# Aberdeen Australia Equity Fund, Inc. (NYSE MKT: IAF)
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Key Advantages of Closed-End Funds

There are several characteristics of closed-end funds that can help investors meet their investment goals:

Portfolio Management - Closed-end funds offer active professional management often at cost-effective prices.

Stable Asset Level - The asset base for closed-end funds is fairly stable. Without the pressure from unexpected cash flows into and out of the fund, managers can focus on longer-term strategies and participate in opportunities that may involve less liquid securities.

Market Pricing - Investors who wish to buy or sell fund shares do it on the stock exchange in a process identical to the purchase or sale of any other listed stock. All the strategies associated with stocks, such as market orders, limit orders, stop orders, short sales, and margin buying can be used in the purchase and sale of closed-end funds.

Trading Liquidity and Flexibility - Stock market listing means that closed-end fund shares may be bought or sold at any time during the trading day, and the price is updated throughout the trading day. Closed-end fund share prices will fluctuate with the market and may be worth more or less at the time of sale than the original purchase price.

Distributions - Although the amount of distributions may vary with fund performance and market conditions, distributions are paid according to a prescribed schedule -- typically monthly or quarterly -- and investors can rely on their timing.

Use of Leverage - Closed-end funds may use leverage to potentially enhance portfolio returns over the long term. By borrowing capital, the fund managers seek to provide outsized gains or enhance earnings. The principle is simple: the fund borrows capital or issues preferred shares in order to leverage its portfolio. When markets are rising and the cost of borrowing is lower than the net long-term rates earned by the underlying fund's portfolio, the fund's common shareholders will see greater returns. If the cost of leverage is too high or markets retrench, it can result in lower returns and increased volatility.

Lower Expense Ratios - Closed-end funds do not carry ongoing costs associated with distribution of shares, as a result their expense ratios may be lower. Over time, a lower expense ratio can boost investment results.

Automatic Dividend Reinvestment Plans - With an automatic dividend reinvestment plan, shareholders in a closed-end fund can generally choose to receive any dividends distributed by the fund in cash, or use the dividends to purchase additional fund shares. An automatic dividend reinvestment plan automatically invests all dividends received by investors in additional fund shares.

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