The challenges

Over the course of 2023, investment trust discounts hit their widest level since 2008’s global financial crisis. This widening has been attributed to several key factors. Firstly, the impact of rising interest rates and the increasing appeal of cash deposits versus all risk assets. Secondly, the regulatory rules around cost disclosure: it has been argued that the calculation methodology used is making investment trusts appear optically less attractive than their open-ended peers, and less attractive to investors accordingly. As Chair of AAIF I have gladly been a signatory to the parliamentary paper requesting urgent change to the rules. Furthermore, investor demand has also fallen across the industry due to market stress and poor sentiment.

Being agile and responsive

This structural environment, when put into the context of the attractive long-term opportunities which Asian markets still offer, has acted as a strong motivator for the board to address, in order to increase investor demand for our trust. We have taken a holistic approach and addressed various key aspects, including performance, with the aim of increasing investor attention to the fund’s attractions.

Notable outperformance

Over recent years AAIF has delivered consistently robust performance, in no short part, we believe, due to abrdn’s investment teams being based ‘on the ground’ in Asia. These local teams, strategically positioned across the region, seek out cash-generative companies with robust balance sheets. The goal is to find companies that not only provide capital growth, but also increasingly attractive dividends that contribute to the fund’s rising income. During 2023, its NAV total return of 2.5% outshone the broader market represented by the MSCI AC Asia Pacific ex-Japan Index, which returned 1.6%. But in addition, the trust’s NAV and share price total returns have consistently outperformed the Index over one, three, and five years. A strategic underweight exposure to China has been a key contributor to this success.

Increasing dividend yield

Combined with this point-to-point investment return, the board has directed abrdn’s investment teams to optimise the portfolio with a target to increase its dividend yield. We know higher yields are particularly important for our retail investors.

In this regard, I am pleased to state that AAIF has a compelling track record. In the latest financial year to 31 December 2023, the fund achieved a notable 17.5% increase in total dividends, paying out 11.75p per share. This translates to a meaningful dividend yield of 5.6% at year-end. A dividend yield we aim to continue to increase, markets notwithstanding. We believe the Board’s commitment to further increasing dividends underscores its dedication to shareholder value.

Gearing

One of the most significant advantages of investment trusts is their ability to use ‘gearing’ or borrowing. When the stock market performs well and the fund manager makes sound investment choices, gearing can amplify income and capital returns over time. However, it also exposes investors to greater market movements, potentially exaggerating losses and increasing volatility. The actual level of gearing is determined by the investment manager, dependent on market conditions and in consultation with the board. AAIF’s gearing figure (net of cash) at year-end was 7.5% compared to 8.1% at the start of the year. The cost of borrowing plays a crucial role, and trusts typically use a mix of fixed and variable debt. In summary, gearing can enhance returns but requires prudent management to balance risk and reward.

Fees – realignment, reduction and reinvesting

All investors, whether retail or institutional, deserve value for money. In order to increase the fund’s appeal we have realigned the mechanism for how management fees are generated for the manager. From 1st January 2024 the management fees are now based on the lower of market capitalisation or net asset value. The ongoing charges ratio (OCR) is now expected to drop from 1% to 0.82%, which we believe positions the fund as one of the most cost-effective in its peer group. Also of note is the fact that the fee is market cap-based, aligning the manager with investors when it comes to being incentivised to attempt to reduce the discount. Furthermore, abrdn recently announced it was going to invest half of its management fees back into the fund, also aligning itself with investors.

In addition, we have engaged an external marketing advisor, to assist us in communicating our messages in a forthright and uncomplicated way, so that retail investors can immediately understand the fund’s appeal. This will be rolled out across our website messaging as well as our annual report, where we hope you will see a bold, fresh and engaging level of communication.

Investing in tomorrow – the abrdn Asian Income Fund advantage

In the ever-shifting landscape of investment trusts, abrdn Asian Income Fund has continued to evolve. We’ve navigated challenges, optimised performance, and realigned fees—all with one goal: to deliver value to our investors.

But we’re not just about numbers; we’re also about clarity. From our website to our annual report, get ready for a bold, fresh, and engaging experience.

Important information

Investment objective

To provide investors with a total return primarily through investing in Asia Pacific securities, including those with an above average yield. Within its overall investment objective, the Company aims to grow its dividends over time.

Discrete performance (%)

Total return; NAV to NAV, net income reinvested, GBP. Share price total return is on a mid-to-mid basis. Dividend calculations are to reinvest as at the ex-dividend date. NAV returns based on NAVs with debt valued at fair value. Source: abrdn Investments Limited, Lipper and Morningstar. Past performance is not a guide to future results.^A Including current year revenue.

Dividend per share (p)

DPS includes special dividends, where applicable.

Risk factors you should consider prior to investing:

• The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
• Past performance is not a guide to future results.
• Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
• The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
• The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
• The Company may charge expenses to capital which may erode the capital value of the investment.
Movements in exchange rates will impact on both the level of income received and the capital value of your investment.
• There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
• As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
• The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down.
• Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.
• Derivatives may be used, subject to restrictions set out for the Company, in order to manage risk and generate income. The market in derivatives can be volatile and there is a higher than average risk of loss.

Other important information:

An investment trust should be considered only as part of a balanced portfolio. The information contained in this document should not be considered as an offer, solicitation or investment recommendation to deal in the shares of any securities or financial instruments. It is not intended for distribution or use by any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication or use would be prohibited. Nothing herein constitutes investment, legal, tax or other advice and is not to be relied upon in making an investment or other decision. No recommendation is made, positive or otherwise, regarding individual securities mentioned. This is not an invitation to subscribe for shares and is by way of information only. Investment should only be following a review of the current Key Information Document (KID) and pre-investment disclosure document (PIDD) both of which are available on www.invtrusts. co.uk. Any data contained herein which is attributed to a third party (“Third Party Data”) is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use by abrdn*. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, abrdn* or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates. * abrdn means the relevant member of abrdn group, being abrdn plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis, should not be taken as an indication or guarantee of any future performance analysis forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI” Parties) expressly disclaims all warranties (including without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages (www.msci.com).

abrdn Investments Limited, registered in Scotland (No. 108419), 10 Queen’s Terrace, Aberdeen AB10 1XL, authorised and regulated by the Financial Conduct Authority in the UK. abrdn Asian Income Fund Limited has a registered office at JTC House, 28 Esplanade, St Helier, Jersey JE4 2QP, JTC Fund Solutions (Jersey) Limited acts as the administrator, and the Collective Investment Fund is regulated by the Jersey Financial Services Commission.