Morgan, Lewis & Bockius LLP MORGAN LEWIS
1701 Market Street
Philadelphia, PA 19103-2921
Tel. 215.963.5000
Fax: 215.963.5001
www.morganlewis.com
November 25, 2015
FILED AS EDGAR CORRESPONDENCE
Patrick Scott, Esq.
U.S. Securities and Exchange Commission
Division of Investment Management
100 F. Street, N.E.
Washington, DC 20549
Re: Gallery Trust Initial N-1A Filing (File Nos. 333-206713 and 811-23091)
------------------------------------------------------------------------
Dear Mr. Scott:
On behalf of our client, Gallery Trust (the "Trust"), this letter responds
to your letter dated October 1, 2015 in which you set forth the Securities and
Exchange Commission (the "Commission") Staff's comments concerning the Trust's
initial Registration Statement on Form N-1A (the "Registration Statement"). The
Registration Statement was filed with the Commission on September 1, 2015 under
the Investment Company Act of 1940, as amended (the "1940 Act"), and the
Securities Act of 1933, as amended (the "1933 Act"), for the purpose of
registering shares of the following series of the Trust: The Mondrian
International Equity Fund (the "Fund"). Responses to each of the Staff's
comments, based on information provided by Mondrian Investment Partners Limited
(the "Adviser"), are set forth below. Capitalized terms not defined herein
should be given the meaning provided in the Registration Statement.
I. PROSPECTUS COMMENTS
A. ITEM 3
1. COMMENT. In the introduction to the example, please state that the example
assumes that the investor either redeems or retains the shares at the end
of the period.
RESPONSE. The requested change has been made.
2. COMMENT. In the paragraph on Portfolio Turnover, add disclosure indicating
that no portfolio turnover rate is included because the Fund is new.
RESPONSE. The requested change has been made.
B. ITEMS 4 AND 9
1. COMMENT. The Principal Investment Strategies section states that, to the
extent the Fund may invest in convertible securities, if those convertible
securities are rated, the rating will not be an important factor in the
Fund's investment decision. Please explain supplementally to the staff why
this is the case with respect to ratings. Furthermore, consider adding
disclosure regarding the rationale for this investment policy.
RESPONSE. The statement has been removed from the section.
2. COMMENT. As noted above, the Fund may invest in convertible securities. If
the Fund invests or expects to invest in contingent convertible securities
("CoCos"), 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 CoCos, and the
characteristics of the CoCos, (e.g., the credit quality, the conversion
triggers). If CoCos are or will be a principal type of investment, the Fund
should provide a description of them and should provide appropriate risk
disclosure, including the amount the Fund might invest in such securities.
RESPONSE. The Adviser does not currently expect the Fund to invest in
CoCos.
3. COMMENT. In light of the Fund's statement on page 5, that it "may make
limited use of foreign fixed income securities," the staff questions
whether such investments should be considered a principal strategy. Please
supplementally explain this, or revise your Items 4 and 9 disclosure, as
appropriate.
RESPONSE. Although the Adviser expects to commit a limited amount (up to
20%) of the Fund's assets to foreign fixed income securities, the Adviser
considers investments in such securities to be a principal investment
strategy of the Fund because of the amount of assets that can be invested
in foreign fixed income securities and the possible impact of such
investments on the Fund's potential risks and returns. See Instruction 2 to
Item 9(b) of Form N-1A.
4. COMMENT. Include Foreign Government Agencies Risk as a principal risk only
if foreign fixed income investments are disclosed as a principal strategy.
RESPONSE. Foreign fixed income investments are disclosed as a principal
strategy of the Fund.
5. COMMENT. Include Corporate Fixed Income Securities Risk as a principal
risk only if foreign fixed income investments are disclosed as a principal
strategy.
RESPONSE. Foreign fixed income investments are disclosed as a principal
strategy of the Fund.
6. COMMENT. If the Fund expects to have a portfolio turnover rate of 100% or
more, please add appropriate risk disclosure, e.g., transaction costs,
taxable distributions.
RESPONSE. Under normal circumstances, the Adviser does not expect the Fund
to have a portfolio turnover rate of 100% or more.
7. COMMENT. Disclosure states that the Fund's policy of 80% investment in
equity securities will not be changed prior to 60 days' prior notice to
shareholders. Since the word "International" is used in the Fund's name,
please confirm to the staff that 60 days prior notice to shareholders would
also be provided before changing the Fund's name or its investment policy
regarding non U.S. companies.
RESPONSE. Unlike the term "equity" in the Fund's name, the term
"international" in the Fund's name does not implicate the 60 days' notice
requirement under Rule 35d-1 under the 1940 Act. That being said, the Fund
will generally provide shareholders 60 days' notice before changing its
investment policy to invest, under normal circumstances, in at least three
countries, and invest at least 40% of its total assets in securities of
non-U.S. companies.
8. COMMENT. Please revise the sections captioned, "More Information about the
Fund's Investment Objectives and Strategies," and "More Information About
Risk," as required by Item 9. Disclosure in response to Items 4 and 9
cannot be substantially the same. See IM Guidance Update 2014-08.
RESPONSE. The Trust respectfully declines to make the requested changes
because it believes that the disclosure provided in the "More Information
About Risk" section is not substantially the same as the disclosure
provided in the "Principal Risks" section, and that the disclosure in the
"More Information about the Fund's Investment Objectives and Strategies"
section appropriately describes how the Fund intends to achieve its
investment objective, in accordance with Item 9(b) of Form N-1A.
C. INVESTMENT ADVISER
1. COMMENT. Consider moving the disclosure on page 13 in the paragraph that
begins, "[f]rom time to time," to the section where risk disclosure is set
forth.
RESPONSE. The requested change has been made.
2. COMMENT. In the next paragraph beginning with, "if permitted under
applicable law," please discuss the law applicable to the Adviser reducing
the shareholder's investment advisory fees.
RESPONSE. The phrase has been removed from the paragraph.
D. RELATED PERFORMANCE DATA OF THE ADVISER - PERFORMANCE INFORMATION FOR THE
ADVISER'S OTHER INTERNATIONAL EQUITY ACCOUNTS
1. COMMENT. Since the Fund is presenting adjusted performance, the Fund
should represent supplementally that the use of adjusted fees and expenses
does not result in performance that is higher than what would have been
achieved using the actual fees and expenses.
RESPONSE. The "Related Performance Data of the Adviser" section has been
removed.
2. COMMENT. At the end of the first paragraph in this section, prior to the
parenthetical that states, "as set forth in the Annual Fund Operating
Expenses table... ," please add, "including maximum sales loads."
RESPONSE. The "Related Performance Data of the Adviser" section has been
removed.
3. COMMENT. Please add to the narrative disclosure how the performance was
calculated. For clarity and to the extent applicable, consider adding an
explanation similar to that used in footnote 1 of this section, regarding
the modified Dietz method.
RESPONSE. The "Related Performance Data of the Adviser" section has been
removed.
4. COMMENT. We note that the composite performance information is calculated
in and expressed in U.S. dollars. Please clarify to the staff whether the
accounts included in this performance were denominated in a different
currency. If so, the Fund should explain what currency the accounts were
denominated in and explain that performance would have been different
because of currency conversions.
RESPONSE. The "Related Performance Data of the Adviser" section has been
removed.
5. COMMENT. The heading on page 15 should read "Prior Performance Information
for the Adviser's Other International Equity Accounts."
RESPONSE. The "Related Performance Data of the Adviser" section has been
removed.
6. COMMENT. Please represent supplementally that the Fund has the records
necessary to support the calculation of the performance as required by rule
204-2(a)(16) under the Investment Advisers Act.
RESPONSE. The "Related Performance Data of the Adviser" section has been
removed.
E. INVOLUNTARY REDEMPTION OF YOUR SHARES
COMMENT. Please disclose the circumstances under which you would
involuntarily redeem shares when the account balance drops below $1
million.
RESPONSE. Disclosure has been added to indicate that involuntary
redemptions will be effected only if they are deemed to be in the best
interests of the Fund and its shareholders.
II. SAI COMMENTS
A. INVESTMENT LIMITATIONS - FUNDAMENTAL POLICIES
COMMENT. Please revise the disclosure in item 2 on page S-31 so that it is
clear that this exclusion does not eliminate the requirement for tax-exempt
bond funds to disclose their policy with respect to concentration.
RESPONSE. The Trust believes that the disclosure in item 2 on page S-31 is
appropriate in light of the Fund's principal investment strategies.
However, the "Concentration" paragraph on page S-32 has been revised to
state that the 1940 Act requires that every investment company have a
fundamental investment policy regarding concentration.
B. UNDERWRITING
COMMENT. In the first sentence of the second paragraph in this section, on
page S-33, insert the words, "and illiquid securities," after the words,
"the Fund's policy concerning borrowing."
RESPONSE. Long-standing Commission guidelines generally limit an open-end
fund's aggregate holdings of illiquid securities to 15% of the fund's net
assets (the "15% guideline"). The Commission has stated that the 15%
guideline should be interpreted as a limit on the acquisition of illiquid
assets, not a limit on the holdings of illiquid assets, and the Commission
has acknowledged that this approach is consistent with approaches that
Congress and the Commission have historically taken in other parts of the
1940 Act and the rules thereunder. See Open-End Fund Liquidity Risk
Management Programs; Swing Pricing; Re-Opening of Comment Period for
Investment Company Reporting Modernization Release, Investment Company Act
Release No. 31835 (Sept. 22, 2015), at n.92 and accompanying text.
Accordingly, the Trust respectfully declines to make the requested change
because, although the Fund will take steps to bring the aggregate amount of
illiquid instruments back within the 15% guideline as soon as reasonably
practicable in the event that a change in net assets or other circumstances
causes the Fund to exceed the 15% guideline, an increase in holdings of
illiquid securities above the 15% guideline not resulting from an
acquisition will not constitute a violation of the 15% guideline.
C. PORTFOLIO HOLDINGS
COMMENT. In this section, identify by name all third parties who receive
portfolio holdings information in advance pursuant to an ongoing
arrangement.
RESPONSE. No third parties are currently expected to receive the Fund's
portfolio holdings information in advance pursuant to an ongoing
arrangement.
* * * * * * * * * * * *
If you have any questions, need any additional information or would like any
clarification, please contact me at (215) 963-5620.
Very truly yours,
/s/ Leon Salkin
-----------------
Leon Salkin