
[Federal Register: August 29, 2008 (Volume 73, Number 169)]
[Notices]               
[Page 51027-51029]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29au08-140]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28364; 812-13528]

 
Aberdeen Asset Management Inc. and Aberdeen Funds; Notice of 
Application

August 25, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from section 15(a) of 
the Act and rule 18f-2 under the Act, as well as from certain 
disclosure requirements.

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Summary of Application: Applicants request an order that would permit 
them to enter into and materially amend subadvisory agreements without 
shareholder approval and would grant relief from certain disclosure 
requirements.

Applicants: Aberdeen Asset Management Inc. (the ``Adviser'') and 
Aberdeen Funds (the ``Trust'').

Filing Dates:  The application was filed on May 8, 2008. Applicants 
have agreed to file an amendment during the notice period, the 
substance of which is reflected in this notice.

Hearing or Notification of Hearing:  An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on September 19, 2008, and should be accompanied by proof of 
service on the applicants, in the form of an affidavit or, for lawyers, 
a certificate of service. Hearing requests should state the nature of 
the writer's interest, the reason for the request, and the issues 
contested. Persons may request notification of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants: Aberdeen Asset 
Management Inc., 1735 Market Street, 37th Floor, Philadelphia, PA 
19103; Aberdeen Funds, 5 Tower Bridge, 300 Barr Harbor Drive, Suite 
300, West Conshohocken, PA 19428.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, at 
(202) 551-6868, or Julia Kim Gilmer, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Room, 100 F Street, NE., Washington, DC 
20549-1520 (telephone (202) 551-5850).
    Applicants' Representations:
    1. The Trust, a Delaware statutory trust, is registered under the 
Act as an open-end management investment company and offers, or will 
offer, shares in 26 series each with separate investment objectives, 
policies and restrictions (each a ``Fund'' and collectively, the 
``Funds'').\1\ The Adviser

[[Page 51028]]

is registered as an investment adviser under the Investment Advisers 
Act of 1940 (``Advisers Act'') and provides investment management 
services to the Funds pursuant to an investment management agreement 
(``Advisory Agreement'') with the Trust. The Advisory Agreement has 
been approved by the Trust's board of trustees (the ``Board''), 
including a majority of the trustees who are not ``interested 
persons,'' as defined in section 2(a)(19) of the Act, of the Trust or 
the Adviser (``Independent Trustees'') and by the initial shareholder 
of each Fund.
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    \1\ Applicants also request relief with respect to future series 
of the Trust and any other existing or future registered open-end 
management investment company or series thereof that: (a) Is advised 
by the Adviser or a person controlling, controlled by, or under 
common control with the Adviser; (b) uses the manager of managers 
structure described in the application; and (c) complies with the 
terms and conditions of the application (included in the term 
``Funds''). The only existing registered open-end management 
investment company that currently intends to rely on the requested 
order is named as an applicant. The term ``Adviser'' includes (a) 
the Adviser, and (b) any entity controlling, controlled by, or under 
common control with the Adviser. If the name of any Fund contains 
the name of a Subadviser (as defined below), the name of the Adviser 
will precede the name of the Subadviser.
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    2. Under the terms of the Advisory Agreement, the Adviser is 
authorized to manage the investment and reinvestment of the assets of 
each Fund and to continuously review, supervise and administer the 
investment program of each Fund. The Advisory Agreement also authorizes 
the Adviser, subject to Board approval, to enter into investment sub-
advisory agreements (``Subadvisory Agreements'') with one or more 
subadvisers (``Subadvisers''). Each Subadviser is, and will be, 
registered as an investment adviser under the Advisers Act. The Adviser 
evaluates, allocates assets to and oversees the Subadvisers and makes 
recommendations about their hiring, termination and replacement to the 
Board. Subadvisers recommended to the Board by the Adviser have been or 
will be selected and approved by the Board, including a majority of the 
Independent Trustees. Each Subadviser has discretionary authority to 
invest the assets or a portion of the assets of a particular Fund. The 
Adviser compensates each Subadviser out of the fees paid to the Adviser 
under the Advisory Agreement.
    3. Applicants request an order to permit the Adviser, subject to 
Board approval, to enter into and materially amend Subadvisory 
Agreements without obtaining shareholder approval. The requested relief 
will not extend to any Subadviser that is an affiliated person, as 
defined in section 2(a)(3) of the Act, of the Trust, a Fund or of the 
Adviser, other than by reason of serving as a Subadviser to one or more 
of the Funds (``Affiliated Subadviser'').
    4. Applicants also request an exemption from the various disclosure 
provisions described below that may require a Fund to disclose fees 
paid by the Adviser to each Subadviser. An exemption is requested to 
permit the Trust to disclose for each Fund (as both a dollar amount and 
as a percentage of each Fund's net assets): (a) The aggregate fees paid 
to the Adviser and any Affiliated Subadvisers; and (b) the aggregate 
fees paid to Subadvisers other than Affiliated Subadvisers 
(collectively, ``Aggregate Fee Disclosure''). For any Fund that employs 
an Affiliated Subadviser, the Fund will provide separate disclosure of 
any fees paid to the Affiliated Subadviser.
    Applicants' Legal Analysis:
    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except under a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series company affected by a matter must approve such 
matter if the Act requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 14(a)(3) of Form N-1A requires disclosure of 
the method and amount of the investment adviser's compensation.
    3. Rule 20a-1 under the Act requires proxies solicited with respect 
to an investment company to comply with Schedule 14A under the 
Securities Exchange Act of 1934 (``1934 Act''). Items 22(c)(1)(ii), 
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together, 
require a proxy statement for a shareholder meeting at which the 
advisory contract will be voted upon to include the ``rate of 
compensation of the investment adviser,'' the ``aggregate amount of the 
investment adviser's fees,'' a description of the ``terms of the 
contract to be acted upon,'' and, if a change in the advisory fee is 
proposed, the existing and proposed fees and the difference between the 
two fees. Form N-SAR is the semi-annual report filed with the 
Commission by registered investment companies. Item 48 of Form N-SAR 
requires investment companies to disclose the rate schedule for fees 
paid to their investment advisers, including the Subadvisers.
    4. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of investment company 
registration statements and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require 
that investment companies include in their financial statements 
information about investment advisory fees.
    5. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provisions of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act. Applicants state that their requested relief meets this standard 
for the reasons discussed below.
    6. Applicants assert that the shareholders are relying on the 
Adviser's experience to select one or more Subadvisers best suited to 
achieve a Fund's investment objectives. Applicants assert that, from 
the perspective of the investor, the role of the Subadvisers is 
comparable to that of the individual portfolio managers employed by 
traditional investment company advisory firms. Applicants state that 
requiring shareholder approval of each Subadvisory Agreement would 
impose costs and unnecessary delays on the Funds, and may preclude the 
Adviser from acting promptly in a manner considered advisable by the 
Board. Applicants note that the Advisory Agreement and any Subadvisory 
Agreement with an Affiliated Subadviser will remain subject to section 
15(a) of the Act and rule 18f-2 under the Act.
    7. Applicants assert that some Subadvisers use a ``posted'' rate 
schedule to set their fees. Applicants state that while Subadvisers are 
willing to negotiate fees that are lower than those posted on the 
schedule, they are reluctant to do so where the fees are disclosed to 
other prospective and existing customers. Applicants submit that the 
requested relief will allow the Adviser to negotiate more effectively 
with each Subadviser.
    Applicants' Conditions:
    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Fund may rely on the order requested in the 
application, the operation of the Fund in the manner described in the 
application will be approved by a majority of the Fund's outstanding 
voting securities, as defined in the Act, or, in the case of a Fund 
whose public shareholders purchase

[[Page 51029]]

shares on the basis of a prospectus containing the disclosure 
contemplated by condition 2 below, by the sole initial shareholder 
before offering that Fund's shares to the public.
    2. The prospectus for each Fund will disclose the existence, 
substance, and effect of any order granted pursuant to the application. 
Each Fund will hold itself out to the public as employing the 
management structure described in the application. The prospectus will 
prominently disclose that the Adviser has ultimate responsibility 
(subject to oversight by the Board) to oversee the Subadvisers and 
recommend their hiring, termination, and replacement.
    3. Within 90 days of the hiring of a new Subadviser, the affected 
Fund shareholders will be furnished all information about the new 
Subadviser that would be included in a proxy statement, except as 
modified to permit Aggregate Fee Disclosure. This information will 
include Aggregate Fee Disclosure and any change in such disclosure 
caused by the addition of the new Subadviser. To meet this obligation, 
the Fund will provide shareholders within 90 days of the hiring of a 
new Subadviser with an information statement meeting the requirements 
of Regulation 14C, Schedule 14C, and Item 22 of Schedule 14A under the 
1934 Act, except as modified by the order to permit Aggregate Fee 
Disclosure.
    4. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
    6. Independent legal counsel, as defined in rule 0-1(a)(6) under 
the Act, will be engaged to represent the Independent Trustees. The 
selection of such counsel will be within the discretion of the then-
existing Independent Trustees.
    7. Whenever a Subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
applicable Board minutes, that such change is in the best interests of 
the Fund and its shareholders, and does not involve a conflict of 
interest from which the Adviser or the Affiliated Subadviser derives an 
inappropriate advantage.
    8. Whenever a Subadviser is hired or terminated, the Adviser will 
provide the Board with information showing the expected impact on the 
profitability of the Adviser.
    9. The Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of the Fund's assets, and, subject to review 
and approval of the Board, will: (a) Set each Fund's overall investment 
strategies; (b) evaluate, select and recommend Subadvisers to manage 
all or a part of a Fund's assets; (c) allocate and, when appropriate, 
reallocate a Fund's assets among one or more Subadvisers; (d) monitor 
and evaluate the performance of Subadvisers; and (e) implement 
procedures reasonably designed to ensure that the Subadvisers comply 
with the relevant Fund's investment objective, policies and 
restrictions.
    10. The Adviser will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Adviser on a 
per-Fund basis. The information will reflect the impact on 
profitability of the hiring or termination of any Subadviser during the 
applicable quarter.
    11. No trustee or officer of the Trust or a Fund, or director or 
officer of the Adviser, will own, directly or indirectly (other than 
through a pooled investment vehicle that is not controlled by such 
person), any interest in a Subadviser, except for: (a) Ownership of 
interests in the Adviser or any entity that controls, is controlled by, 
or is under common control with the Adviser, or (b) ownership of less 
than 1% of the outstanding securities of any class of equity or debt of 
any publicly traded company that is either a Subadviser or an entity 
that controls, is controlled by, or is under common control with a 
Subadviser.
    12. Each Fund will disclose in its registration statement the 
Aggregate Fee Disclosure.
    13. The requested order will expire on the effective date of rule 
15a-5 under the Act, if adopted.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20017 Filed 8-28-08; 8:45 am]

BILLING CODE 8010-01-P
