April 21, 2021
Keith S. MacLeod, Esq.
Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199-3600
Re: PIMCO Flexible Emerging Markets Income Fund
File Nos. 333-254586 and 811-23648
Dear Mr. MacLeod:
On March 22, 2021, you filed a registration statement on Form N-2 for
PIMCO Flexible
Emerging Markets Income Fund (the Fund ). Our comments are set forth
below. For
convenience, we generally organized our comments using the headings, defined
terms and page
numbers from the registration statement. Where a comment is made with respect
to the
disclosure in one location of the filing, it applies to all similar disclosure
found elsewhere.
PROSPECTUS
Cover Page
1. The Investment Objectives of the Fund are to seek to provide attractive
risk-adjusted returns
and current income. Please revise the investment objectives to emphasize
seeking current
income. See Frequently Asked Questions about Rule 35d-1 (Investment Company
Names),
no. 9. Please also disclose in plain English what the phrase
risk-adjusted returns means.
2. The last sentence under Investment Strategy states that it is expected
that the Fund
normally will have a short to longer average portfolio duration (i.e.,
within a zero to 12 year
range), as calculated by the Investment Manager, although it may be shorter
or longer at any
time or from time to time depending on market conditions and other factors.
Inasmuch as
this disclosure sets forth a flexible, open-ended duration policy, please
revise this sentence to
state that the Fund has no targeted average portfolio duration and, if
accurate, that it can
range widely from zero to 12 years or more.
Keith S. MacLeod, Esq.
Page 2
April 21, 2021
3. The fourth sentence under Portfolio Contents states that [w]ithin
the limits of the
foregoing 80% policy , the Fund may invest in instruments tied
economically to the United
States or other developed markets and equity securities. Please clarify the
disclosure to
indicate that these investments will be excluded from the 80% policy.
4. The second paragraph under Portfolio Contents describes how PIMCO
identifies countries
as emerging market countries and provides a non-exhaustive list of examples
of how the
Fund may consider a country to be an emerging market country. Please
disclose the specific
criteria PIMCO will use to identify emerging market countries for purposes
of the Fund s
policy to invest at least 80% of its assets in instruments that are tied
economically to
emerging market countries. See Rule 35d-1(a)(3)(ii) under the Investment
Company Act of
1940 ( 1940 Act ).
5. The third paragraph under Portfolio Contents sets forth the criteria
used by PIMCO to
determine whether an instrument is economically tied to an emerging market
country. Please
consider removing such disclosure from the Prospectus cover page as it is
very detailed.
6. The first sentence of the sixth paragraph states that the Fund may invest
through Subsidiaries
in Alt Lending ABS. Please respond to the following comments with respect to
the
Subsidiaries.
a. Disclose any of a Subsidiary s principal investment strategies or
principal risks that
constitute principal investment strategies or principal risks of the
Fund.
b. Confirm to us that the financial statements of each wholly-owned
Subsidiary will be
consolidated with those of the Fund.
c. Confirm to us that the investment advisory contract between a Subsidiary
and its
investment adviser will be filed as an exhibit to the registration
statement.
d. Confirm to us that (a) a Subsidiary s management fee (including any
performance fee)
will be included in the Management Fee line item of the fee table
and a Subsidiary s
expenses will be included in the Other Expenses line item of the
fee table; (b) if a
Subsidiary is not organized in the U.S., the Subsidiary and its board of
directors will
agree to designate an agent for service of process in the U.S.; and (c) a
Subsidiary and its
board of directors will agree to inspection by the staff of the
Subsidiary s books and
records, which will be maintained in accordance with Section 31 of the
1940 Act.
7. The first sentence under Leverage identifies, among other things,
credit default swaps that
the Fund will use to add leverage to its portfolio. The second sentence
under Leverage
states that the Fund may also enter into transactions other than those noted
above that may
give rise to a form of leverage, including credit default swaps. Please
revise the disclosure to
identify credit default swaps only once in these two sentences. Also, please
disclose if the
Fund will sell credit default swaps and the corresponding risks of doing so.
Keith S. MacLeod, Esq.
Page 3
April 21, 2021
Prospectus Summary The Offering (pages 1 2)
8. The third to last sentence of this section states that the Fund reserves the
right to reject a
purchase order for any reason. Please disclose the circumstances in which
the Fund would
reject a purchase order. We may have additional comments after reviewing
your response.
Prospectus Summary Portfolio Management Strategies (pages 3 6)
9. The fourth sentence on page 3 states that PIMCO may choose to focus on
particular countries
or emerging market regions or industries and sectors at any time and from
time to time. If
the Fund will be focused on particular countries, regions, industries or
sectors at launch,
please disclose the specific risks of those countries, regions, industries
or sectors in the
Principal Risks of the Fund section.
10. The paragraph on pages 4 and 5 identifies the debt instruments in which the
Fund may invest.
Please review this paragraph and limit the disclosure to only the types of
investments in
which the Fund will principally invest. Please move disclosure of any
non-principal
investments to a separate section outside of the Prospectus Summary. See
Instruction to Item
3.2. of Form N-2 (stating that the synopsis should provide a clear and
concise [emphasis
added] description of the key features of the offering and the Fund,
with cross-references to
relevant disclosure elsewhere in the Prospectus or Statement of Additional
Information). See
also Item 8.2.b.(1) of Form N-2; Item 8.4. of Form N-2 and Instruction a.
thereto; ADI 2019-
08 Improving Principal Risks Disclosure (at text preceding footnote 7).
11. The second full paragraph on page 5 sets forth numerous, multi-layered
criteria used by
PIMCO to determine whether an instrument is economically tied to an
emerging market
country. Please revise the disclosure in plain English to provide a clear,
objective discussion
of how the Fund determines that an instrument is economically tied to an
emerging market
country.
12. Please explain to us how the following are appropriate criteria for
determining whether an
instrument is tied economically to an emerging market country:
a. the currency of settlement of a security is a currency of an emerging
market country; and
b. with respect to derivative instruments, the underlying assets are
currencies of emerging
market countries (or baskets or indexes of such currencies).
Please also explain to us how the country of risk criteria applied to
an issuer or an issuer s
ultimate parent indicate that a security is economically tied to an emerging
market country.
See Rule 35d-1(a)(3)(i).
13. The fourth sentence on page 6 states that the Fund s investments in,
origination of and/or
securitization of loans may also be limited by the Fund s intention to
qualify as a regulated
investment company. Please clarify the disclosure to indicate what
limitations the sentence
refers (e.g., Subchapter M of the Internal Revenue Code).
Keith S. MacLeod, Esq.
Page 4
April 21, 2021
14. The last sentence of the second full paragraph on page 6 states that the
Fund may engage in
short sales. Please confirm whether the Fund intends to use short sales
and, if so, please
include an estimate of dividend and interest expense on short sales in the
fee table.
Alternatively, please confirm to us that the Fund has no current intention
to engage in short
sales (i.e., the Fund will not engage in short sales within one year of the
effective date of the
registration statement).
15. The first sentence of the third full paragraph on page 6 states that the
Fund may invest in
other investment companies. Please confirm that, if necessary, the expenses
of such
investments will be reflected in a separate Acquired Fund Fees and Expenses
line item in the
fee table. See Instruction 10 to Item 3.1 of Form N-2.
Prospectus Summary Distributor, Custodian and Transfer Agent (page 9)
16. The second sentence of this section will identify the Fund s primary
custodian. Please also
identify the custodian of any wholly-owned Subsidiary.
Prospectus Summary Principal Risks of the Fund (pages 10 39)
17. This section of the Prospectus Summary is approximately 29 pages. The
Principal Risks of
the Fund section of the Prospectus is approximately 33 pages. Please
summarize the
disclosure of the Fund s principal risks in this section of the
Prospectus Summary. See
Instruction to Item 3.2. of Form N-2
Prospectus Summary Principal Risks of the Fund Foreign (non-U.S.)
Investment
Risk (pages 16 17)
18. Disclosure on pages 16 and 17 describes the risks of investments in China
and Russia. If
investing in China and Russia are principal strategies of the Fund, please
identify such
investments in the Fund s Investment Objectives and Strategies section of
the Prospectus
Summary or explain to us why doing so is not appropriate.
Prospectus Summary Securitization Risk (pages 25 26)
19. The first sentence of this risk factor states that the Fund may securitize
its assets, including
loans it has originated, through a Securitized Vehicle, such as a
wholly-owned subsidiary,
which is established solely for the purpose of holding such assets. In the
Investment
Objectives and Strategy section, please disclose in greater detail how the
Fund may securitize
assets, including the types of assets it may securitize, the types of
vehicles the Fund will use
to do so (including whether or not all such vehicles will be wholly-owned
subsidiaries of the
Fund), the types of securities the vehicles will issue (e.g., debt,
equity), how the vehicles will
issue securities (e.g., in private placements), and what recourse debt
holders will have against
the Fund s assets. We may have more comments after reviewing your
response.
20. Please explain to us whether the sale of interests by a securitized vehicle
involves the
issuance of a senior security by the Fund. If so, please explain to us how
this issuance would
Keith S. MacLeod, Esq.
Page 5
April 21, 2021
comply with Sections 18(a)(1) and 18(c) of the 1940 Act. We may have more
comments
after reviewing your response.
21. Please respond to the following comments with respect to any Securitized
Vehicles that are
wholly-owned subsidiaries of the Fund.
a. Disclose that each collateral manager to the Securitized Vehicle will
comply with the
provisions of the 1940 Act relating to investment advisory contracts
(Section 15) as an
investment adviser to the Fund under Section 2(a)(20) of the 1940 Act.
Please confirm
that the management agreement between the Securitized Vehicle and the
manager will be
filed as an exhibit to the registration statement. Please also confirm
that the collateral
manager will be identified as an investment adviser to the Fund. See Item
9.1.(b) of
Form N-2.
b. Please identify the custodian for the Securitized Vehicle.
c. Disclose any of the Securitized Vehicles principal strategies or risks
that constitute
principal strategies or risks of the Fund. The principal strategies and
risks of the Fund
should reflect aggregate operations of the Fund and the Securitized
Vehicle.
d. Confirm to us that the management fee (including any performance fees)
paid to any
collateral manager of the Securitized Vehicle will be included in the
Management Fee
line item in the fee table and the other expenses of the Securitized
Vehicle will be
included in the Other Expenses line item in the fee table.
e. Confirm to us that the Securitized Vehicles will be organized in the
United States.
Alternatively, confirm to us that the Securitized Vehicle and any board
of directors it has
will agree to designate an agent for service of process in the United
States and the
Securitized Vehicle and any board of directors will agree to inspection
by the staff of the
Securitized Vehicle s books and records. Confirm to us that these books
and records will
be maintained in accordance with Section 31 of the 1940 Act and the rules
thereunder.
f. Confirm to us that the financial statements of the Securitized Vehicles
will be
consolidated with those of the Fund.
Prospectus Summary Principal Risks of the Fund Market Disruptions Risk
(page 37)
22. This risk factor describes risks associated with global market developments
and disruptions,
including those arising from public health emergencies, and the possible
impact on the Fund.
Please consider whether the Fund s disclosures, including risk
disclosures should be revised
based on how these events may affect the Fund and its investments and
investment process.
If you believe that no additional disclosure is warranted, please explain
to us why not.
Keith S. MacLeod, Esq.
Page 6
April 21, 2021
Summary of Fund Expenses (pages 40 41)
23. In footnote 4 to the fee table, please disclose the period for which the
contractual waiver is
expected to continue, including the expected termination date and briefly
describe who can
terminate the waiver contract and under what circumstances.
Portfolio Contents and Other Information Leverage (pages 77 79)
24. The second to last sentence on page 77 states that the Fund may determine
to issue preferred
shares. Please confirm whether the Fund intends to issue preferred shares
and, if so, please
(i) include an estimate of the costs of issuing and maintaining preferred
shares in the fee table
and (ii) disclose the risks to shareholders in the event of a preferred
shares offering.
Alternatively, please confirm that the Fund has no current intention to
issue preferred shares
(i.e., the Fund will not issue preferred shares within one year of the
effective date of the
registration statement).
Sales Charge Class A-2 and Class A-4 Common Shares (pages 125 129)
25. The first sentence on page 128, under Sales at Net Asset Value states
that Class A-2 and A-
4 Common Shares may be sold at NAV without an initial sales charge to
certain types of
accounts or account holders including, among others, purchases made
through . . . certain
types of group omnibus plans sponsored by employers, professional or
charitable
organizations . Please describe this class of purchases with greater
specificity. See Item
12(a)(2) of Form N-1A and Instruction 1 thereto.
Sales Charge How EWCs will be Calculated (pages 128 129)
26. This first sentence of this section states that an EWC is imposed on
repurchases of Class A-2
and Class A-4 Common Shares on the amount of the repurchase which causes
the current
value of your account for the particular class of Common Shares of the Fund
to fall below the
total dollar amount of your purchase payments subject to the EWC. Please
clarify the
quoted disclosure in this sentence.
Sales Charge Reductions and Waivers of Initial Sales Charges and EWCs (page
129)
27. The first sentence of the second paragraph of this section states that EWCs
may be reduced
or waived for repurchases where the shareholder can demonstrate hardship
and there will be
minimal cost borne by the Distributor associated with the repurchase.
Please disclose with
greater specificity the circumstance in which a hardship would be
demonstrated and the
repurchase will result in minimal cost borne by the Distributor. See Item
12(a)(2) of Form
N-1A and Instruction 1 thereto.
Shares Purchased or Held Through Financial Intermediaries (page 130)
28. The first sentence of this section states that the availability of sales
charge waivers and
discounts may depend on the particular financial intermediary or type of
account through
Keith S. MacLeod, Esq.
Page 7
April 21, 2021
which you purchase or hold Fund shares. Please disclose sales charge waivers
and discounts
made available through specific financial intermediaries. See Item 12(a)(2)
of Form N-1A
and Instruction 1 thereto; IM Guidance Update 2016-06, at text preceding and
following
footnote 5.
Net Asset Value (pages 135 137)
29. The second sentence of the second paragraph on page 136 states that whole
loans, including
those originated by the Fund, generally are fair valued. Please confirm
that the Fund will
update underlying valuation data with respect to each individual loan that
it holds at least as
often as it calculates its NAV. Also, please disclose that originated loans
will be valued on
an individual loan level, fair valuation will be performed using inputs
that incorporate
borrower level data which is updated as often as the Fund s NAV is
calculated and the type
of information that will be used to value loans.
Distributions (pages 137 138)
30. The second sentence of the second paragraph on page 138 states that there
is a possibility that
the Fund may make total distributions during a taxable year that exceeds
the Fund s net
investment income and net realized capital gains (i.e., a return of
capital). Please tell us if the
Fund may make a significant amount of return of capital distributions in
its first year of
operations. If so, please prominently disclose on the Prospectus cover page
that the Fund
expects to make return of capital distributions and that such distributions
do not represent
income.
Anti-Takeover and Other Provisions in the Declaration of Trust (pages 140
141)
31. Please describe the limitations on the ability of shareholders to bring
direct and derivative
claims set forth in Sections 5 and 6 of the Fund s Declaration of Trust.
Please also disclose
that these limitations do not apply to claims made under the federal
securities laws. In
addition, please disclose that the forum for adjudication of disputes is
the federal or state
courts of Massachusetts, as described in Section 11.1 of the Fund s
Bylaws, and the
corresponding risks of such provision (e.g., that shareholders may have to
bring suit in an
inconvenient and unfavorable forum).
STATEMENT OF ADDITIONAL INFORMATION
Investment Restrictions Other Information Regarding Investment Restrictions
(pages
102 105)
32. Please confirm that the Fund will look through a private activity municipal
debt security
whose principal and interest payments are derived principally from the
assets and revenues of
a nongovernmental entity in order to determine the industry to which the
investment should
be allocated when determining the Fund s compliance with its
concentration policy.
Keith S. MacLeod, Esq.
Page 8
April 21, 2021
PART C OTHER INFORMATION
Item 34. Undertakings
33. Please insert the undertaking set forth in Item 34.4 of Form N-2 or explain
to us why it is not
applicable.
GENERAL COMMENTS
34. Please tell us if you have presented any test the waters materials to
potential investors in
connection with this offering. If so, please provide us with copies of such
materials.
35. We note that many portions of your filing are incomplete or to be updated
by amendment
(e.g., fee table, information regarding Trustees). We may have additional
comments on such
portions when you complete them in pre-effective amendments, on disclosures
made in
response to this letter, on information supplied supplementally, or on
exhibits added in any
pre-effective amendment.
36. If you intend to omit certain information from the form of prospectus
included with the
registration statement that is declared effective in reliance on Rule 430A
under the Securities
Act of 1933 ( Securities Act ), please identify the omitted information
to us supplementally,
preferably before filing the pre-effective amendment.
37. Please advise us if you have submitted or expect to submit any exemptive
applications or no-
action requests in connection with your registration statement.
38. Response to this letter should be in the form of a pre-effective amendment
filed pursuant to
Rule 472 under the Securities Act. Where no change will be made in the
filing in response to
a comment, please indicate this fact in a supplemental letter and briefly
state the basis for
your position.
In closing, we remind you that the Fund and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
* * * * *
If you have any questions prior to filing a pre-effective amendment,
please call me at
(202) 551-6782.
Sincerely,
/s/ Anu Dubey
Anu Dubey
Senior Counsel
cc: Michael Spratt
Michael Shaffer