ABERDEEN FUNDS

 

PROSPECTUS

February 29, 2016, as amended March 9, 2016

 

Aberdeen Equity Long-Short Fund

Class A — MLSAX · Class C — MLSCX · Class R — GLSRX · Institutional Class — GGUIX · Institutional Service Class — AELSX

 

Aberdeen Global Natural Resources Fund

Class A — GGNAX · Class C — GGNCX · Class R — GGNRX · Institutional Class — GGNIX · Institutional Service Class — GGNSX

 

Aberdeen U.S. Small Cap Equity Fund (formerly, Aberdeen Small Cap Fund)

Class A — GSXAX · Class C — GSXCX · Class R — GNSRX · Institutional Class — GSCIX · Institutional Service Class — GSXIX

 

Aberdeen China Opportunities Fund

Class A — GOPAX · Class C — GOPCX · Class R — GOPRX · Institutional Class — GOPIX · Institutional Service Class — GOPSX

 

Aberdeen International Equity Fund

Class A — GIGAX · Class C — GIGCX · Class R — GIRRX · Institutional Class — GIGIX · Institutional Service Class — GIGSX

 

Aberdeen Global Equity Fund

Class A — GLLAX · Class C — GLLCX · Class R — GWLRX · Institutional Class — GWLIX · Institutional Service Class — GLLSX

 

Aberdeen Diversified Income Fund

Class A — GMAAX · Class C — GMACX · Class R — GMRRX · Institutional Class — GMAIX · Institutional Service Class — GAMSX

 

Aberdeen Dynamic Allocation Fund

Class A — GMMAX · Class C — GMMCX · Class R — GAGRX · Institutional Class — GMMIX · Institutional Service Class — GAASX

 

Aberdeen Diversified Alternatives Fund

Class A — GASAX · Class C — GAMCX · Class R — GASRX · Institutional Class — GASIX · Institutional Service Class — GAISX

 

Aberdeen Asia Bond Fund

Class A — AEEAX · Class C — AEECX · Class R — AEERX · Institutional Class — CSABX · Institutional Service Class — ABISX

 

Aberdeen Asia-Pacific (ex-Japan) Equity Fund

Class A — APJAX · Class C — APJCX · Class R — APJRX · Institutional Class — AAPIX · Institutional Service Class — AAPEX

 

Aberdeen Asia-Pacific Smaller Companies Fund

Class A — APCAX · Class C — APCCX · Class R — APCRX · Institutional Class — APCIX · Institutional Service Class — APCSX

 

Aberdeen Emerging Markets Fund

Class A — GEGAX · Class C — GEGCX · Class R — GEMRX · Institutional Class — ABEMX · Institutional Service Class — AEMSX

 

Aberdeen Emerging Markets Debt Fund

Class A — AKFAX · Class C — AKFCX · Class R — AKFRX · Institutional Class — AKFIX · Institutional Service Class — AKFSX

 

Aberdeen Emerging Markets Debt Local Currency Fund

Class A — ADLAX · Class C — ADLCX · Class R — AECRX · Institutional Class — AEDSX · Institutional Service Class — AEDIX

 

Aberdeen Global Fixed Income Fund

Class A — CUGAX · Class C — CGBCX · Class R — AGCRX · Institutional Class — AGCIX · Institutional

 

 

Service Class — CGFIX

 

Aberdeen International Small Cap Fund (formerly, Aberdeen Global Small Cap Fund)

Class A — WVCCX · Class C — CPVCX · Class R — WPVAX · Institutional Class — ABNIX · Institutional Service Class — AGISX

 

Aberdeen Tax-Free Income Fund

Class A — NTFAX · Class C — GTICX · Class R — ABERX · Institutional Class — ABEIX · Institutional Service Class — ABESX

 

Aberdeen Ultra-Short Duration Bond Fund

Class A — AUDAX · Class C — AUSCX · Class R — AUSRX · Institutional Class — AUDIX · Institutional Service Class — AUSIX

 

Aberdeen U.S. Multi-Cap Equity Fund (formerly, Aberdeen U.S. Equity Fund)

Class A — GXXAX · Class C — GXXCX · Class R — GGLRX · Institutional Class — GGLIX · Institutional Service Class — GXXIX

 

Aberdeen European Equity Fund

Class A — AEUAX · Class C — AEUCX · Class R — AERUX · Institutional Class — AEUIX · Institutional Service Class — AEUSX

 

Aberdeen Latin American Equity Fund

Class A — ALEAX · Class C — ALECX · Class R — ALREX · Institutional Class — ALIEX · Institutional Service Class — ALESX

 

Aberdeen Japanese Equities Fund

Class A — AJEAX · Class C — AJECX · Class R — AJERX · Institutional Class — AJEIX · Institutional Service Class — AJESX

 

Aberdeen U.S. Mid Cap Equity Fund

Class A — GUEAX · Class C — GUECX · Class R — GUERX · Institutional Class — GUEIX · Institutional Service Class — GUESX

 

As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds’ shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.

 

 

Summary		Page
Aberdeen Equity Long-Short Fund		1
Aberdeen Global Natural Resources Fund		6
Aberdeen U.S. Small Cap Equity Fund		12
Aberdeen China Opportunities Fund		17
Aberdeen International Equity Fund		23
Aberdeen Global Equity Fund		28
Aberdeen Diversified Income Fund		33
Aberdeen Dynamic Allocation Fund		41
Aberdeen Diversified Alternatives Fund		48
Aberdeen Asia Bond Fund		55
Aberdeen Asia-Pacific (ex-Japan) Equity Fund		63
Aberdeen Asia-Pacific Smaller Companies Fund		68
Aberdeen Emerging Markets Fund		73
Aberdeen Emerging Markets Debt Fund		78
Aberdeen Emerging Markets Debt Local Currency Fund		84
Aberdeen Global Fixed Income Fund		90
Aberdeen International Small Cap Fund		98
Aberdeen Tax-Free Income Fund		104
Aberdeen Ultra-Short Duration Bond Fund		110
Aberdeen U.S. Multi-Cap Equity Fund		115
Aberdeen European Equity Fund		120
Aberdeen Latin American Equity Fund		125
Aberdeen Japanese Equities Fund		130
Aberdeen U.S. Mid Cap Equity Fund		134
Fund Details
Additional Information about Principal Strategies		138
Additional Information about Investments, Investment Techniques and Risks		140
Fund Management
Investment Adviser		178
Subadvisers		178
Management Fees		178
Portfolio Management		181
Multi-Manager Structure		195
Investing with Aberdeen Funds
Share Classes		197
Sales Charges and Fees		203
Contacting Aberdeen Funds		205
Buying, Exchanging and Selling Shares		207
Distributions and Taxes
Income and Capital Gain Distributions		213
Tax Considerations		213
Selling and Exchanging Shares		214
Tax Status for Retirement Plans and Other Tax-Deferred Accounts		214
Backup Withholding		214
Other		215
Financial Highlights		216

 

 

Summary — Aberdeen Equity Long-Short Fund

 

Aberdeen Equity Long-Short Fund

 

Objective

 

The Aberdeen Equity Long-Short Fund (the “Long-Short Fund” or the “Fund”) seeks long-term capital appreciation.

 

Fees and Expenses of the Fund

 

This table describes the fees and expenses that you may pay when you buy and hold shares of the Long-Short Fund.  You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Aberdeen Funds.  More information about these and other discounts is available from your financial advisor and in the “Investing with Aberdeen Funds: Choosing a Share Class — Reduction and Waiver of Class A Sales Charges” section on page 200 of the Fund’s prospectus and in the “Additional Information on Purchases and Sales — Waiver of Class A Sales Charges” and “Reduction of Sales Charges” sections on pages 154-156 of the Fund’s Statement of Additional Information.

 

Shareholder Fees (fees paid directly from your investment)		Class A Shares		Class C Shares		Class R Shares		Institutional Class Shares		Institutional Service Class Shares
Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price)		5.75	%	None		None		None		None
Maximum Deferred Sales Charge (Load) (as a percentage of offering or sale price, whichever is less)		1.00	%(1)	1.00	%	None		None		None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fees		1.15	%	1.15	%	1.15	%	1.15	%	1.15	%
Distribution and/or Service (12b-1) Fees		0.25	%	1.00	%	0.50	%	None		None
Other Expenses(2)
Expenses Related to Short Selling (Dividend Expense and Brokerage Fees)		1.36	%	1.36	%	1.36	%	1.36	%	1.36	%
All Other Expenses		0.35	%	0.38	%	0.38	%	0.32	%	0.38	%
Total Other Expenses		1.71	%	1.74	%	1.74	%	1.68	%	1.74	%
Total Annual Fund Operating Expenses		3.11	%	3.89	%	3.39	%	2.83	%	2.89	%
Less: Amount of Fee Limitations/Expense Reimbursements(3)		0.15	%	0.28	%	0.15	%	0.22	%	0.15	%
Total Annual Fund Operating Expenses After Fee Limitations/Expense Reimbursements		2.96	%	3.61	%	3.24	%	2.61	%	2.74	%

 

(1)   Unless you are otherwise eligible to purchase Class A shares without a sales charge, a contingent deferred sales charge (CDSC) of up to 1.00% will be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finder’s fee was paid.

 

(2)   Other Expenses have been restated to reflect current fees.

 

(3)   Aberdeen Funds (the “Trust”) and Aberdeen Asset Management Inc. (the “Adviser”) have entered into a written contract limiting operating expenses to 1.40% for all Classes of the Fund. This contractual limitation may not be terminated before February 28, 2017 without the approval of the Board of Trustees. This limit excludes certain expenses, including any taxes, interest, brokerage fees, short-sale dividend expenses, Acquired Fund Fees and Expenses, Rule 12b-1 fees, administrative services fees, transfer agent out-of-pocket expenses for Class A Shares, Class R Shares and Institutional Service Class Shares and extraordinary expenses. The Trust is authorized to reimburse the Adviser for management fees previously limited and/or for expenses previously paid by the Adviser, provided, however, that any reimbursements must be paid at a date not more than three years after the date when the Adviser limited the fees or reimbursed the expenses and the reimbursements do not cause a Class to exceed the applicable expense limitation in the contract at the time the fees were limited or expenses are paid.

 

The Adviser has also entered into a written contract to reimburse the Fund for short-sale brokerage expenses at an annual rate of up to 0.15% of the Fund’s average daily net assets.  Amounts reimbursed by the Adviser for short sale brokerage expenses are not subject to recoupment at a later date. This contract may not be terminated before February 28, 2017 without the approval of the Board of Trustees.

 

1

 

Example

 

This Example is intended to help you compare the cost of investing in the Long-Short Fund with the cost of investing in other mutual funds.

 

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then sell all of your shares at the end of those periods. It assumes a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

		1 Year			3 Years			5 Years			10 Years
Class A shares		$	857		$	1,466		$	2,099		$	3,789
Class C shares		$	464		$	1,161		$	1,977		$	4,096
Class R shares		$	327		$	1,028		$	1,752		$	3,666
Institutional Class shares		$	264		$	856		$	1,474		$	3,141
Institutional Service Class shares		$	277		$	881		$	1,510		$	3,203

 

You would pay the following expenses on the same investment if you did not sell your shares:

 

		1 Year			3 Years			5 Years			10 Years
Class C shares		$	364		$	1,161		$	1,977		$	4,096

 

Portfolio Turnover

 

The Long-Short Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account.  These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance.  During the most recent fiscal year, the Fund’s portfolio turnover rate was 14.04% of the average value of its portfolio.

 

Principal Strategies

 

The Long-Short Fund seeks to achieve its objective regardless of market conditions through the purchase and short sale of equity securities of U.S. companies of any size. Equity securities include, but are not limited to, common stock, preferred stock and depositary receipts. As a non-fundamental policy, under normal circumstances, the Fund will invest at least 80% of the value of its net assets, plus any borrowings for investment purposes, in equity securities of companies that:

 

·                  are organized under the laws of, or have their principal office in the United States;

 

·                  have their principal securities trading market in the United States;

 

·                  alone or on a consolidated basis derive the highest concentration of their annual revenue or earnings or assets from goods produced, sales made or services performed in the United States; and/or

 

·                  issue securities denominated in the currency of the United States.

 

If the Fund changes its 80% investment policy, it will notify shareholders at least 60 days before the change and, if necessary, will change the name of the Long-Short Fund.

 

The Fund seeks to achieve long-term capital appreciation with lower volatility than that of long-only equities, commodities or other investment classes.  The use of both long and short positions enables the Fund to seek to produce returns that have low correlation to those available by investing in the market as a whole.  The Fund may at any time have either a net long exposure or a net short exposure to the equity markets. In making purchases and short sales, the Fund’s investment team employs a fundamental, bottom-up equity investment style, which is characterized by intensive, first-hand research and disciplined company evaluation.  The Fund’s investment team takes long positions in the stocks of companies it believes will increase in value and it sells short the stock of companies it believes will either decline in value or underperform the Fund’s long positions.  With a long position, the Fund purchases a stock outright; with a short position, the Fund sells a security that it does not own and must borrow to meet its settlement obligations. In engaging in short sales, the Fund will profit or incur a loss depending on whether the value of the underlying stock decreases, or instead increases, between the time the stock is sold and when the Fund purchases its replacement.

 

Principal Risks

 

The Long-Short Fund cannot guarantee that it will achieve its investment objective.

 

As with any fund, the value of the Fund’s investments — and therefore, the value of Fund shares — may fluctuate. These changes may occur because of:

 

Impact of Large Redemptions and Purchases of Fund Shares — Occasionally, shareholders may make large redemptions or purchases of Fund shares, which may cause the Fund to have to sell securities or invest additional cash. These transactions may adversely affect the Fund’s

 

2

 

performance and increase transaction costs. In addition, large redemption requests may exceed the cash balance of the Fund and result in credit line borrowing fees and/or overdraft charges to the Fund until the sales of portfolio securities necessary to cover the redemption request settle.

 

Long-Short Strategy Risk — The strategy used by the Fund’s investment team may fail to produce the intended result. There is no guarantee that the use of long and short positions will succeed in limiting the Fund’s exposure to stock market movements, capitalization, sector swings or other risk factors.

 

Market Risk — Deteriorating market conditions might cause a general weakness in the market that reduces the prices of securities in those markets in which the Fund invests.

 

Mid-Cap Securities Risk — Stocks of medium-sized companies tend to be more volatile and less liquid than stocks of larger companies.

 

Sector Risk — To the extent that the Fund has a significant portion of its assets invested in securities of companies conducting business in a broadly related group of industries within an economic sector, the Fund may be more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly.

 

Securities Selection Risk — The investment team may take long positions in securities that underperform the stock market or other funds with similar investment objectives and strategies or take short positions in securities that have positive performance.

 

Short Sale Risk — The risk that the price of a security sold short will increase in value between the time of the short sale and the time the Fund must purchase the security to return it to the lender.  The Fund’s potential loss on a short sale could theoretically be unlimited in a case where the Fund is unable, for any reason, to close out its short position.  A loss on a short sale is increased by the amount of the premium or interest the Fund must pay to the lender of the security.

 

Small-Cap Securities Risk — Stocks of smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.

 

If the value of the Fund’s investments decreases, you may lose money.

 

For additional information regarding the above identified risks, see “Fund Details: Additional Information about Investments, Investment Techniques and Risks” in the prospectus.

 

Performance

 

The bar chart and table below can help you evaluate potential risks of the Long-Short Fund. The bar chart shows how the Fund’s annual total returns for Class C have varied from year to year. The returns in the table reflect the maximum sales charge for Class A. The table compares the Fund’s average annual total returns to the returns of the S&P 500® Index, a broad-based securities index, and the Citigroup 3-Month Treasury Bill Index, an unmanaged index that is generally representative of the average of the last 3-month Treasury bill issues (excluding the current month-end bills).  Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.  For updated performance information, please visit www.aberdeen-asset.us or call 866-667-9231.

 

The returns presented for the Fund for periods prior to June 23, 2008 reflect the performance of a predecessor fund (the “Predecessor Fund”). The Long-Short Fund adopted the performance of the Predecessor Fund as the result of a reorganization on June 23, 2008 in which the Long-Short Fund acquired all of the assets, subject to the liabilities, of the Predecessor Fund. The Long-Short Fund and the Predecessor Fund have substantially similar investment objectives and strategies.

 

Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes.  Institutional Service Class returns prior to the commencement of operations of the Institutional Service Class (inception date: November 1, 2009) are based on the previous performance of the Fund’s Institutional Class shares. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what each individual class would have produced because all classes invest in the same portfolio of securities.  Returns would only differ to the extent of the differences in expenses between the two classes.

 

3

 

Annual Total Returns — Class C Shares
(Years Ended Dec. 31)

 

 

Highest Return: 5.48% - 3rd quarter 2010

 

Lowest Return: -8.62% -3rd quarter 2008

 

After-tax returns are shown in the following table for Class C shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect the impact of state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.

 

Average Annual Total Returns
as of December 31, 2015

 

		1 Year		5 Years		10 Years
Class A shares — Before Taxes		-6.42	%	0.72	%	2.07	%
Class C shares — Before Taxes		-2.26	%	1.21	%	1.96	%
Class C shares — After Taxes on Distributions		-7.19	%	-1.23	%	0.66	%
Class C shares — After Taxes on Distributions and Sales of Shares		2.71	%	0.98	%	1.53	%
Class R shares — Before Taxes		-1.07	%	1.55	%	2.31	%
Institutional Class shares — Before Taxes		-0.41	%	2.25	%	2.97	%
Institutional Service Class shares — Before Taxes		-0.61	%	2.02	%	2.84	%
S&P 500® Index (reflects no deduction for fees, expenses or taxes)		1.38	%	12.57	%	7.31	%
Citigroup 3-Month Treasury Bill Index (reflects no deduction for fees, expenses or taxes)		0.03	%	0.05	%	1.17	%

 

Investment Adviser

 

Aberdeen Asset Management Inc. (the “Adviser”) serves as the Long-Short Fund’s investment adviser.

 

Portfolio Managers

 

The Fund is managed using a team-based approach, with the following team members being jointly and primarily responsible for the day-to-day management of the Fund:

 

 

*Includes Predecessor Fund

 

Purchase and Sale of Fund Shares

 

The Fund’s minimum investment requirements are as follows:

 

CLASS A and CLASS C SHARES

 

To open an account		$	1,000
To open an IRA account		$	1,000
Additional investments		$	50
To start an Automatic Investment Plan		$	1,000
Additional Investments (Automatic Investment Plan)		$	50

 

4

 

CLASS R SHARES

 

To open an account		No Minimum
Additional investments		No Minimum

 

INSTITUTIONAL CLASS SHARES

 

To open an account		$	1,000,000
Additional investments		No Minimum

 

INSTITUTIONAL SERVICE CLASS SHARES

 

To open an account		$	1,000,000
Additional investments		No Minimum

 

Minimum investment requirements do not apply to purchases by employees of the Adviser or its affiliates (or their spouses, children or immediate relatives), or to certain retirement plans, fee-based programs or omnibus accounts. Certain endowments, non-profits, and charitable organizations may also be eligible for waiver of minimum investment requirements. If you purchase shares through an intermediary, different minimum account requirements may apply. The Trust reserves the right to waive investment minimums under certain circumstances.

 

Fund shares may be redeemed on each day that the New York Stock Exchange is open.  Fund shares may be sold by mail or fax, by telephone or on-line.

 

Tax Information

 

The Fund’s dividends and distributions are subject to federal income taxes and will be taxed as ordinary income or capital gains, unless you are a tax-exempt investor or invest through a qualified employee benefit plan, retirement plan or other tax-deferred account, in which case your withdrawals from such account may be taxed as ordinary income.

 

Payments to Broker-Dealers and Other Financial Intermediaries

 

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services.  These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your financial advisor to recommend the Fund over another investment.  Ask your financial advisor or visit your financial intermediary’s website for more information.

 

5

 

 

Summary — Aberdeen Global Natural Resources Fund

 

Aberdeen Global Natural Resources Fund

 

Objective

 

The Aberdeen Global Natural Resources Fund (the “Global Natural Resources Fund” or the “Fund”) seeks long-term capital growth.

 

Fees and Expenses of the Fund

 

This table describes the fees and expenses that you may pay when you buy and hold shares of the Global Natural Resources Fund.  You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Aberdeen Funds.  More information about these and other discounts is available from your financial advisor and in the “Investing with Aberdeen Funds: Choosing a Share Class — Reduction and Waiver of Class A Sales Charges” section on page 200 of the Fund’s prospectus and in the “Additional Information on Purchases and Sales — Waiver of Class A Sales Charges” and “Reduction of Sales Charges” sections on pages 154-156 of the Fund’s Statement of Additional Information.

 

Shareholder Fees (fees paid directly from your investment)		Class A Shares		Class C Shares		Class R Shares		Institutional Class Shares		Institutional Service Class Shares
Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price)		5.75	%	None		None		None		None
Maximum Deferred Sales Charge (Load) (as a percentage of offering or sale price, whichever is less)		1.00	%(1)	1.00	%	None		None		None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fees		0.70	%	0.70	%	0.70	%	0.70	%	0.70	%
Distribution and/or Service (12b-1) Fees		0.25	%	1.00	%	0.50	%	None		None
Other Expenses(2)		1.11	%	1.11	%	1.11	%	1.02	%	1.03	%
Total Annual Fund Operating Expenses		2.06	%	2.81	%	2.31	%	1.72	%	1.73	%
Less: Amount of Fee Limitations/Expense Reimbursements(3)		0.50	%	0.65	%	0.50	%	0.56	%	0.50	%
Total Annual Fund Operating Expenses After Fee Limitations/Expense Reimbursements		1.56	%	2.16	%	1.81	%	1.16	%	1.23	%

 

(1)         Unless you are otherwise eligible to purchase Class A shares without a sales charge, a contingent deferred sales charge (CDSC) of up to 1.00% will be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finder’s fee was paid.

 

(2)         Other Expenses have been restated to reflect current fees.

 

(3)         Aberdeen Funds (the “Trust”) and Aberdeen Asset Management Inc. (the “Adviser”) have entered into a written contract limiting operating expenses to 1.16% for all Classes of the Fund. This contractual limitation may not be terminated before February 28, 2017 without the approval of the Board of Trustees. This limit excludes certain expenses, including any taxes, interest, brokerage fees, short-sale dividend expenses, Acquired Fund Fees and Expenses, Rule 12b-1 fees, administrative services fees, transfer agent out-of-pocket expenses for Class A Shares, Class R Shares and Institutional Service Class Shares and extraordinary expenses. The Trust is authorized to reimburse the Adviser for management fees previously limited and/or for expenses previously paid by the Adviser, provided, however, that any reimbursements must be paid at a date not more than three years after the date when the Adviser limited the fees or reimbursed the expenses and the reimbursements do not cause a Class to exceed the applicable expense limitation in the contract at the time the fees were limited or expenses are paid.

 

6

 

Example

 

This Example is intended to help you compare the cost of investing in the Global Natural Resources Fund with the cost of investing in other mutual funds.

 

The Example assumes that you invest $10,000 in the Global Natural Resources Fund for the time periods indicated and then sell all of your shares at the end of those periods. It assumes a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

		1 Year			3 Years			5 Years			10 Years
Class A shares		$	725		$	1,138		$	1,576		$	2,790
Class C shares		$	319		$	810		$	1,427		$	3,091
Class R shares		$	184		$	674		$	1,190		$	2,607
Institutional Class shares		$	118		$	487		$	881		$	1,984
Institutional Service Class shares		$	125		$	496		$	892		$	1,999

 

You would pay the following expenses on the same investment if you did not sell your shares:

 

		1 Year			3 Years			5 Years			10 Years
Class C shares		$	219		$	810		$	1,427		$	3,091

 

Portfolio Turnover

 

The Global Natural Resources Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account.  These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance.  During the most recent fiscal year, the Fund’s portfolio turnover rate was 31.83% of the average value of its portfolio.

 

Principal Strategies

 

As a non-fundamental policy, under normal circumstances, the Global Natural Resources Fund invests at least 80% of the value of its net assets, plus any borrowings for investment purposes, in equity securities issued by U.S. and foreign companies (including those located in emerging market countries) with business operations in or related to activities in natural resources industries, as discussed below. Equity securities include, but are not limited to, common stock, preferred stock and depositary receipts. Natural resources are materials with economic value that are derived from natural origins, such as energy sources, precious metals (e.g., gold, platinum), non-precious metals (e.g., aluminum, copper), chemicals and other basic commodities.

 

If the Fund changes its 80% investment policy, it will notify shareholders at least 60 days before the change and, if necessary, will change the name of the Global Natural Resources Fund.

 

Under normal market conditions, the Fund will invest significantly (at least 40%—unless market conditions are not deemed favorable by the Adviser in which case the Fund would invest at least 30%) in non-U.S. companies.  A company will be considered a non-U.S. company if Fund management determines that the company meets one or more of the following criteria: the company

 

·                  is organized under the laws of or has its principal place of business in a country outside the U.S.;

 

·                  has its principal securities trading market in a country outside the U.S.;

 

·                  alone or on a consolidated basis derives the highest concentration of its annual revenue or earnings or assets from goods produced, sales made or services performed in a country outside the U.S.; and/or

 

·                  issues securities denominated in the currency of a country outside the U.S.

 

Under normal market conditions, the Fund invests in securities from at least three different countries. The Fund may also invest in companies of emerging market countries. The Fund may invest in securities denominated in U.S. Dollars and the currencies of the foreign countries in which it is permitted to invest.  The Fund typically has full currency exposure to those markets in which it invests.

 

A company that is eligible for investment by the Global Natural Resources Fund typically derives at least 50% of its revenues, net income or assets from the natural resources sector. Companies in natural resources industries may include those that:

 

·             participate in the discovery and development of natural resources;

 

·             own or produce natural resources;

 

·             engage in the transportation, distribution, or processing of natural resources;

 

·             contribute new technologies for the production or efficient use of natural resources, such as systems for energy

 

7

 

conversion, conservation and pollution control;

 

·             provide related services such as mining, drilling, chemicals and related parts and equipment;

 

·             provide services/equipment that aid the production, processing or transportation of a resource (energy, agriculture, metals); and

 

·             would have related investments such as drilling rigs, oil tankers, any oil field service company, engineering and construction companies, chemical companies, fertilizer and ethanol.

 

The Global Natural Resources Fund is diversified; however, the Fund will invest more than 25% of its total assets in securities of issuers in natural resources industries.  These industries include:

 

·                       agricultural and farming products;

 

·                       alternative energy sources;

 

·                       base metal production;

 

·                       building materials;

 

·                       chemicals;

 

·                       coal;

 

·                       energy services and technology;

 

·                       environmental services;

 

·                       forest products;

 

·                       gold and other precious metals;

 

·                       integrated oil;

 

·                       steel and iron ore production;

 

·                       oil and gas exploration and production; and

 

·                       paper products.

 

The Global Natural Resources Fund may invest in natural resources companies of any size, including established large-cap companies, as well as small-cap and mid-cap companies.

 

Principal Risks

 

The Global Natural Resources Fund cannot guarantee that it will achieve its investment objective.

 

As with any fund, the value of the Fund’s investments — and therefore, the value of Fund shares — may fluctuate. These changes may occur because of:

 

Concentration Risk — Investing 25% or more of the Fund’s net assets in a select group of companies in natural resources industries could subject the Fund to greater risk of loss and could be considerably more volatile than a broad-based market index or other mutual funds that are diversified across a greater number of industries.

 

Country/Regional Focus Risk — Significant exposure to a single country or geographical region involves increased currency, political, regulatory and other risks. Market swings in the targeted country or geographical region likely will have a greater effect on portfolio performance than they would in a more geographically diversified fund.

 

Emerging Markets Risk — A magnification of the risks that apply to foreign investments. These risks are greater for securities of companies in emerging markets countries because the countries may have less stable governments, more volatile currencies and less established markets (see “Foreign Securities Risk” below).

 

Foreign Currency Exposure Risk —The value of foreign currencies relative to the U.S. Dollar fluctuates in response to market, economic, political, regulatory, geopolitical or other conditions. A decline in the value of a foreign currency versus the U.S. Dollar reduces the value in U.S. Dollars of investments denominated in that foreign currency.  This risk may impact the Fund more greatly to the extent the Fund does not hedge its currency risk, or hedging techniques used by the Adviser are unsuccessful.

 

Foreign Securities Risk — Foreign securities may be more volatile, harder to price and less liquid than U.S. securities.

 

Impact of Large Redemptions and Purchases of Fund Shares — Occasionally, shareholders may make large redemptions or purchases of Fund shares, which may cause the Fund to have to sell securities or invest additional cash. These transactions may adversely affect the Fund’s performance and increase transaction costs. In addition, large redemption requests may exceed the cash balance of the Fund and result in credit line borrowing fees and/or overdraft charges to the Fund until the sales of portfolio securities necessary to cover the redemption request settle.

 

Market Risk — Deteriorating market conditions might cause a general weakness in the market that reduces the prices of securities in those markets in which the Fund invests.

 

Mid-Cap Securities Risk — Stocks of medium-sized companies tend to be more volatile and less liquid than stocks of larger companies.

 

8

 

Natural Resources Industry Risk — The natural resources industry can be significantly affected by events relating to international political and economic developments, energy conservation, the success of exploration projects, commodity prices, and tax and other government regulations. The securities of companies in the natural resources sector may experience more price volatility than securities of companies in other industries.

 

Sector Risk — To the extent that the Fund has a significant portion of its assets invested in securities of companies conducting business in a broadly related group of industries within an economic sector, the Fund may be more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly.

 

Securities Selection Risk — The investment team may select securities that underperform the stock market or other funds with similar investment objectives and strategies.

 

Small-Cap Securities Risk — Stocks of smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.

 

If the value of the Fund’s investments decreases, you may lose money.

 

For additional information regarding the above identified risks, see “Fund Details: Additional Information about Investments, Investment Techniques and Risks” in the prospectus.

 

Performance

 

The bar chart and table below can help you evaluate potential risks of the Global Natural Resources Fund. The bar chart shows how the Fund’s annual total returns for Class A have varied from year to year. The returns in the table reflect the maximum sales charge for Class A.  The returns in the bar chart do not reflect sales loads or account fees. If these amounts were reflected, returns would be less than those shown.

 

The table compares the Fund’s average annual total returns to the returns of the MSCI All Country World Index and the S&P Global Natural Resources Index™.  Remember that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.  For updated performance information, please visit www.aberdeen-asset.us or call 866-667-9231.

 

The returns presented for the Global Natural Resources Fund for periods prior to June 23, 2008 reflect the performance of a predecessor fund (the “Predecessor Fund”). The Global Natural Resources Fund adopted the performance of the Predecessor Fund as the result of a reorganization on June 23, 2008 in which the Global Natural Resources Fund acquired all of the assets, subject to the liabilities, of the Predecessor Fund. The Global Natural Resources Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes.

 

Annual Total Returns — Class A Shares
(Years Ended Dec. 31)

 

 

Highest Return: 24.89% -  2nd quarter 2008

 

Lowest Return: -34.35% - 4th quarter 2008

 

After-tax returns are shown in the following table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect the impact of state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.

 

Average Annual Total Returns
as of December 31, 2015

 

		1 Year		5 Years		10 Years
Class A shares — Before Taxes		-29.02	%	-10.07	%	-2.00	%
Class A shares — After Taxes on Distributions		-29.80	%	-10.61	%	-2.76	%
Class A shares — After Taxes on Distributions and Sales of Shares		-16.35	%	-7.38	%	-0.91	%
Class C shares — Before Taxes		-25.93	%	-9.63	%	-2.08	%
Class R shares — Before Taxes		-24.85	%	-9.18	%	-1.62	%
Institutional Class shares — Before Taxes		-24.38	%	-8.70	%	-1.11	%
Institutional Service Class shares — Before Taxes		-24.40	%	-8.69	%	-1.09	%
MSCI All Country World Index (reflects no deduction for fees, expenses or taxes)		-1.84	%	6.66	%	5.31	%
S&P Global Natural Resources Index™ (reflects no deduction for fees, expenses or taxes)		-24.00	%	-8.65	%	0.87	%

 

9

 

Investment Adviser

 

Aberdeen Asset Management Inc. (the “Adviser”) serves as the Global Natural Resources Fund’s investment adviser and Aberdeen Asset Managers Limited (“AAML”) serves as the Fund’s subadviser.

 

Portfolio Managers

 

The Fund is managed using a team-based approach, with the following team members being jointly and primarily responsible for the day-to-day management of the Fund:

 

 

Purchase and Sale of Fund Shares

 

The Fund’s minimum investment requirements are as follows:

 

CLASS A and CLASS C SHARES

 

To open an account		$	1,000
To open an IRA account		$	1,000
Additional investments		$	50
To start an Automatic Investment Plan		$	1,000
Additional Investments (Automatic Investment Plan)		$	50

 

CLASS R SHARES

 

To open an account		No Minimum
Additional investments		No Minimum

 

INSTITUTIONAL CLASS SHARES

 

To open an account		$	1,000,000
Additional investments		No Minimum

 

INSTITUTIONAL SERVICE CLASS SHARES

 

To open an account		$	1,000,000
Additional investments		No Minimum

 

Minimum investment requirements do not apply to purchases by employees of the Adviser or its affiliates (or their spouses, children or immediate relatives), and generally do not apply to retirement plans, fee-based programs or omnibus accounts. Certain endowments, non-profits, and charitable organizations may also be eligible for waiver of minimum investment requirements. If you purchase shares through an intermediary, different minimum account requirements may apply. The Trust reserves the right to apply or waive investment minimums under certain circumstances.

 

Fund shares may be redeemed on each day that the New York Stock Exchange is open.  Fund shares may be sold by mail or fax, by telephone or on-line.

 

Tax Information

 

The Fund’s dividends and distributions are subject to federal income taxes and will be taxed as ordinary income or capital gains, unless you are a tax-exempt investor or invest through a qualified employee benefit plan, retirement plan or other tax-deferred account, in which case your withdrawals from such account may be taxed as ordinary income.

 

Payments to Broker-Dealers and Other Financial Intermediaries

 

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services.  These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your financial advisor

 

10

 

to recommend the Fund over another investment.  Ask your financial advisor or visit your financial intermediary’s website for more information.

 

11

 

 

Summary — Aberdeen U.S. Small Cap Equity Fund

 

Aberdeen U.S. Small Cap Equity Fund (formerly, Aberdeen Small Cap Fund)

 

Objective

 

The Aberdeen U.S. Small Cap Equity Fund (formerly, Aberdeen Small Cap Fund) (the “U.S. Small Cap Equity Fund” or the “Fund”) seeks long-term capital appreciation.

 

Fees and Expenses of the Fund

 

This table describes the fees and expenses that you may pay when you buy and hold shares of the U.S. Small Cap Equity Fund.  You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Aberdeen Funds.  More information about these and other discounts is available from your financial advisor and in the “Investing with Aberdeen Funds: Choosing a Share Class — Reduction and Waiver of Class A Sales Charges” section on page 200 of the Fund’s prospectus and in the “Additional Information on Purchases and Sales — Waiver of Class A Sales Charges” and “Reduction of Sales Charges” sections on pages 154-156 of the Fund’s Statement of Additional Information.

 

Shareholder Fees (fees paid directly from your investment)		Class A Shares		Class C Shares		Class R Shares		Institutional Class Shares		Institutional Service Class Shares
Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price)		5.75	%	None		None		None		None
Maximum Deferred Sales Charge (Load) (as a percentage of offering or sale price, whichever is less)		0.50	%(1)	1.00	%	None		None		None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fees		0.86	%	0.86	%	0.86	%	0.86	%	0.86	%
Distribution and/or Service (12b-1) Fees		0.25	%	1.00	%	0.50	%	None		None
Other Expenses(2)		0.37	%	0.37	%	0.39	%	0.36	%	0.33	%
Total Annual Fund Operating Expenses		1.48	%	2.23	%	1.75	%	1.22	%	1.19	%
Less: Amount of Fee Limitations/Expense Reimbursements(3)		0.00	%	0.08	%	0.00	%	0.07	%	0.00	%
Total Annual Fund Operating Expenses After Fee Limitations/Expense Reimbursements		1.48	%	2.15	%	1.75	%	1.15	%	1.19	%

 

(1)         Unless you are otherwise eligible to purchase Class A shares without a sales charge, a contingent deferred sales charge (CDSC) of up to 0.50% will be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finder’s fee was paid.

 

(2)         Other Expenses have been restated to reflect current fees.

 

(3)         Aberdeen Funds (the “Trust”) and Aberdeen Asset Management Inc. (the “Adviser”) have entered into a written contract limiting operating expenses to 1.15% for all Classes of the Fund. This contractual limitation may not be terminated before February 28, 2017 without the approval of the Board of Trustees. This limit excludes certain expenses, including any taxes, interest, brokerage fees, short-sale dividend expenses, Acquired Fund Fees and Expenses, Rule 12b-1 fees, administrative services fees, transfer agent out-of-pocket expenses for Class A Shares, Class R Shares and Institutional Service Class Shares and extraordinary expenses. The Trust is authorized to reimburse the Adviser for management fees previously limited and/or for expenses previously paid by the Adviser, provided, however, that any reimbursements must be paid at a date not more than three years after the date when the Adviser limited the fees or reimbursed the expenses and the reimbursements do not cause a Class to exceed the applicable expense limitation in the contract at the time the fees were limited or expenses are paid.

 

12

 

Example

 

This Example is intended to help you compare the cost of investing in the U.S. Small Cap Equity Fund with the cost of investing in other mutual funds.

 

The Example assumes that you invest $10,000 in the U.S. Small Cap Equity Fund for the time periods indicated and then sell all of your shares at the end of those periods. It assumes a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

		1 Year			3 Years			5 Years			10 Years
Class A shares		$	717		$	1,016		$	1,336		$	2,242
Class C shares		$	318		$	690		$	1,188		$	2,558
Class R shares		$	178		$	551		$	949		$	2,062
Institutional Class shares		$	117		$	380		$	664		$	1,471
Institutional Service Class shares		$	121		$	378		$	654		$	1,443

 

You would pay the following expenses on the same investment if you did not sell your shares:

 

		1 Year			3 Years			5 Years			10 Years
Class C shares		$	218		$	690		$	1,188		$	2,558

 

Portfolio Turnover

 

The U.S. Small Cap Equity Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account.  These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance.  During the most recent fiscal year, the Fund’s portfolio turnover rate was 29.43% of the average value of its portfolio.

 

Principal Strategies

 

As a non-fundamental policy, under normal circumstances, the U.S. Small Cap Equity Fund invests at least 80% of the value of its net assets, plus any borrowings for investment purposes, in equity securities issued by U.S. small-cap companies.  A company is considered to be a U.S. company if Fund management determines that the company meets one or more of the following criteria:  the company

 

·                  is organized under the laws of, or has its principal office in the United States;

 

·                  has its principal securities trading market in the United States;

 

·                  alone or on a consolidated basis derives the highest concentration of its annual revenue or earnings or assets from goods produced, sales made or services performed in the United States; and/or

 

·                  issues securities denominated in the currency of the United States.

 

The Fund considers small-cap companies to be companies that have market capitalizations similar to those of companies included in the Russell 2000® Index at the time of investment. The range of the Russell 2000® Index was $14.78 million to $6.43 billion as of December 31, 2015. In addition, based on current market conditions, the Fund generally will not consider a company with a market capitalization in excess of $5 billion to be small-cap; however, this maximum capitalization may change with market conditions. Some companies may outgrow the definition of a small company after the Fund has purchased their securities or may no longer fall within the range of a reconstituted index. These companies continue to be considered small for purposes of the Fund’s minimum 80% allocation to small company equities. The Fund also may invest in foreign securities and securities of larger companies. Equity securities include, but are not limited to, common stock, preferred stock and depositary receipts. If the Fund changes its 80% investment policy it will notify shareholders at least 60 days before the change and, if necessary, will change the name of the U.S. Small Cap Equity Fund.

 

While the Fund may sell a security if its market capitalization exceeds the definition of small-cap company, it is not required to sell solely because of that fact.

 

Principal Risks

 

The U.S. Small Cap Equity Fund cannot guarantee that it will achieve its investment objective.

 

As with any fund, the value of the Fund’s investments — and therefore, the value of Fund shares — may fluctuate. These changes may occur because of:

 

Foreign Securities Risk — Foreign securities may be more volatile, harder to price and less liquid than U.S. securities.

 

Illiquid Securities Risk — Illiquid securities are assets which may not be sold or disposed of in the ordinary course of business within seven days at approximately the price at which the Fund has valued the investment on its books and may include such securities as those not registered under U.S.

 

13

 

securities laws or securities that cannot be sold in public transactions. An inability to sell a portfolio position can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities. Illiquid securities and relatively less liquid securities may also be difficult to value.

 

The Fund employs proprietary procedures and tests using third-party and internal data inputs that seek to assess and manage the liquidity of its portfolio holdings. The Fund’s procedures and tests take into account relevant market, trading and other factors, and monitor whether liquidity assessments should be adjusted based on changed market conditions. These procedures and tests are designed to assist the Fund in determining its ability to meet redemption requests in various market conditions. In light of the dynamic nature of markets, there can be no assurance that these procedures and tests will enable the Fund to ensure that it has sufficient liquidity to meet redemption requests.

 

Impact of Large Redemptions and Purchases of Fund Shares — Occasionally, shareholders may make large redemptions or purchases of Fund shares, which may cause the Fund to have to sell securities or invest additional cash. These transactions may adversely affect the Fund’s performance and increase transaction costs. In addition, large redemption requests may exceed the cash balance of the Fund and result in credit line borrowing fees and/or overdraft charges to the Fund until the sales of portfolio securities necessary to cover the redemption request settle.

 

Market Risk — Deteriorating market conditions might cause a general weakness in the market that reduces the prices of securities in those markets in which the Fund invests.

 

Sector Risk — To the extent that the Fund has a significant portion of its assets invested in securities of companies conducting business in a broadly related group of industries within an economic sector, the Fund may be more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly.

 

Securities Selection Risk — The investment team may select securities that underperform the stock market or other funds with similar investment objectives and strategies.

 

Small-Cap Securities Risk — Stocks of smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.

 

If the value of the Fund’s investments decreases, you may lose money.

 

For additional information regarding the above identified risks, see “Fund Details: Additional Information about Investments, Investment Techniques and Risks” in the prospectus.

 

Performance

 

The bar chart and table below can help you evaluate potential risks of the U.S. Small Cap Equity Fund. The bar chart shows how the Fund’s annual total returns for Class A have varied from year to year. The returns in the table reflect the maximum sales charge for Class A. The returns in the bar chart do not reflect sales loads or account fees. If these amounts were reflected, returns would be less than those shown.

 

The table compares the Fund’s average annual total returns to the returns of the Russell 2000® Index, a broad-based securities index. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.  For updated performance information, please visit www.aberdeen-asset.us or call 866-667-9231.

 

The Fund changed its investment strategy effective February 29, 2016.  Performance information for periods prior to February 29, 2016 does not reflect the current investment strategy.  In connection with the change in investment strategy, the Fund changed its name from Aberdeen Small Cap Fund to Aberdeen U.S. Small Cap Equity Fund.  The returns presented for the U.S. Small Cap Equity Fund for periods prior to June 23, 2008 reflect the performance of a predecessor fund (the “Predecessor Fund”). The U.S. Small Cap Equity Fund adopted the performance of the Predecessor Fund as the result of a reorganization on June 23, 2008 in which the U.S. Small Cap Equity Fund acquired all of the assets, subject to the liabilities, of the Predecessor Fund. The U.S. Small Cap Equity Fund and the Predecessor Fund had substantially similar investment objectives and strategies prior to the Fund’s adoption of its current investment strategy on February 29, 2016.

 

Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes.

 

14

 

Annual Total Returns — Class A Shares
(Years Ended Dec. 31)

 

 

Highest Return: 23.73 % - 3rd quarter 2009

 

Lowest Return: -31.39 % - 4th quarter 2008

 

After-tax returns are shown in the following table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect the impact of state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.

 

Average Annual Total Returns
as of December 31, 2015

 

		1 Year		5 Years		10 Years
Class A shares — Before Taxes		2.06	%	10.60	%	6.88	%
Class A shares — After Taxes on Distributions		2.06	%	10.58	%	6.40	%
Class A shares — After Taxes on Distributions and Sales of Shares		1.16	%	8.42	%	5.56	%
Class C shares — Before Taxes		6.58	%	11.18	%	6.78	%
Class R shares — Before Taxes		8.07	%	11.68	%	7.28	%
Institutional Class shares — Before Taxes		8.64	%	12.28	%	7.84	%
Institutional Service Class shares — Before Taxes		8.63	%	12.24	%	7.86	%
Russell 2000® Index (reflects no deduction for fees, expenses or taxes)		-4.41	%	9.19	%	6.80	%

 

Investment Adviser

 

Aberdeen Asset Management Inc. (the “Adviser”) serves as the U.S. Small Cap Equity Fund’s investment adviser.

 

Portfolio Managers

 

The Fund is managed using a team-based approach, with the following team members being jointly and primarily responsible for the day-to-day management of the Fund:

 

 

Purchase and Sale of Fund Shares

 

The Fund’s minimum investment requirements are as follows:

 

CLASS A and CLASS C SHARES

 

To open an account		$	1,000
To open an IRA account		$	1,000
Additional investments		$	50
To start an Automatic Investment Plan		$	1,000
Additional Investments (Automatic Investment Plan)		$	50

 

CLASS R SHARES

 

To open an account		No Minimum
Additional investments		No Minimum

 

15

 

INSTITUTIONAL CLASS SHARES

 

To open an account		$	1,000,000
Additional investments		No Minimum

 

INSTITUTIONAL SERVICE CLASS SHARES

 

To open an account		$	1,000,000
Additional investments		No Minimum

 

Minimum investment requirements do not apply to purchases by employees of the Adviser or its affiliates (or their spouses, children or immediate relatives), and generally do not apply to retirement plans, fee-based programs or omnibus accounts. Certain endowments, non-profits, and charitable organizations may also be eligible for waiver of minimum investment requirements.  If you purchase shares through an intermediary, different minimum account requirements may apply. The Trust reserves the right to apply or waive investment minimums under certain circumstances.

 

Fund shares may be redeemed on each day that the New York Stock Exchange is open.  Fund shares may be sold by mail or fax, by telephone or on-line.

 

Tax Information

 

The Fund’s dividends and distributions are subject to federal income taxes and will be taxed as ordinary income or capital gains, unless you are a tax-exempt investor or invest through a qualified employee benefit plan, retirement plan or other tax-deferred account, in which case your withdrawals from such account may be taxed as ordinary income.

 

Payments to Broker-Dealers and Other Financial Intermediaries

 

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services.  These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your financial advisor to recommend the Fund over another investment.  Ask your financial advisor or visit your financial intermediary’s website for more information.

 

16

 

 

Summary — Aberdeen China Opportunities Fund

 

Aberdeen China Opportunities Fund

 

Objective

 

The Aberdeen China Opportunities Fund (the “China Fund” or the “Fund”) seeks long-term capital appreciation.

 

Fees and Expenses of the Fund

 

This table describes the fees and expenses that you may pay when you buy and hold shares of the China Fund.  You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Aberdeen Funds.  More information about these and other discounts is available from your financial advisor and in the “Investing with Aberdeen Funds: Choosing a Share Class — Reduction and Waiver of Class A Sales Charges” section on page 200 of the Fund’s prospectus and in the “Additional Information on Purchases and Sales — Waiver of Class A Sales Charges” and “Reduction of Sales Charges” sections on pages 154-156 of the Fund’s Statement of Additional Information.

 

Shareholder Fees (fees paid directly from your investment)		Class A Shares		Class C Shares		Class R Shares		Institutional Class Shares		Institutional Service Class Shares
Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price)		5.75	%	None		None		None		None
Maximum Deferred Sales Charge (Load) (as a percentage of offering or sale price, whichever is less)		1.00	%(1)	1.00	%	None		None		None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fees		1.25	%	1.25	%	1.25	%	1.25	%	1.25	%
Distribution and/or Service (12b-1) Fees		0.25	%	1.00	%	0.50	%	None		None
Other Expenses(2)		1.00	%	0.99	%	1.03	%	0.96	%	0.99	%
Total Annual Fund Operating Expenses		2.50	%	3.24	%	2.78	%	2.21	%	2.24	%
Less: Amount of Fee Limitations/Expense Reimbursements(3)		0.51	%	0.62	%	0.51	%	0.59	%	0.51	%
Total Annual Fund Operating Expenses After Fee Limitations/Expense Reimbursements		1.99	%	2.62	%	2.27	%	1.62	%	1.73	%

 

(1)         Unless you are otherwise eligible to purchase Class A shares without a sales charge, a contingent deferred sales charge (CDSC) of up to 1.00% will be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finder’s fee was paid.

 

(2)         Other Expenses have been restated to reflect current fees.

 

(3)         Aberdeen Funds (the “Trust”) and Aberdeen Asset Management Inc. (the “Adviser”) have entered into a written contract limiting operating expenses to 1.62% for all Classes of the Fund. This contractual limitation may not be terminated before February 28, 2017 without the approval of the Board of Trustees. This limit excludes certain expenses, including any taxes, interest, brokerage fees, short-sale dividend expenses, Acquired Fund Fees and Expenses, Rule 12b-1 fees, administrative services fees, transfer agent out-of-pocket expenses for Class A Shares, Class R Shares and Institutional Service Class Shares and extraordinary expenses. The Trust is authorized to reimburse the Adviser for management fees previously limited and/or for expenses previously paid by the Adviser, provided, however, that any reimbursements must be paid at a date not more than three years after the date when the Adviser limited the fees or reimbursed the expenses and the reimbursements do not cause a Class to exceed the applicable expense limitation in the contract at the time the fees were limited or expenses are paid.

 

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Example

 

This Example is intended to help you compare the cost of investing in the China Fund with the cost of investing in other mutual funds.

 

The Example assumes that you invest $10,000 in the China Fund for the time periods indicated and then sell all of your shares at the end of those periods. It assumes a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

		1 Year			3 Years			5 Years			10 Years
Class A shares		$	765		$	1,263		$	1,786		$	3,212
Class C shares		$	365		$	940		$	1,639		$	3,498
Class R shares		$	230		$	814		$	1,424		$	3,072
Institutional Class shares		$	165		$	635		$	1,131		$	2,498
Institutional Service Class shares		$	176		$	651		$	1,153		$	2,535

 

You would pay the following expenses on the same investment if you did not sell your shares.

 

		1 Year			3 Years			5 Years			10 Years
Class C shares		$	265		$	940		$	1,639		$	3,498

 

Portfolio Turnover

 

The China Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account.  These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance.  During the most recent fiscal year, the Fund’s portfolio turnover rate was 10.48% of the average value of its portfolio.

 

Principal Strategies

 

As a non-fundamental policy, under normal circumstances, the China Fund invests at least 80% of the value of its net assets, plus any borrowings for investment purposes, in equity securities issued by Chinese companies (including Hong Kong). A company is generally considered to be a China company if Fund management determines that the company meets one or more of the following criteria: the company

 

·                       is organized under the laws of, or has its principal office in China or Hong Kong;

 

·                       has its principal securities trading market in China or Hong Kong;

 

·                       alone or on a consolidated basis derives the highest concentration of its annual revenue or earnings or assets from goods produced, sales made or services performed in China or Hong Kong; and/or

 

·                       issues securities denominated in the currency of China or Hong Kong.

 

If the Fund changes its 80% investment policy, it will notify shareholders at least 60 days before the change and, if necessary, will change the name of the China Fund.

 

The Fund may invest in securities denominated in U.S. Dollars and the currencies of the foreign countries in which it is permitted to invest.  The Fund typically has full currency exposure to those markets in which it invests.

 

The Fund may invest without limit in the equity securities of companies of any size, including small-cap and mid-cap companies. Equity securities include, but are not limited to, common stock, preferred stock and depositary receipts. The Fund also may invest in equity-linked notes. An equity-linked note is a security whose performance is generally tied to a single stock, a stock index or a basket of stocks. For purposes of the Fund’s 80% policy described above, equity-linked notes are classified according to their underlying or referenced security or securities.

 

In carrying out the Fund’s investment strategies, the Fund’s investment team employs a fundamental, bottom-up equity investment style, which is characterized by intensive, first-hand research and disciplined company evaluation. Stocks are identified for their long-term, fundamental value based on quality and price.

 

Principal Risks

 

The China Fund cannot guarantee that it will achieve its investment objective.

 

As with any fund, the value of the Fund’s investments — and therefore, the value of Fund’s shares — may fluctuate. These changes may occur because of:

 

Country/Regional Focus Risk — Significant exposure to a single country or geographical region

 

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involves increased currency, political, regulatory and other risks. Market swings in the targeted country or geographical region likely will have a greater effect on portfolio performance than they would in a more geographically diversified fund.

 

Emerging Markets Risk — A magnification of the risks that apply to foreign investments. These risks are greater for securities of companies in emerging markets countries because the countries may have less stable governments, more volatile currencies and less established markets (see “Foreign Securities Risk” below).

 

Equity-Linked Notes — The Fund may invest in equity-linked notes, which are generally subject to the same risks as the foreign equity securities or the basket of foreign securities they are linked to. If the linked security(ies) declines in value, the note may return a lower amount at maturity. The trading price of an equity-linked note also depends on the value of the linked security(ies).

 

Foreign Currency Exposure Risk —The value of foreign currencies relative to the U.S. Dollar fluctuates in response to market, economic, political, regulatory, geopolitical or other conditions. A decline in the value of a foreign currency versus the U.S. Dollar reduces the value in U.S. Dollars of investments denominated in that foreign currency. This risk may impact the Fund more greatly to the extent the Fund does not hedge its currency risk, or hedging techniques used by the Adviser are unsuccessful.

 

Foreign Securities Risk — Foreign securities may be more volatile, harder to price and less liquid than U.S. securities.

 

Asian Risk. Parts of the Asian region may be subject to a greater degree of economic, political and social instability than is the case in the United States and Europe. Some Asian countries can be characterized as emerging markets or newly industrialized and may experience more volatile economic cycles than developed countries. The developing nature of securities markets in many countries in the Asian region may lead to a lack of liquidity while some countries have restricted the flow of money in and out of the country. Some countries in Asia have historically experienced political uncertainty, corruption, military intervention and social unrest. The Fund may be more volatile than a fund which is broadly diversified geographically.

 

China Risk. Concentrating investments in China and Hong Kong subjects the Fund to additional risks, and may make it significantly more volatile than geographically diverse mutual funds. Additional risks associated with investments in China and Hong Kong include exposure to currency fluctuations, less liquidity, expropriation, confiscatory taxation, nationalization, exchange control regulations (including currency blockage), trading halts, limitations on repatriation and differing legal standards.

 

Impact of Large Redemptions and Purchases of Fund Shares — Occasionally, shareholders may make large redemptions or purchases of Fund shares, which may cause the Fund to have to sell securities or invest additional cash. These transactions may adversely affect the Fund’s performance and increase transaction costs. In addition, large redemption requests may exceed the cash balance of the Fund and result in credit line borrowing fees and/or overdraft charges to the Fund until the sales of portfolio securities necessary to cover the redemption request settle.

 

Market Risk — Deteriorating market conditions might cause a general weakness in the market that reduces the prices of securities in those markets in which the Fund invests.

 

Mid-Cap Securities Risk — Stocks of medium-sized companies tend to be more volatile and less liquid than stocks of larger companies.

 

Sector Risk — To the extent that the Fund has a significant portion of its assets invested in securities of companies conducting business in a broadly related group of industries within an economic sector, the Fund may be more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly.

 

Financials Sector Risk.  To the extent that the financials sector continues to represent a significant portion of the Fund, the Fund will be sensitive to changes in, and its performance may depend to a greater extent on, factors impacting this sector.  Performance of companies in the financials sector may be adversely impacted by many factors, including, among others, government regulations, economic conditions, credit rating downgrades, changes in interest rates, and decreased liquidity in credit markets. The impact of more stringent capital requirements, recent or future regulation of any individual financial company, or recent or future regulation of the financials sector as a whole cannot be predicted. In recent years, cyber attacks and technology malfunctions and failures have become increasingly frequent in this sector and have caused significant losses.

 

Securities Selection Risk — The investment team may select securities that underperform the stock market or other funds with similar investment objectives and strategies.

 

Small-Cap Securities Risk — Stocks of smaller companies are usually less stable in price and less

 

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liquid than those of larger, more established companies. Therefore, they generally involve greater risk.

 

Valuation Risk — The lack of active trading markets may make it difficult to obtain an accurate price for a security held by the Fund.

 

If the value of the Fund’s investments decreases, you may lose money.

 

For additional information regarding the above identified risks, see “Fund Details: Additional Information about Investments, Investment Techniques and Risks” in the prospectus.

 

Performance

 

The bar chart and table below can help you evaluate potential risks of the China Fund. The bar chart shows how the Fund’s annual total returns for Class A have varied from year to year. The returns in the table reflect the maximum sales charge for Class A. The returns in the bar chart do not reflect sales loads or account fees. If these amounts were reflected, returns would be less than those shown.  The table compares the Fund’s average annual total returns to the returns of the MSCI Zhong Hua Index, a broad-based securities index. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.  For updated performance information, please visit www.aberdeen-asset.us or call 866-667-9231.

 

The returns presented for the China Fund for periods prior to June 23, 2008 reflect the performance of a predecessor fund (the “Predecessor Fund”). The China Fund adopted the performance of the Predecessor Fund as the result of a reorganization on June 23, 2008 in which the China Fund acquired all of the assets, subject to the liabilities, of the Predecessor Fund. The China Fund and the Predecessor Fund have substantially similar investment objectives and strategies. Returns of the Predecessor Fund have not been adjusted to reflect the expenses applicable to the respective classes. Aberdeen Asset Management Asia Limited (“AAMAL”) began sub-advising the Fund on January 1, 2009. Performance prior to this date reflects the performance of an unaffiliated sub-adviser.

 

Annual Total Returns — Class A Shares (Years Ended Dec. 31)

 

 

Highest Return: 42.99% - 2nd quarter 2009

 

Lowest Return: -27.49 % – 3rd quarter 2008

 

After-tax returns are shown in the following table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.

 

Average Annual Total Returns
As of December 31, 2015

 

		1 Year		5 Years		10 Years
Class A shares — Before Taxes		-12.80	%	-3.86	%	8.05	%
Class A shares — After Taxes on Distributions		-13.41	%	-4.30	%	7.10	%
Class A shares — After Taxes on Distributions and Sales of Shares		-7.24	%	-3.04	%	6.70	%
Class C shares — Before Taxes		-9.10	%	-3.42	%	7.91	%
Class R shares — Before Taxes		-7.88	%	-3.07	%	8.35	%
Institutional Class shares — Before Taxes		-7.24	%	-2.46	%	8.95	%
Institutional Service Class shares — Before Taxes		-7.26	%	-2.46	%	8.98	%
MSCI Zhong Hua Index (reflects no deduction for fees, expenses or taxes)		-5.58	%	2.05	%	8.78	%

 

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Investment Adviser

 

Aberdeen Asset Management Inc. (the “Adviser”) serves as the China Fund’s investment adviser and AAMAL serves as the Fund’s subadviser.

 

Portfolio Managers

 

The Fund is managed using a team-based approach, with the following team members being jointly and primarily responsible for the day-to-day management of the Fund:

 

 

Purchase and Sale of Fund Shares

 

The Fund’s minimum investment requirements are as follows:

 

CLASS A and CLASS C SHARES

 

To open an account		$	1,000
To open an IRA account		$	1,000
Additional investments		$	50
To start an Automatic Investment Plan		$	1,000
Additional Investments (Automatic Investment Plan)		$	50

 

CLASS R SHARES

 

To open an account		No Minimum
Additional investments		No Minimum

 

INSTITUTIONAL CLASS SHARES

 

To open an account		$	1,000,000
Additional investments		No Minimum

 

INSTITUTIONAL SERVICE CLASS SHARES

 

To open an account		$	1,000,000
Additional investments		No Minimum

 

Minimum investment requirements do not apply to purchases by employees of the Adviser or its affiliates (or their spouses, children or immediate relatives), and generally do not apply to retirement plans, fee-based programs or omnibus accounts. Certain endowments, non-profits, and charitable organizations may also be eligible for waiver of minimum investment requirements. If you purchase shares through an intermediary, different minimum account requirements may apply. The Trust reserves the right to apply or waive investment minimums under certain circumstances.

 

Fund shares may be redeemed on each day that the New York Stock Exchange is open.  Fund shares may be sold by mail or fax, by telephone or on-line.

 

Tax Information

 

The Fund’s dividends and distributions are subject to federal income taxes and will be taxed as ordinary income or capital gains, unless you are a tax-exempt investor or invest through a qualified employee benefit plan, retirement plan or other tax-deferred account, in which case your withdrawals from such account may be taxed as ordinary income.

 

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Payments to Broker-Dealers and Other Financial Intermediaries

 

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services.  These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your financial advisor to recommend the Fund over another investment.  Ask your financial advisor or visit your financial intermediary’s website for more information.

 

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Summary — Aberdeen International Equity Fund

 

Aberdeen International Equity Fund

 

Objective

 

The Aberdeen International Equity Fund (the “International Equity Fund” or the “Fund”) seeks long-term capital appreciation by investing primarily in equity securities of companies located in Europe, Australasia, the Far East and other regions, including emerging countries.

 

Fees and Expenses of the Fund

 

This table describes the fees and expenses that you may pay when you buy and hold shares of the International Equity Fund.  You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Aberdeen Funds.  More information about these and other discounts is available from your financial advisor and in the “Investing with Aberdeen Funds: Choosing a Share Class — Reduction and Waiver of Class A Sales Charges” section on page 200 of the Fund’s prospectus and in the “Additional Information on Purchases and Sales —Waiver of Class A Sales Charges” and “Reduction of Sales Charges” sections on pages 154-156 of the Fund’s Statement of Additional Information.

 

Shareholder Fees (fees paid directly from your investment)		Class A Shares		Class C Shares		Class R Shares		Institutional Class Shares		Institutional Service Class Shares
Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price)		5.75	%	None		None		None		None
Maximum Deferred Sales Charge (Load) (as a percentage of offering or sale price, whichever is less)		1.00	%(1)	1.00	%	None		None		None
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fees		0.80	%	0.80	%	0.80	%	0.80	%	0.80	%
Distribution and/or Service (12b-1) Fees		0.25	%	1.00	%	0.50	%	None		None
Other Expenses(2)		0.33	%	0.33	%	0.33	%	0.22	%	0.33	%
Total Annual Fund Operating Expenses		1.38	%	2.13	%	1.63	%	1.02	%	1.13	%
Less: Amount of Fee Limitations/Expense Reimbursements(3)		0.00	%	0.03	%	0.00	%	0.00	%	0.00	%
Total Annual Fund Operating Expenses After Fee Limitations/Expense Reimbursements		1.38	%	2.10	%	1.63	%	1.02	%	1.13	%

 

(1)         Unless you are otherwise eligible to purchase Class A shares without a sales charge, a contingent deferred sales charge (CDSC) of up to 1.00% will be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finder’s fee was paid.

 

(2)         Other Expenses have been restated to reflect current fees.

 

(3)         Aberdeen Funds (the “Trust”) and Aberdeen Asset Management Inc. (the “Adviser”) have entered into a written contract limiting operating expenses to 1.10% for all Classes of the Fund. This contractual limitation may not be terminated before February 28, 2017 without the approval of the Board of Trustees.  This limit excludes certain expenses, including any taxes, interest, brokerage fees, short-sale dividend expenses, Acquired Fund Fees and Expenses, Rule 12b-1 fees, administrative services fees, transfer agent out-of-pocket expenses for Class A Shares, Class R Shares and Institutional Service Class Shares and extraordinary expenses. The Trust is authorized to reimburse the Adviser for management fees previously limited and/or for expenses previously paid by the Adviser, provided, however, that any reimbursements must be paid at a date not more than three years after the date when the Adviser limited the fees or reimbursed the expenses and the reimbursements do not cause a Class to exceed the applicable expense limitation in the contract at the time the fees were limited or expenses are paid.

 

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