SEC Company Response from BAILLIE GIFFORD FUNDS (CIK 0001120543) — Dec 22, 2021
BAILLIE GIFFORD FUNDS (CIK 0001120543)
Date: Dec. 22, 2021 · CIK: 0001120543 · Accession: 0001104659-21-152591
AI Filing Summary & Sentiment
File numbers found in text: 333-200831, 811-10145
Letter
VIA EDGAR Securities and Exchange Commission 100 F Street, NE Washington, DC Attn: Ms. Holly Hunter-Ceci
Re: Post-Effective Amendment Number 58 to the Registration Statement of Baillie Gifford Funds (File Nos. 811-10145 and 333-200831) on Form N-1A filed on October 7, 2021
Dear Ms. Hunter-Ceci:
I am writing on behalf of Baillie Gifford Funds (the “Trust”) to respond to the comments by the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission,” or, the “SEC”) on Post-Effective Amendment No. 58 (the “485(a) Amendment”) to the Registration Statement of the Trust on Form N-1A (the “Registration Statement”). The 485(a) Amendment was filed pursuant to Rule 485(a) under the Securities Act of 1933, as amended (“Securities Act”), on October 7, 2021 to register for public offer and sale the Institutional Class and Class K shares of Baillie Gifford Emerging Markets ex China Fund (the “EM ex China Fund”) and Baillie Gifford Health Innovation Equities Fund (the “Health Fund,” and together with the EM ex China Fund, the “Funds”), each a new series of the Trust.
On November 23, 2021, December 17, 2021, December 20, 2021 and December 21, 2021 the Staff provided comments regarding the 485(a) Amendment by telephone to Ropes & Gray LLP, counsel to the Trust. This letter reflects responses intended to address all comments the Staff provided. For convenience of reference, each comment is summarized before the Trust’s corresponding response. These responses will be reflected, to the extent applicable, in Post-Effective Amendment No.60 to the Trust’s Registration Statement, which is expected to be filed effective December 23, 2021, pursuant to Rule 485(b) under the Securities Act. Capitalized terms not otherwise defined herein have the meanings ascribed to them in the Registration Statement.
General
1. Comment: Where a comment is made in one location, it is applicable to all similar disclosure appearing elsewhere in the Registration Statement. Where a response indicates a change will be made to disclosure, please reflect that change in the response
letter. We remind you that the Trust and management are responsible for the adequacy and accuracy of all disclosure notwithstanding any review, action, or absence of action by the Staff. Please file the response at least 5 days in advance of the effective date. Please complete all bracketed information. Please provide the Staff with each Fund’s completed fee table and expense examples prior to the effective date.
Response: The Trust acknowledges this comment.
2. Please confirm that, when available, tickers will be added on EDGAR and associated with each Fund’s applicable EDGAR class identification number.
Response: The Trust confirms that tickers will be added on EDGAR when available and will be associated with each Fund’s class identification number.
Prospectuses
3. Comment: For each Fund’s fee table please:
(a) Provide the Fund’s completed fee table and expense examples prior to the effective date and include the completed fee table and expense examples in the Registrant’s response letter.
Response: The Funds intend to include the following fee tables and expense examples in the Prospectus:
Baillie Gifford Emerging Markets Ex China Fund
Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your investment)
Class K Institutional
Class
Management Fees(a) 0.72% 0.72%
Distribution (12b-1) Fees None None
Other Expenses(b) 17.04% 17.19%
Total Annual Fund
Operating Expenses 17.76% 17.91%
Fee Waiver and/or
Expense
Reimbursement(c) (16.89)% (16.89)%
Total Annual Fund
Operating Expenses
After Fee Waiver and/or
Expense
Reimbursement(c) 0.87% 1.02%
(a) The Management Fee consists of an Advisory Fee and an Administration and Supervisory Fee paid by the Fund to Baillie Gifford Overseas Limited.
(b) The Fund is newly organized. Therefore Other Expenses have been estimated for the current fiscal year assuming Fund assets of $1 million.
(c) Baillie Gifford Overseas Limited has contractually agreed to waive its fees and/or bear Other Expenses of the Fund until April 30, 2023 to the extent that the Fund's Total Annual Fund Operating Expenses (excluding taxes, sub-accounting expenses and
extraordinary expenses) exceed 0.87% for Class K and Institutional Class shares. This contractual agreement may only be terminated by the Board of Trustees of the Trust. Expenses after waiver/reimbursement are higher for Institutional Class than for Class K due to estimated sub-accounting expenses of 0.15% that will be borne by Institutional Class and not by Class K.
Example of Expenses
The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. It assumes that you invest $10,000 in the Fund for the time periods indicated, regardless of whether or not you redeem your shares at the end of such periods. It also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. The example below also applies any contractual expense waivers and/or expense reimbursements to the first year of each period listed in the table.
Although your actual costs may be higher or lower, based on these assumptions, your expenses would be:
Class K Institutional Class
Year $89 $104
Years $3,331 $3,363
Baillie Gifford Health Innovation Equities Fund
Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your investment)
Class K Institutional
Class
Management Fees(a) 0.50% 0.50%
Distribution (12b-1) Fees None None
Other Expenses(b) 1.72% 1.87%
Total Annual Fund
Operating Expenses 2.22% 2.37%
Fee Waiver and/or
Expense
Reimbursement(c) (1.57)% (1.57)%
Total Annual Fund
Operating Expenses
After Fee Waiver and/or
Expense
Reimbursement(c) 0.65% 0.80%
(a) The Management Fee consists of an Advisory Fee and an Administration and Supervisory Fee paid by the Fund to Baillie Gifford Overseas Limited.
(b) The Fund is newly organized. Therefore Other Expenses have been estimated for the current fiscal year assuming Fund assets of $10 million.
(c) Baillie Gifford Overseas Limited has contractually agreed to waive its fees and/or bear Other Expenses of the Fund until April 30, 2023 to the extent that the Fund's Total Annual Fund Operating Expenses (excluding taxes, sub-accounting expenses and extraordinary expenses) exceed 0.65% for Class K and Institutional Class shares. This contractual agreement may only be terminated by the Board of Trustees of the Trust. Expenses after waiver/reimbursement are higher for Institutional Class than for Class K due to estimated sub-accounting expenses of 0.15% that will be borne by Institutional Class and not by Class K.
Example of Expenses
The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. It assumes that you invest $10,000 in the Fund for the time periods indicated, regardless of whether or not you redeem your shares at the end of such periods. It also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. The example below also applies any contractual expense waivers and/or expense reimbursements to the first year of each period listed in the table.
Although your actual costs may be higher or lower, based on these assumptions, your expenses would be:
Class K Institutional Class
Year $66 $82
Years $543 $589
(b) Supplementally explain how each Fund estimated Other Expenses and why such methodology is reasonable.
Response: The EM ex China Fund intends to estimate Other Expenses based on $1 million in assets, which is the amount of seed capital that the Fund expects to receive from Baillie Gifford at launch. The Health Fund intends to estimate Other Expenses based on $10 million in assets, which is the amount of seed capital that the Fund expects to receive from Baillie Gifford at launch.
(c) Update the fee table to include Acquired Fund Fees and Expenses, if applicable.
Response: While the Funds maintain the flexibility to invest in investment companies or other collective investment vehicles, the Trust does not believe that an additional line item is necessary for either Fund. The Trust confirms that if the Funds’ investments in other funds that are required, under Form N-1A and related guidance, to be included within Acquired Fund Fees and Expenses (“AFFE”) cause the Fund’s AFFE to exceed one basis point, such fees would be disclosed as a separate line item in the Fund’s fees and expenses table.
(d) Confirm that the fee waiver/expense reimbursement agreement referred to in footnote (c) to each Fund’s fee table will extend for at least one year beyond the effective date of the Registration Statement.
Response: The Trust confirms that the fee waiver/expense reimbursement arrangement for each Fund will extend until April 30, 2023, which is greater than one year beyond the expected effective date of the Registration Statement.
4. Comment: Given each Fund’s stated ability to invest in convertible securities, please supplementally advise whether the Fund intends to invest in contingent convertible securities, and, if so, please consider what related disclosure should be added, if any.
Response: The Trust confirms that each Fund may invest in contingent convertible securities, though such securities are currently not expected to constitute a principal investment strategy.
5. Comment: With respect to the EM ex China Fund, to the extent that the Fund expects to have material exposure to any specific country (e.g., Taiwan, South Korea or India) or industry (e.g., IT, financials, materials), please add corresponding risk disclosure.
Response: In response to this comment, the Fund will add the following disclosure to the ADDITIONAL INFORMATION ABOUT PRINCIPAL STRATEGIES AND RISKS—Principal Investment Risks— Emerging Markets Risk Section:
In addition, emerging markets risk for an emerging markets fund that excludes China from its investment universe may entail the additional risks associated with taking more focused positions in a smaller number of countries given the outsize investment opportunities presented in some emerging markets countries (such as India and South Korea) as opposed to others. See "Focused Investment Risk" below.
6. Comment: With respect to the EM ex China Fund, because the Fund expects to have only limited exposure to the Chinese economy, please consider deleting the cross reference to “China Risk” in the Fund Summary—Principal Investment Strategies—Asia Risk Section.
Response: In response to this comment, the Fund will delete the cross reference.
7. Comment: With respect to the Health Fund, the Fund Summary—Principal Investment Strategies Section states that:
“Under normal circumstances, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of companies engaged in or supporting innovation in one or more healthcare or healthcare-related industries. Healthcare and healthcare-related industries include companies that manufacture healthcare supplies or provide healthcare-related services, and companies in the research, development, production and marketing of pharmaceuticals and biotechnology products.”
Please supplement or revise this disclosure in the Fund Summary or the related Item 9 disclosure to clarify how the Fund determines that a company is sufficiently engaged in, or supporting, innovation in healthcare or healthcare-related industries so as to satisfy investor expectations and the requirements of Rule 35d-1 under the Investment Company Act of 1940, as amended (the “1940 Act”). Additionally, please revise this disclosure to clarify the meaning of “healthcare-related services.”
Response: In response to this comment, the Fund intends to revise the above-referenced disclosure as follows:
Under normal circumstances, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of companies engaged in or supporting innovation in one or more healthcare or healthcare-related industries. Healthcare and healthcare-related industries include companies that manufacture medical treatments, devices, or diagnostic tools, such as devices and tools that aid the understanding, early identification and prevention of human diseases or companies that provide healthcare supplies or provide healthcare-related services, and companies in the research, development, production and marketing of pharmaceuticals and biotechnology products., such as products for genetic analysis and engineering and protein-based therapeutics to treat or prevent human diseases. Companies providing healthcare-related services include companies that provide operational support to the healthcare system, such as information technology companies focusing on software for healthcare companies or information technology solutions relevant to the healthcare sector. In identifying candidates for the 80% test described above, the portfolio managers seek to identify companies for which healthcare and healthcare-related activities are expected to be a key driver of the company’s growth over the long-term, but will generally focus on companies that derive at least 50% of their revenue from healthcare and healthcare-related activities.
8. Comment: With respect to the Health Fund, the principal investment strategy states that “The Fund intends to invest globally, including in emerging markets, though the Fund expects that many of the innovative health-related companies in which it seeks to invest will be located in the United States.”
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CORRESP
1
filename1.htm
December 22, 2021
VIA
EDGAR
Securities and
Exchange Commission
100 F Street, NE
Washington, DC
20549
Attn: Ms. Holly
Hunter-Ceci
Re: Post-Effective
Amendment Number 58 to the Registration Statement of Baillie Gifford Funds (File Nos. 811-10145
and 333-200831) on Form N-1A filed on October 7, 2021
Dear Ms. Hunter-Ceci:
I
am writing on behalf of Baillie Gifford Funds (the “Trust”) to respond to the comments by the staff (the “Staff”)
of the Securities and Exchange Commission (the “Commission,” or, the “SEC”) on Post-Effective Amendment No. 58
(the “485(a) Amendment”) to the Registration Statement of the Trust on Form N-1A (the “Registration Statement”).
The 485(a) Amendment was filed pursuant to Rule 485(a) under the Securities Act of 1933, as amended (“Securities Act”), on
October 7, 2021 to register for public offer and sale the Institutional Class and Class K shares of Baillie Gifford Emerging Markets
ex China Fund (the “EM ex China Fund”) and Baillie Gifford Health Innovation Equities Fund (the “Health Fund,”
and together with the EM ex China Fund, the “Funds”), each a new series of the Trust.
On November 23, 2021, December 17, 2021, December 20, 2021 and December 21, 2021 the Staff provided comments regarding the 485(a) Amendment by telephone to Ropes & Gray LLP, counsel to the Trust.
This letter reflects responses intended to address all comments the Staff provided. For convenience of reference, each comment is summarized before the Trust’s corresponding response. These responses
will be reflected, to the extent applicable, in Post-Effective Amendment No.60 to the Trust’s Registration Statement, which is
expected to be filed effective December 23, 2021, pursuant to Rule 485(b) under the Securities Act. Capitalized terms not otherwise defined
herein have the meanings ascribed to them in the Registration Statement.
General
1. Comment:
Where a comment is made in one location, it is applicable to all similar disclosure appearing
elsewhere in the Registration Statement. Where a response indicates a change will be made
to disclosure, please reflect that change in the response
1
letter. We remind you that the
Trust and management are responsible for the adequacy and accuracy of all disclosure notwithstanding
any review, action, or absence of action by the Staff. Please file the response at least
5 days in advance of the effective date. Please complete all bracketed information.
Please provide the Staff with each Fund’s completed fee table and expense examples prior to the effective date.
Response: The Trust
acknowledges this comment.
2. Please
confirm that, when available, tickers will be added on EDGAR and associated with each Fund’s
applicable EDGAR class identification number.
Response: The Trust
confirms that tickers will be added on EDGAR when available and will be associated with each Fund’s class identification number.
Prospectuses
3. Comment:
For each Fund’s fee table please:
(a) Provide
the Fund’s completed fee table and expense examples prior to the effective date and
include the completed fee table and expense examples in the Registrant’s response letter.
Response: The Funds
intend to include the following fee tables and expense examples in the Prospectus:
Baillie Gifford Emerging Markets
Ex China Fund
Annual
Fund Operating Expenses
(Expenses
that you pay each year as a percentage of the value of your investment)
Class
K
Institutional
Class
Management
Fees(a)
0.72%
0.72%
Distribution
(12b-1) Fees
None
None
Other
Expenses(b)
17.04%
17.19%
Total
Annual Fund
Operating Expenses
17.76%
17.91%
Fee
Waiver and/or
Expense
Reimbursement(c)
(16.89)%
(16.89)%
Total
Annual Fund
Operating Expenses
After Fee Waiver and/or
Expense
Reimbursement(c)
0.87%
1.02%
(a) The
Management Fee consists of an Advisory Fee and an Administration and Supervisory Fee paid
by the Fund to Baillie Gifford Overseas Limited.
(b) The Fund is newly organized. Therefore Other Expenses have been estimated for the current fiscal year assuming Fund assets of $1 million.
(c) Baillie Gifford Overseas Limited has contractually agreed to waive its fees and/or bear Other Expenses of the Fund until April 30, 2023 to the extent that the Fund's Total Annual Fund Operating Expenses (excluding taxes, sub-accounting expenses and
2
extraordinary
expenses) exceed 0.87% for Class K and Institutional Class shares. This contractual agreement may only be terminated by the Board of
Trustees of the Trust. Expenses after waiver/reimbursement are higher for Institutional Class than for Class K due to estimated sub-accounting
expenses of 0.15% that will be borne by Institutional Class and not by Class K.
Example
of Expenses
The
example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. It
assumes that you invest $10,000 in the Fund for the time periods indicated, regardless of whether or not you redeem your shares at the
end of such periods. It also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain
the same. The example below also applies any contractual expense waivers and/or expense reimbursements to the first year of each
period listed in the table.
Although
your actual costs may be higher or lower, based on these assumptions, your expenses would be:
Class
K
Institutional
Class
1
Year
$89
$104
3
Years
$3,331
$3,363
Baillie Gifford Health Innovation
Equities Fund
Annual
Fund Operating Expenses
(Expenses
that you pay each year as a percentage of the value of your investment)
Class
K
Institutional
Class
Management
Fees(a)
0.50%
0.50%
Distribution
(12b-1) Fees
None
None
Other
Expenses(b)
1.72%
1.87%
Total
Annual Fund
Operating Expenses
2.22%
2.37%
Fee
Waiver and/or
Expense
Reimbursement(c)
(1.57)%
(1.57)%
Total
Annual Fund
Operating Expenses
After Fee Waiver and/or
Expense
Reimbursement(c)
0.65%
0.80%
(a) The
Management Fee consists of an Advisory Fee and an Administration and Supervisory Fee paid
by the Fund to Baillie Gifford Overseas Limited.
(b) The Fund is newly organized. Therefore Other Expenses have been estimated for the current fiscal year assuming Fund assets of $10 million.
(c) Baillie Gifford Overseas Limited has contractually agreed to waive its fees and/or bear Other Expenses of the Fund until April 30, 2023 to the extent that the Fund's Total Annual Fund Operating Expenses (excluding taxes, sub-accounting expenses and extraordinary expenses) exceed 0.65% for Class K and Institutional Class shares. This contractual agreement may only be terminated by the Board of Trustees of the Trust. Expenses after waiver/reimbursement are higher for Institutional Class than for Class K due to estimated sub-accounting expenses of 0.15% that will be borne by Institutional Class and not by Class K.
3
Example
of Expenses
The
example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. It
assumes that you invest $10,000 in the Fund for the time periods indicated, regardless of whether or not you redeem your shares at the
end of such periods. It also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain
the same. The example below also applies any contractual expense waivers and/or expense reimbursements to the first year of each
period listed in the table.
Although
your actual costs may be higher or lower, based on these assumptions, your expenses would be:
Class
K
Institutional
Class
1
Year
$66
$82
3
Years
$543
$589
(b) Supplementally
explain how each Fund estimated Other Expenses and why such methodology is reasonable.
Response: The
EM ex China Fund intends to estimate Other Expenses based on $1 million in assets, which is the amount of seed capital that the Fund
expects to receive from Baillie Gifford at launch. The Health Fund intends to estimate Other Expenses based on $10 million in assets,
which is the amount of seed capital that the Fund expects to receive from Baillie Gifford at launch.
(c) Update
the fee table to include Acquired Fund Fees and Expenses, if applicable.
Response: While the Funds maintain the flexibility to invest in investment companies
or other collective investment vehicles, the Trust does not believe that an additional line item is necessary for either Fund. The Trust
confirms that if the Funds’ investments in other funds that are required, under Form N-1A and related guidance, to be included within
Acquired Fund Fees and Expenses (“AFFE”) cause the Fund’s AFFE to exceed one basis point, such fees would be disclosed
as a separate line item in the Fund’s fees and expenses table.
(d) Confirm
that the fee waiver/expense reimbursement agreement referred to in footnote (c) to each Fund’s
fee table will extend for at least one year beyond the effective date of the Registration
Statement.
Response: The Trust confirms that the fee waiver/expense reimbursement arrangement
for each Fund will extend until April 30, 2023, which is greater than one year beyond the expected effective date of the Registration
Statement.
4. Comment:
Given each Fund’s stated ability to invest in convertible securities, please supplementally
advise whether the Fund intends to invest in contingent convertible securities, and, if so,
please consider what related disclosure should be added, if any.
4
Response: The Trust
confirms that each Fund may invest in contingent convertible securities, though such securities are currently not expected to constitute
a principal investment strategy.
5. Comment: With respect to the
EM ex China Fund, to the extent that the Fund expects to have material exposure to any specific
country (e.g., Taiwan, South Korea or India) or industry (e.g., IT, financials, materials),
please add corresponding risk disclosure.
Response: In response to this comment, the Fund will add the following disclosure
to the ADDITIONAL INFORMATION ABOUT PRINCIPAL STRATEGIES AND RISKS—Principal Investment Risks— Emerging Markets
Risk Section:
In addition, emerging markets risk for an emerging markets fund
that excludes China from its investment universe may entail the additional risks associated with taking more focused positions in a smaller
number of countries given the outsize investment opportunities presented in some emerging markets countries (such as India and South
Korea) as opposed to others. See "Focused Investment Risk" below.
6. Comment: With respect to the
EM ex China Fund, because the Fund expects to have only limited exposure to the Chinese economy,
please consider deleting the cross reference to “China Risk” in the Fund Summary—Principal
Investment Strategies—Asia Risk Section.
Response: In response
to this comment, the Fund will delete the cross reference.
7. Comment: With respect to the
Health Fund, the Fund Summary—Principal Investment Strategies Section states
that:
“Under normal circumstances, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of companies engaged in or supporting innovation in one or more healthcare or healthcare-related industries. Healthcare and healthcare-related industries include companies that manufacture healthcare supplies or provide healthcare-related services, and companies in the research, development, production and marketing of pharmaceuticals and biotechnology products.”
Please supplement or revise
this disclosure in the Fund Summary or the related Item 9 disclosure to clarify how the Fund determines that a company is sufficiently
engaged in, or supporting, innovation in healthcare or healthcare-related industries so as to satisfy investor expectations and the requirements
of Rule 35d-1 under the Investment Company Act of 1940, as amended (the “1940 Act”). Additionally, please revise this disclosure
to clarify the meaning of “healthcare-related services.”
Response: In response
to this comment, the Fund intends to revise the above-referenced disclosure as follows:
Under
normal circumstances, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities
of companies engaged in or supporting innovation in one or more healthcare or healthcare-related industries. Healthcare and healthcare-related
industries include companies that manufacture medical treatments, devices, or diagnostic tools, such as
devices and tools that aid the understanding, early identification and prevention of human diseases or companies that provide
healthcare supplies or provide healthcare-related services, and companies in the research,
development, production and marketing of pharmaceuticals and biotechnology products.,
such as products for genetic analysis and engineering and protein-based therapeutics to treat or prevent
human diseases. Companies providing healthcare-related services include companies that provide operational support to the healthcare
system, such as information technology companies focusing on software for healthcare companies or information technology solutions relevant
to the healthcare sector. In identifying candidates for the 80% test described above, the portfolio managers seek to identify companies
for which healthcare and healthcare-related activities are expected to be a key driver of the company’s growth over the long-term,
but will generally focus on companies that derive at least 50% of their revenue from healthcare and healthcare-related activities.
5
8. Comment: With respect to the
Health Fund, the principal investment strategy states that “The Fund intends to invest
globally, including in emerging markets, though the Fund expects that many of the innovative
health-related companies in which it seeks to invest will be located in the United States.”