SEC Company Response from BISHOP STREET FUNDS (CIK 0000925737) — Apr 29, 2020
BISHOP STREET FUNDS (CIK 0000925737)
Date: April 29, 2020 · CIK: 0000925737 · Accession: 0001683863-20-007147
AI Filing Summary & Sentiment
File numbers found in text: 811-08572
Letter
U.S. Securities and Exchange Commission 100 F Street, NE Washington, D.C. 20549 Re: Bishop Street Funds 485(a) Filing (File Nos. 033-80514 and 811-08572)
Dear Ms. Marquigny:
On behalf of our client, the Bishop Street Funds (the "Trust"), this letter responds to the comments you provided on behalf of the staff (the "Staff") of the Securities and Exchange Commission (the "SEC") via telephone, regarding the Trust's post-effective amendment no. 53, under the Securities Act of 1933, as amended (the "1933 Act"), and amendment no. 54, under the Investment Company Act of 1940, as amended (the "1940 Act"), to its registration statement filed with the SEC pursuant to Rule 485(a) under the 1933 Act (the "Amendment") with respect to Class A Shares of the Bishop Street Funds Hawaii Municipal Bond Fund (the "Fund"). Below, we have briefly summarized your comments and questions, followed by our responses. Where indicated, certain of the responses are based on information provided by Bishop Street Capital Management (the "Adviser") for the specific purpose of responding to the Staff's comments. Capitalized terms not defined herein should be given the meaning provided in the Amendment.
Comments on the Prospectus
1.Comment. Please confirm that the Fund's ticker symbol is included on the cover page.
Response. The Trust confirms that the Fund's ticker symbol is included on the cover page.
2.Comment. In the footnote to the Fees and Expenses table, in the parenthetical describing excluded expenses, please replace "acquired fund fees" with "acquired fund fees and expenses".
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
+1.215.963.5000
United States
+1.215.963.5001
DB1/ 113632652.4
April 29, 2020
Page 2
Response. The requested change has been made.
3.Comment. Please revise the second sentence of the footnote to the "Fees and Expenses" table to clarify that the Adviser may recoup waived fees and/or reimbursed expenses only to the extent that the Fund's Total Annual Fund Operating
Expenses (not including excluded expenses), after taking the recoupment into account, are below the contractual expense limit in effect (i) at the time of the fee waiver and/or expense reimbursement and (ii) at the time of the recoupment.
Response. As drafted, the footnote provides in part that "the Board of Trustees (Board) of Bishop Street Funds (Trust) may permit the Adviser to receive from the Fund the difference between the Total Annual Fund Operating Expenses (not including excluded expenses) and the Contractual Expense Limitation to recoup all or a portion of its prior fee reductions or expense reimbursements made during the rolling three-year period preceding the date of the recoupment if at any point Total Annual Fund Operating Expenses (not including excluded expenses) are below the Contractual Expense Limitation: (i) at the time of the fee waiver and/or expense reimbursement; and (ii) at the time of the recoupment." This language was previously revised in response to comments provided by the Staff, and the Trust believes it adequately describes the terms of the Fund's expense limitation agreement and conveys the intention indicated in the change that the Staff requests. Therefore, the Trust respectfully declines to make the requested change.
4.Comment. In the first paragraph of the "Principal Investment Strategies" section, please revise the following sentence to state more clearly whether the Fund "will" invest in pre-refunded bonds as part of its principal investment strategies in an effort to achieve its investment objective.
Certain municipal bonds in which the Fund invests may be pre-refunded, meaning that the payment of principal and interest of the bonds is funded from a designated escrow account that holds U.S. Treasury securities or other obligations of the U.S. Government (including its agencies and instrumentalities).
Response. While the Fund may not be invested in pre-refunded bonds principally at any particular time, the Adviser considers it important to achieving the Fund's investment objective to be able to invest in such securities. As a result, the Adviser believes that the sentence, as drafted, accurately describes how investments in pre-refunded bonds are part of the Fund's principal investment strategies. However, in response to this comment, for clarity the referenced sentence has been revised as follows:
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April 29, 2020
Page 3
Certain municipal bonds in which the Fund invests may be In addition, the Fund may invest in municipal bonds that are pre-refunded, meaning that the payment of principal and interest of the bonds is funded from a designated escrow account that holds U.S. Treasury securities or other obligations of the U.S. Government (including its agencies and instrumentalities).
5.Comment. In the third sentence of the "Principal Investment Strategies" section, please define the term "non-corporate shareholders" and expressly refer to "individual investors" in the definition.
Response. The referenced sentence has been revised as follows:
There is no restriction upon the amount of the Fund's assets that may be invested in obligations that pay income subject to the federal alternative minimum tax ("AMT") applicable to non-corporate shareholders (i.e., shareholders that are not taxed as corporations, including but not limited to individual investors).
6.Comment. In the "Principal Investment Strategies" section, please identify any duration parameters applicable to the portfolio managers' selection of portfolio holdings or, if accurate, state that there are none.
Response. The following sentence has been added to the first paragraph:
While the portfolio duration of the Fund's portfolio will vary, it is generally expected to be within a 10% margin (higher or lower) of the duration of the Fund's benchmark index.
7.Comment. In the "Principal Investment Strategies" section, please describe the type of municipal bonds included in the Fund's universe of permitted investments.
For example, will the Fund invest in general obligation bonds and revenue bonds as part of its principal investment strategies?
Response. The following sentence has been added to the "Principal Investment Strategies" section:
Although the Adviser intends to invest Fund assets across a variety of municipal securities, the Fund may have significant positions in certain types of municipal obligations, such as state and local general obligation bonds (bonds whose payments are typically backed by the taxing power of the municipal issuer) and revenue bonds (bonds whose payments are backed by revenue from a particular source).
DB1/ 113632652.4
April 29, 2020
Page 4
8.Comment. In the "Principal Risks" section, please add risk disclosure regarding the impact of pandemics such as COVID-19 on the markets in which the Fund invests.
Response. The following disclosure has been added to "Fixed Income Risk":
In addition, the impact of any epidemic, pandemic or natural disaster, or widespread fear that such events may occur, could negatively affect the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the markets in general in significant and unforeseen ways. Any such impact could adversely affect the prices and liquidity of the securities and other instruments in which the Fund invests, which in turn could negatively impact the Fund's performance and cause losses on your investment in the Fund.
9.Comment. In the "Principal Risks" section, non-diversification is listed as a principal risk of the Fund. Please add corresponding non-diversification strategy disclosure to the principal investment strategies or delete the principal risk.
Response. The following language has been added to the "Principal Investment Strategies" section:
The Fund is classified as "non-diversified," which means that it may invest a larger percentage of its assets in a smaller number of issuers than a diversified fund.
10.Comment. In the "Principal Risks" section, please add specific disclosure relating to investments in municipal obligations of issuers located in Hawaii.
Response. The disclosure under "Municipal Issuers Risk" has been revised as follows:
There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. In addition, the Fund invests significantly in municipal obligations of issuers located in Hawaii. The values of shares of the Fund therefore will be affected by economic and political developments in Hawaii.
11.Comment. In the "Performance Information" section, please provide the Fund's first quarter performance for the quarter ending March 31, 2020.
DB1/ 113632652.4
April 29, 2020
Page 5
Response. The requested change has been made.
12.Comment. In the "Performance Information" section, please provide the definition of "ICE BofAML."
Response. The requested change has been made.
13.Comment. In the "Performance Information" section please consider removing the disclosure that "returns after taxes on distributions and sale of Fund shares may be higher than before tax returns when a net capital losses occurs upon the redemptions of Fund shares."
Response. The Trust notes that Item 4(b)(2)(iv)(D) of Form N-1A states that "[i]f average annual total return (after taxes on distributions and redemption) is higher than average annual total return, the reason for this result may be explained." The Trust further notes that the Fund's Average Annual Total Return Table shows that the Fund's returns after taxes on distributions and sale of Fund shares is higher than before tax returns for the 5-year period ended December 31, 2019. Accordingly, the Trust believes that the explanation included in the referenced disclosure is pertinent to Fund investors and permitted by Item 4(b)(2)(iv)(D) of Form N-1A. Accordingly, the Trust respectfully declines to make the requested change.
14.Comment. In the response to Item 9 of Form N-1A, please include a more detailed discussion of the "Principal Investment Strategies" disclosed pursuant to
Item 4 of Form N-1A, including more information about how the identified combination of principal strategies and instruments are used to inform the instruments in which the Fund may invest.
Response. General Instruction 3(a) to Form N-1A states that "[i]nformation that is included in response to Items 2 through 8 need not be repeated elsewhere in the prospectus." In the prospectus, information related to the Fund's principal investment strategies has been included in response to Item 4(a) of Form N-1A, and therefore, consistent with Form N-1A instructions, such information has not been repeated in response to Item 9.
15.Comment. In the "More Information About Risk" section, please consider updating the section headings to clarify that municipal issuer risk and pre-refunded bonds risk are principal risks of investing in the Fund.
Response. The requested changes have been made.
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April 29, 2020
Page 6
16.Comment. In the "More Information About Risk" section, under "Concentration Risk," please identify Hawaii as the state in which the Fund concentrates its investments and discuss any risks that are unique to Hawaiian investments.
Response. The referenced disclosure has been replaced with the following:
The Fund's concentration of investments in securities of issuers located in Hawaii subjects the Fund to economic conditions and government policies within that state. As a result, the Fund will be more susceptible to factors that adversely affect issuers of Hawaii obligations than a mutual fund that does not have as great a concentration in Hawaii. The Fund also may be riskier than mutual funds that buy securities of issuers in numerous states.
17.Comment. In the "More Information About Risk" section, under "Valuation Risk," please add additional disclosure regarding the risks associated with valuing securities or instruments held by the Fund.
Response. The following language has been added to the referenced paragraph:
Certain securities and instruments held by the Fund may be difficult to value, and to the extent the Fund sells a security or instrument at a price lower than that used to value the security, its net asset value will be adversely affected.
18.Comment. In the "More Information About Risk" section, under "Tax Risk," please clarify which portion of this disclosure is applicable to the municipal securities in which the Fund may invest.
Response. In response to this comment, the heading has been changed to "Tax Risk for Municipal Securities" to clarify that all disclosure under this heading relates to municipal securities in which the Fund may invest.
19.Comment. Please revise the fourth paragraph of "The Adviser" section to clarify that the Adviser may recoup waived fees and/or reimbursed expenses only to the extent that the Fund's Total Annual Fund Operating Expenses (not including excluded expenses), "after taking the recoupment into account," are below the contractual expense limit in effect (i) at the time of the fee waiver and/or expense reimbursement and (ii) at the time of the recoupment.
Response. As drafted, the footnote provides in part that "the Board may permit the Adviser to receive from the Fund the difference between the Fund's total annual Fund operating expenses (not including excluded expenses) and the Fund's
Contractual Expense Limitation to recoup all or a portion of its prior fee reductions or expense reimbursements made during the rolling three-year period preceding the
DB1/ 113632652.4
April 29, 2020
Page 7
date of the recoupment if at any point total annual Fund operating expenses (not including excluded expenses) are below the Contractual Expense Limitation: (i) at the time of the fee waiver and/or expense reimbursement; and (ii) at the time of the recoupment." This language was previously revised in response to comments provided by the Staff, and the Trust believes it adequately describes the terms of the Fund's expense limitation agreement and conveys the intention indicated in the change that the Staff requests. Therefore, the Trust respectfully declines to make the requested change.
20.Comment. In the last bullet point in the "Sales Charges – Waiver of Front-End Sales Charge – Class A Shares" section, please identify any dealers, retirement plans, asset allocation programs and financial institutions that, under their dealer agreements with the Distributor or otherwise, do not receive any portion of the front- end sales charge, or provide investors with information regarding how they can inquire whether a front-end sales charge waiver applies to them.
Response. The Trust respectfully declines to make the requested change becaus
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Brian T. London
Associate +1.215.963.5886
April 29, 2020
FILED AS EDGAR CORRESPONDENCE
Rebecca Marquigny, Esq.
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Bishop Street Funds 485(a) Filing (File Nos. 033-80514 and 811-08572)
Dear Ms. Marquigny:
On behalf of our client, the Bishop Street Funds (the "Trust"), this letter responds to the comments you provided on behalf of the staff (the "Staff") of the Securities and Exchange Commission (the "SEC") via telephone, regarding the Trust's post-effective amendment no. 53, under the Securities Act of 1933, as amended (the "1933 Act"), and amendment no. 54, under the Investment Company Act of 1940, as amended (the "1940 Act"), to its registration statement filed with the SEC pursuant to Rule 485(a) under the 1933 Act (the "Amendment") with respect to Class A Shares of the Bishop Street Funds Hawaii Municipal Bond Fund (the "Fund"). Below, we have briefly summarized your comments and questions, followed by our responses. Where indicated, certain of the responses are based on information provided by Bishop Street Capital Management (the "Adviser") for the specific purpose of responding to the Staff's comments. Capitalized terms not defined herein should be given the meaning provided in the Amendment.
Comments on the Prospectus
1.Comment. Please confirm that the Fund's ticker symbol is included on the cover page.
Response. The Trust confirms that the Fund's ticker symbol is included on the cover page.
2.Comment. In the footnote to the Fees and Expenses table, in the parenthetical describing excluded expenses, please replace "acquired fund fees" with "acquired fund fees and expenses".
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
+1.215.963.5000
United States
+1.215.963.5001
DB1/ 113632652.4
April 29, 2020
Page 2
Response. The requested change has been made.
3.Comment. Please revise the second sentence of the footnote to the "Fees and Expenses" table to clarify that the Adviser may recoup waived fees and/or reimbursed expenses only to the extent that the Fund's Total Annual Fund Operating
Expenses (not including excluded expenses), after taking the recoupment into account, are below the contractual expense limit in effect (i) at the time of the fee waiver and/or expense reimbursement and (ii) at the time of the recoupment.
Response. As drafted, the footnote provides in part that "the Board of Trustees (Board) of Bishop Street Funds (Trust) may permit the Adviser to receive from the Fund the difference between the Total Annual Fund Operating Expenses (not including excluded expenses) and the Contractual Expense Limitation to recoup all or a portion of its prior fee reductions or expense reimbursements made during the rolling three-year period preceding the date of the recoupment if at any point Total Annual Fund Operating Expenses (not including excluded expenses) are below the Contractual Expense Limitation: (i) at the time of the fee waiver and/or expense reimbursement; and (ii) at the time of the recoupment." This language was previously revised in response to comments provided by the Staff, and the Trust believes it adequately describes the terms of the Fund's expense limitation agreement and conveys the intention indicated in the change that the Staff requests. Therefore, the Trust respectfully declines to make the requested change.
4.Comment. In the first paragraph of the "Principal Investment Strategies" section, please revise the following sentence to state more clearly whether the Fund "will" invest in pre-refunded bonds as part of its principal investment strategies in an effort to achieve its investment objective.
Certain municipal bonds in which the Fund invests may be pre-refunded, meaning that the payment of principal and interest of the bonds is funded from a designated escrow account that holds U.S. Treasury securities or other obligations of the U.S. Government (including its agencies and instrumentalities).
Response. While the Fund may not be invested in pre-refunded bonds principally at any particular time, the Adviser considers it important to achieving the Fund's investment objective to be able to invest in such securities. As a result, the Adviser believes that the sentence, as drafted, accurately describes how investments in pre-refunded bonds are part of the Fund's principal investment strategies. However, in response to this comment, for clarity the referenced sentence has been revised as follows:
DB1/ 113632652.4
April 29, 2020
Page 3
Certain municipal bonds in which the Fund invests may be In addition, the Fund may invest in municipal bonds that are pre-refunded, meaning that the payment of principal and interest of the bonds is funded from a designated escrow account that holds U.S. Treasury securities or other obligations of the U.S. Government (including its agencies and instrumentalities).
5.Comment. In the third sentence of the "Principal Investment Strategies" section, please define the term "non-corporate shareholders" and expressly refer to "individual investors" in the definition.
Response. The referenced sentence has been revised as follows:
There is no restriction upon the amount of the Fund's assets that may be invested in obligations that pay income subject to the federal alternative minimum tax ("AMT") applicable to non-corporate shareholders (i.e., shareholders that are not taxed as corporations, including but not limited to individual investors).
6.Comment. In the "Principal Investment Strategies" section, please identify any duration parameters applicable to the portfolio managers' selection of portfolio holdings or, if accurate, state that there are none.
Response. The following sentence has been added to the first paragraph:
While the portfolio duration of the Fund's portfolio will vary, it is generally expected to be within a 10% margin (higher or lower) of the duration of the Fund's benchmark index.
7.Comment. In the "Principal Investment Strategies" section, please describe the type of municipal bonds included in the Fund's universe of permitted investments.
For example, will the Fund invest in general obligation bonds and revenue bonds as part of its principal investment strategies?
Response. The following sentence has been added to the "Principal Investment Strategies" section:
Although the Adviser intends to invest Fund assets across a variety of municipal securities, the Fund may have significant positions in certain types of municipal obligations, such as state and local general obligation bonds (bonds whose payments are typically backed by the taxing power of the municipal issuer) and revenue bonds (bonds whose payments are backed by revenue from a particular source).
DB1/ 113632652.4
April 29, 2020
Page 4
8.Comment. In the "Principal Risks" section, please add risk disclosure regarding the impact of pandemics such as COVID-19 on the markets in which the Fund invests.
Response. The following disclosure has been added to "Fixed Income Risk":
In addition, the impact of any epidemic, pandemic or natural disaster, or widespread fear that such events may occur, could negatively affect the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the markets in general in significant and unforeseen ways. Any such impact could adversely affect the prices and liquidity of the securities and other instruments in which the Fund invests, which in turn could negatively impact the Fund's performance and cause losses on your investment in the Fund.
9.Comment. In the "Principal Risks" section, non-diversification is listed as a principal risk of the Fund. Please add corresponding non-diversification strategy disclosure to the principal investment strategies or delete the principal risk.
Response. The following language has been added to the "Principal Investment Strategies" section:
The Fund is classified as "non-diversified," which means that it may invest a larger percentage of its assets in a smaller number of issuers than a diversified fund.
10.Comment. In the "Principal Risks" section, please add specific disclosure relating to investments in municipal obligations of issuers located in Hawaii.
Response. The disclosure under "Municipal Issuers Risk" has been revised as follows:
There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. In addition, the Fund invests significantly in municipal obligations of issuers located in Hawaii. The values of shares of the Fund therefore will be affected by economic and political developments in Hawaii.
11.Comment. In the "Performance Information" section, please provide the Fund's first quarter performance for the quarter ending March 31, 2020.
DB1/ 113632652.4
April 29, 2020
Page 5
Response. The requested change has been made.
12.Comment. In the "Performance Information" section, please provide the definition of "ICE BofAML."
Response. The requested change has been made.
13.Comment. In the "Performance Information" section please consider removing the disclosure that "returns after taxes on distributions and sale of Fund shares may be higher than before tax returns when a net capital losses occurs upon the redemptions of Fund shares."
Response. The Trust notes that Item 4(b)(2)(iv)(D) of Form N-1A states that "[i]f average annual total return (after taxes on distributions and redemption) is higher than average annual total return, the reason for this result may be explained." The Trust further notes that the Fund's Average Annual Total Return Table shows that the Fund's returns after taxes on distributions and sale of Fund shares is higher than before tax returns for the 5-year period ended December 31, 2019. Accordingly, the Trust believes that the explanation included in the referenced disclosure is pertinent to Fund investors and permitted by Item 4(b)(2)(iv)(D) of Form N-1A. Accordingly, the Trust respectfully declines to make the requested change.
14.Comment. In the response to Item 9 of Form N-1A, please include a more detailed discussion of the "Principal Investment Strategies" disclosed pursuant to
Item 4 of Form N-1A, including more information about how the identified combination of principal strategies and instruments are used to inform the instruments in which the Fund may invest.
Response. General Instruction 3(a) to Form N-1A states that "[i]nformation that is included in response to Items 2 through 8 need not be repeated elsewhere in the prospectus." In the prospectus, information related to the Fund's principal investment strategies has been included in response to Item 4(a) of Form N-1A, and therefore, consistent with Form N-1A instructions, such information has not been repeated in response to Item 9.
15.Comment. In the "More Information About Risk" section, please consider updating the section headings to clarify that municipal issuer risk and pre-refunded bonds risk are principal risks of investing in the Fund.
Response. The requested changes have been made.
DB1/ 113632652.4
April 29, 2020
Page 6
16.Comment. In the "More Information About Risk" section, under "Concentration Risk," please identify Hawaii as the state in which the Fund concentrates its investments and discuss any risks that are unique to Hawaiian investments.
Response. The referenced disclosure has been replaced with the following:
The Fund's concentration of investments in securities of issuers located in Hawaii subjects the Fund to economic conditions and government policies within that state. As a result, the Fund will be more susceptible to factors that adversely affect issuers of Hawaii obligations than a mutual fund that does not have as great a concentration in Hawaii. The Fund also may be riskier than mutual funds that buy securities of issuers in numerous states.
17.Comment. In the "More Information About Risk" section, under "Valuation Risk," please add additional disclosure regarding the risks associated with valuing securities or instruments held by the Fund.
Response. The following language has been added to the referenced paragraph:
Certain securities and instruments held by the Fund may be difficult to value, and to the extent the Fund sells a security or instrument at a price lower than that used to value the security, its net asset value will be adversely affected.
18.Comment. In the "More Information About Risk" section, under "Tax Risk," please clarify which portion of this disclosure is applicable to the municipal securities in which the Fund may invest.
Response. In response to this comment, the heading has been changed to "Tax Risk for Municipal Securities" to clarify that all disclosure under this heading relates to municipal securities in which the Fund may invest.
19.Comment. Please revise the fourth paragraph of "The Adviser" section to clarify that the Adviser may recoup waived fees and/or reimbursed expenses only to the extent that the Fund's Total Annual Fund Operating Expenses (not including excluded expenses), "after taking the recoupment into account," are below the contractual expense limit in effect (i) at the time of the fee waiver and/or expense reimbursement and (ii) at the time of the recoupment.
Response. As drafted, the footnote provides in part that "the Board may permit the Adviser to receive from the Fund the difference between the Fund's total annual Fund operating expenses (not including excluded expenses) and the Fund's
Contractual Expense Limitation to recoup all or a portion of its prior fee reductions or expense reimbursements made during the rolling three-year period preceding the
DB1/ 113632652.4
April 29, 2020
Page 7
date of the recoupment if at any point total annual Fund operating expenses (not including excluded expenses) are below the Contractual Expense Limitation: (i) at the time of the fee waiver and/or expense reimbursement; and (ii) at the time of the recoupment." This language was previously revised in response to comments provided by the Staff, and the Trust believes it adequately describes the terms of the Fund's expense limitation agreement and conveys the intention indicated in the change that the Staff requests. Therefore, the Trust respectfully declines to make the requested change.
20.Comment. In the last bullet point in the "Sales Charges – Waiver of Front-End Sales Charge – Class A Shares" section, please identify any dealers, retirement plans, asset allocation programs and financial institutions that, under their dealer agreements with the Distributor or otherwise, do not receive any portion of the front- end sales charge, or provide investors with information regarding how they can inquire whether a front-end sales charge waiver applies to them.
Response. The Trust respectfully declines to make the requested change becaus