Correspondence 0000930413-23-000404 from FIRST EAGLE FUNDS (CIK 0000906352)
FIRST EAGLE FUNDS (CIK 0000906352)
Date: Feb. 15, 2023 · CIK: 0000906352 · Accession: 0000930413-23-000404
AI Filing Summary & Sentiment
File numbers found in text: 811-7762
Letter
Division of Investment Management, Disclosure Review and Accounting Office Washington, DC 20549 Re: First Eagle Funds (the “Trust”) File Nos.: 033-63560 and 811-7762 Post-Effective Amendment No. 108 to the Trust’s Registration Statement on Form N-1A
Dear Ms. Rowland:
Thank you for your comments regarding Post-Effective Amendment No. 108 to the Trust’s registration statement on Form N-1A, filed with the Securities and Exchange Commission (the “Commission”) on December 22, 2022 (the “PEA”). The PEA was filed for the purpose of revising the name and principal investment strategy of the First Eagle Fund of America (to be renamed the First Eagle Rising Dividend Fund) (the “Fund”), a series of the Trust. This letter responds to your comments, which you provided to us by telephone on February 3, 2023.
Below, we describe changes the Trust will make to the PEA in response to the Staff’s comments, generally described by reference to where the responsive disclosures will appear in the PEA.
We anticipate making the applicable changes in a filing pursuant to Rule 485(b) under the Securities Act of 1933, as amended (the “Securities Act”), on or about February 28, 2023, with an effective date of March 1, 2023. All text changes described below will be implemented substantially as noted here, though some variation in the final filing may be appropriate.
Capitalized terms used, but not otherwise defined, have the meaning ascribed to them in the PEA.
Sidley Austin (NY) LLP is a Delaware limited liability partnership doing business as Sidley Austin LLP and practicing in affiliation with other Sidley Austin partnerships.
Page 2
GENERAL COMMENTS
1. COMMENT: You asked that the Fund please provide its responses to the Staff’s comments no later than five business days prior to the effective date of the filing to give the Staff adequate time to review the Fund’s responses. You noted that the Fund and management are responsible for the accuracy of the disclosure notwithstanding any review by the Staff.
RESPONSE: The Fund’s responses to the Staff’s comments are included herein.
2. COMMENT: You noted that where a comment is made to one section of the PEA, the comment is applicable to all similar disclosure appearing elsewhere in the PEA.
RESPONSE: The Fund will incorporate the Staff’s comments throughout the PEA.
3. COMMENT: You asked that the Fund please update its name on EDGAR in connection with the filing.
RESPONSE: The Fund will update its name on EDGAR in connection with the filing.
FEES AND EXPENSES
4. COMMENT: With respect to the footnote to the Fees and Expenses table indicated by “**,” and in particular the sentence “The Fund has agreed that each of Classes A, C, I, R3, R4, R5 and R6 will repay the Adviser for fees and expenses waived or reimbursed for the class provided that repayment does not cause annual operating expenses (after the repayment is taken into account) to exceed either: (1) 0.90%,1.65%, 0.65%, 1.00%, 0.75%, 0.65% and 0.65% of the class’ average net assets, respectively; or” you asked that the Fund replace the language from “either: (1)…; or (2)…” to “[the lesser of] or [both] (1)…; and (2)…”
RESPONSE: The Fund will revise the above-quoted sentence in footnote “**” to the Fees and Expenses table as follows:
The Fund has agreed that each of Classes A, C, I, R3, R4, R5 and R6 will repay the Adviser for fees and expenses waived or reimbursed for the class provided that repayment does not cause annual operating expenses (after the repayment is taken into account) to exceed either the lesser of: (1) 0.90%, 1.65%, 0.65%, 1.00%, 0.75%, 0.65% and 0.65% of the class’ average net assets, respectively; or (2) if applicable, the then-current expense
Page 3
limitations. Any such repayment must be made within three years after the year in which the Adviser incurred the expense.
5. COMMENT: With respect to the footnote to the Fees and Expenses table indicated by “**,” and in particular the sentence “Any such repayment must be made within three years after the year in which the Adviser incurred the expense,” you asked that the Fund revise the sentence to say “Any such repayment must be made within three years from the date such amount was originally waived or reimbursed.”
RESPONSE: The Fund respectfully declines to make the change in response to the Staff’s comment regarding the phrase “after the year in which the Adviser incurred the expense.” The Fund believes that the disclosures are accurate and consistent with the terms of the expense limitation arrangement in place for the Fund. Under the expense limitation agreement, the Adviser has agreed to waive its fees or reimburse the Fund in order to limit the Fund’s annual operating expenses to the stated expense ratios, as calculated on a per annum basis.
While the Fund will attempt to estimate the amounts to be waived or reimbursed by the Adviser via accruals made throughout the term of the expense limitation arrangement, the Fund’s expenses and asset levels will fluctuate, preventing a determination of the final annual expense ratios and, accordingly, the amounts required to be waived or reimbursed by the Adviser until the full year is completed. For example, the Fund may experience a significant increase in asset levels during the term of the expense limitation agreement and may accrue an expense waiver over the first few months of the term, but later determine that such expense waiver is not actually required if the Fund’s expense ratio, as calculated on an annualized basis, is under the agreed upon limit. In this situation, despite the fact that the Fund initially accrued for an expense waiver, the Adviser would not actually waive any of its fees during the term.
At the present time, the Adviser has concluded that it does not believe that the conditions of FAS 5 will require the Fund to record a liability for the potential recapture of fees waived or expenses reimbursed.
The Adviser will provide the Fund’s independent auditor with its FAS 5 analysis in due course.
For this reason, the Adviser’s ability to recoup its previously waived fees or reimbursed expenses cannot be determined until the conclusion of the fiscal year end. Only if the Funds’ annual expense ratios are below the agreed upon limits is the Adviser eligible for recoupment of its previously waived fees/reimbursed expenses. Further, under the terms of the expense limitation agreement, such amounts are only eligible for recoupment if they
Page 4
are within the three years following the year that they were waived or reimbursed. As noted above, the actual waiver or reimbursement is always determined as of the end of the term. Therefore, any recoupment by the Adviser would occur within three years of that date.
6. COMMENT: You asked the Fund to delete the Footnote *** (“‘Other Expenses’ shown generally reflect actual expenses for the Fund for the fiscal year ended October 31, 2022.”), and noted that a footnote like this is generally included only if expenses are being restated.
RESPONSE: The Fund will delete Footnote ***.
PORTFOLIO TURNOVER
7. COMMENT: You asked that if the Fund’s portfolio is being repositioned as a result of the changes to the Fund’s principal investment strategy and portfolio turnover occurs, the Fund should include disclosure regarding:
a. Portfolio turnover risk, which risk should include that existing and new shareholders who purchase Fund shares may have adverse tax consequences due to the repositioning; and
b. Any anticipated variation in the portfolio turnover rate in the SAI.
RESPONSE: The changes to the Fund’s name and principal investment strategy are not expected to result in changes to the Fund’s investment philosophy, or significantly alter the composition of the Fund’s portfolio. Accordingly, the Fund will not be including risks associated with portfolio turnover or disclosure of the anticipated variation in the portfolio turnover rate in the SAI.
PRINCIPAL INVESTMENT STRATEGY
8. COMMENT: You asked that the Fund disclose in its principal investment strategy in response to Item 4 of Form N-1A that its investments in foreign equity instruments can be denominated in any applicable foreign currency.
RESPONSE: The Fund will revise the disclosure as follows:
To achieve its objective of capital appreciation and current income, under normal circumstances the Fund will primarily invest in domestic stocks and, to a lesser extent, debt and foreign equity instruments (including American Depositary Receipts, Global Depositary Receipts and European Depositary Receipts). The
Page 5
Fund’s investments in foreign equity instruments can be denominated in any applicable foreign currency.
9. COMMENT: You asked that the Fund disclose in its principal investment strategy in response to Item 9 of Form N-1A how the Adviser determines whether an investment prospect has the capacity to grow dividends (e.g., what metrics are used).
RESPONSE: The Fund has revised its disclosure in response to Item 9 of Form N-1A to include the following: “In selecting companies with the capacity to grow dividends, the Adviser assesses, among other factors, a company’s historical return on investment, 5- and 10-year dividend growth rates and available cash flow.”
10. COMMENT: You noted that the disclosure states that the Fund invests in convertible securities. You asked that if the Fund invests, or expects to invest, in contingent convertible securities then the Fund should consider what, if any, disclosure is appropriate. The type and location of disclosure will depend on, among other things, the extent to which the Fund invests in contingent convertible securities and the characteristics of the contingent convertible securities (e.g., credit quality and conversion triggers). If contingent convertible securities are, or will be, a principal investment, the Fund should provide a description of them and it should provide appropriate risk disclosure.
RESPONSE: The Fund currently does not expect to invest in contingent convertible securities. Accordingly, the Fund will not be including the above-referenced disclosure in its principal investment strategy or principal risks.
11. COMMENT: You noted that the disclosure of the Fund’s principal investment strategy in response to Item 4 of Form N-1A describes how the Adviser selects companies for investment. You asked the Fund to also describe how the Adviser decides when to sell investments. You asked that it be summarized in the principal investment strategy in response to Item 4 of Form N-1A with a more full description in response to Item 9 of Form N-1A.
RESPONSE: The Fund has revised its disclosure to include the following: “The Adviser generally will sell an investment if it no longer meets these criteria.”
12. COMMENT: You noted that the disclosure of the Fund’s principal investment strategy in response to Item 4 of Form N-1A references “durable competitive advantage.” You asked that the Fund explain this more in its principal investment strategy disclosure in response to Item 9 of Form N-1A.
Page 6
RESPONSE: The Fund has revised its disclosure in response to Item 9 of Form N-1A to include the following with respect to “durable competitive advantage”: “(e.g., a strong brand, robust distribution network or premium location)”.
13. COMMENT: You referred us to the following paragraph:
Derivatives include investing in options, futures and swaps and related products. Specifically, the Fund may enter into interest rate, credit default, cur
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Sidley Austin LLP
787 Seventh Avenue
New York, NY 10019
+1 212 839 5300
+1 212 839 5599 Fax
AMERICA • ASIA PACIFIC
• EUROPE
+1 212 839 8679
MKUTNER@sidley.com
February 15, 2023
Emily Rowland
Senior Counsel
U.S. Securities and Exchange Commission
Division of Investment Management, Disclosure Review and Accounting
Office
100 F. Street, N.E.
Washington, DC 20549
Re:
First Eagle Funds (the “Trust”)
File Nos.: 033-63560
and 811-7762
Post-Effective Amendment No. 108
to the Trust’s Registration Statement on Form N-1A
Dear Ms. Rowland:
Thank you for your comments regarding
Post-Effective Amendment No. 108 to the Trust’s registration statement on Form N-1A, filed with the Securities and Exchange
Commission (the “Commission”) on December 22, 2022 (the “PEA”). The PEA was filed for the purpose of revising
the name and principal investment strategy of the First Eagle Fund of America (to be renamed the First Eagle Rising Dividend Fund)
(the “Fund”), a series of the Trust. This letter responds to your comments, which you provided to us by telephone
on February 3, 2023.
Below, we describe changes the Trust will
make to the PEA in response to the Staff’s comments, generally described by reference to where the responsive disclosures
will appear in the PEA.
We anticipate making the applicable changes
in a filing pursuant to Rule 485(b) under the Securities Act of 1933, as amended (the “Securities Act”), on or about
February 28, 2023, with an effective date of March 1, 2023. All text changes described below will be implemented substantially
as noted here, though some variation in the final filing may be appropriate.
Capitalized terms used, but not otherwise
defined, have the meaning ascribed to them in the PEA.
Sidley Austin (NY) LLP is a Delaware limited
liability partnership doing business as Sidley Austin LLP and practicing in affiliation with other Sidley Austin partnerships.
Page 2
GENERAL COMMENTS
1. COMMENT: You asked that
the Fund please provide its responses to the Staff’s comments
no later than five business days prior to the effective date of the
filing to give the Staff adequate time to review the Fund’s
responses. You noted that the Fund and management are responsible
for the accuracy of the disclosure notwithstanding any review by the
Staff.
RESPONSE: The Fund’s
responses to the Staff’s comments are included herein.
2. COMMENT: You noted that
where a comment is made to one section of the PEA, the comment is
applicable to all similar disclosure appearing elsewhere in the PEA.
RESPONSE: The Fund will
incorporate the Staff’s comments throughout the PEA.
3. COMMENT: You asked that
the Fund please update its name on EDGAR in connection with the filing.
RESPONSE: The Fund will
update its name on EDGAR in connection with the filing.
FEES AND EXPENSES
4. COMMENT: With respect to
the footnote to the Fees and Expenses table indicated by “**,”
and in particular the sentence “The Fund has agreed that each
of Classes A, C, I, R3, R4, R5 and R6 will repay the Adviser for fees
and expenses waived or reimbursed for the class provided that repayment
does not cause annual operating expenses (after the repayment is taken
into account) to exceed either: (1) 0.90%,1.65%, 0.65%, 1.00%, 0.75%,
0.65% and 0.65% of the class’ average net assets, respectively;
or” you asked that the Fund replace the language from “either:
(1)…; or (2)…” to “[the lesser of] or [both]
(1)…; and (2)…”
RESPONSE: The Fund will
revise the above-quoted sentence in footnote “**” to the Fees and Expenses table as follows:
The Fund
has agreed that each of Classes A, C, I, R3, R4, R5 and R6 will repay the Adviser for fees and expenses waived or reimbursed for
the class provided that repayment does not cause annual operating expenses (after the repayment is taken into account) to exceed
either the
lesser of: (1) 0.90%, 1.65%, 0.65%, 1.00%, 0.75%, 0.65% and 0.65% of the class’ average
net assets, respectively; or (2) if applicable, the then-current expense
Page 3
limitations. Any such repayment must be made within three
years after the year in which the Adviser incurred the expense.
5. COMMENT: With respect to
the footnote to the Fees and Expenses table indicated by “**,”
and in particular the sentence “Any such repayment must be made
within three years after the year in which the Adviser incurred the
expense,” you asked that the Fund revise the sentence to say
“Any such repayment must be made within three years from the
date such amount was originally waived or reimbursed.”
RESPONSE: The Fund respectfully
declines to make the change in response to the Staff’s comment regarding the phrase “after the year in which the Adviser
incurred the expense.” The Fund believes that the disclosures are accurate and consistent with the terms of the expense
limitation arrangement in place for the Fund. Under the expense limitation agreement, the Adviser has agreed to waive its fees
or reimburse the Fund in order to limit the Fund’s annual operating expenses to the stated expense ratios, as calculated
on a per annum basis.
While the Fund will attempt to
estimate the amounts to be waived or reimbursed by the Adviser via accruals made throughout the term of the expense limitation
arrangement, the Fund’s expenses and asset levels will fluctuate, preventing a determination of the final annual expense
ratios and, accordingly, the amounts required to be waived or reimbursed by the Adviser until the full year is completed. For
example, the Fund may experience a significant increase in asset levels during the term of the expense limitation agreement and
may accrue an expense waiver over the first few months of the term, but later determine that such expense waiver is not actually
required if the Fund’s expense ratio, as calculated on an annualized basis, is under the agreed upon limit. In this situation,
despite the fact that the Fund initially accrued for an expense waiver, the Adviser would not actually waive any of its fees during
the term.
At the present time, the Adviser
has concluded that it does not believe that the conditions of FAS 5 will require the Fund to record a liability for the potential
recapture of fees waived or expenses reimbursed.
The Adviser will provide the
Fund’s independent auditor with its FAS 5 analysis in due course.
For this reason, the Adviser’s
ability to recoup its previously waived fees or reimbursed expenses cannot be determined until the conclusion of the fiscal year
end. Only if the Funds’ annual expense ratios are below the agreed upon limits is the Adviser eligible for recoupment of
its previously waived fees/reimbursed expenses. Further, under the terms of the expense limitation agreement, such amounts are
only eligible for recoupment if they
Page 4
are within the three years following the year that they were waived or reimbursed. As noted
above, the actual waiver or reimbursement is always determined as of the end of the term. Therefore, any recoupment by the Adviser
would occur within three years of that date.
6. COMMENT: You asked the Fund
to delete the Footnote *** (“‘Other Expenses’ shown
generally reflect actual expenses for the Fund for the fiscal year
ended October 31, 2022.”), and noted that a footnote like this
is generally included only if expenses are being restated.
RESPONSE: The Fund will
delete Footnote ***.
PORTFOLIO TURNOVER
7. COMMENT:
You asked that if the Fund’s portfolio is being
repositioned as a result of the changes to the Fund’s principal
investment strategy and portfolio turnover occurs, the Fund
should include disclosure regarding:
a. Portfolio turnover risk,
which risk should include that existing and new shareholders
who purchase Fund shares may have adverse tax consequences
due to the repositioning; and
b. Any anticipated variation
in the portfolio turnover rate in the SAI.
RESPONSE: The changes
to the Fund’s name and principal investment strategy are not expected to result in changes to the Fund’s investment
philosophy, or significantly alter the composition of the Fund’s portfolio. Accordingly, the Fund will not be including
risks associated with portfolio turnover or disclosure of the anticipated variation in the portfolio turnover rate in the SAI.
PRINCIPAL INVESTMENT STRATEGY
8. COMMENT: You asked that
the Fund disclose in its principal investment strategy in response
to Item 4 of Form N-1A that its investments in foreign equity instruments
can be denominated in any applicable foreign currency.
RESPONSE: The Fund will
revise the disclosure as follows:
To achieve
its objective of capital appreciation and current income, under normal circumstances the Fund will primarily invest in domestic
stocks and, to a lesser extent, debt and foreign equity instruments (including American Depositary Receipts, Global Depositary
Receipts and European Depositary Receipts). The
Page 5
Fund’s investments in foreign equity
instruments can be denominated in any applicable foreign currency.
9. COMMENT: You asked that
the Fund disclose in its principal investment strategy in response
to Item 9 of Form N-1A how the Adviser determines whether an investment
prospect has the capacity to grow dividends (e.g., what metrics are
used).
RESPONSE:
The Fund has revised its disclosure in response to Item 9 of Form N-1A to include the following: “In selecting companies
with the capacity to grow dividends, the Adviser assesses, among other factors, a company’s historical return on investment, 5- and 10-year
dividend growth rates and available cash flow.”
10. COMMENT: You noted that
the disclosure states that the Fund invests in convertible securities.
You asked that if the Fund invests, or expects to invest, in contingent
convertible securities then the Fund should consider what, if any,
disclosure is appropriate. The type and location of disclosure will
depend on, among other things, the extent to which the Fund invests
in contingent convertible securities and the characteristics of the
contingent convertible securities (e.g., credit quality and conversion
triggers). If contingent convertible securities are, or will be,
a principal investment, the Fund should provide a description of
them and it should provide appropriate risk disclosure.
RESPONSE:
The Fund currently does not expect to invest in contingent convertible securities. Accordingly, the Fund
will not be including the above-referenced disclosure in its principal investment strategy or principal risks.
11. COMMENT: You noted that
the disclosure of the Fund’s principal investment strategy
in response to Item 4 of Form N-1A describes how the Adviser selects
companies for investment. You asked the Fund to also describe how
the Adviser decides when to sell investments. You asked that it be
summarized in the principal investment strategy in response to Item
4 of Form N-1A with a more full description in response to Item 9
of Form N-1A.
RESPONSE: The Fund has
revised its disclosure to include the following: “The Adviser generally will sell an investment if it no longer meets these
criteria.”
12. COMMENT: You noted that
the disclosure of the Fund’s principal investment strategy
in response to Item 4 of Form N-1A references “durable competitive
advantage.” You asked that the Fund explain this more in its
principal investment strategy disclosure in response to Item 9 of
Form N-1A.
Page 6
RESPONSE: The Fund has
revised its disclosure in response to Item 9 of Form N-1A to include the following with respect to “durable competitive
advantage”: “(e.g., a strong brand, robust distribution network or premium location)”.
13. COMMENT: You referred us
to the following paragraph:
Derivatives include investing in
options, futures and swaps and related products. Specifically, the Fund may enter into interest rate, credit default, cur