Correspondence 0001592900-24-001762 from EA Series Trust (CIK 0001592900)
EA Series Trust (CIK 0001592900)
Date: Sept. 12, 2024 · CIK: 0001592900 · Accession: 0001592900-24-001762
AI Filing Summary & Sentiment
File numbers found in text: 333-195493, 811-22961
Letter
Post-Effective Amendment No. 355 to the Registration Statement on Form N-1A (the “Amendment”) File Nos.: 333-195493 and 811-22961 Astoria International Quality Growth Kings ETF; Astoria US Quality Growth Kings ETF
RE: EA Series Trust (the “Trust”)
Dear Ms. Browning:
This correspondence responds to comments to the Trust received by the undersigned from the staff of the U.S. Securities and Exchange Commission (the “Staff” of the “Commission”) with respect to the Amendment relating to the Astoria International Quality Growth Kings ETF (the “International ETF”) and the Astoria US Quality Growth Kings ETF (the “Growth ETF”) (the “Funds”), each a proposed new series of the Trust. For your convenience, the comments have been reproduced with responses following each comment. Capitalized terms not otherwise defined have the same meaning as in the Amendment.
GENERAL
1. Comment: Please provide your responses to the Staff as soon as possible, but in no event less than five days before the Funds’ 485(b) filing. Please supplementally provide the Staff with a marked copy of the changes made to the Prospectus.
Response: The Trust confirms the foregoing.
2. Comment: Please supplementally provide the Staff with a Fee Table pre-effectively. In addition, please tell us in correspondence how the Trust estimated Other Expenses and determined it was a reasonable estimate of the expenses for the current fiscal year.
Response: Each Fund’s completed Fees and Expenses table and Expense Example are as shown in the attached Appendix A. The Trust further responds by noting that Other Expenses were estimated based on a review of sample portfolio holdings for each Fund. The Trust believes that the estimated Other Expenses for each Fund’s initial fiscal year are reasonable given the Fund’s expected portfolio holdings.
Prospectus
3. Comment: The manager of manager exemptive relief (“MOM Order”) granted to the Funds’ investment adviser and the Trust states that a fund that includes the name of its sub-adviser as part of the fund’s name will include the adviser’s name as well and, the adviser name will be placed in front of the sub-adviser’s name. Please update each Funds’ name to comply with MOM Order or remove the reference to the Funds’ reliance on the MOM Order.
Response: The Trust respectfully declines to remove the MOM Order disclosure from the prospectus. The Trust is not currently relying on the MOM Order with respect to the Funds. The Trust confirms that, at such time as it begins relying on the MOM Order, the Trust will comply with the conditions of the MOM Order, including with respect to a Fund’s name.
11300 Tomahawk Creek Pkwy, Suite 310 ● Leawood, KS 66211
Practus, LLP ● Practus.com
4. Comment: In the Principal Investment Strategies discussion for the International ETF, explain what “equity securities” the Fund intends to invest in. Does equity security include preferred stock, other investment companies, etc.?
Response: See italicized text for the Trust’s revision.
The Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in common stock and depositary receipts of issuers outside the U.S. that the Fund’s sub-adviser, Astoria Portfolio Advisors, LLC (the “Sub-Adviser”) believes has the potential for growth. The Fund’s investments in depositary receipts may include American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”) and Global Depositary Receipts (“GDRs”). The Fund’s investments in ADRs may be sponsored or unsponsored. A sponsored depositary receipts is issued by a depositary which has an exclusive relationship with the issuer of the underlying security. An unsponsored depositary receipts may be issued by any number of depositaries. Under the terms of most sponsored arrangements, depositaries agree to distribute notices of shareholder meetings and voting instructions, and to provide shareholder communications and other information to the depositary receipts holders at the request of the issuer of the deposited securities. The depositary of an unsponsored depositary receipts, on the other hand, is under no obligation to distribute shareholder communications received from the issuer of the deposited securities or to pass through voting rights to depositary receipts holders in respect of the deposited securities.
5. Comment: In the Principal Investment Strategies discussion for the International ETF, specify what type or types of depositary receipts the Fund will invest in. Indicate whether the depositary receipts are sponsored and/or unsponsored. Add risk disclosure as applicable to address any changes made in response to this comment.
Response: The Trust has added disclosure to the Principal Investment Strategies discussion indicating that the International Fund may have exposure to ADRs, EDRs and GDRs. The Trust has also included a brief description of sponsored and unsponsored depositary receipts in the Principal Investment Strategies section. The Trust points out that International ETF’s risk disclosure in Additional Information About the Funds’ Risks section includes risk disclosure regarding each type of depositary receipt mentioned in the strategy discussion and explains the risks associated with sponsored and unsponsored depositary receipts.
See Response 4 above for the Trust’s revisions.
6. Comment: In the Principal Investment Strategies discussion for the International ETF, include a list of the countries the Fund may invest in and state the minimum number of countries the Fund will invest in. The Staff takes the position that an “international” fund must invest in at least three different countries.
Response: The Principal Investment Strategies section includes a list of the developed market countries the International ETF may invest in. As stated in the new disclosure listed below, the International ETF does not have a policy to invest in a specific number of developed countries, but it has committed to maintain exposure to at least three countries at all times, excluding periods where the Fund takes a temporary defensive position. See the italicized text below.
“The number of stocks selected will vary based on the Sub-Adviser’s decision to overweight or underweight sectors and countries in accordance with its assessment of the markets at the time of screening and to maintain diversification in the Fund’s portfolio. The Fund does not have a policy to invest in a certain number of developed countries, but it will maintain exposure to at least three different countries at all times, except during periods where it has taken a temporary defensive position. In addition, the Fund is not required to allocate its investments in set percentages to particular countries.”
7. Comment: In the Principal Investment Strategies section, please include information on any specific sectors the Funds expect overweight. In addition, if a Fund has an allocation policy please add discussion of the policy.
Response: The Funds do not have a policy to overweight any particular sector, but it is possible due to market conditions that a Fund could be overweight a particular sector. The Trust believes the current disclosure is adequate to alert shareholders to this possibility. As it relates to an allocation policy, see Response 6 for the International ETF’s disclosure regarding an allocation policy.
8. Comment: In the Principal Investment Strategies section for the International ETF, explain in Plain English what “country peers” means.
Response: See the italicized text below for the Trust’s revisions.
The Sub-Adviser defines a growth company as a company with higher than average price/earnings, sales or, earnings growth compared to sector and country peers (i.e., companies operating within the same sector from the same country).”
9. Comment: In the Principal Investment Strategies section, please provide the source for the following sentence:
In addition, growth companies generally demonstrate strong growth potential through development of new products, technologies and/or have a strong industry or market position.
Response: The source for that sentence is the Sub-Adviser and that has been added. See the italicized text for the Trust’s revisions.
In addition, the Sub-Adviser believes growth companies generally demonstrate strong growth potential through development of new products, technologies and/or have a strong industry or market position.
10. Comment: In the Principal Investment Strategies section, clarify how companies are selected for investment. Please explain what “growth criteria” means. In addition, please explain what the Sub-Adviser’s liquidity criteria is.
Response: See the italicized text below for changes in response to the comment. This text has been added to the Principal Investment Strategies section of each Fund.
International ETF
“The Sub-Adviser constructs the Fund’s portfolio by evaluating all of the securities in an investment universe comprised of the common stock (including depositary receipts associated with such common stocks) of publicly traded large- and mid- capitalization companies (defined by the Sub-Adviser as companies with a market capitalization of at least $5 billion) located in developed markets that satisfy the Sub-Adviser’s liquidity and growth criteria. The Sub-Adviser’s growth criteria focus on companies with higher-than-average price/earnings, sales or earnings growth compared to sector and country peers (i.e., companies operating within the same sector from the same country). The Sub-Adviser believes these companies generally demonstrate strong growth potential through development of new products, technologies and/or have a strong industry or market position. The Sub-Adviser requires each company to maintain a minimum level of liquidity of at least $15 million US dollars in average trading volumes over the past 6 months.”
Growth ETF
The Sub-Adviser constructs the Fund’s portfolio by evaluating all of the securities in an investment universe comprised of publicly traded U.S. listed stocks of large- and mid-capitalization companies (defined by the Sub-Adviser to be companies with a market capitalization of at least $5 billion) that satisfy the Sub-Adviser’s liquidity and growth criteria. The Sub-Adviser’s growth criteria focus on companies with higher-than-average price/earnings, sales or, earnings growth compared to sector
peers. The Sub-Adviser believes these companies generally demonstrate strong growth potential through development of new products, technologies and/or have a strong industry or market position. The Sub-Adviser requires each company to maintain a minimum level of liquidity of at least $50 million US dollars in average trading volumes over the past six months.
11. Comment: In the Principal Investment Strategies section, remove “but are not limited to” and “but not limited to” from the following sentences:
Developed countries include, but are not limited to, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The Fund intends to exclude United States. The Fund does not intend to invest in companies located in emerging markets.
The Sub-Adviser uses a variety of metrics in its discretion to evaluate each stock for each of these factors, including but not limited to return on equity, return on investment capital, price-to-earnings-growth ratio, estimate revisions, projected growth estimates, and earnings momentum.
Response: See the italicized text below for changes in response to the comment.
Developed countries, as it relates to this Fund, include, but are not limited to, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. Under normal circumstances, the Fund will maintain exposure to at least three of these developed countries. The Sub-Adviser may update the list of developed countries as deemed appropriate.
The Sub-Adviser uses a variety of metrics in its discretion to evaluate each stock for each of these factors, including but not limited to return on equity, return on investment capital, price-to-earnings-growth ratio, estimate revisions, projected growth estimates, and earnings momentum.
12. Comment: In the Principal Investment Strategies section for the International ETF, please remove the following sentence:
The Fund intends to exclude United States.
Response: The sentence has been removed from the International ETF’s Principal Investment Strategies discussion.
13. Comment: In the Principal Investment Strategies section, please explain what “robust quality” means. Please provide the source for determining if a company meets the criteria for “robust quality”.
Response: The Trust has added the following disclosure to further explain what the Sub-Adviser means by “robust quality”. The bracketed text is included in International ETF’s discussion only.
“The Sub-Adviser defines a robust quality company as a company with higher than average return on equity, return on assets, and return on invested capital compared to its sector [and country] peers.”
14. Comment: In the Principal Investment Strategies section, please explain what the “historical” period is for assessing each metric. State what the time period is being considered for these metrics”.
The metrics used evaluate each factor vary by sector based on the Sub-Adviser’s assessment of which metric(s) have historically provided the best measure of that factor.
Response: The Trust respectfully declines to make any changes as it relates to this comment. The Trust believes that providing date ranges as it relates to each of the factors is not material to shareholders understanding of the strategy.
15. Comment: In the Principal Investment Strategies section, please clarify what is meant by “growth metrics relative to the median of their sector and country”. Please provide definitions for “estimate revisions” and “earnings momentum”.
Proprietary quantitative screens developed by the Sub-Adviser are used to rank such stocks according to their quality and growth metrics relative to the median of their sector and country.
Response: The Trust has added the following disclosure to further explain what is meant by “growth metrics relative to the median of their sector and country” as applicable. In addition, information has been added to further explain earnings estimates and earnings momentum. These changes have been made for each Fund as appropriate.
“Proprietary quantitative screens developed by the Sub-Adviser are used to rank such stocks according to their quality and growth metrics relative to the median of their sector and country peers. The Sub-Adviser uses a variety of metrics in its discretion to evaluate each stock for each of these factors, including but not limited to return on equity, return on investment capital, price-to-earnings-growth ratio, earnings estimates, projected growth estimates, and earnings momentum. These factors are subject to change over time. The Sub-Adviser believes that companies with greater than median return on equity, return on investment capital, projected growth rates and/or lower than median price-to-earnings-growth ratio relative to their sector and/or country peers are good indicators of company’s investment merit. In addition, the Sub-Adviser believes positive revisions to ea
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CORRESP 1 filename1.htm Document September 12, 2024 Ms. Kimberly Browning U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 RE: EA Series Trust (the “Trust”) Post-Effective Amendment No. 355 to the Registration Statement on Form N-1A (the “Amendment”) File Nos.: 333-195493 and 811-22961 Astoria International Quality Growth Kings ETF; Astoria US Quality Growth Kings ETF Dear Ms. Browning: This correspondence responds to comments to the Trust received by the undersigned from the staff of the U.S. Securities and Exchange Commission (the “Staff” of the “Commission”) with respect to the Amendment relating to the Astoria International Quality Growth Kings ETF (the “International ETF”) and the Astoria US Quality Growth Kings ETF (the “Growth ETF”) (the “Funds”), each a proposed new series of the Trust. For your convenience, the comments have been reproduced with responses following each comment. Capitalized terms not otherwise defined have the same meaning as in the Amendment. GENERAL 1. Comment: Please provide your responses to the Staff as soon as possible, but in no event less than five days before the Funds’ 485(b) filing. Please supplementally provide the Staff with a marked copy of the changes made to the Prospectus. Response: The Trust confirms the foregoing. 2. Comment: Please supplementally provide the Staff with a Fee Table pre-effectively. In addition, please tell us in correspondence how the Trust estimated Other Expenses and determined it was a reasonable estimate of the expenses for the current fiscal year. Response: Each Fund’s completed Fees and Expenses table and Expense Example are as shown in the attached Appendix A. The Trust further responds by noting that Other Expenses were estimated based on a review of sample portfolio holdings for each Fund. The Trust believes that the estimated Other Expenses for each Fund’s initial fiscal year are reasonable given the Fund’s expected portfolio holdings. Prospectus 3. Comment: The manager of manager exemptive relief (“MOM Order”) granted to the Funds’ investment adviser and the Trust states that a fund that includes the name of its sub-adviser as part of the fund’s name will include the adviser’s name as well and, the adviser name will be placed in front of the sub-adviser’s name. Please update each Funds’ name to comply with MOM Order or remove the reference to the Funds’ reliance on the MOM Order. Response: The Trust respectfully declines to remove the MOM Order disclosure from the prospectus. The Trust is not currently relying on the MOM Order with respect to the Funds. The Trust confirms that, at such time as it begins relying on the MOM Order, the Trust will comply with the conditions of the MOM Order, including with respect to a Fund’s name. 11300 Tomahawk Creek Pkwy, Suite 310 ● Leawood, KS 66211 Practus, LLP ● Practus.com 4. Comment: In the Principal Investment Strategies discussion for the International ETF, explain what “equity securities” the Fund intends to invest in. Does equity security include preferred stock, other investment companies, etc.? Response: See italicized text for the Trust’s revision. The Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in common stock and depositary receipts of issuers outside the U.S. that the Fund’s sub-adviser, Astoria Portfolio Advisors, LLC (the “Sub-Adviser”) believes has the potential for growth. The Fund’s investments in depositary receipts may include American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”) and Global Depositary Receipts (“GDRs”). The Fund’s investments in ADRs may be sponsored or unsponsored. A sponsored depositary receipts is issued by a depositary which has an exclusive relationship with the issuer of the underlying security. An unsponsored depositary receipts may be issued by any number of depositaries. Under the terms of most sponsored arrangements, depositaries agree to distribute notices of shareholder meetings and voting instructions, and to provide shareholder communications and other information to the depositary receipts holders at the request of the issuer of the deposited securities. The depositary of an unsponsored depositary receipts, on the other hand, is under no obligation to distribute shareholder communications received from the issuer of the deposited securities or to pass through voting rights to depositary receipts holders in respect of the deposited securities. 5. Comment: In the Principal Investment Strategies discussion for the International ETF, specify what type or types of depositary receipts the Fund will invest in. Indicate whether the depositary receipts are sponsored and/or unsponsored. Add risk disclosure as applicable to address any changes made in response to this comment. Response: The Trust has added disclosure to the Principal Investment Strategies discussion indicating that the International Fund may have exposure to ADRs, EDRs and GDRs. The Trust has also included a brief description of sponsored and unsponsored depositary receipts in the Principal Investment Strategies section. The Trust points out that International ETF’s risk disclosure in Additional Information About the Funds’ Risks section includes risk disclosure regarding each type of depositary receipt mentioned in the strategy discussion and explains the risks associated with sponsored and unsponsored depositary receipts. See Response 4 above for the Trust’s revisions. 6. Comment: In the Principal Investment Strategies discussion for the International ETF, include a list of the countries the Fund may invest in and state the minimum number of countries the Fund will invest in. The Staff takes the position that an “international” fund must invest in at least three different countries. Response: The Principal Investment Strategies section includes a list of the developed market countries the International ETF may invest in. As stated in the new disclosure listed below, the International ETF does not have a policy to invest in a specific number of developed countries, but it has committed to maintain exposure to at least three countries at all times, excluding periods where the Fund takes a temporary defensive position. See the italicized text below. “The number of stocks selected will vary based on the Sub-Adviser’s decision to overweight or underweight sectors and countries in accordance with its assessment of the markets at the time of screening and to maintain diversification in the Fund’s portfolio. The Fund does not have a policy to invest in a certain number of developed countries, but it will maintain exposure to at least three different countries at all times, except during periods where it has taken a temporary defensive position. In addition, the Fund is not required to allocate its investments in set percentages to particular countries.” 2 7. Comment: In the Principal Investment Strategies section, please include information on any specific sectors the Funds expect overweight. In addition, if a Fund has an allocation policy please add discussion of the policy. Response: The Funds do not have a policy to overweight any particular sector, but it is possible due to market conditions that a Fund could be overweight a particular sector. The Trust believes the current disclosure is adequate to alert shareholders to this possibility. As it relates to an allocation policy, see Response 6 for the International ETF’s disclosure regarding an allocation policy. 8. Comment: In the Principal Investment Strategies section for the International ETF, explain in Plain English what “country peers” means. Response: See the italicized text below for the Trust’s revisions. The Sub-Adviser defines a growth company as a company with higher than average price/earnings, sales or, earnings growth compared to sector and country peers (i.e., companies operating within the same sector from the same country).” 9. Comment: In the Principal Investment Strategies section, please provide the source for the following sentence: In addition, growth companies generally demonstrate strong growth potential through development of new products, technologies and/or have a strong industry or market position. Response: The source for that sentence is the Sub-Adviser and that has been added. See the italicized text for the Trust’s revisions. In addition, the Sub-Adviser believes growth companies generally demonstrate strong growth potential through development of new products, technologies and/or have a strong industry or market position. 10. Comment: In the Principal Investment Strategies section, clarify how companies are selected for investment. Please explain what “growth criteria” means. In addition, please explain what the Sub-Adviser’s liquidity criteria is. Response: See the italicized text below for changes in response to the comment. This text has been added to the Principal Investment Strategies section of each Fund. International ETF “The Sub-Adviser constructs the Fund’s portfolio by evaluating all of the securities in an investment universe comprised of the common stock (including depositary receipts associated with such common stocks) of publicly traded large- and mid- capitalization companies (defined by the Sub-Adviser as companies with a market capitalization of at least $5 billion) located in developed markets that satisfy the Sub-Adviser’s liquidity and growth criteria. The Sub-Adviser’s growth criteria focus on companies with higher-than-average price/earnings, sales or earnings growth compared to sector and country peers (i.e., companies operating within the same sector from the same country). The Sub-Adviser believes these companies generally demonstrate strong growth potential through development of new products, technologies and/or have a strong industry or market position. The Sub-Adviser requires each company to maintain a minimum level of liquidity of at least $15 million US dollars in average trading volumes over the past 6 months.” Growth ETF The Sub-Adviser constructs the Fund’s portfolio by evaluating all of the securities in an investment universe comprised of publicly traded U.S. listed stocks of large- and mid-capitalization companies (defined by the Sub-Adviser to be companies with a market capitalization of at least $5 billion) that satisfy the Sub-Adviser’s liquidity and growth criteria. The Sub-Adviser’s growth criteria focus on companies with higher-than-average price/earnings, sales or, earnings growth compared to sector 3 peers. The Sub-Adviser believes these companies generally demonstrate strong growth potential through development of new products, technologies and/or have a strong industry or market position. The Sub-Adviser requires each company to maintain a minimum level of liquidity of at least $50 million US dollars in average trading volumes over the past six months. 11. Comment: In the Principal Investment Strategies section, remove “but are not limited to” and “but not limited to” from the following sentences: Developed countries include, but are not limited to, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The Fund intends to exclude United States. The Fund does not intend to invest in companies located in emerging markets. The Sub-Adviser uses a variety of metrics in its discretion to evaluate each stock for each of these factors, including but not limited to return on equity, return on investment capital, price-to-earnings-growth ratio, estimate revisions, projected growth estimates, and earnings momentum. Response: See the italicized text below for changes in response to the comment. Developed countries, as it relates to this Fund, include, but are not limited to, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. Under normal circumstances, the Fund will maintain exposure to at least three of these developed countries. The Sub-Adviser may update the list of developed countries as deemed appropriate. The Sub-Adviser uses a variety of metrics in its discretion to evaluate each stock for each of these factors, including but not limited to return on equity, return on investment capital, price-to-earnings-growth ratio, estimate revisions, projected growth estimates, and earnings momentum. 12. Comment: In the Principal Investment Strategies section for the International ETF, please remove the following sentence: The Fund intends to exclude United States. Response: The sentence has been removed from the International ETF’s Principal Investment Strategies discussion. 13. Comment: In the Principal Investment Strategies section, please explain what “robust quality” means. Please provide the source for determining if a company meets the criteria for “robust quality”. Response: The Trust has added the following disclosure to further explain what the Sub-Adviser means by “robust quality”. The bracketed text is included in International ETF’s discussion only. “The Sub-Adviser defines a robust quality company as a company with higher than average return on equity, return on assets, and return on invested capital compared to its sector [and country] peers.” 14. Comment: In the Principal Investment Strategies section, please explain what the “historical” period is for assessing each metric. State what the time period is being considered for these metrics”. The metrics used evaluate each factor vary by sector based on the Sub-Adviser’s assessment of which metric(s) have historically provided the best measure of that factor. Response: The Trust respectfully declines to make any changes as it relates to this comment. The Trust believes that providing date ranges as it relates to each of the factors is not material to shareholders understanding of the strategy. 4 15. Comment: In the Principal Investment Strategies section, please clarify what is meant by “growth metrics relative to the median of their sector and country”. Please provide definitions for “estimate revisions” and “earnings momentum”. Proprietary quantitative screens developed by the Sub-Adviser are used to rank such stocks according to their quality and growth metrics relative to the median of their sector and country. Response: The Trust has added the following disclosure to further explain what is meant by “growth metrics relative to the median of their sector and country” as applicable. In addition, information has been added to further explain earnings estimates and earnings momentum. These changes have been made for each Fund as appropriate. “Proprietary quantitative screens developed by the Sub-Adviser are used to rank such stocks according to their quality and growth metrics relative to the median of their sector and country peers. The Sub-Adviser uses a variety of metrics in its discretion to evaluate each stock for each of these factors, including but not limited to return on equity, return on investment capital, price-to-earnings-growth ratio, earnings estimates, projected growth estimates, and earnings momentum. These factors are subject to change over time. The Sub-Adviser believes that companies with greater than median return on equity, return on investment capital, projected growth rates and/or lower than median price-to-earnings-growth ratio relative to their sector and/or country peers are good indicators of company’s investment merit. In addition, the Sub-Adviser believes positive revisions to ea