disclosures under accounting principles generally accepted in the United States of America, (“GAAP”), the Fund discloses the fair value of its investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1 measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon significant observable inputs, including adjusted quoted prices in active markets for similar assets, and Level 3 measurements to valuations based upon unobservable inputs that are significant to the valuation. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement.

The three-level hierarchy of inputs is summarized below:

Level 1 – quoted prices in active markets for similar investments;

Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

The following is a summary of the inputs used as of July 31, 2016 in valuing the Fund’s investments at fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Please refer to the Portfolio of Investments for a detailed breakout of the security types:

 

		Level 1				Level 2				Level 3				Total
Investments, at Value
Long-Term Investments		$	—			$	145,645,882			$	—			$	145,645,882
Short-Term Investment			2,233,951				—				—				2,233,951
Total		$	2,233,951			$	145,645,882			$	—			$	147,879,833
Amounts listed as “—” are $0 or round to $0.

For movements between the Levels within the fair value hierarchy, the Fund has adopted a policy of recognizing transfers at the end of each period. During the period ended July 31, 2016, there were no transfers between Levels 1, 2 or 3. For the period ended July 31, 2016, there have been no significant changes to the fair valuation methodologies.

 

b.	Federal Income Taxes:

The U.S. federal income tax basis of the Fund’s investments and the net unrealized appreciation as of July 31, 2016 were as follows:

 

Cost		Appreciation		Depreciation		Net Unrealized Appreciation
$130,098,298		$29,070,077		$(11,288,542)		$17,781,535

 

Aberdeen Australia Equity Fund, Inc.

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Item 2.

Controls and Procedures

 

(a)

The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Investment Company Act of 1940 (17 CFR 270.30a3(b)) and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

(b)

There was no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3.

Exhibits

 

(a)

Certification of Principal Executive Officer and Principal Financial Officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is attached hereto as Exhibit 99.302CERT.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		Aberdeen Australia Equity Fund, Inc.
		BY:		/s/ Christian Pittard
				Christian Pittard, Principal Executive Officer of Aberdeen Australia Equity Fund, Inc.
		Date: September 28, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

		BY:		/s/ Christian Pittard
				Christian Pittard, Principal Executive Officer of Aberdeen Australia Equity Fund, Inc.
		Date: September 28, 2016

 

		BY:		/s/ Andrea Melia
				Andrea Melia, Principal Financial Officer of Aberdeen Australia Equity Fund, Inc.
		Date: September 28, 2016