Correspondence 0001999371-24-010168 from World Funds Trust (CIK 0001396092)
World Funds Trust (CIK 0001396092)
Date: Aug. 14, 2024 · CIK: 0001396092 · Accession: 0001999371-24-010168
AI Filing Summary & Sentiment
File numbers found in text: 333-148723, 811-22172
Letter
Division of Investment Management 100 F Street, N.E. Washington, D.C. 20549 Re: World Funds Trust (File Nos. 333-148723 and 811-22172) Cook & Bynum Fund
Dear Ms. Ament-Marquigny:
This letter provides the responses of World Funds Trust (the “Trust”) to the comments of the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) that you provided to Practus, LLP on July 18, 2024. The comments related to the Post-Effective Amendment (a “PEA”) to the registration statement of the Trust, which was filed on May 24, 2024, under Rule 485(a) of the Securities Act of 1933, as amended. The PEA was filed to register shares of the new series of the Trust, The Cook & Bynum Fund (the “Fund”). For your convenience, I have summarized the comments in this letter and provided the Trust’s response below each comment. Capitalized terms not defined in this letter shall have the same meaning ascribed to such term in the PEAs.
General Comments
· Please file this comment response letter on EDGAR such that the Staff has at least five business days prior to filing the 485(b) to review.
· Please also send via email to Rebecca Ament Marquigny, redlined or marked pages of revised disclosure.
· The Staff notes that portions of the PEAs are incomplete. The Staff asks that any blanks or bracketed information be completed in the next set of post-effective amendments.
· Please also apply any new or revised disclosure in one section to similar disclosure in other sections throughout the registration statements for each Fund as well as throughout.
Response: The Trust acknowledges the points made above in the “General Comments.”
Prospectus – Shareholder Fees and Annual Fund Operating Expenses Table and Footnotes
1. Comment: Shareholder fees. If the Fund isn’t imposing Shareholder fees, including either the sales charge or deferred sales charge, redemption fees, exchange fees or an account fee, please consider removing the Shareholder fees table from the Prospectus.
Response: The Fund does not charge any Shareholder fees, and accordingly has removed Shareholder fees table from the Prospectus.
Ms. Rebecca Ament Marquigny
Division of Investment Management
U.S. Securities and Exchange Commission
August 14, 2024
2.
Comment: The second footnote to the Annual Fund Operating Expenses table must identify the financially responsible party for those expenses or show the excluded expenses in an appropriately identified fee table line item(s). Please revise accordingly. Also, Acquired Fund Fees and Expenses (“AFFE”) are not incurred by the Fund in the ordinary course of business. Supplementally explain why AFFE are not incurred in the ordinary course of business.
Response: The Fund has revised the second footnote to the Annual Fund Operating Expenses table to identify the party financially responsible for the expenses, as follows: Pursuant to an agreement between the Fund and Cook & Bynum Capital Management, LLC (the “Adviser”), to the extent that the aggregate expenses incurred by the Fund, including but not limited to investment advisory fees of the Adviser (but excluding interest, expenses incurred under a plan of distribution adopted pursuant to Rule 12b-1 under the 1940 Act, taxes, acquired fund fees and expenses, brokerage commissions, dividend expenses on short sales, and other expenditures which are capitalized in accordance with generally accepted accounting principles and other extraordinary expenses not incurred in the ordinary course of the Fund’s business) exceed 1.49% of the Fund’s daily net assets, are the liability of the Adviser. This agreement is in effect through February 1, 2026, and thereafter is reevaluated on an annual basis. The Trust’s Board of Trustees and the Adviser may terminate or modify the agreement prior to February 1, 2026 only by mutual written consent. This agreement shall terminate automatically upon the termination of the investment management agreement with the Adviser. Each waiver or reimbursement of an expense by the Adviser is subject to repayment by the Fund within three-years following the date such waiver and/or reimbursement was made, provided that the Fund is able to make the repayment without exceeding the expense limitation in place at the time of the waiver or reimbursement and at the time the waiver or reimbursement is recouped.
AFFEs are not incurred in the ordinary course of business. The second footnote in the expense table has been revised to reflect this.
3. Comment: With respect to the Annual Fund Operating Expenses table and the related Examples, please attach an updated and complete table and Examples in response.
Response: The Fund has provided an updated and complete Annual Fund Operating Expenses table and related Examples in response to the Staff’s comment.
Fund Summary - Principal Investment Strategy
4. Comment: The first paragraph of the Fund’s Principal Investment Strategy states that the Fund invests in a “select few global public equities.” Identify the Fund as non-diversified in the strategy and explain very briefly what investing in a “select few public equities” means in terms of the number of portfolio holdings. Please state the Fund’s anticipated number of portfolio holdings or disclose an applicable range of portfolio holdings.
Response: The Trust has revised the disclosure to state that the Fund is a non-diversified investment company for purposes of the Investment Company Act of 1940. While the Fund anticipates holding a small amount of global public equity companies, the Trust respectfully declines to provide a range as there is not a range identified by the Adviser.
Ms. Rebecca Ament Marquigny
Division of Investment Management
U.S. Securities and Exchange Commission
August 14, 2024
5. Comment: In the Fund’s Investment Strategy, in the statement immediately preceding the four core criteria, please identify the assumptions, conclusions, and psychological misjudgments which are refer to at the beginning of the second strategy paragraph and rewrite the criteria descriptions for each of those core criteria. Please identify the relevant metrics that are considered and generally explain how they inform individual security selection choices and subsequent buy/sell decisions.
Response: The Trust has identified the assumptions, conclusions, and psychological misjudgments which are referred to at the beginning of the second strategy paragraph and rewritten the criteria descriptions for each of those four core criteria. The Trust has also identified the relevant metrics that are considered and has clarified how it makes individual security selection choices and subsequent buy/sell decisions. How the Adviser determines security sale decisions is disclosed in the fourth paragraph under the description of the four core criteria.
6. Comment: Circle of Competence. The second sentence of the Principal Investment Strategy titled “Circle of Competence” is both unclear and confusing (e.g., what are these “limitations of its knowledge?” What does the “ability to execute its competencies when evaluating an idea” mean? Please rewrite in plain English to the extent material. Explicitly address the types of businesses, industries, and geographies the adviser considers to be within its circle of competence.
Response: The section of the Principal Investment Strategy titled “Circle of Competence” has been expanded and clarified to address the Staff’s comment.
7. Comment: Business. In the Principal Investment Strategy section titled “Business”, please explain how the adviser defines “sustainable competitive advantages,” and what constitutes “predictable free cash flows.” Explain how the portfolio manager decides that a security’s return on equity is “attractive” (i.e., compared to what?) Explain what represents an “extended period of time.” Explain what a “moat” is. Please explain/clarify each of these statements.
Response: The section of the Principal Investment Strategy titled “Business” has been expanded and clarified to address the Staff’s comment.
Ms. Rebecca Ament Marquigny
Division of Investment Management
U.S. Securities and Exchange Commission
August 14, 2024
8. Comment: People. In the Principal Investment Strategy section titled “People”, please clarify how the adviser determines specific management teams are trustworthy and “intellectually honest.” In concrete, practical terms, explain what is meant by “energy,” “thoughtful capital allocation framework,” and “conservative accounting practices.” How does the adviser measure these? Please describe what metrics, data, and analysis the adviser uses to assess “people.” Revise to disclose.
Response: The section of the Principal Investment Strategy titled “People” has been expanded and clarified to address the staff’s comment.
9. Comment: Price. In the Principal Investment Strategy section titled “Price”, please clarify what is meant by “owner earnings” and explicitly define what constitutes a “significant discount” to estimated intrinsic value. Please state how a significant discount is determined and why “owner earnings” are in quotations.
Response: The section of the Principal Investment Strategy titled “Price” has been expanded and clarified to address the Staff’s comment.
10. Comment: Concentration and industry focus. In the third paragraph under the Principal Investment Strategy section, it states that the Fund’s portfolio is “deliberately concentrated in the Adviser’s best, most informed ideas” putting emphasis on deliberately concentrated. Please rewrite this in plain English. Explicitly spell out the Fund’s concentration policy and specifically address the Fund’s strategy regarding investments in the beverage bottling and distribution industry. Review the corresponding risk description with respect to the Risk of Current Focus on Both the Breweries Industry and Soft Drink Bottling and Distribution Industry and where appropriate, move relevant risk disclosures forward (e.g., based on the Fund’s investment percentages in these industries as of last year). Also, ensure the revised strategy and risk section’s concentration and industry emphasis disclosure is complete, internally consistent, and correct. We note that 1) funds may not reserve the right to concentrate as the 4th and 5th sentences of the risk currently suggest; and 2) the SAI discloses a fundamental investment restriction prohibiting the Fund from concentrating in any industry. Please revise and reconcile.
Response: The Fund currently does not have a policy to concentrate nor does it have a strategy that is narrowly focused only on the Soft Drink Bottling and Distribution Industry. There are times that the Fund is concentrated in certain industries as a result of market movements (not additional purchases), and we have included such disclosures in the Principal Investment Strategies section and the Principal Risks section to ensure transparency to such risks. The Principal Investment Strategies section of the Prospectus has been updated to state that the Fund currently holds a significant amount of its assets in the Breweries Industry and the Soft Drink Bottling and Distribution Industry, as a result of market movements. Market movements may include changes in the value of either securities in focused industries or other portfolio securities among other things, and industry weights may rise above 25% of the Fund’s assets. The Fund does not have a policy to concentrate its investments in these industries, or any other industry or group of industries, for purposes of the 1940 Act. That is, at the time of purchase or sale of a security, the Fund does not invest more than 25% of its assets in these industries.
Ms. Rebecca Ament Marquigny
Division of Investment Management
U.S. Securities and Exchange Commission
August 14, 2024
The Trust has updated the “Industry Risk” section of the Prospectus to also state that the Fund may focus its investments in the securities of issuers in a particular industry or industries. From time to time, a relatively high percentage of the assets of the Fund may be invested in a limited number of industries. When the Fund’s investment focus is limited in this manner, the Fund’s performance will be affected by the performance of the issuers within those specific industries and could be more volatile than that of an investment company that invests its assets in a more diverse array of industries.
The Trust has also updated the Disclosure titled: Risk of Current Focus on Both the Breweries Industry and Soft Drink Bottling and Distribution Industry as requested by the staff.
Regarding the Fund’s SAI, the Fund does not have a policy of industry concentration, and accordingly the Fund’s related fundamental policy with respect thereto in the SAI is retained, as follows: The Fund may not concentrate investments in an industry, as concentration may be defined under the 1940 Act or the rules and regulations thereunder (as such statute, rules, or regulations may be amended from time to time) or by guidance regarding, interpretations of, or exemptive orders under, the 1940 Act or the rules or regulations thereunder published by appropriate regulatory authorities. Please see the section entitled “1940 Act Requirements” below for an overview of current requirements regard
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CORRESP
1
filename1.htm
JOHN H. LIVELY, Managing Partner
john.lively@practus.com
11300 Tomahawk Creek Pkwy., Suite 310
Leawood, KS 66211
(913) 660-0778
August 14, 2024
Ms. Rebecca Ament Marquigny
Division of Investment Management
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: World Funds Trust (File Nos. 333-148723 and 811-22172)
Cook & Bynum Fund
Dear Ms. Ament-Marquigny:
This letter provides the responses
of World Funds Trust (the “Trust”) to the comments of the staff (the “Staff”) of the U.S. Securities and Exchange
Commission (the “Commission”) that you provided to Practus, LLP on July 18, 2024. The comments related to the Post-Effective
Amendment (a “PEA”) to the registration statement of the Trust, which was filed on May 24, 2024, under Rule 485(a) of the
Securities Act of 1933, as amended. The PEA was filed to register shares of the new series of the Trust, The Cook & Bynum Fund (the
“Fund”). For your convenience, I have summarized the comments in this letter and provided the Trust’s response below
each comment. Capitalized terms not defined in this letter shall have the same meaning ascribed to such term in the PEAs.
General Comments
·
Please file this comment response letter on EDGAR such
that the Staff has at least five business days prior to filing the 485(b) to review.
·
Please also send via email to Rebecca Ament Marquigny,
redlined or marked pages of revised disclosure.
·
The Staff notes that portions of the PEAs are incomplete.
The Staff asks that any blanks or bracketed information be completed in the next set of post-effective amendments.
·
Please also apply any new
or revised disclosure in one section to similar disclosure in other sections throughout the registration statements for each Fund as
well as throughout.
Response: The Trust acknowledges
the points made above in the “General Comments.”
Prospectus –
Shareholder Fees and Annual Fund Operating Expenses Table and Footnotes
1. Comment: Shareholder fees. If the Fund isn’t imposing
Shareholder fees, including either the sales charge or deferred sales charge, redemption fees, exchange
fees or an account fee, please consider removing the Shareholder fees table from the Prospectus.
Response: The Fund does not charge any Shareholder fees, and
accordingly has removed Shareholder fees table from the Prospectus.
Ms. Rebecca Ament Marquigny
Division of Investment
Management
U.S. Securities and Exchange
Commission
August
14, 2024
2.
Comment:
The second footnote to the Annual Fund Operating Expenses table must identify the financially
responsible party for those expenses or show the excluded expenses in an appropriately identified
fee table line item(s). Please revise accordingly. Also, Acquired Fund Fees and Expenses
(“AFFE”) are not incurred by the Fund in the ordinary course of business. Supplementally
explain why AFFE are not incurred in the ordinary course of business.
Response: The Fund has revised the second footnote to the Annual Fund Operating
Expenses table to identify the party financially responsible for the expenses, as follows: Pursuant to an agreement
between the Fund and Cook & Bynum Capital Management, LLC (the “Adviser”), to the extent that the
aggregate expenses incurred by the Fund, including but not limited to investment advisory fees of the Adviser (but
excluding interest, expenses incurred under a plan of distribution adopted pursuant to Rule 12b-1 under the 1940
Act, taxes, acquired fund fees and expenses, brokerage commissions, dividend expenses on short sales, and other
expenditures which are capitalized in accordance with generally accepted accounting principles and other extraordinary
expenses not incurred in the ordinary course of the Fund’s business) exceed 1.49% of the Fund’s daily
net assets, are the liability of the Adviser. This agreement is in effect through February 1, 2026, and thereafter
is reevaluated on an annual basis. The Trust’s Board of Trustees and the Adviser may terminate or modify
the agreement prior to February 1, 2026 only by mutual written consent. This agreement shall terminate automatically
upon the termination of the investment management agreement with the Adviser. Each waiver or reimbursement of an
expense by the Adviser is subject to repayment by the Fund within three-years following the date such waiver and/or
reimbursement was made, provided that the Fund is able to make the repayment without exceeding the expense limitation
in place at the time of the waiver or reimbursement and at the time the waiver or reimbursement is recouped.
AFFEs are not incurred in the ordinary course of business. The second footnote in the
expense table has been revised to reflect this.
3. Comment: With respect to the Annual Fund Operating Expenses table and the related Examples, please
attach an updated and complete table and Examples in response.
Response: The Fund has provided an updated and complete Annual Fund
Operating Expenses table and related Examples in response to the Staff’s comment.
Fund Summary - Principal
Investment Strategy
4. Comment: The first paragraph of the Fund’s
Principal Investment Strategy states that the Fund invests in a “select few global public equities.”
Identify the Fund as non-diversified in the strategy and explain very briefly what investing in a “select
few public equities” means in terms of the number of portfolio holdings. Please state the Fund’s
anticipated number of portfolio holdings or disclose an applicable range of portfolio holdings.
Response: The Trust has revised the disclosure to state that
the Fund is a non-diversified investment company for purposes of the Investment Company Act of 1940. While
the Fund anticipates holding a small amount of global public equity companies, the Trust respectfully declines
to provide a range as there is not a range identified by the Adviser.
2
Ms. Rebecca Ament Marquigny
Division of Investment
Management
U.S. Securities and Exchange
Commission
August 14, 2024
5. Comment: In the Fund’s Investment Strategy,
in the statement immediately preceding the four core criteria, please identify the assumptions, conclusions,
and psychological misjudgments which are refer to at the beginning of the second strategy paragraph and
rewrite the criteria descriptions for each of those core criteria. Please identify the relevant metrics
that are considered and generally explain how they inform individual security selection choices and subsequent
buy/sell decisions.
Response: The Trust has identified the assumptions, conclusions,
and psychological misjudgments which are referred to at the beginning of the second strategy paragraph
and rewritten the criteria descriptions for each of those four core criteria. The Trust has also identified
the relevant metrics that are considered and has clarified how it makes individual security selection choices
and subsequent buy/sell decisions. How the Adviser determines security sale decisions is disclosed in the
fourth paragraph under the description of the four core criteria.
6. Comment: Circle of Competence. The second sentence
of the Principal Investment Strategy titled “Circle of Competence” is both unclear and confusing
(e.g., what are these “limitations of its knowledge?” What does the “ability to execute
its competencies when evaluating an idea” mean? Please rewrite in plain English to the extent material.
Explicitly address the types of businesses, industries, and geographies the adviser considers to be within
its circle of competence.
Response: The section of the Principal Investment Strategy titled “Circle
of Competence” has been expanded and clarified to address the Staff’s comment.
7. Comment: Business. In the Principal Investment Strategy
section titled “Business”, please explain how the adviser defines “sustainable competitive
advantages,” and what constitutes “predictable free cash flows.” Explain how the portfolio
manager decides that a security’s return on equity is “attractive” (i.e., compared to
what?) Explain what represents an “extended period of time.” Explain what a “moat”
is. Please explain/clarify each of these statements.
Response: The section of the Principal Investment Strategy titled “Business”
has been expanded and clarified to address the Staff’s comment.
3
Ms. Rebecca Ament Marquigny
Division of Investment
Management
U.S. Securities and Exchange
Commission
August 14, 2024
8. Comment: People. In the Principal Investment Strategy
section titled “People”, please clarify how the adviser determines specific management teams
are trustworthy and “intellectually honest.” In concrete, practical terms, explain what is meant
by “energy,” “thoughtful capital allocation framework,” and “conservative
accounting practices.” How does the adviser measure these? Please describe what metrics, data, and
analysis the adviser uses to assess “people.” Revise to disclose.
Response: The section of the Principal Investment Strategy titled “People”
has been expanded and clarified to address the staff’s comment.
9. Comment: Price. In the Principal Investment Strategy
section titled “Price”, please clarify what is meant by “owner earnings” and explicitly
define what constitutes a “significant discount” to estimated intrinsic value. Please state
how a significant discount is determined and why “owner earnings” are in quotations.
Response: The section of the Principal Investment Strategy titled “Price”
has been expanded and clarified to address the Staff’s comment.
10. Comment: Concentration and industry focus. In the
third paragraph under the Principal Investment Strategy section, it states that the Fund’s portfolio
is “deliberately concentrated in the Adviser’s best, most informed ideas” putting emphasis
on deliberately concentrated. Please rewrite this in plain English. Explicitly spell out the Fund’s
concentration policy and specifically address the Fund’s strategy regarding investments in the beverage
bottling and distribution industry. Review the corresponding risk description with respect to the Risk
of Current Focus on Both the Breweries Industry and Soft Drink Bottling and Distribution Industry and where
appropriate, move relevant risk disclosures forward (e.g., based on the Fund’s investment percentages
in these industries as of last year). Also, ensure the revised strategy and risk section’s concentration
and industry emphasis disclosure is complete, internally consistent, and correct. We note that 1) funds
may not reserve the right to concentrate as the 4th and 5th sentences of the risk
currently suggest; and 2) the SAI discloses a fundamental investment restriction prohibiting the Fund from
concentrating in any industry. Please revise and reconcile.
Response: The Fund currently does not have a policy to concentrate nor does
it have a strategy that is narrowly focused only on the Soft Drink Bottling and Distribution Industry. There are times
that the Fund is concentrated in certain industries as a result of market movements (not additional purchases), and we
have included such disclosures in the Principal Investment Strategies section and the Principal Risks section to ensure
transparency to such risks. The Principal Investment Strategies section of the Prospectus has been updated to state that
the Fund currently holds a significant amount of its assets in the Breweries Industry and the Soft Drink Bottling and
Distribution Industry, as a result of market movements. Market movements may include changes in the value of either securities
in focused industries or other portfolio securities among other things, and industry weights may rise above 25% of the
Fund’s assets. The Fund does not have a policy to concentrate its investments in these industries, or any other
industry or group of industries, for purposes of the 1940 Act. That is, at the time of purchase or sale of a security,
the Fund does not invest more than 25% of its assets in these industries.
4
Ms. Rebecca Ament Marquigny
Division of Investment
Management
U.S. Securities and Exchange
Commission
August 14, 2024
The Trust has updated the “Industry
Risk” section of the Prospectus to also state that the Fund may focus its investments in the securities of issuers in a particular
industry or industries. From time to time, a relatively high percentage of the assets of the Fund may be invested in a limited number
of industries. When the Fund’s investment focus is limited in this manner, the Fund’s performance will be affected by the
performance of the issuers within those specific industries and could be more volatile than that of an investment company that invests
its assets in a more diverse array of industries.
The Trust has also updated the Disclosure
titled: Risk of Current Focus on Both the Breweries Industry and Soft Drink Bottling and Distribution Industry as requested by the staff.
Regarding the Fund’s SAI, the Fund does not have a policy of industry concentration,
and accordingly the Fund’s related fundamental policy with respect thereto in the SAI is retained, as follows: The
Fund may not concentrate investments in an industry, as concentration may be defined under the 1940 Act or the rules and
regulations thereunder (as such statute, rules, or regulations may be amended from time to time) or by guidance regarding,
interpretations of, or exemptive orders under, the 1940 Act or the rules or regulations thereunder published by appropriate
regulatory authorities. Please see the section entitled “1940 Act Requirements” below for an overview of current
requirements regard