COMMENTS RECEIVED ON APRIL 25, 2017
FROM EDWARD BARTZ
FIDELITY ABERDEEN STREET TRUST (File Nos. 033-43529 and 811-06440)
Fidelity Freedom Index 2005 Fund
Fidelity Freedom Index 2010 Fund
Fidelity Freedom Index 2015 Fund
Fidelity Freedom Index 2020 Fund
Fidelity Freedom Index 2025 Fund
Fidelity Freedom Index 2030 Fund
Fidelity Freedom Index 2035 Fund
Fidelity Freedom Index 2040 Fund
Fidelity Freedom Index 2045 Fund
Fidelity Freedom Index 2050 Fund
Fidelity Freedom Index 2055 Fund
Fidelity Freedom Index 2060 Fund
Fidelity Freedom Index Income Fund
POST-EFFECTIVE AMENDMENT NO. 89
“Fund Summary” (prospectus)
“Fee Table”
“Fidelity Management & Research Company (FMR) has contractually agreed to reimburse Institutional Premium Class shares of the fund to the extent that total operating expenses (including acquired fund fees and expenses, but excluding interest, certain taxes, certain securities lending costs, brokerage commissions, and extraordinary expenses, if any, incurred by the fund or an acquired fund in which the fund invests) exceed 0.10% of its average net assets. This arrangement will remain in effect through May 31, 2019. FMR may not terminate this arrangement before the expiration date without the approval of the Board of Trustees.”
C:
The Staff also requests confirmation that the contractual agreement will be filed as an exhibit to the registration statement. Also, if the reimbursement is subject to recoupment, the Staff requests we disclose that.
R:
As disclosed, this arrangement will remain in effect for at least a year from the effective date of the prospectus, but there is no agreement to be filed under Item 28(h). Instead, this particular arrangement is an undertaking made by FMR pursuant to which it is bound in accordance with the disclosure to reimburse certain expenses through the stated date (as compared with a voluntary arrangement, which could be discontinued by FMR at any time).
Also, we direct the Staff to the following disclosure in “Fund Management – Advisory Fees”:“From time to time, the Adviser or affiliates may agree to reimburse or waive certain fund expenses while retaining the ability to be repaid if expenses fall below the specified limit prior to the end of the fiscal year.Reimbursement or waiver arrangements can decrease expenses and boost performance.”
“Fund Summary” (prospectus)
“Portfolio Turnover”
C:
The Staff requests we disclose that underlying funds will incur transaction costs.
R:
We believe the disclosure included in the prospectus is consistent with Item 3 of Form N‐1A, which requires that we disclose the relationship between a fund’s transaction costs and a fund’s portfolio turnover rate. The transaction costs of the underlying funds the funds may invest in have no bearing on a fund’s portfolio turnover rate. Accordingly, we have not revised our portfolio turnover disclosure.
“Fund Summary” (prospectus)
“Principal Investment Strategies”
“Investing in a combination of Fidelity® domestic equity funds (including commodity funds), international funds (developed and emerging markets), bond funds (including treasury inflation-protected security funds), and short-term funds (underlying Fidelity® funds), each of which (excluding the money market fund) seeks to provide investment results that correspond to the total return of a specific index or market segment.”
C:
The Staff requests we disclose the specific indexes that are being referenced in the “Principal Investment Strategies” section.
R:
The index of each underlying index fund is disclosed in the statement of additional information for the Freedom Index Funds under “Description of Underlying Funds”.
“Investment Details” (prospectus)
“Principal Investment Strategies”
C:
The Staff requests that we identify where each fund is on the glide path chart.
R:
The glide path is intended to illustrate to shareholders in any of the Fidelity Freedom Index Funds that the asset allocation strategy disclosed under “Principal Investment Strategy” in the “Fund Summary” section for each fund becomes more conservative over time. In addition, each fund’s asset allocation (as of March 31) is disclosed in a pie chart under the glide path in the “Fund Summary” section for each fund. Accordingly, we have not modified this disclosure.
“Fund Summary” (prospectus)
“Principal Investment Risks”
C:
The Staff requests that we provide separate risk disclosure for emerging markets.
R:
Although each fund may invest in securities of foreign issuers, including emerging markets securities, investments in emerging markets are not a principal investment strategy of each fund. As a result, each fund believes that its current strategy and risk disclosures are appropriate.
“Fund Summary” (prospectus)
“Principal Investment Risks”
C:
The Staff requests that we add corresponding strategies for subsidiary risk, leverage risk, mid cap investing risk, and small cap investing risk.
R:
Each fund’s principal investment strategy is to invest in underlying funds according to a disclosed asset allocation strategy. Each fund’s principal investment risks disclosure corresponds to each fund’s exposure to specific underlying funds as of a certain date. Because the funds do not have a principal investment strategy to invest directly in investments that expose the funds to Subsidiary Risk, Leverage Risk, Mid Cap Investing Risk, and Small Cap Investing Risk, but rather invest in underlying funds that may have exposure to such securities, instruments or strategies, we respectfully decline to include this disclosure in the principal investment strategies section and will continue to reflect the appropriate risk disclosure according to each fund’s exposure to such instruments through underlying funds.
“Fund Summary” (prospectus)
“Principal Investment Risks”
“Subsidiary Risk. Investment in an unregistered subsidiary is not subject to the investor protections of the Investment Company Act of 1940 (1940 Act) and is subject to the risks associated with investing in derivatives and commodity-linked investing in general. Changes in tax and other laws could negatively affect investments in the subsidiary.”
C:
The Staff would like us to disclose in the “Principal Investment Strategies” section that the funds invest in a subsidiary organized under the laws of the Cayman Islands.
R:
The funds do not have a principal investment strategy of investing in subsidiaries organized under the laws of the Cayman Islands. Each fund’s principal investment strategy is to invest in underlying funds according to a disclosed asset allocation strategy. We have included “Subsidiary Risk” to the extent that an underlying fund invests in Cayman subsidiaries, which would expose the funds to subsidiary risk. However, based on the funds’ most recent allocation to underlying funds, each fund’s exposure to underlying funds that may invest in the Cayman subsidiary does not rise to the level of a principal investment strategy. Accordingly, we have deleted this disclosure from the prospectus.
“Fund Summary” (prospectus)
“Principal Investment Risks”
“Subsidiary Risk. Investment in an unregistered subsidiary is not subject to the investor protections of the Investment Company Act of 1940 (1940 Act) and is subject to the risks associated with investing in derivatives and commodity-linked investing in general. Changes in tax and other laws could negatively affect investments in the subsidiary.”
C:
The Staff requests we confirm the following:
Comment 1:
Disclose that the fund complies with the provisions of the Investment Company Act governing investment policies (Section 8) and capital structure and leverage (Section 18) on an aggregate basis with the Controlled Foreign Corporation (“CFC”).
Comment 2:
Disclose that each investment adviser to the CFC complies with provisions of the Investment Company Act relating to investment advisory contracts (Section 15) as an investment adviser to the fund under Section 2(a)(20) of the Investment Company Act. The investment advisory agreement between the CFC and its investment adviser is a material contract that should be included as an exhibit to the registration statement. If the same person is the adviser to both the fund and the CFC, then, for purposes of complying with Section 15(c), the reviews of the fund’s and the CFC’s investment advisory agreements may be combined.
Comment 3:
Disclose that each CFC complies with provisions relating to affiliated transactions and custody (Section 17). Identify the custodian of the CFC.
Comment 4:
Disclose: (1) whether the fund has received a private letter ruling from the Internal Revenue Service stating that undistributed income derived from the CFC is qualifying income, and (2) if the fund has not received a private letter ruling, its basis for determining that such undistributed income is qualifying income, such as an opinion of counsel.
Comment 5:
Disclose any of the CFC’s principal investment strategies or principal risks that constitute principal investment strategies or risks of the fund. The principal investment strategies and principal risk disclosures of a fund that invests in a CFC should reflect aggregate operations of the fund and the CFC.
Comment 6:
Confirm in correspondence that the financial statements of the CFC will be consolidated with those of the fund.
Comment 7:
Confirm in correspondence that: (1) the CFC’s management fee (including any performance fee) will be included in “Management Fees” and the CFC’s expenses will be included in “Other Expenses” in the fund’s prospectus fee table; (2) the CFC and its board of directors will agree to designate an agent for service of process in the United States; and (3) the CFC and its board of directors will agree to inspection by the staff of the CFC’s books and records, which will be maintained in accordance with Section 31 of the Investment Company Act and the rules thereunder.
R:
Because the Freedom Index Funds do not invest directly in the Cayman Subsidiary, but rather invest in an underlying fund that invests in the Subsidiary, the responses below are with respect to the underlying fund’s investment in the Cayman Subsidiary:
Response 1:
The fund will look through the CFC, and will aggregate the CFC’s individual holdings together with direct holdings of the fund, for purposes of testing compliance with the fund’s requirements under the 1940 Act. With respect to Section 18(f) and related SEC guidance, compliance is met at both the fund and the CFC level.
Response 2:
The fund will comply with Section 15. The CFC is not a registered investment company under the
1940 Act, and is therefore not required to separately comply with the provisions of the 1940 Act. We note that the CFC’s advisory contract is between its adviser, Geode, and the CFC. The contract is not a material contract with respect to the fund’s shareholders and therefore we do not believe it needs to be filed with the fund’s registration statement.
Response 3:
As previously noted, the fund will look through the CFC, and will aggregate the CFC’s individual holdings together with direct holdings of the fund, for purposes of testing compliance with the fund’s requirements under the 1940 Act. The CFC has the same custodian as the fund (JPMorgan Chase Bank).
Response 4:
As disclosed under “Subsidiary Risk” in the “Principal Investment Risks” section of the fund’s prospectus, “the fund relies on a private letter ruling received by other Fidelity funds from the Internal Revenue Service with respect to its investment in the Subsidiary.”
Response 5:
The principal investment strategies and principal investment risks disclosed for the fund reflect the aggregate operations of the fund and the CFC.
Response 6:
The fund will consolidate its financial statements with the CFC’s consistent with no-action relief dated April 29, 2008 (see Fidelity’s letter to Richard F. Sennett, Chief Accountant of the Division of Investment Management, dated February 13, 2008). These financial statements will be filed on Form N-CSR.
Response 7:
Consistent with the requirements of Item 3 of Form N-1A, the fees and expenses of investing in the CFC, including the CFC’s management fee, will be included in the fund’s prospectus fee table as “Acquired Fund Fees and Expenses” (“AFFE”). Item 3 of Form N-1A defines “Acquired Fund” as “any company in which the Fund invests or has invested during the relevant fiscal period that (A) is an investment company or (B) would be an investment company under Section 3(a) of the Investment Company Act … but for the exceptions to that definition provided for in section 3(c)(1) and 3(c)(7) of the Investment Company Act…” The CFC is exempt from the definition in Section 3(a) pursuant to Section 3(c)(7). Given this, we believe the CFC clearly falls within the Form N-1A definition of “Acquired Fund” for purposes of calculating AFFE. We confirm that the CFC will designate an agent for service of process in the United States and that the CFC will agree to the examination of its books and records by the Staff.
“Fund Summary” (prospectus)
“Principal Investment Risks”
“Issuer-Specific Changes. The value of an individual security or particular type of security can be more volatile than, and can perform differently from, the market as a whole. [Changes in the financial condition of an issuer or counterparty (e.g., broker-dealer or other borrower in a securities lending transaction) can increase the risk of default by an issuer or counterparty, which can affect a security's or instrument's value or result in delays in recovering securities and/or capital from a counterparty.] [A decline in the credit quality of an issuer or a provider of credit support or a maturity-shortening structure for a security can cause the price of a security to decrease.] [The value of securities of smaller issuers can be more volatile than that of larger issuers.] [Lower-quality debt securities (those of less than investment-grade quality, also referred to as high yield debt securities or junk bonds) [, including floating rate loans,] [and certain types of other securities] involve greater risk of default or price changes due to changes in the credit quality of the issuer. The value of lower-quality debt securities [, including floating rate loans,] [and certain types of other securities] can be more volatile due to increased sensitivity to adverse issuer, political, regulatory, market, or economic developments [and can be difficult to resell].]”
C:
The Staff requests a separate risk for lower-quality debt securities.
R:
We believe that the risks associated with investing in lower-quality debt securities are described in “Issuer−Specific Changes” and, therefore, the addition of a separate risk factor for this type of investment would be duplicative.
“Fund Summary” (prospectus)
“Portfolio Manager(s)”
C:
The Staff requests confirmation that all of the portfolio managers are jointly and primarily responsible for the day to day operations of the funds.
R:
We believe this disclosure appropriately identifies each portfolio manager as required by Form N−1A, Item 5(a), Instruction 2.
“Investment Policies and Limitations” (SAI)
C:
The Staff requests that we disclose later in the registration statement that if a fund is a protection seller under a credit default swap, it will segregate assets equal to the full notional amount of the swap agreement.
R:
We confirm that, if a fund holds any non-centrally cleared credit default swaps in its portfolio, it would expect at this time to segregate assets equal to the full notional amount of each transaction. We are aware that the SEC has been analyzing the segregation requirements for mutual funds using derivatives and that rulemaking on the subject may be forthcoming. In the absence of staff guidance or rulemaking on the subject, we do not believe it is prudent to include our internal segregation policies in our disclosure. Accordingly, we respectfully decline to modify the disclosure as suggested.
FOLLOW-UP COMMENTS RECEIVED ON APRIL 25, 2017
FROM EDWARD BARTZ
FIDELITY ABERDEEN STREET TRUST (File Nos. 033-43529 and 811-06440)
Fidelity Freedom Index 2005 Fund
Fidelity Freedom Index 2010 Fund
Fidelity Freedom Index 2015 Fund
Fidelity Freedom Index 2020 Fund
Fidelity Freedom Index 2025 Fund
Fidelity Freedom Index 2030 Fund
Fidelity Freedom Index 2035 Fund
Fidelity Freedom Index 2040 Fund
Fidelity Freedom Index 2045 Fund
Fidelity Freedom Index 2050 Fund
Fidelity Freedom Index 2055 Fund
Fidelity Freedom Index 2060 Fund
Fidelity Freedom Index Income Fund
POST-EFFECTIVE AMENDMENT NO. 89
“Fund Summary” (prospectus)
“Principal Investment Strategies”
“Investing in a combination of Fidelity® domestic equity funds (including commodity funds), international funds (developed and emerging markets), bond funds (including treasury inflation-protected security funds), and short-term funds (underlying Fidelity® funds), each of which (excluding the money market fund) seeks to provide investment results that correspond to the total return of a specific index or market segment.”
C:
The Staff reiterates the request to disclose the specific indexes that are being referenced in the “Principal Investment Strategies” section.
R:
Although we continue to consider the Staff’s comment, we respectfully decline to implement it at this time. Each Freedom Index Fund’s principal investment strategy is to implement the disclosed asset allocation strategy utilizing underlying index funds, not to provide shareholders with exposure to particular indices. We believe that disclosing the specific indices of the underlying funds in the Fund Summary section would not be meaningful to shareholders and may confuse investors regarding the nature of the top level Freedom Index Fund. Although the disclosure above contains a reference to “a specific index”, the reference is not intended to suggest that these products seek to track the indices of the underlying funds, as indicated by the additional reference to “or market segment”. We recognize that some investors may find information regarding the underlying funds relevant in making their investment decision. As a result, we have included additional information regarding the underlying funds in the “Fund Basics” section of the prospectus under “Description of Underlying Fidelity Funds” and in the statement of additional information under “Description of Underlying Funds”.
