Document ID: SEC-2018-0532-0001
Agency: sec
Document Type: Notice
Title: Applications: Aberdeen Asset Management, Inc., et al.
Posted Date: 2018-04-02T04:00Z

[Federal Register Volume 83, Number 63 (Monday, April 2, 2018)]
[Notices]
[Pages 14068-14073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06567]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33058; 812-14670]

Aberdeen Asset Management Inc., et al.

March 27, 2018.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice.

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    Notice of application for an order under sections 6(c) and 17(b) of 
the Investment Company Act of 1940 (``Act'') for exemptions from 
section 17(a) of the Act, and under section 17(d) of the Act and rule 
17d-1 thereunder to permit certain joint transactions.

Summary of Application:  Applicants requests an order to permit certain 
registered open-end and closed-end management investment companies or 
series thereof to invest in a private investment vehicle established by 
their investment advisers for the purpose of investing in China A 
Shares and certain other Chinese securities.

Applicants:  Aberdeen Asset Management Inc. (``AAMI''), Aberdeen Asset 
Managers Limited, (``AAML''), Aberdeen Asset Management Asia Limited 
(``AAMAL,'' and together with AAMI and AAML, the ``Initial Advisers''), 
Aberdeen Funds (the ``Trust''), Aberdeen Greater China Fund, Inc. 
(``GCH''), and Aberdeen Institutional Commingled Funds, LLC (the 
``Commingled LLC'').

Filing Dates:  The application was filed on July 20, 2016, and amended 
on February 10, 2017, September 22, 2017, January 18, 2018, and March 
19, 2018.

Hearing or Notification of Hearing:  An order granting the requested 
relief 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 April 23, 2018, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Pursuant to rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES:  Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE, Washington, DC 20549-1090. Applicants: 225 Liberty Street, 
New York, NY 10281.

FOR FURTHER INFORMATION CONTACT:  Kieran G. Brown, Senior Counsel, at 
(202) 551-6773, or Robert H. Shapiro, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION:  The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations:

    1. The Trust is a Delaware statutory trust and is registered under 
Act as an open-end management investment company. GCH is a Maryland 
corporation and is registered under the Act as a closed-end management 
investment company. Each of Aberdeen Asia-Pacific (ex-Japan) Equity 
Fund, Aberdeen Emerging Markets Fund and Aberdeen China Opportunities 
Fund (together with GCH, collectively, the ``Initial Funds'') is a 
series of the Trust.
    2. The Commingled LLC is a limited liability company under the 
Delaware Limited Liability Company Act, which relies on the exemption 
from registration under the Act provided by section 3(c)(7) of the 
Act.\1\
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    \1\ Each entity that currently intends to rely on the requested 
relief, other than the Initial Sub-Advised Funds (defined below), 
has been named as an applicant. Any existing or future registered 
open-end or closed-end management investment companies or series 
thereof for which an Initial Adviser, or an Initial Adviser's 
successor, or any person controlling, controlled by, or under common 
control with an Initial Adviser (an ``Aberdeen Affiliate'') acts as 
investment adviser or sub-adviser (each such Initial Adviser or 
Aberdeen Affiliate acting as investment adviser or sub-adviser, an 
``Adviser'') that may rely on the requested relief in the future is 
a ``Future Fund''. For purposes of the requested order, the term 
``successor'' is limited to an entity that results from a 
reorganization into another jurisdiction or a change in the type of 
business organization. The Initial Funds, Sub-Advised Funds (as 
defined below) and Future Funds are referred to collectively as the 
``Funds'' or individually as a ``Fund''. Each Fund or other entity 
that may rely on the requested relief in the future will do so only 
in accordance with the terms and conditions of the requested order.
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    3. Each Adviser is registered as an investment adviser under the 
Investment Advisers Act of 1940 (``Advisers Act''), and AAMI, AAML and 
AAMAL are wholly-owned subsidiaries of Aberdeen Asset Management PLC. 
AAMI serves as the investment adviser to the series of the Trust 
pursuant to an investment advisory agreement between AAMI and the 
Trust, on behalf of its series (the ``AAMI Agreement''). AAMAL and AAML 
both serve as sub-advisers (collectively, and in this capacity, the 
``Sub-Advisers'') to certain series of the Trust, including Aberdeen 
Asia-Pacific (ex-Japan) Equity Fund, Aberdeen Emerging Markets Fund and 
Aberdeen China Opportunities Fund, pursuant to sub-advisory agreements 
by and among the Trust, AAMI and the respective Sub-Adviser (the ``Sub-
Advisory Agreements''). The Initial Advisers also serve as sub-adviser 
to a number of other registered management investment companies or 
series thereof.\2\ AAMAL

[[Page 14069]]

serves as the investment manager to GCH pursuant to an investment 
management agreement (together with the AAMI Agreement and Sub-Advisory 
Agreements, the ``Advisory Agreements''). The Initial Advisers are 
responsible for making investment decisions for the Initial Funds and 
Initial Sub-Advised Funds that they advise or sub-advise, as 
applicable, and for administering the business and affairs of such 
Initial Funds. The Initial Advisers are entitled, under the terms of 
the Advisory Agreements, to receive management fees directly from the 
Initial Funds, or in the case of the Sub-Advisers, from AAMI, in each 
case at specified rates. In the case of the Initial Sub-Advised Funds, 
the Initial Advisers receive a sub-advisory fee from the applicable 
Unaffiliated Manager (defined below) at specified rates.\3\ As 
investment adviser, investment manager and/or sub-adviser, AAMI's, 
AAML's and AAMAL's activities are subject to the oversight of the Board 
of Trustees of the Trust and the Board of Directors of GCH, as 
applicable (each Fund's Board of trustees/directors, a ``Board''), at 
least a majority of whose members are not ``interested persons'' of the 
Trust or GCH, as defined in section 2(a)(19) of the Act (the members of 
a Fund's Board who are not ``interested persons'' of the relevant Fund, 
as defined in Section 2(a)(19) of the Act, the ``Independent Board 
Members'').
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    \2\ The following registered management investment companies or 
series of registered management investment companies are sub-advised 
by an Adviser and, to the Adviser's knowledge, currently intend to 
rely on the requested relief, subject to approval by their 
respective primary investment advisers and boards of directors or 
trustees: First Trust/Aberdeen Emerging Opportunity Fund, 
Brighthouse/Aberdeen Emerging Markets Equity Portfolio, Emerging 
Markets Equity Portfolio, Thrivent Partner Emerging Markets Equity 
Fund, Thrivent Partner Worldwide Allocation Fund, Thrivent Partner 
Emerging Markets Equity Portfolio and Thrivent Partner Worldwide 
Allocation Portfolio (collectively, the ``Initial Sub-Advised 
Funds,'' and together with any other existing or future registered 
open-end or closed-end management investment company or series 
thereof that is sub-advised by an Adviser that may rely on the 
requested relief in the future, the ``Sub-Advised Funds''). Only the 
portion of a Sub-Advised Fund managed by an Adviser would be 
permitted to make investments into an Aberdeen China A Fund Series 
(defined below) in reliance on the requested order.
    \3\ Pursuant to condition 10, an Unaffiliated Manager (defined 
below) would be required to contractually agree to comply with the 
applicable conditions of the requested order as a prerequisite to a 
Sub-Advised Fund's reliance on the requested order.
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    4. The Advisers also advise or may advise collective investment 
trusts, private pooled investment vehicles and investment companies 
registered in other jurisdictions (together, the ``Other Vehicles''), 
as well as separately managed accounts (together with the Other 
Vehicles, ``Other Accounts'').\4\ Applicants state that these Other 
Accounts may have similar investment objectives and strategies as the 
Funds and will invest in an Aberdeen China A Fund Series (defined 
below) along with one or more Funds.
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    \4\ The Applicants acknowledge that they are neither seeking nor 
receiving relief with respect to the separately managed accounts.
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    5. The Funds desire to purchase and redeem limited liability 
company interests (``Interests'') of separately identified series of 
the Commingled LLC (each separate series of the Commingled LLC, an 
``Aberdeen China A Fund Series''). Each Aberdeen China A Fund Series 
invests in securities of Chinese companies, including without 
limitation, class A Shares listed on People's Republic of China 
(``PRC'') stock exchanges, rights to invest in such class A Shares or 
other equivalent securities authorized by the China Securities 
Regulatory Commission for purchase by non-Chinese investors or 
``qualified foreign institutional investors'' (``QFII''), corporate or 
government bonds listed on PRC stock exchanges or traded in the over-
the-counter markets of the PRC and warrants listed on PRC stock 
exchanges (together, ``Chinese Securities'').\5\ Notwithstanding the 
foregoing, a security will only be a ``Chinese Security'' if it is 
subject to the quota systems described in the application (as such 
quota systems may be amended or altered from time to time). Interests 
in the Aberdeen China A Fund Series will be sold only to the Funds and 
the Other Accounts. The initial Aberdeen China A Fund Series will be 
the China A Share Equity Fund (the ``Initial Aberdeen China A Fund'').
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    \5\ Applicants represent that the Aberdeen China A Fund Series 
will not invest in derivatives or in other pooled investment 
vehicles.
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    6. Applicants assert that, for a variety of reasons, it is not 
practical or economical for the Funds to invest a significant amount of 
assets directly in Chinese Securities. Applicants state that, until 
2002, the Chinese government restricted investment in China A Shares 
and other Chinese Securities to domestic (i.e., Chinese) investors.\6\ 
According to Applicants, since 2002, the Chinese Government has 
permitted certain non-Chinese investors to invest in China A Shares and 
gradually has liberalized applicable rules to permit non-Chinese 
investors to invest in other types of Chinese Securities. However, 
subject to limited exceptions described in the application, to do so, a 
foreign investor must receive a license as a QFII or Renminbi Qualified 
Foreign Institutional Investor (``RQFII'') and be allotted a quota, 
representing the amount in renminbi of Chinese Securities that the 
investor may purchase. As described more fully in the application, 
individual applications on behalf of each Fund or Other Account would 
generally not be practical or feasible. Accordingly, AAMAL has obtained 
QFII and RQFII licenses and quota so that it can invest in Chinese 
Securities on behalf of the Funds and Other Accounts and the Advisers 
are applying for additional quota under the RQFII to be made available 
to the Initial Aberdeen China A Fund and the Other Accounts.
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    \6\ Applicants assert that, for a variety of reasons, China A 
Shares are a more attractive means to invest in Chinese companies 
than are other categories of stock that are available on the 
Shanghai, Shenzhen and Hong Kong Stock Exchanges (which is where a 
significant majority of publicly traded Chinese companies list their 
shares).
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    7. Applicants state that while some of the Initial Funds currently 
invest in China A Shares (pursuant to quota allocated by AAMAL) and 
other Chinese Securities, the use of the Aberdeen China A Fund Series 
would allow the Funds, and Other Accounts, to gain dedicated exposure 
to Chinese Securities and provide numerous additional investment 
opportunities for the Funds that are consistent with their investment 
objectives and policies. Additionally, being able to pool investments 
into China A Shares with Future Funds and Other Accounts will provide 
more diversification with respect to China A Share investments. Future 
Funds would obtain access to China A Shares without having to obtain 
individual licenses as QFIIs or RQFIIs, and without having to comply 
with the reporting required for each fund or account that is allocated 
quota from an Adviser with an existing QFII or RQFII license. 
Applicants state that each Aberdeen China A Fund Series will invest 
only in Chinese securities and cash and cash equivalents.
    8. The Commingled LLC is organized as a Delaware limited liability 
company. AAMI serves as the managing member of the Commingled LLC. The 
Commingled LLC does not have a board of directors or trustees. Each 
Fund or Other Account may purchase interests of an Aberdeen China A 
Fund Series; if there is more than one Aberdeen China A Fund Series, a 
Fund or Other Account may invest in some or all of the different 
Aberdeen China A Fund Series.\7\ Each Aberdeen China A Fund Series will 
have its own portfolio manager or portfolio management team at AAMI 
and/or AAMAL who will be responsible for selecting particular Chinese 
Securities for investment by that Aberdeen China A Fund Series. Each 
Fund or Other Account investing in an Aberdeen China A Fund Series will 
hold Interests which will represent a proportionate share of the 
Aberdeen China A Fund Series' net assets and a proportionate claim on 
the Aberdeen China A Fund Series' net income. Interests in an Aberdeen 
China A Fund

[[Page 14070]]

Series used by the Funds will be valued daily in accordance with the 
Funds' valuation procedures as approved by each Fund's Board and in 
accordance with section 2(a)(41) of the Act. Each Interest would have 
the same rights as any other Interest, and the Aberdeen China A Fund 
Series would not issue preferred interests.
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    \7\ Applicants state that one Aberdeen China A Fund Series is 
contemplated, but in the future additional Aberdeen China A Fund 
Series may be established to invest in different issuers, or types, 
of Chinese Securities based generally on the particular 
characteristics of those issuers, or types, of Chinese Securities.
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    9. The Advisers will not charge advisory fees to an Aberdeen China 
A Fund Series used by the Funds. The Advisers will, however, be 
entitled to receive applicable advisory fees from the Funds or Other 
Accounts. Expenses of the Aberdeen China A Fund Series will be charged 
to the Aberdeen China A Fund Series as a whole and accrue on a daily 
basis.\8\ The books of each Aberdeen China A Fund Series will be 
accounted for under standard accounting principles and in accordance 
with U.S. Generally Accepted Accounting Principles (``GAAP''), and they 
will be audited annually by a nationally recognized and PCAOB-
registered audit firm in accordance with U.S. Generally Accepted 
Auditing Standards (``GAAS'').\9\ An Aberdeen China A Fund Series in 
which a Fund invests will not engage in leverage or borrow except that 
an Aberdeen China A Fund Series may borrow in amounts not exceeding 5% 
of its total assets for temporary or emergency purposes or for the 
clearance of transactions, but not for speculative investment purposes, 
and may pledge its assets to secure such borrowings.
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    \8\ Expenses of the Aberdeen China A Fund Series will include 
basic fees and expenses of service providers, such as the 
administrator, transfer agent, accountant, local custodian and legal 
counsel. No fees will be paid by an Aberdeen China A Fund Series to 
an administrator or transfer agent that is an Aberdeen Affiliate or 
Unaffiliated Manager (defined below) except in accordance with 
condition 3.
    \9\ Applicants state that the GAAS standards applicable to the 
audit of an Aberdeen China A Fund Series would be the same standards 
as those applicable to a registered investment company. Further, 
applicants state that GAAP would apply to both the Aberdeen China A 
Fund Series audit and a registered investment company audit. Thus, 
applicants assert that critical accounting policies governing 
security valuation, accounting for investment transactions, 
recognition of investment income and of expenses, and accrual of 
expenses, which are often the critical policies applicable to 
investment companies, would apply in substantially the same manner 
for the audit of the Aberdeen China A Fund Series.
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    10. A Fund's decision to invest in an Aberdeen China A Fund Series 
will be made by a Fund's portfolio manager(s). Although daily 
repatriation is permitted under the RQFII open ended fund model, it is 
possible that proceeds from sales of portfolio investments in liquid or 
illiquid Chinese Securities may not be able to immediately be 
repatriated to a foreign investor such as an Aberdeen China A Fund 
Series at the approximate value at which the Aberdeen China A Fund 
Series has valued the investment. Accordingly, each Fund will treat its 
entire investment in an Aberdeen China A Fund Series as an investment 
that is not liquid for purposes of any applicable rules or guidance of 
the Commission or its staff regarding the management of liquidity with 
respect to open-end and/or closed-end funds, as applicable, and will 
otherwise be subject to the limits described in condition 4.
    11. Applicants state that access by the Funds and Other Accounts to 
the quota (i.e., to Chinese Securities) through the Aberdeen China A 
Fund Series is not expected to be limited. On a day to day basis, each 
Aberdeen China A Fund Series will utilize the quota that has been 
allocated by the respective Adviser or Aberdeen Affiliate. When an 
Aberdeen China A Fund Series has used up approximately 70% of the quota 
allocated to it, the respective Adviser or Aberdeen Affiliate will 
apply for additional quota. Before any additional quota is approved, in 
the event that there is a shortfall or an anticipated shortfall in 
available quota, the Adviser or Aberdeen Affiliate will review whether 
there is any surplus quota allocated to a Fund, Other Account or 
Aberdeen China A Fund Series that could be reallocated to the Aberdeen 
China A Fund Series. In the unlikely circumstances that there are times 
when an Aberdeen China A Fund Series' investments will be limited by 
quota limitations, access by the Funds and Other Accounts to Aberdeen 
China A Fund Series Interests will be allocated in accordance with the 
Advisers' trade order aggregation and trade allocation policies and 
procedures (the ``Advisers' Trade Allocation Policy''). Under the 
Advisers' Trade Allocation Policy, if fewer Interests are available 
than are requested by the portfolio managers of the Funds and Other 
Accounts, Interests will generally be allocated across participating 
accounts on a pro rata basis according to requested order size.\10\ 
However, there may be certain circumstances where the Advisers, 
consistent with the Trade Allocation Policy as it will be amended, may 
take into account other factors such that there is a deviation from an 
exact pro rata allocation in an effort to allocate Interests fairly 
across accounts. For example, given that it can take several months to 
receive additional quota under the RQFII structure, there may be an 
instance where one Fund requests additional Interests months before 
they are available, while another Fund requests additional Interests a 
day before they are available. In that case, the Advisers may take the 
timing of the request into account and fulfill the first Fund's entire 
request for additional Interests and offer the second Fund the 
remainder, if any, while the Advisers put in an additional request for 
quota so that it can satisfy the second Fund's request. Similarly, if 
more than one Fund or Other Account seeks to repatriate proceeds at or 
about the same time, and Chinese regulations limit the aggregate amount 
of proceeds that may be repatriated at any given time to a level below 
the aggregate amount sought to be repatriated, the requests by the 
applicable portfolio manager(s) will be aggregated, if received at or 
about the same time, and proceeds available for repatriation will be 
allocated pro rata among requesting Funds and Other Accounts.\11\ The 
Advisers will not consider the potential impact on the quota when 
making investment decisions for the Funds or Other Accounts.\12\
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    \10\ Currently, AAMAL manages one other client to which it has 
granted quota under its RQFII license, which is the Aberdeen 
Global--China A Share Equity Fund, a collective investment vehicle 
incorporated in Luxembourg (the ``Luxembourg China A Fund'') that is 
not available for sale to U.S. investors. The Luxembourg China A 
Fund investors are generally not permitted to invest in the Aberdeen 
China A Fund Series due to their residency outside of the U.S. AAMAL 
expects that both funds will continue to be offered despite their 
duplication in strategy, in order to make the strategy available in 
multiple jurisdictions. Additionally, AAMAL could, but is currently 
not expected to, grant RQFII quota to similar collective investment 
vehicles or other clients in the future (together with the 
Luxembourg China A Fund and the Aberdeen China A Fund Series, 
``Aberdeen China Accounts''). In the event that quota is exhausted 
by the Luxembourg China A Fund or other client(s) prior to the 
launch of the Initial China A Fund Series, AAMAL intends to apply 
for additional quota. To the extent there is demand for additional 
Chinese Securities through the RQFII license from multiple Aberdeen 
China Accounts or from other clients of the Advisers who are 
allocated quota through a QFII license, allocations of Chinese 
Securities, like allocations of other investment opportunities among 
Funds and Other Accounts, will be subject to the Advisers' Trade 
Allocation Policy. Similarly, consistent with the Advisers' Trade 
Allocation Policy, in the event that AAMAL receives additional RQFII 
quota, such additional RQFII quota will be allocated amongst 
Aberdeen China Accounts pro rata based on amounts requested by such 
Aberdeen China Accounts.
    \11\ Applicants are not seeking comfort nor is the Commission 
providing any opinion on whether the Advisers' Trade Allocation 
Policy meets the standards applicable under the Act or the Advisers 
Act.
    \12\ Applicants state that the quota may be reduced or revoked 
if AAMAL (or if other Advisers in the future receive a license, by 
the relevant Adviser) does not invest the full amount of its quota 
over a phase-in period, or if it repatriates its investments below 
the quota amount.

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[[Page 14071]]

    12. Applicants state that AAMI contemplates making a nominal 
investment (i.e. expected to be $1,000 and in no case more than 
$10,000) in the Initial Aberdeen China A Fund. AAMI will acquire 
Interests in the Initial Aberdeen China A Fund having rights, duties 
and obligations that are identical in all respects to Interests 
purchased by other investors in the Initial Aberdeen China A Fund. The 
sole purpose of the proposed investment is to permit AAMI to serve as 
the tax matters partner of the Initial Aberdeen China A Fund, which 
intends to be treated as a partnership for U.S. federal tax purposes. 
Applicants state that in the absence of AAMI's investment, it is likely 
that the U.S. Internal Revenue Service would appoint a non-managing 
member partner of the Commingled LLC to serve as tax matters partner of 
the Initial Aberdeen China A Fund in an audit proceeding. In addition, 
absent AAMI's investment, the tax matters partner could change from 
year-to-year, which may disrupt preparation of the Initial Aberdeen 
China A Fund's annual tax return.

Applicants' Legal Analysis

Section 17(a)--Purchase and Sale of Interests

    1. Section 17(a) generally provides, in part, that it is unlawful 
for any affiliated person of a registered investment company (``first-
tier affiliate''), or any affiliated person of such person (``second 
tier affiliate''), acting as principal, to sell or purchase any 
security or other property to or from such investment company. Section 
2(a)(3) of the Act defines an ``affiliated person'' of another person 
to include (a) any person directly or indirectly owning, controlling, 
or holding with power to vote, 5% or more of the outstanding voting 
securities of the other person; (b) any person 5% or more of whose 
outstanding voting securities are directly or indirectly owned, 
controlled, or held with the power to vote by the other person; and (c) 
any person directly or indirectly controlling, controlled by, or under 
common control with the other person. Section 2(a)(9) defines 
``control'' to mean ``the power to exercise a controlling influence 
over the management or policies of a company, unless such power is 
solely the result of an official position with such company.''
    2. Applicants state that the Funds and the Aberdeen China A Fund 
Series are expected to be affiliated persons under section 2(a)(3) of 
the Act, because it is expected that one or more Funds and Other 
Vehicles will own at least 5%, and potentially, more than 25% of the 
Interests of an Aberdeen China A Fund Series. While Interests of an 
Aberdeen China A Fund Series will be non-voting interests, a Fund or 
Other Vehicle could have power to exercise a controlling influence over 
the management or policies of an Aberdeen China A Fund Series and be 
deemed an affiliated person of the Aberdeen China A Fund Series under 
section 2(a)(3)(C). Furthermore, as the investment advisers to the 
Funds, the Advisers are affiliated persons of the Funds that they 
advise under section 2(a)(3)(E) and, because AAMI is the managing 
member of the Commingled LLC, an Aberdeen China A Fund Series may be 
deemed to be under AAMI's control under section 2(a)(3)(C), resulting 
in each Aberdeen China A Fund Series being deemed an affiliated person 
of an affiliated person of certain, if not all, of the Funds. Since the 
Funds and the Aberdeen China A Fund Series may share a common 
investment adviser or investment advisers that are wholly-owned by the 
same parent company, they may be deemed to be first-tier affiliates by 
virtue of arguably being under common control for purposes of section 
2(a)(3)(C).
    3. If a Fund and an Aberdeen China A Fund Series are deemed 
affiliates of each other, or even second-tier affiliates, the sale of 
Interests of the Aberdeen China A Fund Series to the Fund, and the 
redemption of such Interests by the Fund, would be prohibited under 
section 17(a) of the Act.
    4. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
the terms of the proposed transaction, including the consideration to 
be paid or received, are fair and reasonable and do not involve 
overreaching on the part of any person concerned, and the proposed 
transaction is consistent with the policies of each registered 
investment company involved and with the general purposes of the Act. 
Section 6(c) of the Act permits the Commission to exempt any person or 
transactions from any provisions of the Act 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.
    5. Applicants submit that the proposed arrangement satisfies the 
standards for relief under sections 17(b) and 6(c) of the Act. For the 
reasons discussed below, Applicants submit that the terms of the 
arrangement, including the consideration to be paid, are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned, and that the proposed transactions are consistent with the 
policy of each registered investment company concerned and with the 
general purposes of the Act. Applicants further submit that the Funds' 
participation in the Aberdeen China A Fund Series will be necessary or 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policies and 
provisions of the Act.
    6. Applicants state that each Fund and Other Account will be 
treated identically as a holder of Interest in the Aberdeen China A 
Fund Series, and each Fund and Other Account will purchase and sell 
Interests of an Aberdeen China A Fund Series on the same terms and on 
the same basis as each other Fund and Other Account that invests in 
that Aberdeen China A Fund Series. Applicants note that no Adviser, 
Aberdeen Affiliate, or investment manager to a Sub-Advised Fund that is 
not an Initial Adviser or Aberdeen Affiliate or any person controlling, 
controlled by or under common control with such investment manager (any 
such investment manager to a Sub-Advised Fund or control affiliate of 
such investment manager, an ``Unaffiliated Manager'') will receive an 
advisory fee from an Aberdeen China A Fund Series used by the Funds. 
The Funds, as holders of Interests of the Aberdeen China A Fund Series, 
will not be subject to any sales load, redemption fee, distribution fee 
or service fee, except that the Aberdeen China A Fund Series will have 
the discretion to impose a redemption fee in accordance with applicable 
law or regulation for the purpose of offsetting brokerage, tax or other 
costs. If a redemption fee is charged by an Aberdeen China A Fund 
Series, such fee will be limited in accordance with the then-current 
requirements of the Commission applicable to management investment 
companies offering redeemable securities as if the Aberdeen China A 
Fund Series were an open-end investment company. The financial 
statements of the Aberdeen China A Fund Series will be audited. 
Moreover, administrative fees and transfer agent fees will be paid by 
an Aberdeen China A Fund Series used by the Funds to an Adviser, 
Aberdeen Affiliate, or Unaffiliated Manager only upon the determination 
by each Fund's Board, including a majority of Independent Board 
Members, that the fees are (i) for services in addition to, rather than 
duplicative of, services rendered to the Funds directly and (ii) fair 
and

[[Page 14072]]

reasonable in light of the usual and customary charges imposed by 
others for services of the same nature and quality. Applicants argue 
that the fees payable to the Aberdeen China A Fund Series' service 
providers will be for distinct services, and the costs of such fees 
will be outweighed by opportunity to invest in Chinese Securities.

Section 17(d)

    7. Section 17(d) of the Act and rule 17d-1 under the Act generally 
prohibit joint transactions involving registered investment companies 
and their affiliates unless the Commission has approved the 
transaction. In considering whether to approve a joint transaction 
under rule 17d-1, the Commission considers whether the proposed 
transaction is consistent with the provisions, policies, and purposes 
of the Act, and the extent to which the participation of the investment 
companies is on a basis different from or less advantageous than that 
of the other participants.
    8. Applicants state that the Funds (by purchasing Interests of the 
Aberdeen China A Fund Series), the Advisers (by managing the portfolio 
securities of the Aberdeen China A Fund Series and the Funds at the 
same time that the Funds are invested in Interests of the Aberdeen 
China A Fund Series and/or by providing a nominal tax matters partner 
investment in the Aberdeen China A Fund Series), and the Aberdeen China 
A Fund Series (by selling its Interests to, and redeeming its Interests 
from, the Funds), could be deemed to be participants in a joint 
enterprise or arrangement within the meaning of section 17(d) and rule 
17d-1.
    9. Applicants request an order pursuant to section 17(d) and rule 
17d-1 to permit the proposed transactions with the Aberdeen China A 
Fund Series. Applicants submit that the investment by the Funds in the 
Aberdeen China A Fund Series on the basis proposed is consistent with 
the provisions, policies and purposes of the Act, and that each Fund 
will invest in Interests of the Aberdeen China A Fund Series on the 
same basis as any other shareholder (i.e., the other Funds and Other 
Accounts). Applicants further state that the Advisers will take 
reasonable steps to make sure that allocations among the Funds and 
Other Accounts are fair and equitable. Allocations of Chinese 
Securities to different Aberdeen China A Fund Series, and allocations 
of opportunities to invest in the Aberdeen China A Fund Series, by 
Funds and Other Accounts, will be subject to the Advisers' Trade 
Allocation Policy, under the supervision of the Advisers' and the 
Funds' Chief Compliance Officer, and compliance with the Advisers' 
Trade Allocation Policy will be overseen by each Fund's Board.
    10. Applicants do not believe that AAMI's nominal investment as tax 
matters partner in the Initial Aberdeen China A Fund poses any 
potential conflict of interest not addressed by the conditions 
contained in the application. AAMI will acquire Interests having 
rights, duties and obligations that are identical in all respects to 
Interests purchased by other investors in the Initial Aberdeen China A 
Fund.

Section 17(a)--Cross Transactions

    11. Applicants propose that the Funds be permitted to continue to 
engage in certain purchase and sale cross transactions in securities 
(``Cross Transactions'') between a Fund seeking to implement a 
portfolio strategy and an Other Vehicle seeking to raise or invest 
cash. The Funds currently rely on rule 17a-7 to engage in such Cross 
Transactions; however, if a Fund and an Other Vehicle were deemed to be 
second-tier affiliates of each other by virtue of their ownership or 
control affiliations with an Aberdeen China A Fund Series, the Funds 
may not be entitled to rely on rule 17a-7 because they would no longer 
be affiliated solely for the reasons permitted by the rule.
    12. Applicants assert that the potential affiliations created by 
the Aberdeen China A Fund Series structure do not affect the other 
protections provided by the rule, including the integrity of the 
pricing mechanism employed, and oversight by each Fund's Board. 
Applicants represent that the Funds and Other Vehicles will comply with 
the requirements set forth in rule 17d-(7)(a) through (g). Applicants 
thus believe that Cross Transactions will be reasonable and fair, and 
will not involve overreaching, and will be consistent with the purposes 
of the Act and the investment policy of each Fund.

Applicants' Conditions

    Applicants agree that any order granting the requested relief shall 
be subject to the following conditions:
    1. The Funds' investments in Interests of an Aberdeen China A Fund 
Series will be undertaken only in accordance with the Funds' stated 
investment restrictions and will be consistent with their stated 
investment policies.
    2. The Advisers, their affiliated persons and Unaffiliated Managers 
will receive no advisory fee from an Aberdeen China A Fund Series in 
connection with the Funds' investment in the Aberdeen China A Fund 
Series. The Advisers, their affiliated persons and Unaffiliated 
Managers will receive no commissions, fees, or other compensation 
(except for administrative and/or transfer agent fees that are paid in 
accordance with condition 3 as described in the application) from a 
Fund or an Aberdeen China A Fund Series in connection with the purchase 
or redemption by the Funds of Interests in the Aberdeen China A Fund 
Series. Interests of an Aberdeen China A Fund Series will not be 
subject to a sales load, redemption fee, distribution fee or service 
fee, except that the Aberdeen China A Fund Series will have the 
discretion to impose a redemption fee in accordance with applicable law 
or regulation for the purpose of offsetting brokerage, tax or other 
costs. If a redemption fee is charged by an Aberdeen China A Fund 
Series, such fee will be limited in accordance with the then-current 
requirements of the Commission applicable to management investment 
companies offering redeemable securities as if the Aberdeen China A 
Fund Series were an open-end investment company registered under the 
Act.
    3. Administrative fees and transfer agent fees will be paid by an 
Aberdeen China A Fund Series used by the Funds to an Adviser, Aberdeen 
Affiliate or Unaffiliated Manager only upon a determination by each 
Fund's Board, including a majority of its Independent Board Members, 
that the fees are (i) for services in addition to, rather than 
duplicative of, services rendered to the Funds directly and (ii) fair 
and reasonable in light of the usual and customary charges imposed by 
others for services of the same nature and quality. If such 
determination is not made by a Fund's Board, the Fund's Adviser will 
reimburse to that Fund the amount of any administrative fee and 
transfer agent fee borne by that Fund as an investor in the Aberdeen 
China A Fund Series.
    4. Each Fund will treat its entire investment in an Aberdeen China 
A Fund Series as an investment that is not liquid for purposes of any 
applicable rules or guidance of the Commission or its staff regarding 
the management of liquidity. For example, under current guidelines, 
each Fund that is an open-end fund must not purchase an illiquid 
security if, as a result, more than 15% of its net assets would be 
invested in illiquid assets, which for purposes of the requested relief 
include any investments in an Aberdeen China A Fund Series. In 
addition, each Fund will, at all times, limit its holdings in the 
Aberdeen China A Fund Series to no more than 15% of its net assets.

[[Page 14073]]

    5. Each Fund's Board, including a majority of the Independent Board 
Members, will determine initially and no less frequently than annually 
that the Fund's investment in the Aberdeen China A Fund Series is, and 
continues to be, in the best interests of the Fund and the Fund's 
shareholders. As part of this determination, each Fund's Board will 
consider the custody arrangements for the Aberdeen China A Fund Series' 
foreign securities (under rule 17f-5) and the bonding arrangements in 
place for certain of the Aberdeen China A Fund Series' officers and 
employees (under rule 17g-1).
    6. The Advisers will make the accounts, books and other records of 
each Aberdeen China A Fund Series available for inspection by the 
Commission staff and, if requested, will furnish copies of those 
records to the Commission staff.
    7. Each Aberdeen China A Fund Series will comply with the following 
sections of the Act as if the Aberdeen China A Fund Series were an 
open-end management investment company registered under the Act, except 
as noted: Section 9; section 12 (except that each Aberdeen China A Fund 
Series shall be permitted to sell Interests to Funds in excess of the 
limits set out in section 12(d)(1)(B)); section 13 (the Interests 
issued by the Aberdeen China A Fund Series will be regarded as voting 
securities under section 2(a) (42) of the Act for purposes of applying 
this condition and the offering memorandum utilized by the Aberdeen 
China A Fund Series to offer and sell Interests will be regarded as a 
registration statement for purposes of applying this condition); 
section 17(a) (except as described in the application); section 17(d) 
(except as described in the application); section 17(e); section 17(f); 
section 17(h), section 18 (the Interests issued by the Aberdeen China A 
Fund Series will be regarded as voting securities under section 
2(a)(42) of the Act for purposes of applying this condition); section 
21; section 36; and sections 37-53. In addition, the Aberdeen China A 
Fund Series will comply with the rules under section 17(f) \13\ and 
section 17(g) of the Act, and rule 22c-1 under the Act as if the 
Aberdeen China A Fund Series were an open-end management investment 
company registered under the Act. This condition 7 will apply only to 
Aberdeen China A Fund Series in which a Fund has invested; this 
condition 7 will not apply to Aberdeen China A Fund Series invested in 
exclusively by Other Accounts except insofar as necessary for the 
Aberdeen China A Fund Series invested in by a Fund to comply with this 
condition.
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    \13\ The Applicants note that they will operate each Aberdeen 
China A Fund Series such that rule 17f-1, rule 17f-2, and rule 17f-3 
will not be applicable to it.
---------------------------------------------------------------------------

    The Advisers will adopt procedures designed to ensure that each 
Aberdeen China A Fund Series complies with the aforementioned sections 
of the Act and rules under the Act. The Advisers will periodically 
review and periodically update as appropriate such procedures and will 
maintain books and records describing such procedures, and maintain the 
records required by rules 31d-1(b)(1), 31d-1(b)(2)(ii) and 31d-1(b)(9) 
under the Act. In addition, in connection with the determination 
required by condition 5 above, the Advisers will provide annually to 
each Fund's Board a written report about the Advisers' and the Aberdeen 
China A Fund Series' compliance with this condition.
    All books and records required to be made pursuant to this 
condition will be maintained and preserved for a period of not less 
than six years from the end of the fiscal year in which any transaction 
occurred, the first two years in an easily accessible place, and will 
be subject to examination by the Commission and its staff.
    For purpose of implementing condition 7, any action that the above-
referenced statutory and regulatory provisions require to be taken by 
the directors, officers and/or employees of a registered investment 
company will be performed by AAMI (or its successor) \14\ as the 
managing member of the Commingled LLC, except to the extent that the 
order requires the Funds' Boards to exercise oversight or take action 
with respect to the Aberdeen China A Fund Series as an extension of 
such Boards' duties to the Funds.
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    \14\ See supra, footnote 1.
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    8. To engage in Cross Transactions, the Funds will comply with rule 
17a-7 under the Act in all respects other than the requirement that the 
parties to the transaction be affiliated persons (or affiliated persons 
of affiliated persons) of each other solely by reason of having a 
common investment adviser or investment advisers which are affiliated 
persons of each other, common officers, and/or common directors, solely 
because a Fund and Other Vehicle might become affiliated persons within 
the meaning of section 2(a)(3)(A), (B) or (C) of the Act because of 
their investments in an Aberdeen China A Fund Series.
    9. An Aberdeen China A Fund Series in which a Fund invests will not 
engage in leverage or borrow except that an Aberdeen China A Fund 
Series may borrow in amounts not exceeding 5% of its total assets for 
temporary or emergency purposes or for the clearance of transactions, 
but not for speculative investment purposes, and may pledge its assets 
to secure such borrowings.
    10. A Sub-Advised Fund may not invest in an Aberdeen China A Fund 
Series in reliance on the order unless the Sub-Advised Fund's 
Unaffiliated Manager has executed an agreement with the Aberdeen China 
A Fund Series stating that the Unaffiliated Manager understands the 
terms and conditions of the order and agrees to comply with conditions 
1, 2, 3, 4, 5 and 8 of the order.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jill Peterson,
Assistant Secretary.
[FR Doc. 2018-06567 Filed 3-30-18; 8:45 am]
 BILLING CODE 8011-01-P