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Focus on capital growth and dividend yield

Aberdeen Asian Income Fund 12 March 2020 Update
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Aberdeen Asian Income Fund

Focus on capital growth and dividend yield

Investment companies
Asia-Pacific equity income

12 March 2020

Price

186.5p

Market cap

£330m

AUM

£394m

NAV*

201.6p

Discount to NAV

7.5%

NAV**

202.6p

Discount to NAV

7.9%

*Excluding income. **Including income. As at 10 March 2020.

Yield

5.0%

Ordinary shares in issue

177.1m

Code

AAIF

Primary exchange

LSE

AIC sector

Asia Pacific Income

Share price/discount performance

Three-year performance vs index

52-week high/low

222.5p

182.3p

243.7p

199.0p

**Including income.

Gearing

Gross*

9.3%

Net*

8.0%

*As at 31 January 2020.

Analysts

Mel Jenner

+44 (0)20 3077 5720

Sarah Godfrey

+44 (0)20 3681 2519

Aberdeen Asian Income Fund is a research client of Edison Investment Research Limited

Aberdeen Asian Income Fund (AAIF) is managed by Aberdeen Standard Investments Asia (ASI Asia), aiming to provide reliable quarterly income and long-term capital growth. Its investment process identifies high-quality and attractively valued stocks that can be held for the long term. Manager Yoojeong Oh says that Asia offers attractive growth opportunities and dividend prospects, and ‘the number of dividend-paying stocks is on the rise’. She highlights the deep resources of the ASI Asia investment team, suggesting its presence on the ground and an extensive number of company meetings provides a strong foundation for successful bottom-up stock selection. While AAIF does not have a formal benchmark, its NAV has outperformed the MSCI AC Asia Pacific ex-Japan index and the MSCI AC Asia Pacific ex-Japan High Dividend Yield index over the long term.

Above-average growth prospects in Asia versus the rest of the world

Source: International Monetary Fund, Edison Investment Research

The market opportunity

While near-term economic activity is being negatively affected by the COVID-19 outbreak, over the longer term, the Asia Pacific region offers superior growth prospects. Equity valuations in Asia are relatively attractive compared with global stocks, while Asia also offers a broadly comparable dividend yield.

Why consider investing in AAIF?

Portfolio of high-quality companies, trading on reasonable valuations.

Manager unconstrained by benchmark allocations; differentiated geographic weightings versus its peers.

Long-term NAV outperformance versus the Asia Pacific stock market.

Attractive 5.0% dividend yield, fully funded by income.

Scope for a narrower discount

AAIF is currently trading at a 7.9% discount to cum-income NAV, which compares with the 7.4% to 8.1% range of average discounts over the last one, three and five years. There is scope for the discount to narrow given the fund’s three peers in the AIC Asia Pacific Income sector are all afforded a higher valuation. AAIF has a progressive dividend policy; the annual dividend has increased for the last 11 consecutive years.

Exhibit 1: Company at a glance

Investment objective and fund background

Recent developments

AAIF aims to provide investors with a total return primarily through investing in Asian Pacific securities, including those with an above-average yield. Within its overall investment remit, the company aims to grow its dividends. While the portfolio is constructed without reference to any benchmark, the company measures its performance against the MSCI AC Asia Pacific ex-Japan index and the MSCI AC Asia Pacific ex-Japan High Dividend Yield index (both in £ terms).

14 January 2020: announcement of fourth interim dividend of 2.50p (+4.2% year-on-year).

16 October 2019: announcement of third interim dividend of 2.25p (flat year-on-year).

14 August 2019: results for the six months ended 30 June 2019. NAV TR +13.3% and share price TR +13.4% versus TR +12.5% for the MSCI AC Asia Pacific ex-Japan and TR +11.5% for the MSCI AC Asia Pacific ex-Japan High Dividend Yield indices (both currency adjusted).

Forthcoming

Capital structure

Fund details

AGM

May 2020

Ongoing charges

1.07%

Group

Aberdeen Standard Investments

Final results

April 2020

Net gearing

8.0%

Manager

Aberdeen Standard Investments Asia

Year end

31 December

Annual mgmt fee

0.85%

Address

1st Floor, Sir Walter Raleigh House, 48-50 Esplanade, St Helier, Jersey, JE2 3QB

Dividend paid

Quarterly

Performance fee

No

Launch date

December 2005

Company life

Indefinite

Phone

0808 500 0040/+44 (0) 20 7618 1444

Continuation vote

None

Loan facilities

£50m with Scotiabank

Website

www.asian-income.co.uk

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

Dividends are paid quarterly, in May, August, November and February. The board’s aim is to grow the company’s dividends.

Renewed annually, the board has the authority to repurchase up to 14.99% of AAIF shares or allot up to c 10% of shares. Shares may be repurchased when the discount to NAV exceeds 5%.

Shareholder base (as at 28 February 2020)

Portfolio exposure by sector (as at 31 January 2020)

Top 10 holdings (as at 31 January 2020)

Portfolio weight %

Company

Country

Sector

31 January 2020

31 January 2019*

Samsung Electronics (pref)

South Korea

Information technology

7.0

4.7

Taiwan Semiconductor Manufacturing Co

Taiwan

Information technology

6.6

4.4

Venture Corporation

Singapore

Information technology

3.8

3.8

HSBC

Hong Kong

Financials

3.4

3.9

Oversea-Chinese Banking Corporation

Singapore

Financials

3.3

3.4

Tesco Lotus Retail Growth

Thailand

Consumer staples

2.9

3.2

Taiwan Mobile

Taiwan

Communication services

2.9

2.7

Ping An Insurance

China

Financials

2.8

N/A

LG Chem (pref)

South Korea

Materials

2.6

N/A

SingTel

Singapore

Communication services

2.4

2.4

Top 10 (% of portfolio)

37.7

34.0

Source: AAIF, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in end-January 2019 top 10.

Market outlook: Higher GDP and attractive valuations

Over the last five years, the broad Asian market has performed relatively better than Asian high-yield and UK equities (in sterling terms, Exhibit 2, LHS). While near-term GDP estimates are likely to be revised lower due to the economic impacts of the COVID-19 outbreak, as illustrated on the front-page chart, the Asia Pacific region has superior longer-term growth prospects compared with the world and advanced economies; factors underpinning this include favourable demographic trends and rising demand for premium products and services.

Asian shares also remain relatively attractively valued. The Datastream Asia ex-Japan index is trading on a forward P/E multiple of 12.2x, which is a c 14% discount to the Datastream World index. Asia ex-Japan is also trading at a modest discount to its 10-year average, unlike global equities, which are trading at a 5% premium. With a backdrop of higher long-term growth and relatively attractive valuations, global investors may wish to consider an allocation to the Asia Pacific region; however, given current macro uncertainties, a focus on quality companies that are able to deliver a resilient income stream may be beneficial.

Exhibit 2: Market performance and valuation

Total return performance of Asia Pacific and UK equities over five years (£)

Valuation metrics of Datastream indices (at 10 March 2020)

 

Last

High

Low

10-year
average

Last as % of
average

Asia ex-Japan

P/E 12 months forward (x)

12.2

14.2

10.3

12.4

99

Price to book (x)

1.6

2.1

1.3

1.6

96

Dividend yield (%)

2.7

3.1

2.0

2.5

106

Return on equity (%)

10.2

16.5

10.2

12.8

80

World

P/E 12 months forward (x)

14.3

16.3

9.8

13.7

105

Price to book (x)

1.9

2.3

1.4

1.8

104

Dividend yield (%)

2.9

3.1

2.2

2.6

112

Return on equity (%)

11.2

13.3

9.2

11.2

99

Source: Refinitiv, Edison Investment Research

Fund profile: Above-average income

AAIF is a Jersey-registered, closed-end investment company that launched in December 2005. It is managed by the investment team at ASI Asia (a regional division of Standard Life Aberdeen), and aims to generate an attractive total return from a diversified portfolio of Asia Pacific equities, including those with above-average dividend yields. The manager is able to draw on the broad resources of more than 50 investment professionals across eight regional Asian offices, located in Singapore, Sydney, Kuala Lumpur, Tokyo, Hong Kong, Bangkok, Jakarta and Shanghai. AAIF invests across the market-cap spectrum and is unconstrained in terms of geographic and sector exposures. Its board follows a progressive dividend policy, and the annual dividend has increased in each of the last 11 years. The fund’s performance is measured against the MSCI AC Asia Pacific ex-Japan and the MSCI AC Asia Pacific ex-Japan High Dividend Yield indices (both currency adjusted). AAIF can invest in preference shares, debt, convertible securities, warrants and equity-related securities, as well as off-benchmark stocks (including Japan). A maximum 20% of total assets is permitted in a single issuer and the portfolio typically has 40–70 holdings. Gearing of up to 25% of NAV (up to 15% in normal market conditions) is permitted; at the end of January 2020, net gearing was 8.0%.The manager may write covered put and call options, and undertake stock lending to generate additional revenue, although these features are used sparingly.

The fund manager: ASI Asia

The manager’s view: Expecting a rebound in the IT sector

Oh highlights that in 2019, markets once again rewarded growth- and momentum- focused stocks, with Chinese internet stocks, as an example, performing particularly well. This was detrimental to AAIF’s relative investment performance, as the fund does not invest in companies that do not pay a dividend. However, Oh says that the fund’s 11.1% NAV growth last year was respectable, and the fully covered annual dividend has now grown for 11 consecutive years. Once more, the fund was able to add to its revenue reserves; the manager explains that this was helped by special dividends, including from mining companies, Indian IT services firms and Singaporean REITs.

For 2020, Oh is expecting a pick-up in corporate earnings, led by the IT sector, which should support AAIF’s revenues. However, she notes that some companies are being conservative; while they could pay higher dividends, they are cautious due to the US-China trade dispute, protests in Hong Kong and India, and higher levels of regulation in Australia. The level of caution has been exacerbated by the COVID-19 outbreak, leading companies to hoard cash rather than distribute it to shareholders. Despite this, the manager is confident that AAIF can continue to grow its dividends. At the beginning of this year, she had expected better performance from income/quality stocks, but the outbreak of the coronavirus proves that ‘uncertainty is always around the corner’; those stocks that have been most negatively affected so far have tended to be those operating in the areas of tourism, travel and consumption. Oh says that portfolio companies have discussed how the outbreak has affected their workforces and factory output. She is encouraged to report that AAIF’s largest holding, Samsung Electronics, is running full steam in China as its operations are highly automated, and not very labour intensive, referring to this as a ‘welcome update’. The manager also explains that there is a high level of government support to help cushion the negative economic impact of the coronavirus, which is not limited to China. As an example, the government budget in Singapore was increased to boost spending in areas such as healthcare, national development and transport.

Oh says that as income/value stocks have been out of favour with investors, there are now many good-quality companies, with net cash on their balance sheets, which are attractively valued. She is taking advantage of these opportunities to build up AAIF’s portfolio positions. The manager highlights the fund’s two largest geographical exposures, Singapore and Australia, which combined are approaching 40% of the fund. She says they are both high dividend-yielding economies, ‘but stocks are generally pretty cheap’. Singapore has the highest dividend yield in the region, while Australia offers growing, well-funded dividends in areas including banks and IT.

With the Q419 earnings season in full swing, Oh focuses on AAIF’s top two positions – Samsung and Taiwan Semiconductor Manufacturing Company (TSMC) – which together make up c 13.5% of the fund, saying they have both reported strong numbers. She explains that 2019 was difficult due to lower demand as customers ran down their inventories, but the industry saw an uptick in orders at the end of the year, which provides her with a level of confidence about growth in 2020. Oh says these companies have strong competitive positions, decent pricing power (for a commodity product) and advantages of scale, and generate high levels of cash flow, while industry supply growth is rational. She says that demand for their products is supported by the roll-out of 5G networks and increased demand for cloud-based IT solutions. Less encouraging are the recent results from HSBC; operating in an uncertain market, the bank has announced a restructuring, which the manager suggests is ‘sensible’. The company is focusing on its growth businesses and exiting unprofitable operations. While investors took the restructuring news poorly, the manager is comforted by the bank’s well-capitalised balance sheet and a focus on sustainable returns. She does not consider HSBC’s dividend to be at risk (current yield of 8.2%), and while current trading conditions in Asia are tough – not helped by the coronavirus and protests in Hong Kong – Oh believes the company has a very strong franchise that will prove successful over the long term.

Asset allocation

Investment process: Focus on quality and value

ASI Asia’s investment philosophy is based on the belief that over the long term, a company’s share price is driven by its fundamentals, but over shorter periods, the stock market can be inefficient, leading to value opportunities. Oh and the investment team undertake thorough fundamental research and many company meetings, seeking businesses that are trading below their intrinsic worth. They focus on high-quality companies with long-term growth potential and strong balance sheets that can support regular and growing dividends. AAIF’s investible universe is all companies in the Asia Pacific region that have been ascribed a ‘buy’ or ‘hold’ recommendation by ASI Asia’s investment team. Portfolio turnover is relatively low, averaging c 10–15% pa (12% in 2019), implying around a seven- to 10-year holding period. A focus on environmental, social and governance (ESG) issues is an integral part of the research process. Oh says that she and her team do not distinguish between a normal company meeting and an ESG discussion. For example, they have been talking to TSMC about the sustainability of its factories and water consumption – given water scarcity, the company is looking to improve the efficiency of every drop of water by 2.5x, using new technology. The manager says there is constant engagement with companies about their directors and management remuneration. She also notes that firms are increasingly communicating with shareholders in advance of their AGMs to signpost any necessary changes and make the AGM process smoother. Oh argues that the higher level of respect for external shareholders in Asia is a notable change compared with five years ago.

The manager is permitted to write covered call or put options in order to generate additional income. She says that option writing only contributed 60bp to AAIF’s income in 2019, explaining that premiums have been very tight due to the US-China trade dispute and more recently the COVID-19 outbreak, making it difficult to find options with a suitable risk/reward profile. The AAIF team has only written four options since the practice was adopted in January 2019. Oh says the process has not been as dynamic as she would have liked, but she will not write options ‘just for the sake of it’.

AAIF can hold fixed income investments in companies held in ASI Asia’s equity funds, and there are currently two corporate bonds in the portfolio, ICICI Bank and G3 Exploration.

Current portfolio positioning

At end-January 2020, AAIF’s top 10 holdings made up 37.7% of the fund, which was a modestly higher concentration compared with 34.0% a year earlier; eight positions were common to both periods. Looking at Exhibit 3, over this time, the largest changes on a geographic basis were a 3.3pp higher weighting in Taiwan and a 3.4pp lower exposure to Hong Kong. The fund is unconstrained by benchmark weightings, as evidenced by its significant overweight in Singapore (+18.0pp) and an even larger underweight in China (-22.6pp). In terms of sector exposure, the manager favours real estate (+12.1pp versus the MSCI AC Asia Pacific ex-Japan index), while the largest underweight is consumer discretionary (-8.6pp). AAIF has no healthcare names (c 5% of the index) due to the lack of big pharma companies in Asia that could provide a steady dividend stream.

Oh has been increasing the fund’s exposure to the IT sector, which she believes has good growth prospects; this has been funded by reducing the weighting to banks, which have been large income generators for many decades. The manager notes that Australian and Singaporean banks performed well at the start of 2019 as the US Federal Reserve adopted a more dovish stance, but had a trickier H219. She highlights AAIF’s holding in Bank Rakyat, which engages in the higher-growth business of microfinancing; however, as it is a riskier position compared to the traditional banks, despite its strong balance sheet, it is a modest c 1% holding in the fund. AAIF has an overweight exposure to the materials sector. Oh focuses on the fund’s holding in South Korean company LG Chem, which provides exposure to electric vehicle (EV) batteries. At the end of 2019, the company incurred one-off costs due to problems in its energy storage system business; however, in common with other EV-exposed companies, LG Chem’s share price has performed very well this year. AAIF is invested in this company more for its new, rather than its traditional, chemicals businesses, although this division funds the firm’s dividend.

Exhibit 3: Portfolio geographic exposure vs MSCI AC Asia Pacific ex-Jpn (% unless stated)

Portfolio end-
January 2020

Portfolio end-
January 2019

Change
(pp)

Index
weight

Active weight
vs index (pp)

Fund weight/
index weight (x)

Singapore

21.0

23.7

(2.7)

3.0

18.0

7.0

Australia

17.5

18.3

(0.8)

16.6

0.9

1.1

Taiwan

11.4

8.1

3.3

11.3

0.1

1.0

China

10.6

9.7

0.9

33.2

(22.6)

0.3

South Korea

9.6

6.8

2.8

11.3

(1.7)

0.8

Thailand

8.3

7.1

1.2

2.4

5.9

3.5

Hong Kong

6.6

10.0

(3.4)

8.1

(1.5)

0.8

India

3.3

2.2

1.1

8.8

(5.5)

0.4

New Zealand

3.1

3.3

(0.2)

0.7

2.4

4.4

Japan

3.0

4.0

(1.0)

0.0

3.0

N/A

Malaysia

2.7

4.2

(1.5)

1.8

0.9

1.5

Indonesia

1.1

0.0

1.1

1.9

(0.8)

0.6

United Kingdom

0.5

0.5

0.0

0.0

0.5

N/A

Philippines

0.0

0.0

0.0

0.9

(0.9)

0.0

Cash

1.3

2.1

(0.8)

0.0

1.3

N/A

100.0

100.0

100.0

Source: Aberdeen Asian Income Fund, Edison Investment Research. Note: Numbers subject to rounding.

Oh highlights a couple of new holdings in the fund: Ascendas India Trust (AIT) and Land and Houses. AIT is a higher-than-average growth Singaporean company; it invests in technology parks, office properties and warehouses in key Indian cities. The company has a stable Singapore-based management team, prime assets, strong rental growth, and a diversified tenant base, focusing on the high-growth IT services sector. AIT provides AAIF with exposure to a country where the manager has historically struggled to find attractive quality and value opportunities. The company is benefiting from the consumer growth story, as the increase in e-commerce is driving demand for its logistics assets. Land and Houses is a Thai real estate company – with a higher focus on residential property, it should prove more defensive in the current domestic consumer environment. Oh says the company has an attractive valuation and offers a c 8.6% dividend yield.

Recent disposals within the fund include: British American Tobacco Malaysia (structural trends away from tobacco usage); Japan Tobacco (dividend at risk due to lower returns from next-generation products); Giordano International (challenging growth outlook for the retail sector); and Hong Leong Finance (lower quality than AAIF’s other three Singaporean bank holdings).

Performance: Outperformance over the last decade

Exhibit 4: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

MSCI AC Asia Pac ex-Japan (%)

MSCI AC Asia Pac ex-Japan HDY (%)

CBOE UK All Companies (%)

29/02/16

(18.8)

(12.0)

(12.1)

(13.7)

(7.6)

28/02/17

40.5

37.4

43.7

42.4

23.7

28/02/18

8.6

8.6

15.2

11.6

4.4

28/02/19

0.8

(1.8)

(3.5)

(1.5)

1.6

29/02/20

(1.4)

0.7

4.5

0.5

(2.1)

Source: Refinitiv. Note: All % on a total return basis in pounds sterling.

Oh highlights the fund’s performance during the last six months, where not having a position in Alibaba has been detrimental. Positive contributors include AAIF’s top two holdings, Samsung and TSMC, where the manager is positive on their 2020 outlooks. Some of the fund’s China-exposed holdings have performed well, including China Resources Land and Yum China.

Exhibit 5: Investment company performance to 29 February 2020

Price, NAV and index total return performance, one-year rebased

Price, NAV and index total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised.

AAIF’s relative returns are shown in Exhibit 6. It has outperformed the MSCI AC Asia Pacific ex-Japan index over the last decade in both NAV and share price terms, and its NAV has outpaced the performance of the MSCI AC Asia Pacific ex-Japan High Dividend Yield index over the last one and 10 years. Of interest to UK shareholders, AAIF has also outperformed the broad UK market over the last one, three, five and 10 years in both NAV and share price terms.

Exhibit 6: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to MSCI AC Asia Pac ex-Japan

(2.1)

(3.8)

(5.7)

(5.7)

(7.2)

(16.1)

1.8

NAV relative to MSCI AC Asia Pac ex-Japan

(1.6)

(2.1)

(5.2)

(3.7)

(7.6)

(11.6)

11.0

Price relative to MSCI AC Asia Pac ex-Japan HDY

(3.4)

(3.5)

(4.3)

(1.9)

(2.4)

(9.3)

(1.1)

NAV relative to MSCI AC Asia Pac ex-Japan HDY

(2.9)

(1.7)

(3.8)

0.2

(2.8)

(4.4)

7.8

Price relative to CBOE UK All Companies

6.5

5.1

(1.0)

0.7

3.9

3.8

10.3

NAV relative to CBOE UK All Companies

7.1

7.0

(0.5)

2.9

3.4

9.4

20.2

Source: Refinitiv, Edison Investment Research. Note: Data to end-February 2020. Geometric calculation.

Exhibit 7: NAV TR relative to MSCI AC Asia Pacific ex-Japan index over three years

Source: Refinitiv, Edison Investment Research

Discount: Wider than peers

Oh is disappointed that AAIF’s discount to NAV remains wider than those of its peers, despite the fund’s attractive dividend yield and focus on high-quality companies. It is currently trading at a 7.9% share price discount to cum-income NAV, which is towards the wider end over the last 12 months (range of 5.5% to 9.7%). Over the last one, three, five and 10 years, the fund has traded at average discounts of 7.8%, 8.1%, 7.4% and 2.6% respectively. The board is committed to repurchasing shares when the share price discount to ex-income NAV exceeds 5% (in normal market conditions).

Exhibit 8: Share price discount to NAV (including income) over three years (%)

Source: Refinitiv, Edison Investment Research

Capital structure and fees

AAIF is a Jersey-registered, London-listed, closed-end investment company with one class of share; there are currently 177.1m ordinary shares in issue (with a further 17.9m held in treasury). It has a £40m three-year unsecured loan facility with Scotiabank (Ireland), which expires on 13 April 2020, and a £10m three-year term facility with Scotiabank Europe, which expires on 2 March 2021. At the end of January 2020, net gearing was 8.0%. AAIF’s manager is Aberdeen Standard Capital International Limited (ASCIL), which sub-delegates portfolio management to ASI Asia. ASCIL receives an annual management fee of 0.85% of the company’s rolling monthly average NAV over the previous six months. Fees are charged 40:60 to the revenue and capital accounts respectively, in line with the expected split of returns between income and capital; no performance fee is payable. In H119, AAIF’s ongoing charges were 1.07% (FY18: 1.11%).

Dividend policy and record

AAIF pays quarterly dividends in May, August, November and February. The FY19 total distribution of 9.25p per share is 1.1% higher year-on-year and represents the 11th consecutive annual increase. More Asian companies are paying a dividend, and the region now has a comparable yield to the world market. AAIF has also been adding to revenue reserves, which stood at c 6.3p per share at end-H119.

Based on its current share price, the fund offers a 5.0% dividend yield.

Peer group comparison

In Exhibit 9, we show the four funds in the AIC Asia Pacific Income sector. AAIF’s NAV total return ranks second over the last 10 years, third over the last one and three years, and fourth over the last five years. It has the widest discount, which may be due to AAIF’s differentiated exposure, with large weightings in Singapore and Australia, and a significant underweight exposure to China. However, it is interesting to note that in early February 2020, the fund’s closest peers – Henderson Far East Income and Schroder Oriental Income – were both trading on a premium and have de-rated during the recent stock market sell-off. AAIF’s ongoing charge is modestly above average, and no performance fee is payable. It has the highest level of gearing in the sector, and the second highest dividend yield.

Exhibit 9: AIC Asia Pacific Income sector at 10 March 2020*

% unless stated

Market
cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount
(cum-fair)

Ongoing charge

Perf.
fee

Net
gearing

Dividend
yield

Aberdeen Asian Income

330.2

(7.1)

(0.4)

21.1

110.3

(7.9)

1.1

No

108

5.0

Henderson Far East Income

427.4

(4.7)

3.3

26.4

76.6

(0.5)

1.1

No

103

7.2

JPMorgan Asia Growth & Income

325.5

(0.0)

20.9

57.7

103.7

(7.3)

0.7

No

100

4.5

Schroder Oriental Income

567.5

(7.9)

(0.6)

31.9

148.3

(4.5)

0.9

Yes

107

4.8

Average (4 funds)

412.7

(4.9)

5.8

34.3

109.7

(5.1)

1.0

104

5.4

Company rank in sector

3

3

3

4

2

4

2

1

2

Source: Morningstar, Edison Investment Research. Note: *Performance to 9 March 2020 based on ex-par NAV. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

The board

AAIF’s board has six directors; all are non-executive and five are independent of the manager. Charles Clarke is the chairman; he joined the board in March 2012 and assumed his current role in May 2018. Krystyna Nowak (senior independent director) was appointed in May 2015, Ian Cadby in May 2016, Mark Florance in May 2017 and Nicky McCabe in May 2018. Hugh Young is considered to be non-independent as he is the managing director of Standard Life Aberdeen’s Asian operations; he has served on AAIF’s board since the company’s inception in 2005, and since 31 March 2018 no longer receives a director’s fee.

General disclaimer and copyright

This report has been commissioned by Aberdeen Asian Income Fund and prepared and issued by Edison, in consideration of a fee payable by Aberdeen Asian Income Fund. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Aberdeen Asian Income Fund and prepared and issued by Edison, in consideration of a fee payable by Aberdeen Asian Income Fund. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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