Title of Securities Being Registered

Amount Being
Registered(1)

Proposed
Maximum
Offering Price
Per Share

Proposed
Maximum
Aggregate
Offering
Price(2)

Amount of
Registration
Fee

Preferred Stock, $0.01 par value per share

$

$

100,000,000

$

13,640]

(1)

There are being registered hereunder a presently indeterminate number of shares of preferred stock to be offered on an immediate, continuous or delayed basis.

(2)

Estimated solely for the purpose of calculating the registration fee, pursuant to Rule 457(o) under the Securities Act of 1933. In no event will the aggregate initial offering price of all securities offered from time to time pursuant to a Prospectus Supplement and this Registration Statement exceed $100,000,000.

BASE PROSPECTUS

PAGE

PROSPECTUS SUMMARY

3

FINANCIAL HIGHLIGHTS

25

SENIOR SECURITIES

28

USE OF PROCEEDS

29

THE FUND

29

DESCRIPTION OF THE CAPITAL STOCK

29

INVESTMENT OBJECTIVES

32

INVESTMENT POLICIES

32

PORTFOLIO SECURITIES

35

INVESTMENT RESTRICTIONS

41

USE OF LEVERAGE

42

RISKS AND SPECIAL CONSIDERATIONS

42

MANAGEMENT OF THE FUND

58

EXPENSES

61

TAXATION

62

CERTAIN PROVISIONS OF THE MARYLAND GENERAL CORPORATION LAW AND THE CHARTER AND BYLAWS

63

PLAN OF DISTRIBUTION

64

LEGAL PROCEEDINGS

66

TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION

67

The Fund

The Fund is a non-diversified, closed-end management investment company organized as a Maryland corporation. See “The Fund.”

The Fund’s outstanding shares of common stock are listed for trading on the NYSE MKT under the symbol “FAX.” As of [date], the net assets of the Fund attributable to its shares of common stock were $[             ] and the Fund had outstanding [             ] shares of common stock.  The Shares may or may not be listed on a stock exchange. See “Description of the Capital Stock.”

The Offering

The Fund  may offer, from time to time, in one or more offerings, including through rights offerings, up to $100,000,000 of Shares on terms to be determined at the time of the offering. The Shares may either be fixed rate preferred shares or variable rate preferred shares. The Shares may be offered at prices and on terms to be set forth in one or more Prospectus Supplements. You should read this Prospectus and the applicable Prospectus Supplement carefully before you invest in the Shares. The Shares may be offered directly to one or more purchasers, through agents designated from time to time by the Fund, or to or through underwriters or dealers. The Prospectus Supplement relating to the offering will identify any agents, underwriters or dealers involved in the sale of the Shares, and will set forth any applicable purchase price, fee, commission or discount arrangement between the Fund and its agents or underwriters, or among underwriters, or the basis upon which such amount may be calculated. See “Plan of Distribution.” The Prospectus Supplement relating to any sale of Shares will set forth the liquidation preference and information about the dividend period, dividend rate, any call protection or non-call period and other matters. The Fund may not sell any Shares through agents, underwriters or dealers without delivery of a Prospectus Supplement describing the method and terms of the particular offering of the Shares.

Preferred Stock

Currently, 100,000,000 shares of the Fund’s capital stock, which includes the preferred stock being registered with this registration statement, have been classified by the Fund’s Board of Directors (the “Board of Directors” or the “Board”), or a duly authorized committee thereof, as preferred stock, par value $0.01 per share. The Fund’s Board may reclassify authorized and unissued shares of the Fund, previously classified as common stock, as preferred stock prior to the completion of any offering. The terms of each series of preferred stock may be fixed by the Board and may materially limit and/or qualify the rights of holders of the Fund’s common stock. If the Fund’s Board determines that it may be advantageous to the holders of the Fund’s common stock for the Fund to utilize additional leverage, the Fund may issue additional series of fixed rate preferred stock (“Fixed Rate Preferred Stock”) or additional series of variable rate preferred stock (“Variable Rate Preferred Stock”). Any Fixed Rate Preferred Stock or Variable Rate Preferred Stock issued by the Fund will pay, as applicable, distributions at a fixed rate or at rates that will be reset frequently based on short-term interest rates. Leverage creates a greater risk of loss as well as a potential for more gains for the common shares than if leverage were not used. See “Risk Factors and Special Considerations—Leverage Risk.”

Use of Proceeds

Proceeds from the sale of the Shares may be used (i) to make new portfolio

investments, increasing the Fund’s use of leverage, (ii) to pay down a portion of the Fund’s current leverage and thereby reduce the Fund’s interest rate exposure, or (iii) for general corporate purposes. See “Use of Proceeds.”

Investment Objectives

The Fund’s principal investment objective is to seek current income. The Fund may also achieve incidental capital appreciation. There can be no assurance that the Fund’s investment objectives will be achieved. The Fund’s investment objectives are fundamental and may not be changed without the approval of the holders of a majority of the outstanding voting securities. See “Investment Objectives.”

Investment Policies

To achieve its investment objectives, the Fund normally invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in Asian debt securities, Australian debt securities and New Zealand debt securities, as defined below. This 80% investment policy is non-fundamental and may be changed by the Board upon 60 days prior written notice to shareholders.

The investment policies of the Fund under the section below entitled “Fundamental Investment Policies” are fundamental and may not be changed without the approval of the holders of a majority of the Fund’s outstanding voting securities. The remainder of the Fund’s investment policies are non-fundamental (applies to all policies except the policies under the “Fundamental Investment Policies” section) and may be changed with Board approval.

Fundamental Investment Policies

The Fund may invest up to 80% of its total assets, plus the amount of any borrowings for investment purposes, in “Asian debt securities,” which include: (1) debt securities of Asian Country (as defined below) issuers, including securities issued by Asian Country governmental entities, as well as by banks, companies and other entities which are located in Asian Countries, whether or not denominated in an Asian Country currency; (2) debt securities of other issuers denominated in, or linked to, the currency of an Asian Country, including securities issued by supranational issuers, such as The World Bank and derivative debt securities that replicate, or substitute for, the currency of an Asian Country; (3) debt securities issued by entities which, although not located in an Asian Country, derive at least 50% of their revenues from Asian Countries or have at least 50% of their assets located in Asian Countries; and (4) debt securities issued by a wholly-owned subsidiary of an entity located in an Asian Country, provided that the debt securities are guaranteed by the parent entity located in the Asian Country. With reference to items (3) and (4) above, Asian debt securities may be denominated in an Asian Country currency or in Australian, New Zealand or U.S. dollars. The maximum country exposure to any one Asian Country (other than Korea) is limited to 20% of the Fund’s total assets and the maximum currency exposure to any one Asian Country currency (other than Korea) is limited to 10% of the Fund’s total assets. The maximum country exposure for Korea is limited to 40% of the Fund’s total assets, and the maximum currency exposure for Korea is limited to 25% of the Fund’s total assets.

“Asian Countries” (each, an “Asian Country”) include China, Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam, Sri Lanka, Kazakhstan and Mongolia, and such other countries on the Asian continent approved for investment by the Board of Directors upon the recommendation of Aberdeen Asset Management Asia

Limited, the Fund’s investment manager (“AAMAL” or the “Investment Manager”).

At least 20% of the Fund’s total assets will be invested in “Australian debt securities,” which include: (1) debt securities of Australian issuers, including securities issued by Australian governmental entities, as well as by banks, companies and other entities which are located in Australia, whether or not denominated in the Australian dollar; (2) debt securities of other issuers denominated in, or linked to, the Australian dollar, including securities issued by supranational issuers, such as The World Bank and derivative debt securities that replicate, or substitute for, the Australian dollar; (3) debt securities issued by entities which, although not located in Australia, derive at least 50% of their revenues from Australia or have at least 50% of their assets located in Australia; and (4) debt securities issued by a wholly-owned subsidiary of an entity located in Australia, provided that the debt securities are guaranteed by the parent entity located in Australia. With reference to items (3) and (4) above, Australian debt securities may be denominated in Australian, New Zealand or U.S. dollars.

The Fund may also invest in “New Zealand debt securities,” which include: (1) debt securities of New Zealand issuers, including securities issued by New Zealand governmental entities, as well as by banks, companies and other entities which are located in New Zealand, whether or not denominated in the New Zealand dollar; (2) debt securities of other issuers, denominated in, or linked to, the New Zealand dollar, including securities issued by supranational issuers, such as The World Bank and derivative debt securities that replicate, or substitute for, the New Zealand dollar; (3) debt securities issued by entities which, although not located in New Zealand, derive at least 50% of their revenues from New Zealand or have at least 50% of their assets located in New Zealand; and (4) debt securities issued by a wholly-owned subsidiary of an entity located in New Zealand, provided that the debt securities are guaranteed by the parent entity located in New Zealand. With reference to items (3) and (4) above, New Zealand debt securities may be denominated in Australian, New Zealand or U.S. dollars. The maximum country exposure for New Zealand is limited to 35% of the Fund’s total assets, and the maximum currency exposure for New Zealand is limited to 35% of the Fund’s total assets.

During periods when, in the Investment Manager’s, Aberdeen Asset Management Limited’s, the Fund’s investment adviser (the “Investment Adviser”), or Aberdeen Asset Managers Limited’s, the Fund’s sub-adviser (the “Sub-Adviser”) (collectively, the “Advisers”) judgment, economic conditions warrant a temporary defensive investment policy, the Fund may temporarily invest up to 100% of its assets in U.S. debt securities.

In order to accommodate investment in Asian markets, the Fund may invest up to 35% of its total assets in Asian debt securities rated below BBB-  by Standard & Poor’s, a division of The McGraw-Hill Companies (“S&P”) or Baa3 by Moody’s Investor Services, Inc. (“Moody’s”) (also known as “junk bonds”), or judged by the Advisers to be below investment grade at the time of investment, provided that, with the approval of the Board of Directors, the ratings of other recognized rating services may be used. The Fund may invest up to 35% of its total assets in Asian debt securities that may be deemed to be illiquid.

The Fund may invest up to 10% of its total assets in securities rated by S&P or Moody’s, or judged by the Advisers to be, below B- at the time of investment, provided that, with the approval of the Board of Directors, the ratings of other recognized ratings services may be used.

The Fund may enter into repurchase agreements with banks and broker-dealers pursuant to which the Fund may acquire a security for a relatively short period (usually no more than a week) subject to the obligations of the seller to repurchase and the Fund to resell such security at a fixed time and price. The Fund will enter into repurchase agreements only with parties who meet creditworthiness standards approved by the Board of Directors, i.e., banks or broker-dealers which have been determined by the Advisers to present no serious risk of becoming involved in bankruptcy proceedings within the period contemplated by the repurchase transaction.

Non-Fundamental Investment Policies

A maximum of 20% of the Fund’s total assets in Asian debt securities can be denominated in any combination of Yen, Euro and British pounds.

The Fund may invest up to 10% of the Fund’s total assets in secondary market bank loans, up to 10% of the Fund’s total assets in convertible securities and other hybrid securities, and up to 10% of the Fund’s total assets in asset-backed securities.

The Fund currently utilizes and in the future expects to continue to utilize leverage through borrowings (including through the issuance of debt securities) or through other transactions, such as reverse repurchase agreements, which have the effect of leverage. The Fund may also utilize leverage through the issuance of preferred stock, as discussed in this Prospectus.  The Fund may use leverage up to 33 1/3% of its total assets (including the amount obtained through leverage).  The Fund generally will not utilize leverage if it anticipates that the Fund’s leveraged capital structure would result in a lower return to common shareholders than that obtainable over time with an unleveraged capital structure. 

Consistent with its investment objectives, the Fund may invest in a broad array of financial instruments and securities in which the value of the instrument or security is “derived” from the performance of an underlying asset or a “benchmark” such as a security index, an interest rate or a foreign currency (“derivatives”).  The Fund may use derivatives to manage currency, interest rate and credit risk and as a substitute for physical securities.  The Fund may use interest rate swaps to hedge the Fund’s liability with respect to its leverage. The Fund has adopted a policy to limit the amount of interest rate swap transactions that may be entered into by the Fund.  Derivative debt securities that replicate, or substitute for, the currency of a particular country will be counted toward the limitations applicable with respect to issuers in that country. The Fund may invest in over-the-counter or exchange traded derivatives. The Fund may invest in derivatives up to the limits allowed under the 1940 Act.  The following guidelines apply with respect to the Fund’s derivative investments:

(a)

The Fund will only use counterparty institutions rated A- or better by recognized international rating agencies, except with respect to Korean futures. In Korea, brokerage houses with Korean futures exchanges require deposits into margin accounts, and in many cases, these accounts are with unrated entities.

(b)

A maximum of 7.5% of the Fund’s total assets may be invested in a derivative transaction with any single counterparty.

(c)

A maximum of 20% of the Fund’s total assets may have exposure to currency-linked notes.

(d)

A maximum of 10% of the Fund’s total assets may be at risk to any single counterparty (aggregate interest rate, currency and credit derivatives).

(e)

Exchange-traded derivatives may only be traded on regulated derivative exchanges and a maximum of 35% of the Fund’s total assets may have exposure to exchange-traded derivatives.

(f)

The Fund’s maximum gross exposure (long plus short positions) to derivatives traded on the Sydney Futures Exchange is 20% of its total assets and the maximum net exposure (long positions minus short positions) to derivatives traded on the Sydney Futures Exchange is 15% of the Fund’s total assets.

(g)

A maximum of 20% of the Fund’s total assets may have exposure to derivatives traded on the Chicago Board of Trade.

(h)

A maximum of 7% of the Fund’s total assets may have exposure to derivatives traded on any one Asian Futures Exchanges.

See “Derivatives” in the “Portfolio Securities” section for further information.

The Fund may invest in securities issued by investment companies registered as such under the 1940 Act and unregistered, private funds (each, an “acquired company”), subject to the limitations below (which are to be applied immediately after the acquisition of such securities).

The Fund may not acquire securities issued by an acquired company:

·    if the value of such securities exceeds 3% of the total outstanding voting stock of the acquired company;

·    if the aggregate value of such securities would exceed 5% of the value of the total assets of the Fund; or

·    if the aggregate value of such securities, together with all other acquired company securities in the Fund’s portfolio, would exceed 10% of the value of the total assets of the Fund.

As a non-diversified company, there is no investment restriction on the percentage of the Fund’s assets that may be invested at any time in the securities of any single issuer. However, the Fund intends to limit its investments in the securities of any single issuer, except for securities issued or guaranteed as to payment of principal and interest by Australian, New Zealand or Asian Country governmental entities, to 5% of its total assets at the time of purchase. The Fund may invest without limitation in securities of Australian governmental entities and intends to invest at least 25% of its assets in securities of Australian governmental entities.  The Fund may, at the time of purchase, invest up to 24.9% of its total assets in New Zealand governmental securities and Korea governmental securities. The Fund also may, at the time of purchase, invest up to 15% of its total assets in governmental securities of any one Asian Country (other than Korea). The Fund intends to invest in a variety of debt securities, with differing issuers, maturities and interest rates, and to comply with the

diversification and other requirements of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies so that the Fund will not be subject to U.S. federal income taxes on its net investment income. The average U.S. dollar weighted maturity of the Fund’s portfolio is not expected to exceed 10 years.

Investment Restrictions

In addition to the Fund’s fundamental investment policies set out above, the Fund has certain investment restrictions that may not be changed without approval by a majority of the Fund’s outstanding voting securities. These restrictions concern issuance of senior securities, borrowing, lending, concentration, underwriting and real estate. See “Investment Restrictions.”

Use of Leverage

As noted above, the Fund currently utilizes leverage as part of its investment strategy.  The Fund, as of [     ], is leveraged through borrowings from a revolving credit facility in the amount of $600,000,000 or [  ]% of the Fund’s total assets (including the proceeds of such leverage). The Fund’s asset coverage ratio as of [   ] was [  ]%. See “Description of the Capital Stock—Credit Facility” for a brief description of the Fund’s credit agreement with a syndicate of banks led by Bank of America, N.A.

The Fund intends to continue to use leverage through borrowings from banks, and expects to use leverage through the issuance of shares of preferred stock, as described in this Prospectus.  The Fund may also use leverage through the issuance of debt securities.

The Fund may engage in leverage through the issuance of preferred stock and/or notes or other forms of indebtedness. Under the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund is not permitted to issue preferred stock unless immediately after such issuance the Fund will have an asset coverage of at least 200%. In general, the term “asset coverage” for this purpose means the ratio the value of the total assets of the Fund, less all liabilities and indebtedness not represented by senior securities, bears to the aggregate amount of senior securities representing indebtedness of the Fund plus the aggregate of the involuntary liquidation preference of the preferred stock. The involuntary liquidation preference refers to the amount to which the preferred stock would be entitled on the involuntary liquidation of the Fund in preference to a security junior to it. The Fund is not permitted to incur indebtedness, including through the issuance of debt securities, unless immediately thereafter the Fund will have an asset coverage of at least 300%. In general, the term “asset coverage” for this purpose means the ratio which the value of the total assets of the Fund, less all liabilities and indebtedness not represented by senior securities, bears to the aggregate amount of senior securities representing indebtedness of the Fund. In addition, the Fund may be limited in its ability to declare any cash distribution on its capital stock or purchase its capital stock unless (including its preferred stock), at the time of such declaration or purchase, the Fund has an asset coverage (on its indebtedness) of at least 300% after deducting the amount of such distribution or purchase price, as applicable. The 1940 Act contains an exception, however, that permits dividends to be declared upon any preferred stock issued by the Fund if the Fund’s indebtedness has an asset coverage of at least 200% at the time of declaration after deducting the amount of the dividend. In addition, if the Fund issues non-public indebtedness (for example, if it enters into a loan agreement in a privately arranged transaction with a bank), it may be able to continue to pay dividends on its capital stock even if the asset coverage ratio on its indebtedness falls below 300%. Under the 1940 Act, certain short-term borrowings (such as for cash management purposes) are not subject to these limitations if (i) repaid within 60 days, (ii) not extended or renewed and

(iii) not in excess of 5% of the total assets of the Fund. 

The Fund may also enter into certain transactions that create leverage, such as reverse repurchase agreements, which are not subject to the asset coverage requirements set out above so long as the Fund establishes in a segregated account cash or other liquid securities equal to the Fund’s obligations in respect of such transactions or enters into other transactions offsetting the Fund’s obligations in respect to such transactions.

Risks (See generally “Risks and Special Considerations” for more information on these and other risks)

Risk is inherent in all investing.  Before making an investment decision, you should carefully consider the following risks. 

Risks of Investing in the Shares

The principal risks of investing in the Shares include:

Failure to Pay Distributions.  The Fund’s investments are subject to a high degree of risk.  The Fund may invest a significant portion of its assets in debt securities rated below investment grade (i.e., junk bonds) or in other asset classes that may be considered speculative.  If the value of the Fund’s investments were to decline suddenly and substantially, the Fund may not be able to make timely payments of distributions or pay the full liquidation preference of the Shares.  In addition, the Fund may not meet the asset coverage requirements or earn sufficient income from its investments to make distributions on the Shares.

Subordination Risk.  Shares will be junior in liquidation and with respect to distribution rights to any outstanding debt securities and other borrowings of the Fund. Senior securities representing indebtedness may constitute a substantial lien on the Fund’s assets and pose substantial risks to the holders of Shares by reason of their prior claim against the Fund’s income and against the Fund’s net assets in liquidation. The Fund may not be permitted to declare distributions with respect to any series of Shares unless at such time it meets applicable asset coverage requirements and the payment of principal or interest is not in default with respect to the Fund’s debt securities, if any, and other borrowings.

Ratings Risk. Shares may be rated by a rating agency.  There can be no assurance that the Shares will receive any particular rating from any of Moody’s, S&P or Fitch Ratings, Inc. (“Fitch”) (each, a “Rating Agency”), or that any such ratings will be maintained at the level originally assigned through the term of the Shares.  Ratings do no eliminate or mitigate the risks of investing in Shares.  A rating issued by a Rating Agency is only the opinion of the entity issuing the rating at that time, and is not a guarantee as to quality, or an assurance of the future performance, of the rated security (in this case, the Shares).  In addition, the manner in which the Rating Agency obtains and processes information about a particular security may affect the Rating Agency’s ability to timely react to changes in an issuer’s circumstances (in this case, the Fund) that could influence a particular rating. A Rating Agency could downgrade the Shares, which may reduce demand for the Shares causing them to become less liquid in any secondary market and reduce market prices.

Early Redemption Risk.  The Fund may issue classes of Shares that are callable at the discretion of the Fund. In such circumstances, the Fund may voluntarily

redeem Shares or may be forced to redeem Shares to meet regulatory requirements and the asset coverage requirements of the Shares. Such redemptions may be at a time that is unfavorable to holders of Shares.

Inflation Risk. Inflation is the reduction in the purchasing power of money resulting from the increase in the price of goods and services. Inflation risk is the risk that the inflation-adjusted (or “real”) value of an investment in the Shares or the income from that investment will be worth less in the future. As inflation occurs, the real value of the Shares and dividends on the Shares declines.

Special Risks to Holders of Fixed Rate Preferred Stock.

·                  Interest Rate Risk.  Shares of Fixed Rate Preferred Stock pay dividends at a fixed dividend rate. Prices of fixed income investments vary inversely with changes in market yields.  The market yields on securities comparable to Fixed Rate Preferred Stock may increase, which would likely result in a decline in the secondary market price (if any) of shares of Fixed Rate Preferred Stock.

·                  Secondary Market and Delayed Listing Risk.  The Fund may list shares of Fixed Rate Preferred Stock on an exchange. Prior to any offering, there will be no public market for any series of Fixed Rate Preferred Stock. In the event any series of Fixed Rate Preferred Stock are issued, prior application will have been made to list such shares on a national securities exchange, which will likely be the NYSE MKT. However, during an initial period, which is not expected to exceed 30 days after the date of its initial issuance, such Shares may not be listed on any securities exchange. During such period, any underwriters of the Fixed Rate Preferred Stock may make a market in such shares, although they will have no obligation to do so. Consequently, an investment in such Shares may be illiquid during such period. Even after a series of Fixed Rate Preferred Stock is listed on a securities exchange, there is a risk that the market for such series of Fixed Rate Preferred Stock may be thinly traded and relatively illiquid compared to the market for other types of securities, with the spread between the bid and asked prices considerably greater than the spreads of other securities with comparable terms, credit ratings and tax-advantaged income features.  Shares of Fixed Rate Preferred Stock may trade at a premium to or discount from liquidation value for various reasons, including changes in interest rates.

Special Risks for Holders of Variable Rate Preferred Stock.

·                  Auction Risk.  Shares of Variable Rate Preferred Stock may have rates set a periodic auctions.  You may not be able to sell your Variable Rate Preferred Stock at an auction if the auction fails, i.e., if more Variable Rate Preferred Stock is offered for sale than there are buyers for those shares. Also, if you place an order (a hold order) at an auction to retain Variable Rate Preferred Stock only at a specified rate that exceeds the rate set at the auction, you will not retain your Variable Rate Preferred Stock. Additionally, if you place a hold order without specifying a rate below which you would not wish to continue to hold your shares and the auction sets a below-market rate, you will receive a lower rate of return on your shares than the market rate. Finally, the dividend period may be changed, subject to certain conditions and with notice to the holders of the Variable Rate Preferred Stock, which could also affect the liquidity of your

investment.

·                  Secondary Market Risk. If you try to sell your Variable Rate Preferred Stock between auctions, you may not be able to sell them for their liquidation preference per share or such amount per share plus accumulated dividends. If the Fund has designated a special dividend period of more than seven days, changes in interest rates could affect the price you would receive if you sold your shares in the secondary market. Broker-dealers that maintain a secondary trading market for the Variable Rate Preferred Stock are not required to maintain this market, and the Fund may not be required to redeem Variable Rate Preferred Stock if either an auction or an attempted secondary market sale fails because of a lack of buyers. The Variable Rate Preferred Stock is not expected to be registered on a stock exchange. If you sell your Variable Rate Preferred Stock to a broker-dealer between auctions, you may receive less than the price you paid for them, especially when market interest rates have risen since the last auction or during a special dividend period.

General Risks of Investing in the Fund

An investment in the Shares involves the risks of investing in the Fund generally. The Fund’s ability to pay distributions on the Shares or their underlying liquidation preference be impaired by the investment results of the Fund. The following is a summary of certain of the principal risks of the Fund.

General. The Fund is a non-diversified, closed-end investment company designed primarily as a long-term investment and not as a trading tool. The Fund invests primarily in fixed income securities. An investment in the Fund may be speculative and involves a high degree of risk. Due to the uncertainty in all investments, there can be no assurance that the Fund will achieve its investment objectives.

Investment and Market Risk. An investment in the Fund is subject to investment risk, including the possible loss by the Fund of the entire value of its portfolio.  The value of the securities owned by the Fund, like other market investments, may move up or down, sometimes rapidly and unpredictably, and these fluctuations are likely to have a greater impact on the value of the Shares during periods in which the Fund utilizes a leveraged capital structure. If the current global economic downturn continues into a prolonged recession or deteriorates further, the ability of issuers of the corporate fixed-income securities and other securities in which the Fund invests to service their obligations could be materially and adversely affected.

Asian-Pacific Region Risk. Parts of the Asian-Pacific region may be subject to a greater degree of economic, political and social instability than is the case in the United States and Europe. Some Asian-Pacific countries can be characterized as emerging markets or newly industrialized and may experience more volatile economic cycles than developed countries. The developing nature of securities markets in many countries in the Asian-Pacific region may lead to a lack of liquidity while some countries have restricted the flow of money in and out of the country. Some countries in Asia-Pacific have historically experienced political uncertainty, corruption, military intervention and social unrest.

Additionally, the Fund may be more volatile than a fund which is broadly

diversified geographically. Focusing on a single geographical region involves increased currency, political, regulatory and other risks. Market swings in the targeted geographical region (Asia-Pacific) likely will have a greater effect on portfolio performance than they would in a more geographically diversified fixed income fund.

Australian Risk. Because the Fund invests a significant portion of its assets in Australian securities, the Fund is particularly vulnerable to loss in the event of adverse political, economic, financial and other developments that affect Australia, including fluctuations of Australian currency versus the U.S. dollar. Also, Australia is located in a part of the world that has historically been prone to natural disasters such as drought and is economically sensitive to environmental events. Any such event could result in a significant adverse impact on the Australian economy.

Credit Risk. Investments in debt securities expose the Fund to credit risk. Credit risk is the risk that one or more of the Fund’s investments in debt securities or other instruments will decline in price, or fail to pay interest, liquidation value or principal when due, because the issuer of the obligation or the issuer of a reference security experiences an actual or perceived decline in its financial status. Credit risk is influenced by changes in general economic and political conditions and changes in the financial condition of the issuers. During periods of economic downturn or rising interest rates, issuers of securities with a low credit rating may experience financial weakness that could affect their ability to make payments of interest and principal.

Interest Rate Risk. Generally, when market interest rates rise, the prices of debt obligations fall, and vice versa. Interest rate risk is the risk that debt obligations and other instruments in the Fund’s portfolio will decline in value because of increases in market interest rates. This risk may be particularly acute when market interest rates are at low levels. The prices of long-term debt obligations generally fluctuate more than prices of short-term debt obligations as interest rates change. During periods of rising interest rates, the average life of certain types of securities may be extended due to slower than expected payments. This may lock in a below market yield, increase the security’s duration and reduce the security’s value. The Fund’s use of leverage will tend to increase interest rate risk.

Investments in floating rate debt instruments, although generally less sensitive to interest rate changes than longer duration fixed rate instruments, may nevertheless decline in value in response to rising interest rates if, for example, the rates at which they pay interest do not rise as much, or as quickly, as market interest rates in general. Conversely, floating rate instruments will not generally increase in value if interest rates decline. Inverse floating rate debt securities may also exhibit greater price volatility than a fixed rate debt obligation with similar credit quality. To the extent the Fund holds floating rate instruments, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect the income received from such securities.

Foreign Securities Risk. Investing in foreign securities involves certain special considerations that are not typically associated with investments in the securities of U.S. issuers. Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards and may have policies that are not comparable to those of domestic issuers. As a result, there may be

less information available about foreign issuers than about domestic issuers. Securities of some foreign issuers may be less liquid and more volatile than securities of comparable domestic issuers. There is generally less government supervision and regulation of securities markets, brokers and issuers than in the United States. In addition, with respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, political and social instability, or diplomatic developments, which could affect the value of investments in those countries. The costs of investing in foreign countries frequently are higher than the costs of investing in the United States. Although the Advisers endeavor to achieve the most favorable execution costs in portfolio transactions, trading costs in non-U.S. securities markets are generally higher than trading costs in the United States.

Investments in securities of foreign issuers often will be denominated in foreign currencies. Accordingly, the value of the Fund’s assets, as measured in U.S. dollars, may be affected favorably or unfavorably by changes in currency exchange rates and in exchange control regulations. The Fund may incur costs in connection with conversions between various currencies. See “Risks and Special Considerations—Foreign Currency Risk.”

The Fund generally holds its foreign securities and cash in foreign banks and securities depositories approved by State Street Bank and Trust Company, the Fund’s Foreign Custody Manager (as that term is defined in Rule 17f-5 under the 1940 Act). Some foreign banks and securities depositories may be recently organized or new to the foreign custody business. There may be limited or no regulatory oversight over their operations. Also, the laws of certain countries may put limits on the Fund’s ability to recover its assets if a foreign bank, depository or issuer of a security, or any of their agents, goes bankrupt. In addition, it is often more expensive for the Fund to buy, sell and hold securities in certain foreign markets than in the United States. The increased expense of investing in foreign markets reduces the amount the Fund can earn on its investments and typically results in a higher operating expense ratio for the Fund than for investment companies invested only in the United States.

Certain foreign governments levy withholding or other taxes on dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion of foreign withholding taxes will reduce the income received from investments in such countries.

From time to time, the Fund may have invested in certain sovereign debt obligations that are issued by, or certain companies that operate in or have dealings with, countries that become subject to sanctions or embargoes imposed by the U.S. government and the United Nations and/or countries identified by the U.S. government as state sponsors of terrorism. Investments in such countries may be adversely affected because, for example, the credit rating of the sovereign debt security may be lowered due to the country’s instability or unreliability or the company may suffer damage to its reputation if it is identified as a company which operates in, or has dealings with, such countries. As an investor in such companies, the Fund will be indirectly subject to those risks.

Developing and Emerging Markets Risk. Investing in the securities of issuers located in developing and emerging market countries (and to a certain extent non-U.S. developed market countries) involves special considerations not typically associated with investing in the securities of U.S. issuers and other

developed market issuers, including heightened risks of expropriation and/or nationalization, armed conflict, confiscatory taxation, restrictions on transfers of assets, lack of uniform accounting and auditing standards, difficulties in dividend withholding reclaims procedures, less publicly available financial and other information and potential difficulties in enforcing contractual obligations.

The economies of individual developing and emerging market countries may differ favorably or unfavorably from the United States economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, capital reinvestment, resource self-sufficiency and balance of payments position. Governments of many developing and emerging market countries have exercised and continue to exercise substantial influence over many aspects of the private sector. In some cases, the government owns or controls many companies, including some of the largest in the country.

Accordingly, government actions could have a significant effect on economic conditions in a developing or emerging market country and on market conditions, prices and yields of securities in the Fund’s portfolio. Moreover, the economies of developing and emerging market countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. Many developing and emerging market economies are considered to be more politically volatile than the developed markets. Investments in securities of issuers in countries other than the U.S. may involve greater political risk, including in some countries, the possibility of nationalization of assets, expropriation or confiscatory taxation, restrictions on repatriation, and the establishment of foreign exchange controls, political changes, government regulation, overburdened and obsolete or unseasoned financial systems, environmental problems, less developed legal systems, economic or social instability or diplomatic developments (including war) which could affect adversely the economies of such countries or the value of the Fund’s investments in those countries. Central authorities also tend to exercise a high degree of control over the economies and in many cases have ownership over core productive assets.

The legal systems in many developing and emerging market countries are less developed than those in more developed countries, with the administration of laws and regulations often subject to considerable discretion. Non-U.S. markets may offer less protection to investors than U.S. or other developed markets. It also may be difficult to obtain and enforce a judgment in a court outside of the United States.

Adequate public information on non-U.S. issuers may not be available, and it may be difficult to secure information regarding corporate actions on a timely basis. In general, there is less overall governmental supervision and regulation of securities exchanges, brokers, and listed companies than in the United States or other developed market countries.

Due to their strong reliance on international trade, most developing and emerging market economies tend to be sensitive both to economic changes in their own region and to changes affecting their major trading partners. These include changes in growth, inflation, foreign exchange rates, current account

positions, government policies, taxation and tariffs.

Investments in developing and emerging market countries may entail purchasing securities issued by or on behalf of entities that are insolvent, bankrupt, in default or otherwise engaged in an attempt to reorganize or reschedule their obligations or in entities that have little or no proven credit rating or credit history. In any such case, the issuer’s poor or deteriorating financial condition may increase the likelihood that the Fund will experience losses or diminution in available gains due to bankruptcy, insolvency or fraud.

Foreign Currency Risk. The Fund may invest all of its assets in debt securities which are denominated in currencies other than the U.S. dollar. Currency exchange rates can fluctuate significantly over short periods and can be subject to unpredictable changes based on a variety of factors including political developments and currency controls by governments. A change in the value of a currency in which a security is denominated against the U.S. dollar will generally result in a change in the U.S. dollar value of the Fund’s assets.

The currencies of developing and emerging markets, in particular, have experienced periods of steady declines or even sudden devaluations relative to the U.S. dollar. Some developing and emerging market currencies may not be internationally traded or may be subject to strict controls by local governments, resulting in undervalued or overvalued currencies. Some developing and emerging markets have experienced balance of payment deficits and shortages in foreign exchange reserves. Governments have responded by restricting currency conversions. Future restrictive exchange controls could prevent or restrict a company’s ability to make dividend or interest payments in the original currency of an obligation (often U.S. dollars). In addition, even though the currencies of some developing and emerging markets may be convertible into U.S. dollars, the conversion rates may be artificial to their actual market values.

Sovereign Debt Risk. Investments in sovereign debt involve special risks. Foreign governmental issuers of debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or pay interest when due. In the event of default, there may be limited or no legal recourse in that, generally, remedies for defaults must be pursued in the courts of the defaulting party. Political conditions, especially a sovereign entity’s willingness to meet the terms of its debt obligations, are of considerable significance. The ability of a foreign sovereign issuer, especially an emerging market country, to make timely payments on its debt obligations will also be strongly influenced by the sovereign issuer’s balance of payments, including export performance, its access to international credit facilities and investments, fluctuations of interest rates and the extent of its foreign reserves.

Corporate Debt Risk. The Fund may invest in debt securities of non-governmental issuers. Like all debt securities, corporate debt securities generally represent an issuer’s obligation to repay to the investor (or lender) the amount borrowed plus interest over a specified time period. A typical corporate bond specifies a fixed date when the amount borrowed (principal) is due in full, known as the maturity date, and specifies dates when periodic interest (coupon) payments will be made over the life of the security.

Corporate debt securities come in many varieties and may differ in the way that interest is calculated, the amount and frequency of payments, the type of

collateral, if any, and the presence of special features (e.g., conversion rights). The Fund’s investments in corporate debt securities may include, but are not limited to, senior, junior, secured and unsecured bonds, notes and other debt securities, and may be fixed rate, floating rate, zero coupon and inflation linked, among other things.

Prices of corporate debt securities fluctuate and, in particular, are subject to several key risks including, but not limited to, interest rate risk, credit risk, prepayment risk and spread risk. The market value of a corporate bond may be affected by the credit rating of the corporation, the corporation’s performance and perceptions of the corporation in the market place. There is a risk that the issuers of the corporate debt securities in which the Fund may invest may not be able to meet their obligations on interest or principal payments at the time called for by an instrument.

Below Investment Grade Securities Risk. Among other things, investment in securities which are rated below investment grade requires skilled credit analysis and reduces the overall credit quality of the Fund’s portfolio.

Investments in securities rated below investment grade are subject to greater market fluctuations and risk of loss of income and principal than investments in securities with investment grade credit ratings. The former will generally provide higher yields due to the higher premiums required by investors for taking the associated credit risk.

Leverage Risk. The Fund currently leverages through borrowings from a credit facility. In addition, the Fund intends to use leverage for investment purposes by issuing preferred stock, as described in this Prospectus.  The Fund also may use leverage for investment purposes by issuing debt securities.  As of [               ], 2013, the Fund had $[            ] of total leverage outstanding, representing approximately [    ]% of the Fund’s total assets. The Fund’s leveraged capital structure creates special risks not associated with unleveraged funds having similar investment objectives and policies. These include the possibility of greater loss and the likelihood of higher volatility of the net asset value of the Fund and the asset coverage for the Shares. Such volatility may increase the likelihood of the Fund having to redeem Shares when it may be disadvantageous to do so.

Liquidity Risk. While the Fund ordinarily invests in debt securities for which there is an active secondary market, the Fund may invest in debt securities for which there is no established secondary market. The securities markets that exist in developing and emerging market countries are substantially smaller, less developed, less liquid and more volatile than the securities markets of the United States and other more developed countries. The Fund may not be able readily to dispose of illiquid securities at prices that approximate those at which the Fund could sell such securities if they were more widely traded.

Bank Loans Risk. Bank loans are generally subject to legal or contractual restrictions on resale. As a result, there may not be a recognized, liquid public market for bank loan interests. Purchasers of loans and other forms of direct indebtedness depend primarily upon the creditworthiness of the borrower for payment of principal and interest. The borrower may be in financial distress or may default or have a right to borrow additional cash from the owners of direct debt. Direct debt instruments may involve a risk of insolvency of the lending bank or intermediary. In addition, there may be fewer legal protections for

owners of direct debt than conventional debt securities. If the Fund acquires a participation interest in a loan, the Fund may not be able to control the exercise of any remedies that the lender would have under the loan. In addition, the Fund normally will have to rely on the participating lender to demand and receive payments in respect of the loans, and to pay those amounts on to the Fund; the Fund will be subject to the risk that the lender may be unwilling or unable to do so. In such a case, the Fund would not likely have any rights against the borrower directly.

Convertible Securities Risk. The Fund may invest in convertible securities, which include bonds, debentures, notes, preferred stocks and other securities that entitle the holder to acquire common stock or other equity securities of the same or a different issuer. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. As with all debt securities, the market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. Convertible securities also tend to reflect the market price of the underlying stock in varying degrees, depending on the relationship of such market price to the conversion price in the terms of the convertible security. Convertible securities rank senior to common stock in an issuer’s capital structure and consequently entail less risk than the issuer’s common stock.

Asset-Backed Securities Risk. Payment of interest and repayment of principal on asset-backed securities is largely dependent upon the cash flows generated by the assets backing the securities and, in certain cases, supported by letters of credit, surety bonds or other credit enhancements. Asset-backed security values may also be affected by the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables and any entities providing the credit enhancement. In addition, the underlying assets are subject to prepayments that shorten the securities’ weighted average maturity and may lower their return.

Derivatives Risk. The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may increase or decrease. Adverse movements in the value of the underlying asset can expose the Fund to losses. In addition, risks in the use of derivatives include:

·

an imperfect correlation between the price of derivatives and the movement of the securities prices, interest rates or currency exchange rates being hedged or replicated;

·

the possible absence of a liquid secondary market for any particular derivative at any time;

·

the potential loss if the counterparty to the transaction does not perform as promised;

·

the possible need to defer closing out certain positions to avoid adverse tax consequences, as well as the possibility that derivative transactions may result in acceleration of gain, deferral of losses or a change in the character of gain realized;

·

the risk that the financial intermediary “manufacturing” the over-the-counter derivative, being the most active market maker and offering the best price for repurchase, will not continue to create a credible market in the derivative;

·

because certain derivatives are “manufactured” by financial institutions, the risk that the Fund may develop a substantial exposure to financial institution counterparties; and

·

the risk that a full and complete appreciation of the complexity of derivatives and how future value is affected by various factors including changing interest rates, exchange rates and credit quality is not attained.

There is no guarantee that derivatives will provide successful results and any success in their use depends on a variety of factors including the ability of the Advisers to predict correctly the direction of interest rates, securities prices, currency exchange rates and other factors.

The Fund may use interest rate swaps to hedge up to 100% of its leverage. A significant type of risk associated with interest rate swaps is the risk that the counterparty 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 hedging the Fund’s interest rate risk with respect to the Fund’s leverage.  See “Derivatives Risk” in the “Risks and Special Considerations” section for further information.

Risks of Regulatory Developments.  It is possible that government regulation of various types of derivative instruments, including futures and swap agreements (including but not limited to interest rate and credit default swaps described herein), may limit or prevent the Fund from using such instruments as part of its investment strategy, which could negatively impact the Fund. For example, the swaps market has been an evolving and largely unregulated market. It is possible that developments in the swaps market, including new regulatory requirements, could limit or prevent the Fund’s ability to utilize swap agreements or options on swaps as part of its investment strategy, terminate existing swap agreements or realize amounts to be received under such agreements, which could negatively affect the Fund. Some swaps currently are, and more in the future will be, centrally cleared, which affects how swaps are transacted.

In particular, the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 21, 2010 (the “Dodd-Frank Act”), has resulted in new clearing and exchange-trading requirements for swaps and other over-the-counter (“OTC”) derivatives. The Dodd-Frank Act also requires the Commodity Futures Trading Commission (“CFTC”) and/or the SEC, in consultation with banking regulators, to establish capital requirements for swap dealers and major swap participants, as well as requirements for posting margin by counterparties such as the Fund on cleared and uncleared derivatives, including swaps.  In addition, some provisions of the Dodd-Frank Act impose business conduct, reporting and disclosure requirements on dealers, and recordkeeping and other obligations on counterparties such as the Fund.

While some provisions of the Dodd-Frank Act have either already been implemented through rulemaking by the CFTC and/or the SEC or must be implemented through future rulemaking by those and other federal agencies, and any regulatory or legislative activity may not necessarily have a direct, immediate effect upon the Fund, it is possible that, when compliance with these rules is required, they could potentially limit or completely restrict the ability of the Fund to use certain derivatives as a part of its investment strategy, increase the cost of entering into derivatives transactions or require

more assets of the Fund to be used for collateral in support of those derivatives than is currently the case. Limits or restrictions applicable to the counterparties with which the Fund engages in derivative transactions also could prevent the Fund from using derivatives or affect the pricing or other factors relating to these transactions, or may change the availability of certain derivatives.

The CFTC and the SEC continue to review the proposed and current regulatory requirements applicable to derivatives, including swaps.  It is not certain at this time how the regulators may change these requirements and such proposals may create barriers to the Fund’s use of certain types of investments.

Hedging Strategy Risk. Certain of the investment techniques that the Fund may employ for hedging will expose the Fund to additional or increased risks.

There may be an imperfect correlation between changes in the value of the Fund’s portfolio holdings and hedging positions entered into by the Fund, which may prevent the Fund from achieving the intended hedge or expose the Fund to risk of loss. In addition, the Fund’s success in using hedge instruments is subject to the Advisers’ ability to predict correctly changes in the relationships of such hedge instruments to the Fund’s portfolio holdings, and there can be no assurance that the Advisers’ judgment in this respect will be accurate. Consequently, the use of hedging transactions might result in a poorer overall performance for the Fund, whether or not adjusted for risk, than if the Fund had not hedged its portfolio holdings.

The Advisers are under no obligation to engage in any hedging strategies, and may, in their discretion, choose not to engage in hedging strategies. Even if the Advisers desire to hedge some of the Fund’s risks, suitable hedging transactions may not be available or, if available, attractive. A failure to hedge may result in losses to the value of the Fund’s investments.

Counterparty Risk. The Fund will be subject to credit risk with respect to the counterparties to the derivative contracts purchased or sold by the Fund. Recently, several broker-dealers and other financial institutions have experienced extreme financial difficulty, sometimes resulting in bankruptcy of the institution. Although the Investment Manager monitors the creditworthiness of the Fund’s counterparties, there can be no assurance that the Fund’s counterparties will not experience similar difficulties, possibly resulting in losses to the Fund. If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances.

Inflation Risk. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.

Management Risk. The Advisers’ judgment about the attractiveness, relative value or potential appreciation of a particular security or investment strategy may prove to be incorrect.

Current Economic Conditions—Credit Crisis Liquidity and Volatility Risk. The

markets for credit instruments, including fixed income securities, have experienced periods of extreme illiquidity and volatility since the latter half of 2007. Tightening of credit conditions occurred just as a record amount of corporate bonds (as measured by transaction volume) were scheduled to enter the markets in the third quarter of 2007. This imbalance has caused a significant dislocation in the markets, marked by sharply widened credit spreads, delayed high yield bond offerings and a general reduction in liquidity. General market uncertainty and consequent repricing risk have led to market imbalances of sellers and buyers, which in turn have also resulted in significant valuation uncertainties in a variety of debt securities, including certain fixed income securities. In addition, during 2008, several major dealers of fixed income securities exited the market via acquisition or bankruptcy. These conditions resulted, and in many cases continue to result in greater volatility, less liquidity, widening credit spreads and a lack of price transparency, with many debt securities remaining illiquid and of uncertain value. During times of reduced market liquidity the Fund may not be able to sell securities readily at prices reflecting the values at which the securities are carried on the Fund’s books. Sales of large blocks of securities by market participants, such as the Fund, that are seeking liquidity can further reduce security prices in an illiquid market.

Furthermore, because of the current conditions in the credit markets across the globe, issuers of fixed income securities may be subject to increased costs associated with incurring debt, tightening underwriting standards and reduced liquidity for the loans they make, the securities they purchase and the securities they issue. The worsening general economic conditions have materially and adversely impacted the broader financial and credit markets and have reduced the availability of debt and equity capital for the market as a whole.

These developments have adversely affected the broader economy, and may continue to do so, which in turn may adversely affect the ability of issuers of securities owned by the Fund to make payments of principal and interest when due, lead to lower credit ratings and increased defaults. Such developments could, in turn, reduce the value of securities owned by the Fund. Extraordinary steps have been taken by the governments of several leading economic countries to combat the current economic crisis. The impact of these measures is not yet known and cannot be predicted.

Government Intervention in Financial Markets Risk. The recent instability in the financial markets has led the U.S. government and foreign governments to take a number of unprecedented actions designed to support certain financial institutions and segments of the financial markets that have experienced extreme volatility, and in some cases a lack of liquidity. U.S. federal and state governments and foreign governments, their regulatory agencies or self-regulatory organizations may take additional actions that affect the regulation of the securities in which the Fund invests, or the issuers of such securities, in ways that are unforeseeable. Issuers of corporate fixed income securities might seek protection under the bankruptcy laws. Legislation or regulation may also change the way in which the Fund itself is regulated. Such legislation or regulation could limit or preclude the Fund’s ability to achieve its investment objectives. The Advisers will monitor developments and seek to manage the Fund’s portfolio in a manner consistent with achieving the Fund’s investment objectives, but there can be no assurance that it will be successful in doing so.

Conflicts of Interest Risk.  The Investment Manager’s, the Investment

Adviser’s and the Sub-Adviser’s advisory fees are based on net assets plus the amount of any borrowings for investment purposes.  Consequently, the Advisers will benefit from an increase in the Fund’s net assets resulting from an offering or borrowings.  In addition, a Director who is an “interested person” (as such term is defined under the 1940 Act) of the Fund or a portfolio manager of the Fund could benefit indirectly from an increase in Fund assets because of such affiliations.

Non-Diversification Risk. As a “non-diversified” investment company, the Fund can invest more of its assets in fewer issuers than an investment company that is “diversified,” exposing the Fund to greater risk. The Fund, however, intends to comply with the diversification requirements imposed by the Code, for qualification as a regulated investment company.

Repurchase Agreements Risk. These transactions involve risks in the event of counterparty default or insolvency.

Securities Lending Risk. In connection with its loans of portfolio securities, the Fund may be exposed to the risk of delay in recovery of the loaned securities or possible loss of rights in the collateral should the borrower become insolvent. The Fund also bears the risk of loss on the investment of cash collateral. There is also the risk that, in the event of default by the borrower, the collateral might not be sufficient to cover any losses incurred by the Fund. There can be no assurance that the return to the Fund from a particular loan, or from its loans overall, will exceed the related costs and any related losses.

Tax Risk. The Fund may invest in securities of which the federal income tax treatment may not be clear or may be subject to recharacterization by the Internal Revenue Service (the “IRS”). It could be more difficult for the Fund to comply with the United States tax requirements applicable to regulated investment companies, or with other tax requirements applicable to foreign investors, if the tax characterization of the Fund’s investments or the tax treatment of the income from such investments were successfully challenged by the IRS. See “Taxation.”

Investment Manager, Investment Adviser and Sub-Adviser

The Fund’s investment manager is Aberdeen Asset Management Asia Limited, the Fund’s investment adviser is Aberdeen Asset Management Limited and the Fund’s sub-adviser is Aberdeen Asset Managers Limited. The Investment Manager is a Singapore corporation located at 21 Church Street, #01-01 Capital Square Two, Singapore 049480. The Investment Manager manages the Fund’s investments and makes investment decisions on behalf of the Fund. The Investment Adviser is an Australian corporation located at Level 6, 201 Kent Street, Sydney, NSW 2000, Australia. The Investment Adviser makes recommendations to the Investment Manager as to the overall structure of the Fund’s portfolio, including asset allocation advice and general advice on investment strategy relating to the Fund’s overall investment objectives and the selection of and the placement of orders with brokers and dealers to execute portfolio transactions on behalf of the Fund. The Sub-Adviser is a United Kingdom limited company located at Bow Bells House, 1 Bread Street, London, England, EC4M 9HH. The Sub-Adviser provides sub-advisory services to the Fund, in accordance with the Fund’s stated investment objectives, policies and limitations and subject to the supervision of the Board of Directors, and manages the portion of the Fund’s assets allocated to it by the Investment Manager. Each of the Investment Manager, the Investment Adviser and the Sub-Adviser is a registered investment adviser under the Advisers Act.

Each of the Investment Manager, the Investment Adviser, and the Sub-Adviser is a wholly-owned subsidiary of Aberdeen Asset Management PLC (“Aberdeen PLC”), which is the parent company of an asset management group managing approximately $[     ] billion in assets as of [date] for a range of pension funds, financial institutions, investment trusts, unit trusts, offshore funds, charities and private clients, in addition to U.S. registered investment companies. The registered offices of Aberdeen PLC are located at 10 Queen’s Terrace, Aberdeen, Scotland AB 10 1 YG. Aberdeen PLC, its affiliates and subsidiaries are referred to collectively herein as “Aberdeen.” Aberdeen PLC was formed in 1983 and was first listed on the London Stock Exchange in 1991. See “Management of the Fund—The Investment Manager, the Investment Adviser and the Sub-Adviser.”

The Fund pays the Investment Manager a fee at the annual rate of 0.65% of the Fund’s average weekly Managed Assets (defined below) up to $200 million, 0.60% of Managed Assets between $200 million and $500 million, 0.55% of Managed Assets between $500 million and $900 million, 0.50% of Managed Assets between $900 million and $1.75 billion, and 0.45% of Managed Assets in excess of $1.75 billion, computed based upon Managed Assets determined weekly and payable at the end of each calendar month. For purposes of this calculation, “Managed Assets” of the Fund shall mean total assets of the Fund, including any form of investment leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility or the issuance of debt securities), (ii) the issuance of preferred stock or other similar preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the Fund’s investment objectives and policies, and/or (iv) any other means. During periods in which the Fund is utilizing leverage, the advisory fee payable to the Investment Manager will be higher than if the Fund did not utilize a leveraged capital structure because the fee is calculated as a percentage of the Managed Assets, including those purchased with leverage. The Fund is currently utilizing leverage.

The Investment Manager pays the fees of the Investment Adviser. These fees are computed at the annual rate of 0.25% of the Fund’s average weekly Managed Assets up to $1,200 million and 0.20% of such assets in excess of $1,200 million, computed based upon the value of the Managed Assets determined weekly and payable at the end of each calendar month.

The Investment Manager pays the fees of the Sub-Adviser. The Sub-Adviser receives an annual total fee of $100,000, payable in monthly increments.

Portfolio Managers

The Fund is managed by the Asian Fixed Income Team. The following persons have the most significant responsibility for the day-to-day management of the Fund’s portfolio—Anthony Michael, Head of Fixed Income—Asia; Adam McCabe, Senior Portfolio Manager/Deputy Head of Asian Fixed Income; Kenneth Akintewe, Portfolio Manager; Thu HaChow, Senior Investment Manager — Fixed Income — Asia; and Nick Bishop, Senior Investment Manager. See “Management of the Fund—Portfolio Management.”

Administrator

Aberdeen Asset Management Inc. (the “Administrator”), 1735 Market Street, 32nd Floor, Philadelphia, PA 19103, is the administrator for the Fund. The Administrator is a subsidiary of Aberdeen PLC and an affiliate of the Investment Manager, the Investment Adviser and the Sub-Adviser. The Fund pays the

Administrator a fee at an annual rate equal to 0.125% of the Fund’s average weekly Managed Assets between $0 to $1 billion, 0.10% between $1 billion and $2 billion, and 0.075% in excess of $2 billion, computed based upon the value of the Managed Assets determined at the end of each week. See “Management of the Fund—Administrator.”

Sub-Administrator

State Street Bank and Trust Company (“State Street”), One Heritage Drive, North Quincy, MA 02171, is the sub-administrator for the Fund and certain other affiliated funds.

Custodian

State Street acts as the Fund’s custodian. See “Management of the Fund—Custodian.”

Transfer Agent

Computershare Trust Company, N.A., ESPP/SOP, 250 Royall Street, Canton, MA 02021 (“Computershare”), serves as the Fund’s stock transfer agent and dividend paying agent. See “Management of the Fund—Transfer Agent.”

Dividends and Distributions

Preferred Stock Distributions. In accordance with the Fund’s Articles of Incorporation and any amendments or supplements thereto, including any articles supplementary of the Fund establishing a series of preferred stock (the “Articles Supplementary” and together with the Articles of Incorporation, the “Charter”), all preferred stock of the Fund must have the same seniority with respect to distributions. Accordingly, no full distribution will be declared or paid on any series of preferred stock of the Fund for any dividend period, or part thereof, unless full cumulative dividends and distributions due through the most recent dividend payment dates for all series of outstanding preferred stock of the Fund are declared and paid. If full cumulative distributions due have not been declared and made on all outstanding preferred stock of the Fund, any distributions on such preferred stock will be made as nearly pro rata as possible in proportion to the respective amounts of distributions accumulated but unmade on each such series of preferred stock on the relevant dividend payment date.

In the event that for any calendar year the total distributions on shares of the Fund’s preferred stock exceed the Fund’s current and accumulated earnings and profits allocable to such shares, the excess distributions will generally be treated as a tax-free return of capital (to the extent of the shareholder’s tax basis in the shares). The amount treated as a tax-free return of capital will reduce a shareholder’s adjusted tax basis in the preferred stock, thereby increasing the shareholder’s potential gain or reducing the potential loss on the sale of the shares.

Common Stock Distributions. It is the Fund’s current policy to pay distributions to shareholders of common stock from net investment income supplemented by net realized foreign exchange gains, net realized short-term capital gains and return of capital distributions, if necessary, on a monthly basis. A return of capital to a shareholder represents a return of a portion of the shareholder’s original investment in the Fund.  A return of capital may have the effect of decreasing the asset coverage per share with respect to the Fund’s preferred stock. The Fund will also declare and pay distributions to shareholders of common stock at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any. Dividends and distributions to shareholders are recorded on the ex-dividend date.

Taxation

Withholding and/or other taxes may apply in the countries in which the Fund invests, which will reduce the Fund’s cash return in those countries. The Fund intends to elect, when eligible, to “pass-through” to the Fund’s shareholders the

ability to claim (subject to limitations) a deduction or credit for the amount of foreign income and similar taxes paid by the Fund. Tax considerations for an investor in the Fund are summarized under “Taxation.” See also “Risks and Special Considerations.”

For the Year Ended October 31,

2012

2011

2010

2009

2008

2007

Per Share Operating Performance(a):

Net asset value per common share, beginning of year

$

7.48

$

7.27

$

6.53

$

4.91

$

6.99

$

6.46

Net investment income

0.36

0.39

0.37

0.35

0.42

0.44

Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions

0.36

0.24

0.79

1.73

(2.03

)

0.63

Dividends to preferred shareholders from net investment income

—

—

—

—

(0.06

)

(0.12

)

Total from investment operations applicable to common shareholders

0.72

0.63

1.16

2.08

(1.67

)

0.95

Distributions to common shareholders from:

Net investment income

(0.42

)

(0.42

)

(0.42

)

(0.38

)

(0.42

)

(0.26

)

Tax return of capital

—

—

—

(0.09

)

—

(0.16

)

Total distributions

(0.42

)

(0.42

)

(0.42

)

(0.47

)

(0.42

)

(0.42

)

Effect of Fund shares repurchased

—

—

—

0.01

0.01

—

Net asset value per common share, end of year

7.78

7.48

7.27

6.53

4.91

6.99

Market value, end of year

7.90

6.93

6.90

6.04

4.18

6.29

Total Investment Return Based on(b):

Market value

20.47

%

6.59

%

21.73

%

58.26

%

-28.40

%

10.18

%

Net asset value

9.92

%(g)

9.20

%

18.63

%

45.66

%

-24.32

%

15.62

%

Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data(c):

Net assets applicable to common shareholders, end of year (000 omitted)

$

2,042,337

$

1,951,739

$

1,897,181

$

1,703,352

$

1,284,318

$

1,853,448

Average net assets applicable to common shareholders (000 omitted)

$

1,965,038

$

1,937,986

$

1,753,665

$

1,457,521

$

1,741,105

$

1,763,579

Net operating expenses

1.38

%

1.49

%

1.89

%

2.20

%

1.85

%(d)

1.24

%(d)

Net operating expenses without reimbursement

1.38

%

1.49

%

1.89

%

2.22

%(e)

—

—

Net operating expenses, excluding interest expense

1.01

%

1.05

%

1.19

%

1.37

%

1.22

%

1.24

%

Net investment income

4.85

%

5.30

%

5.44

%

6.40

%

5.51

%

4.80

%

Portfolio turnover

38

%

72

%

67

%

68

%

58

%

32

%

Senior securities (loan facility) outstanding (000 omitted)

$

600,000

$

600,000

$

600,000

$

600,000

$

520,000

—

Senior securities (preferred stock) outstanding (000 omitted)

—

—

—

—

—

$

600,000

Asset coverage ratio on revolving credit facility at year end(f)

440

%

425

%

416

%

384

%

347

%

—

Asset coverage per $1,000 on revolving credit facility at year end

$

4,404

$

4,253

$

4,162

$

3,839

$

3,470

—

Asset coverage ratio on preferred stock at year end(f)

—

—

—

—

—

409

%

Asset coverage per share on preferred stock at year end

—

—

—

—

—

$

102,227

For the Year Ended October 31,

2006

2005

2004

2003

PER SHARE OPERATING PERFORMANCE(1):

Net asset value per common share, beginning of year

$

6.32

$

6.42

$

6.10

$

5.06

Net investment income

0.40

0.41

0.36

0.40

Net realized and unrealized gains/(losses) on investments, swaps, futures contracts and foreign currency transactions

0.27

(0.02

)

0.41

1.09

Dividends to preferred shareholders from:

Net investment income

(0.11

)

(0.07

)

(0.03

)

(0.03

)

Total from investment operations applicable to common shareholders

0.56

0.32

0.74

1.46

Distributions to common shareholders from:

Net investment income

(0.37

)

(0.36

)

(0.37

)

(0.31

)

Tax return of capital

(0.05

)

(0.06

)

(0.05

)

(0.11

)

Total distributions

(0.42

)

(0.42

)

(0.42

)

(0.42

)

Increase resulting from Fund share repurchase

—

—

—

—

Net asset value per common share, end of year

6.46

6.32

6.42

6.10

Market value, end of year

6.10

5.76

6.34

6.03

TOTAL INVESTMENT RETURN BASED ON(3):

Market value

13.43

%

-2.93

%

12.58

%

53.64

%

Net asset value

9.48

%

5.18

%

12.69

%

30.55

%

RATIO TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS/SUPPLEMENTARY DATA(4):

Net assets applicable to common shareholders, end of year (000 omitted)

$

1,712,017

$

1,675,651

$

1,700,459

$

1,613,979

Average net assets applicable to common shareholders (000 omitted)

1,689,100

1,749,085

1,654,712

1,496,312

Operating expenses(5)

1.22

%

1.22

%

1.30

%

1.45

%

Net investment income

4.65

%

5.11

%

5.22

%

6.51

%

Portfolio turnover

21

%

16

%

13

%

37

%

Senior securities (preferred stock) outstanding (000 omitted)

$

600,000

$

600,000

$

600,000

$

600,000

Asset coverage on preferred stock at year end

385

%

379

%

384

%

369

%

Year

Title of Security

Total Amount
Outstanding(1)

Asset Coverage
Per Unit

Involuntary
Liquidating
Preference Per
Unit(2)

Average Market
Value

2012

Revolving Credit Facility

$

600,000

2011

Revolving Credit Facility

$

600,000

2010

Revolving Credit Facility

$

600,000

2009

Revolving Credit Facility

$

600,000

2008

Revolving Credit Facility

$

520,000

2007

Auction Market Preferred Stock

$

600,000

2006

Auction Market Preferred Stock

$

600,000

2005

Auction Market Preferred Stock

$

600,000

2004

Auction Market Preferred Stock

$

600,000

2003

Auction Market Preferred Stock

$

600,000

(1)

Total amount of outstanding at the end of the period presented.

(2)

The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it.

Title of Class 

Amount
Authorized

Amount Held
by Fund for
its own Account

Amount
Outstanding
Exclusive of
Amount held
by Fund

Common Stock

400,000,000

263,032,220

Preferred Stock

100,000,000

0