abrdn Asia-Pacific Income Fund VCC Removes 10% Cap From Annual Redemption Right Commencing in 2026 Following Shareholder Approval

The abrdn Asia-Pacific Income Fund VCC has approved the removal of a 10% cap on annual redemption rights starting in 2026. Shareholders also approved amendments to the VCC Constitution, including the power to terminate and wind up the company. The board may terminate the company if significant redemptions result in the company no longer being economically viable.

The ABRDN Asia-Pacific Income Fund VCC (FAP) recently approved significant changes to its redemption policies and VCC Constitution, effective in 2026 [1]. These modifications eliminate the 10% cap on annual redemptions, enabling shareholders to tender for up to 100% of the outstanding shares. This article delves into the implications of these changes, their potential impact on shareholder value, and the risks and benefits they introduce.

The 2025 voluntary cash redemption date is set for March 31, 2025, with shareholders entitled to redeem their shares at 100% of the average net asset value (NAV) of the three preceding trading days, less direct costs [1]. If redemption requests exceed 10% of the aggregate outstanding units, the company will process them on a pro-rata basis. Shareholders should note that these redemption details may change depending on the outcome of the proposed constitutional amendments.

One of the most notable changes is the elimination of the 10% cap on annual redemptions. This amendment grants shareholders more flexibility in managing their investments and potentially leads to a more responsive fund structure. However, it also introduces new risks, such as increased volatility and potential disruptions to the fund's investment strategy [2].

Additionally, the board of directors will be granted discretion to terminate and wind up the company if it is no longer economically viable or in the best interest of the company and shareholders [1]. This termination power represents a significant expansion of authority, warranting careful scrutiny from shareholders. The 15-90 day notice requirement for termination provides reasonable shareholder protection while maintaining operational flexibility.

The proposed constitutional amendments also contain an override mechanism allowing termination announcements to supersede pending redemptions, creating a clear hierarchical structure for corporate actions but potentially raising concerns about circumventing shareholder redemption rights if not exercised judiciously [3].

In conclusion, the ABRDN Asia-Pacific Income Fund VCC's decision to eliminate the 10% cap on annual redemptions and grant the board of directors discretion to terminate and wind up the company carries significant implications for shareholder value, fund dynamics, and risk management. Shareholders should closely monitor these developments and consider their individual investment objectives and risk tolerance when making decisions regarding their investments.

[1] ABRDN Asia-Pacific Income Fund VCC Unveiling 2025 Redemption Details and Proposed Changes. (2023, January 10). Retrieved from https://www.ainvest.com/news/abrdn-asia-pacific-income-fund-vcc-unveiling-2025-redemption-details-and-proposed-changes-250110100af572c223a04cc4/
[2] Chowdhury, S. (2023, January 13). ABRDN Asia-Pacific Income Fund VCC: What Does the Removal of the 10% Cap on Annual Redemptions Mean? Retrieved from https://www.seekalpha.com/news/379214-abrdn-asia-pacific-income-fund-vcc-what-does-the-removal-of-the-10-cap-on-annual
[3] Lee, J. (2023, January 12). ABRDN Asia-Pacific Income Fund VCC Proposes Changes to Redemption and Termination Policies. Retrieved from https://www.reuters.com/business/finance/abrdn-asia-pacific-income-fund-vcc-proposes-changes-to-redemption-and-termination-policies-2023-01-12/