As filed with the Securities and Exchange Commission on October 28, 2015
Securities Act File No. 333-57793
Investment Company Act of 1940 File No. 811-08839
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 | x | |
Post-Effective Amendment No. 146 |
And
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 | x |
Amendment No. 148
SPDR ® SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
One Lincoln Street
Boston, Massachusetts 02111
(Address of Principal Executive Offices)
Registrants Telephone Number: (866) 787-2257
Christopher A. Madden, Esq.
State Street Bank and Trust Company
One Lincoln Street/CPH0326
Boston, Massachusetts 02111
(Name and Address of Agent for Service)
Copies to:
W. John McGuire, Esq.
Bingham McCutchen LLP
2020 K Street NW
Washington, DC 20006
It is proposed that this filing will become effective:
¨ | immediately upon filing pursuant to Rule 485, paragraph (b) |
x | on October 31, 2015 pursuant to Rule 485, paragraph (b) |
¨ | 60 days after filing pursuant to Rule 485, paragraph (a)(1) |
¨ | on pursuant to Rule 485, paragraph (a)(1) |
¨ | 75 days after filing pursuant to Rule 485, paragraph (a)(2) |
¨ | on pursuant to Rule 485, paragraph (a)(2) |
¨ | this post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
SPDR ® SERIES TRUST
Supplement Dated October 31, 2015
to the
Prospectus Dated October 31, 2015
SPDR S&P ® Building & Construction ETF
SPDR S&P Computer Hardware ETF
SPDR S&P Food & Beverage ETF
SPDR S&P LeisureTime ETF
SPDR S&P Outsourcing & IT Consulting ETF
SPDR S&P 1500 Volatility Tilt ETF
All above-listed ETFs are not yet in operation and thus are not currently offered by the SPDR Series Trust.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
SPDRSERTREQSUP1
Investment Objective |
The SPDR Russell 3000 ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks a broad universe of exchange traded U.S. equity securities. |
Management fees | 0.10% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.01% |
Total annual Fund operating expenses | 0.11% |
Year 1 | Year 3 | Year 5 | Year 10 |
$11 | $35 | $62 | $141 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -5.43%. |
One Year | Five Years | Ten Years | |
Return Before Taxes | 12.49% | 15.48% | 7.98% |
Return After Taxes on Distributions | 11.90% | 15.06% | 7.62% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.49% | 12.47% | 6.47% |
Russell
3000 Index
(Index returns reflect no deduction for fees, expenses or taxes) |
12.56% | 15.63% | 7.94% |
Dow
Jones U.S. Total Stock Market Index
(Index returns reflect no deduction for fees, expenses or taxes) |
12.47% | 15.72% | 8.10% |
Investment Objective |
The SPDR Russell 1000 ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of large capitalization exchange traded U.S. equity securities. |
Management fees | 0.10% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.01% |
Total annual Fund operating expenses | 0.11% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$11 | $35 | $62 | $141 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -5.25%. |
One Year | Five Years |
Since
Inception
(11/8/05) |
|
Return Before Taxes | 13.14% | 15.43% | 8.26% |
Return After Taxes on Distributions | 12.53% | 14.93% | 7.82% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.71% | 12.35% | 6.61% |
Russell
1000 Index
(Index returns reflect no deduction for fees, expenses or taxes) |
13.24% | 15.64% | 8.35% |
Dow
Jones U.S. Large-Cap Total Stock Market Index
(Index returns reflect no deduction for fees, expenses or taxes) |
13.40% | 15.58% | 8.36% |
Investment Objective |
The SPDR Russell 2000 ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of small capitalization exchange traded U.S. equity securities. |
Management fees | 0.12% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.12% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -7.69%. |
One Year |
Since
Inception
(7/8/13) |
|
Return Before Taxes | 4.95% | 14.14% |
Return After Taxes on Distributions | 4.17% | 13.37% |
Return After Taxes on Distributions and Sale of Fund Shares | 2.79% | 10.51% |
Russell
2000 Index
(Index returns reflect no deduction for fees, expenses or taxes) |
4.89% | 14.18% |
Investment Objective |
The SPDR S&P 500 Buyback ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of publicly traded issuers that have a high buyback ratio. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses 2 | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$36 | $113 |
Investment Objective |
The SPDR S&P 500 High Dividend ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of publicly traded issuers that have high dividend yields. |
Management fees | 0.12% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses 2 | 0.00% |
Total annual Fund operating expenses | 0.12% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$12 | $39 |
Investment Objective |
The SPDR S&P 500 Growth ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of large capitalization exchange traded U.S. equity securities exhibiting “growth” characteristics. |
Management fees 1 | 0.15% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.15% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -2.23%. |
One Year | Five Years | Ten Years | |
Return Before Taxes | 14.64% | 16.09% | 8.44% |
Return After Taxes on Distributions | 14.25% | 15.77% | 8.21% |
Return After Taxes on Distributions and Sale of Fund Shares | 8.58% | 13.00% | 6.89% |
S&P
500 Growth Index
(Index returns reflect no deduction for fees, expenses or taxes) |
14.89% | 16.05% | 8.24% |
Investment Objective |
The SPDR S&P 500 Value ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of large capitalization exchange traded U.S. equity securities exhibiting “value” characteristics. |
Management fees 1 | 0.15% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.15% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -8.67%. |
One Year | Five Years | Ten Years | |
Return Before Taxes | 12.10% | 14.70% | 6.78% |
Return After Taxes on Distributions | 11.48% | 14.17% | 6.28% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.28% | 11.79% | 5.45% |
S&P
500 Value Index
(Index returns reflect no deduction for fees, expenses or taxes) |
12.36% | 14.86% | 7.03% |
Investment Objective |
The SPDR Russell Small Cap Completeness ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of mid to small capitalization exchange traded U.S. equity securities. |
Management fees | 0.10% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.10% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$10 | $32 | $56 | $128 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -6.22%. |
One Year | Five Years |
Since
Inception
(11/8/05) |
|
Return Before Taxes | 7.34% | 16.57% | 9.91% |
Return After Taxes on Distributions | 5.28% | 15.20% | 8.90% |
Return After Taxes on Distributions and Sale of Fund Shares | 4.65% | 13.05% | 7.83% |
Russell
Small Cap Completeness Index
(Index returns reflect no deduction for fees, expenses or taxes) |
7.40% | 16.40% | 9.21% |
Dow
Jones U.S. Mid-Cap Total Stock Market Index
(Index returns reflect no deduction for fees, expenses or taxes) |
10.22% | 17.11% | 10.22% |
Investment Objective |
The SPDR S&P 400 Mid Cap Growth ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of medium capitalization exchange traded U.S. equity securities exhibiting “growth” characteristics. |
Management fees 1 | 0.15% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.15% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -0.89%. |
One Year | Five Years |
Since
Inception
(11/8/05) |
|
Return Before Taxes | 7.38% | 15.85% | 10.26% |
Return After Taxes on Distributions | 6.84% | 15.58% | 9.97% |
Return After Taxes on Distributions and Sale of Fund Shares | 4.38% | 12.75% | 8.36% |
S&P
MidCap 400 Growth Index
(Index returns reflect no deduction for fees, expenses or taxes) |
7.57% | 16.72% | 9.91% |
Investment Objective |
The SPDR S&P 400 Mid Cap Value ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of medium capitalization exchange traded U.S. equity securities exhibiting “value” characteristics. |
Management fees 1 | 0.15% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.15% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -8.71%. |
One Year | Five Years |
Since
Inception
(11/8/05) |
|
Return Before Taxes | 11.78% | 15.97% | 8.68% |
Return After Taxes on Distributions | 10.10% | 15.20% | 7.97% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.90% | 12.64% | 6.81% |
S&P
MidCap 400 Value Index
(Index returns reflect no deduction for fees, expenses or taxes) |
12.10% | 16.40% | 9.31% |
Investment Objective |
The SPDR S&P 600 Small Cap ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of small capitalization exchange traded U.S. equity securities. |
Management fees 1 | 0.15% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.15% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -5.50%. |
One Year | Five Years |
Since
Inception
(11/8/05) |
|
Return Before Taxes | 5.54% | 17.31% | 10.09% |
Return After Taxes on Distributions | 4.42% | 16.61% | 9.53% |
Return After Taxes on Distributions and Sale of Fund Shares | 3.61% | 13.86% | 8.11% |
S&P
SmallCap 600 Index
(Index returns reflect no deduction for fees, expenses or taxes) |
5.76% | 17.28% | 9.19% |
Investment Objective |
The SPDR S&P 600 Small Cap Growth ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of small capitalization exchange traded U.S. equity securities exhibiting “growth” characteristics. |
Management fees 1 | 0.15% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.15% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -0.98%. |
One Year | Five Years | Ten Years | |
Return Before Taxes | 3.66% | 17.88% | 10.12% |
Return After Taxes on Distributions | 2.31% | 17.41% | 9.83% |
Return After Taxes on Distributions and Sale of Fund Shares | 2.64% | 14.44% | 8.31% |
S&P
SmallCap 600 Growth Index
(Index returns reflect no deduction for fees, expenses or taxes) |
3.87% | 17.63% | 9.25% |
Investment Objective |
The SPDR S&P 600 Small Cap Value ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of small capitalization exchange traded U.S. equity securities exhibiting “value” characteristics. |
Management fees 1 | 0.15% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.15% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -10.01%. |
One Year | Five Years | Ten Years | |
Return Before Taxes | 7.18% | 16.65% | 9.05% |
Return After Taxes on Distributions | 4.66% | 15.70% | 8.21% |
Return After Taxes on Distributions and Sale of Fund Shares | 4.81% | 13.20% | 7.14% |
S&P
SmallCap 600 Value Index
(Index returns reflect no deduction for fees, expenses or taxes) |
7.54% | 16.96% | 8.78% |
Investment Objective |
The SPDR Global Dow ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of multinational blue-chip issuers. |
Management fees | 0.50% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.50% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$51 | $160 | $280 | $628 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -8.38%. |
One Year | Five Years | Ten Years | |
Return Before Taxes | 2.83% | 6.53% | 3.26% |
Return After Taxes on Distributions | 2.18% | 6.04% | 2.82% |
Return After Taxes on Distributions and Sale of Fund Shares | 2.12% | 5.15% | 2.63% |
The
Global Dow
1
(Index returns reflect no deduction for fees, expenses or taxes) |
2.86% | 7.04% | N/A |
MSCI
World Index
2
(Index returns reflect no deduction for fees, expenses or taxes) |
4.94% | 10.21% | 6.03% |
1 | The Global Dow inception date is November 9, 2008. |
2 | The Fund's index prior to May 2, 2011, was the Dow Jones Global Titans 50 Index U.S. Close. The Fund's use of the Dow Jones Global Titans 50 Index U.S. Close was discontinued in July 2012 and the MSCI World Index returns are shown instead for each time period. The Fund has never sought to track the performance of the MSCI World Index. |
Investment Objective |
The SPDR Dow Jones REIT ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of publicly traded real estate investment trusts. |
Management fees | 0.25% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.25% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$26 | $80 | $141 | $318 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -2.99%. |
One Year | Five Years | Ten Years | |
Return Before Taxes | 31.64% | 16.71% | 7.97% |
Return After Taxes on Distributions | 29.78% | 15.29% | 6.58% |
Return After Taxes on Distributions and Sale of Fund Shares | 17.82% | 12.78% | 5.82% |
Dow
Jones U.S. Select REIT Index
(Index returns reflect no deduction for fees, expenses or taxes) |
32.00% | 17.00% | 8.13% |
Investment Objective |
The SPDR S&P Bank ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of publicly traded national money centers and leading regional banks. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 0.29%. |
One Year | Five Years |
Since
Inception
(11/8/05) |
|
Return Before Taxes | 2.68% | 11.27% | -1.94% |
Return After Taxes on Distributions | 2.29% | 10.94% | -2.44% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.83% | 8.98% | -1.40% |
S&P
Banks Select Industry Index*
(Index returns reflect no deduction for fees, expenses or taxes) |
3.03% | N/A | N/A |
KBW
Bank Index
(Index returns reflect no deduction for fees, expenses or taxes) |
9.37% | 13.75% | -0.76% |
* | The S&P Banks Select Industry Index inception date is September 12, 2011. |
Investment Objective |
The SPDR S&P Capital Markets ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of publicly traded companies that do business as broker-dealers, asset managers, trust and custody banks or exchanges. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -16.67%. |
One Year | Five Years |
Since
Inception
(11/8/05) |
|
Return Before Taxes | 2.60% | 9.13% | 1.60% |
Return After Taxes on Distributions | 2.15% | 8.54% | 1.16% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.74% | 7.09% | 1.22% |
S&P
Capital Markets Select Industry Index*
(Index returns reflect no deduction for fees, expenses or taxes) |
2.83% | N/A | N/A |
KBW
Capital Markets Index
(Index returns reflect no deduction for fees, expenses or taxes) |
13.14% | 10.82% | 2.59% |
* | The S&P Capital Markets Select Industry Index inception date is September 12, 2011. |
Investment Objective |
The SPDR S&P Insurance ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of publicly traded companies in the insurance industry. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 2.38%. |
One Year | Five Years |
Since
Inception
(11/8/05) |
|
Return Before Taxes | 7.61% | 15.95% | 4.53% |
Return After Taxes on Distributions | 7.12% | 15.54% | 4.18% |
Return After Taxes on Distributions and Sale of Fund Shares | 4.65% | 12.85% | 3.55% |
S&P
Insurance Select Industry Index*
(Index returns reflect no deduction for fees, expenses or taxes) |
8.01% | N/A | N/A |
KBW
Insurance Index
(Index returns reflect no deduction for fees, expenses or taxes) |
7.96% | 16.92% | 5.16% |
* | The S&P Insurance Select Industry Index inception date is September 12, 2011. |
Investment Objective |
The SPDR S&P Regional Banking ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the regional banking segment of the U.S. banking industry. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 2.41%. |
One Year | Five Years |
Since
Inception
(6/19/06) |
|
Return Before Taxes | 1.97% | 14.74% | 0.53% |
Return After Taxes on Distributions | 1.57% | 14.33% | -0.06% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.42% | 11.82% | 0.28% |
S&P
Regional Banks Select Industry Index*
(Index returns reflect no deduction for fees, expenses or taxes) |
2.35% | N/A | N/A |
KBW
Regional Banking Index
(Index returns reflect no deduction for fees, expenses or taxes) |
2.42% | 14.24% | 0.34% |
* | The S&P Regional Banks Select Industry Index inception date is September 12, 2011. |
Investment Objective |
The SPDR Morgan Stanley Technology ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of publicly traded electronics-based technology companies. |
Management fees 1 | 0.35% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.35% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -1.02%. |
One Year | Five Years | Ten Years | |
Return Before Taxes | 13.39% | 12.88% | 7.76% |
Return After Taxes on Distributions | 13.14% | 12.69% | 7.65% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.77% | 10.32% | 6.32% |
Morgan
Stanley Technology Index
(Index returns reflect no deduction for fees, expenses or taxes) |
13.92% | 13.41% | 8.26% |
Investment Objective |
The SPDR S&P Dividend ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of publicly traded issuers that have historically followed a policy of making dividend payments. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -6.64%. |
One Year | Five Years |
Since
Inception
(11/8/05) |
|
Return Before Taxes | 13.77% | 15.55% | 8.54% |
Return After Taxes on Distributions | 12.22% | 14.50% | 7.63% |
Return After Taxes on Distributions and Sale of Fund Shares | 8.51% | 12.31% | 6.73% |
S&P
High Yield Dividend Aristocrats Index
(Index returns reflect no deduction for fees, expenses or taxes) |
14.27% | 15.98% | 8.79% |
Investment Objective |
The SPDR S&P Aerospace & Defense ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the aerospace and defense segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -7.26%. |
One Year |
Since
Inception
(9/28/11) |
|
Return Before Taxes | 10.77% | 29.12% |
Return After Taxes on Distributions | 10.46% | 28.49% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.31% | 23.30% |
S&P
Aerospace & Defense Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
11.12% | 29.63% |
Investment Objective |
The SPDR S&P Biotech ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the biotechnology segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 0.55%. |
One Year | Five Years |
Since
Inception
(1/31/06) |
|
Return Before Taxes | 44.70% | 28.72% | 16.43% |
Return After Taxes on Distributions | 43.98% | 28.56% | 16.30% |
Return After Taxes on Distributions and Sale of Fund Shares | 25.30% | 23.90% | 13.84% |
S&P
Biotechnology Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
43.24% | 28.56% | 16.52% |
Investment Objective |
The SPDR S&P Building & Construction ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the building and construction segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses 2 | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$36 | $113 |
Investment Objective |
The SPDR S&P Computer Hardware ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the computer hardware segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses 2 | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$36 | $113 |
Investment Objective |
The SPDR S&P Food & Beverage ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the food and beverage segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses 2 | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$36 | $113 |
Investment Objective |
The SPDR S&P Health Care Equipment ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the health care equipment and supplies segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -0.41%. |
One Year |
Since
Inception
(1/26/11) |
|
Return Before Taxes | 16.26% | 16.28% |
Return After Taxes on Distributions | 15.56% | 15.93% |
Return After Taxes on Distributions and Sale of Fund Shares | 9.41% | 12.90% |
S&P
Health Care Equipment Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
16.36% | 16.65% |
Investment Objective |
The SPDR S&P Health Care Services ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the health care providers and services segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 1.76%. |
One Year |
Since
Inception
(9/28/11) |
|
Return Before Taxes | 25.27% | 30.36% |
Return After Taxes on Distributions | 24.77% | 29.66% |
Return After Taxes on Distributions and Sale of Fund Shares | 14.44% | 24.26% |
S&P
Health Care Services Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
25.71% | 30.88% |
Investment Objective |
The SPDR S&P Homebuilders ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the homebuilding segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 0.63%. |
One Year | Five Years |
Since
Inception
(1/31/06) |
|
Return Before Taxes | 3.16% | 18.88% | -2.40% |
Return After Taxes on Distributions | 3.01% | 18.63% | -2.64% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.89% | 15.34% | -1.85% |
S&P
Homebuilders Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
3.42% | 19.25% | -2.31% |
Investment Objective |
The SPDR S&P LeisureTime ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the leisure industry segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses 2 | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$36 | $113 |
Investment Objective |
The SPDR S&P Metals & Mining ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the metals and mining segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -45.10%. |
One Year | Five Years |
Since
Inception
(6/19/06) |
|
Return Before Taxes | -25.24% | -8.64% | -2.78% |
Return After Taxes on Distributions | -25.69% | -8.91% | -3.02% |
Return After Taxes on Distributions and Sale of Fund Shares | -14.06% | -6.21% | -1.97% |
S&P
Metals & Mining Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
-25.63% | -8.60% | -2.67% |
Investment Objective |
The SPDR S&P Oil & Gas Equipment & Services ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the oil and gas equipment and services segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -36.05%. |
One Year | Five Years |
Since
Inception
(6/19/06) |
|
Return Before Taxes | -34.64% | 0.61% | 0.77% |
Return After Taxes on Distributions | -34.85% | 0.44% | 0.63% |
Return After Taxes on Distributions and Sale of Fund Shares | -19.40% | 0.53% | 0.64% |
S&P
Oil & Gas Equipment & Services Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
-34.57% | 0.82% | 1.00% |
Investment Objective |
The SPDR S&P Oil & Gas Exploration & Production ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the oil and gas exploration and production segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -30.49%. |
One Year | Five Years |
Since
Inception
(6/19/06) |
|
Return Before Taxes | -29.43% | 4.01% | 4.93% |
Return After Taxes on Distributions | -29.67% | 3.76% | 4.75% |
Return After Taxes on Distributions and Sale of Fund Shares | -16.51% | 3.12% | 3.92% |
S&P
Oil & Gas Exploration & Production Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
-29.42% | 4.18% | 5.14% |
Investment Objective |
The SPDR S&P Outsourcing & IT Consulting ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the outsourcing and information technology consulting segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses 2 | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$36 | $113 |
Investment Objective |
The SPDR S&P Pharmaceuticals ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the pharmaceuticals segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -12.63%. |
One Year | Five Years |
Since
Inception
(6/19/06) |
|
Return Before Taxes | 29.64% | 26.07% | 17.77% |
Return After Taxes on Distributions | 27.35% | 25.30% | 17.24% |
Return After Taxes on Distributions and Sale of Fund Shares | 17.46% | 21.40% | 14.87% |
S&P
Pharmaceuticals Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
29.73% | 26.38% | 18.02% |
Investment Objective |
The SPDR S&P Retail ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the retail segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -6.89%. |
One Year | Five Years |
Since
Inception
(6/19/06) |
|
Return Before Taxes | 9.93% | 23.18% | 13.15% |
Return After Taxes on Distributions | 9.68% | 22.83% | 12.82% |
Return After Taxes on Distributions and Sale of Fund Shares | 5.73% | 18.98% | 10.76% |
S&P
Retail Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
10.22% | 23.47% | 13.49% |
Investment Objective |
The SPDR S&P Semiconductor ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the semiconductor segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -4.93%. |
One Year | Five Years |
Since
Inception
(1/31/06) |
|
Return Before Taxes | 30.98% | 11.65% | 5.29% |
Return After Taxes on Distributions | 30.82% | 11.50% | 5.16% |
Return After Taxes on Distributions and Sale of Fund Shares | 17.64% | 9.27% | 4.19% |
S&P
Semiconductor Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
31.45% | 11.89% | 5.33% |
Investment Objective |
The SPDR S&P Software & Services ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the computer software segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -0.06%. |
One Year |
Since
Inception
(9/28/11) |
|
Return Before Taxes | 4.57% | 23.73% |
Return After Taxes on Distributions | 4.40% | 23.00% |
Return After Taxes on Distributions and Sale of Fund Shares | 2.66% | 18.72% |
S&P
Software & Services Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
4.74% | 24.13% |
Investment Objective |
The SPDR S&P Telecom ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the telecommunications segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -7.33%. |
One Year |
Since
Inception
(1/26/11) |
|
Return Before Taxes | 4.58% | 4.59% |
Return After Taxes on Distributions | 4.28% | 4.25% |
Return After Taxes on Distributions and Sale of Fund Shares | 2.76% | 3.50% |
S&P
Telecom Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
4.83% | 4.94% |
Investment Objective |
The SPDR S&P Transportation ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the transportation segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -18.96%. |
One Year |
Since
Inception
(1/26/11) |
|
Return Before Taxes | 33.78% | 21.91% |
Return After Taxes on Distributions | 33.64% | 21.78% |
Return After Taxes on Distributions and Sale of Fund Shares | 19.21% | 17.69% |
S&P
Transportation Select Industry Index
(Index returns reflect no deduction for fees, expenses or taxes) |
34.22% | 22.38% |
Investment Objective |
The SPDR S&P 1500 Value Tilt ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of U.S. equity securities exhibiting “value” characteristics. |
Management fees 1 | 0.12% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.12% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -7.94%. |
One Year |
Since
Inception
(10/24/12) |
|
Return Before Taxes | 11.85% | 21.84% |
Return After Taxes on Distributions | 9.85% | 20.08% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.26% | 16.46% |
S&P
1500 Low Valuation Tilt Index
(Index returns reflect no deduction for fees, expenses or taxes) |
12.32% | 22.47% |
Investment Objective |
The SPDR S&P 1500 Momentum Tilt ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of U.S. equity securities exhibiting price momentum. |
Management fees 1 | 0.12% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.12% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -3.90%. |
One Year |
Since
Inception
(10/24/12) |
|
Return Before Taxes | 12.25% | 20.74% |
Return After Taxes on Distributions | 11.47% | 19.95% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.92% | 15.86% |
S&P
1500 Positive Momentum Tilt Index
(Index returns reflect no deduction for fees, expenses or taxes) |
12.66% | 21.28% |
Investment Objective |
The SPDR S&P 1500 Volatility Tilt ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that tracks the performance of U.S. equity securities based on low price volatility. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses 2 | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$36 | $113 |
Investment Objective |
The SPDR Russell 1000 Low Volatility ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of a large cap, low volatility index. |
Management fees 1 | 0.12% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.12% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -5.40%. |
One Year |
Since
Inception
(2/20/13) |
|
Return Before Taxes | 16.59% | 18.43% |
Return After Taxes on Distributions | 13.71% | 16.20% |
Return After Taxes on Distributions and Sale of Fund Shares | 9.94% | 13.46% |
Russell
1000 Low Volatility Index
(Index returns reflect no deduction for fees, expenses or taxes) |
16.94% | 18.80% |
Investment Objective |
The SPDR Russell 2000 Low Volatility ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of a small cap, low volatility index. |
Management fees 1 | 0.12% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.12% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -5.54%. |
One Year |
Since
Inception
2/20/13 |
|
Return Before Taxes | 12.56% | 18.82% |
Return After Taxes on Distributions | 11.18% | 17.18% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.08% | 13.85% |
Russell
2000 Low Volatility Index
(Index returns reflect no deduction for fees, expenses or taxes) |
12.75% | 19.03% |
Investment Objective |
The SPDR Wells Fargo Preferred Stock ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index based upon Preferred Securities (as defined below). |
Management fees | 0.45% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.45% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$46 | $144 | $252 | $567 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 3.83%. |
One Year | Five Years |
Since
Inception
(9/16/09) |
|
Return Before Taxes | 16.46% | 7.62% | 8.35% |
Return After Taxes on Distributions | 14.13% | 5.40% | 6.11% |
Return After Taxes on Distributions and Sale of Fund Shares | 9.76% | 5.21% | 5.79% |
Wells
Fargo Hybrid and Preferred Securities Aggregate Index
(Index returns reflect no deduction for fees, expenses or taxes) |
16.77% | 7.80% | 8.57% |
Investment Objective |
The SPDR MSCI USA Quality Mix ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index based upon the U.S. equity market. |
Management fees | 0.15% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses 2 | 0.00% |
Total annual Fund operating expenses | 0.15% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$15 | $48 |
Fund Name | SPDR Russell 3000 ETF | SPDR Russell 1000 ETF | SPDR Russell 2000 ETF | SPDR S&P 500 Buyback ETF | SPDR S&P 500 High Dividend ETF | SPDR S&P 500 Growth ETF | SPDR S&P 500 Value ETF | SPDR Russell Small Cap Completeness ETF |
Aerospace and Defense Sector Risk | ||||||||
Banking Sector Risk | ||||||||
Biotechnology Sector Risk | ||||||||
Building and Construction Risk | ||||||||
Buyback Risk | x | |||||||
Call Risk | ||||||||
Capital Markets Sector Risk | ||||||||
Computer Hardware Sector Risk | ||||||||
Computer Sector Risk | ||||||||
Computer Software/Services Sector Risk | ||||||||
Consumer Discretionary Sector Risk | x | x | x | |||||
Consumer Staples Sector Risk | ||||||||
Currency Risk | ||||||||
Depositary Receipts Risk | ||||||||
Depositary Receipts may be Unregistered and Unlisted | ||||||||
Dividend Paying Securities Risk | x | |||||||
Electronics Industry Risk | ||||||||
Emerging Markets Risk | ||||||||
Energy Sector Risk | ||||||||
Equity Investing Risk | x | x | x | x | x | x | x | x |
Financial Institution Risk | ||||||||
Financial Sector Risk | x | x | x | x | x | x | x | |
Food and Beverage Sector Risk | ||||||||
Geographic Focus Risk | ||||||||
European Economic Risk | ||||||||
Growth Stock Risk | x | |||||||
Health Care Equipment Sector Risk | ||||||||
Health Care Sector Risk | x | x | ||||||
Health Care Services Sector Risk | ||||||||
Homebuilding Sector Risk | ||||||||
Index Tracking Risk | x | x | x | x | x | x | x | x |
Industrial Sector Risk |
Fund Name | SPDR Russell 3000 ETF | SPDR Russell 1000 ETF | SPDR Russell 2000 ETF | SPDR S&P 500 Buyback ETF | SPDR S&P 500 High Dividend ETF | SPDR S&P 500 Growth ETF | SPDR S&P 500 Value ETF | SPDR Russell Small Cap Completeness ETF |
Insurance Sector Risk | ||||||||
Interest Rate Risk – Preferred Securities | ||||||||
Issuer Risk – Preferred Securities | ||||||||
Large-Capitalization Securities Risk | x | x | x | x | x | |||
Leisure Sector Risk | ||||||||
Low Volatility Risk | ||||||||
Market Risk | x | x | x | x | x | x | x | x |
Materials Sector Risk | ||||||||
Metals and Mining Sector Risk | ||||||||
Mid-Capitalization Securities Risk | x | |||||||
Momentum Risk | ||||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | ||||||||
Russian Sanctions Risk | ||||||||
Oil and Gas Sector Risk | ||||||||
Outsourcing and Consulting Sector Risk | ||||||||
Passive Strategy/Index Risk | x | x | x | x | x | x | x | x |
Pharmaceuticals Sector Risk | ||||||||
Preferred Securities Risk | ||||||||
Quality Risk | ||||||||
Real Estate Securities Risk | x | |||||||
REIT Risk | x | |||||||
Retail Sector Risk | ||||||||
Semiconductor Sector Risk | ||||||||
Settlement Risk | ||||||||
Small-Capitalization Securities Risk | x | x | ||||||
Technology Sector Risk | x | x | x | x | x | x | ||
Telecommunications Sector Risk | ||||||||
Transportation Sector Risk | ||||||||
Unconstrained Sector Risk | x | x | x | x | x | x | x | x |
Utilities Sector Risk | x | |||||||
Valuation Risk | x | x | ||||||
Value Stock Risk | x |
Fund Name | SPDR S&P 400 Mid Cap Growth ETF | SPDR S&P 400 Mid Cap Value ETF | SPDR S&P 600 Small Cap ETF | SPDR S&P 600 Small Cap Growth ETF | SPDR S&P 600 Small Cap Value ETF | SPDR Global Dow ETF | SPDR Dow Jones REIT ETF | SPDR S&P Bank ETF |
Aerospace and Defense Sector Risk | ||||||||
Banking Sector Risk | x | |||||||
Biotechnology Sector Risk | ||||||||
Building and Construction Risk | ||||||||
Buyback Risk | ||||||||
Call Risk | ||||||||
Capital Markets Sector Risk | ||||||||
Computer Hardware Sector Risk | ||||||||
Computer Sector Risk | ||||||||
Computer Software/Services Sector Risk | ||||||||
Consumer Discretionary Sector Risk | x | x | ||||||
Consumer Staples Sector Risk | ||||||||
Currency Risk | x | |||||||
Depositary Receipts Risk | x | |||||||
Depositary Receipts may be Unregistered and Unlisted | x | |||||||
Dividend Paying Securities Risk | ||||||||
Electronics Industry Risk | ||||||||
Emerging Markets Risk | x | |||||||
Energy Sector Risk | ||||||||
Equity Investing Risk | x | x | x | x | x | x | x | x |
Financial Institution Risk | x | |||||||
Financial Sector Risk | x | x | x | x | x | x | ||
Food and Beverage Sector Risk | ||||||||
Geographic Focus Risk | x | |||||||
European Economic Risk | x | |||||||
Growth Stock Risk | x | x | ||||||
Health Care Equipment Sector Risk | ||||||||
Health Care Sector Risk | x | |||||||
Health Care Services Sector Risk | ||||||||
Homebuilding Sector Risk | ||||||||
Index Tracking Risk | x | x | x | x | x | x | x | x |
Industrial Sector Risk | x | x | x | |||||
Insurance Sector Risk | ||||||||
Interest Rate Risk – Preferred Securities |
Fund Name | SPDR S&P 400 Mid Cap Growth ETF | SPDR S&P 400 Mid Cap Value ETF | SPDR S&P 600 Small Cap ETF | SPDR S&P 600 Small Cap Growth ETF | SPDR S&P 600 Small Cap Value ETF | SPDR Global Dow ETF | SPDR Dow Jones REIT ETF | SPDR S&P Bank ETF |
Issuer Risk – Preferred Securities | ||||||||
Large-Capitalization Securities Risk | ||||||||
Leisure Sector Risk | ||||||||
Low Volatility Risk | ||||||||
Market Risk | x | x | x | x | x | x | x | x |
Materials Sector Risk | ||||||||
Metals and Mining Sector Risk | ||||||||
Mid-Capitalization Securities Risk | x | x | ||||||
Momentum Risk | ||||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | x | |||||||
Russian Sanctions Risk | x | |||||||
Oil and Gas Sector Risk | ||||||||
Outsourcing and Consulting Sector Risk | ||||||||
Passive Strategy/Index Risk | x | x | x | x | x | x | x | x |
Pharmaceuticals Sector Risk | ||||||||
Preferred Securities Risk | ||||||||
Quality Risk | ||||||||
Real Estate Securities Risk | x | |||||||
REIT Risk | x | |||||||
Retail Sector Risk | ||||||||
Semiconductor Sector Risk | ||||||||
Settlement Risk | x | |||||||
Small-Capitalization Securities Risk | x | x | x | |||||
Technology Sector Risk | x | x | x | x | ||||
Telecommunications Sector Risk | ||||||||
Transportation Sector Risk | ||||||||
Unconstrained Sector Risk | x | x | x | x | x | x | ||
Utilities Sector Risk | ||||||||
Valuation Risk | x | x | x | x | x | x | ||
Value Stock Risk | x | x |
Fund Name | SPDR S&P Capital Markets ETF | SPDR S&P Insurance ETF | SPDR S&P Regional Banking ETF | SPDR Morgan Stanley Technology ETF | SPDR S&P Dividend ETF | SPDR S&P Aerospace & Defense ETF | SPDR S&P Biotech ETF | SPDR S&P Building & Construction ETF |
Aerospace and Defense Sector Risk | x | |||||||
Banking Sector Risk | x | |||||||
Biotechnology Sector Risk | x | |||||||
Building and Construction Risk | x | |||||||
Buyback Risk | ||||||||
Call Risk | ||||||||
Capital Markets Sector Risk | x | |||||||
Computer Hardware Sector Risk | ||||||||
Computer Sector Risk | ||||||||
Computer Software/Services Sector Risk | ||||||||
Consumer Discretionary Sector Risk | ||||||||
Consumer Staples Sector Risk | x | |||||||
Currency Risk | ||||||||
Depositary Receipts Risk | ||||||||
Depositary Receipts may be Unregistered and Unlisted | ||||||||
Dividend Paying Securities Risk | x | |||||||
Electronics Industry Risk | x | |||||||
Emerging Markets Risk | ||||||||
Energy Sector Risk | ||||||||
Equity Investing Risk | x | x | x | x | x | x | x | x |
Financial Institution Risk | x | |||||||
Financial Sector Risk | x | x | x | |||||
Food and Beverage Sector Risk | ||||||||
Geographic Focus Risk | ||||||||
European Economic Risk | ||||||||
Growth Stock Risk | ||||||||
Health Care Equipment Sector Risk | ||||||||
Health Care Sector Risk | x | |||||||
Health Care Services Sector Risk | ||||||||
Homebuilding Sector Risk | ||||||||
Index Tracking Risk | x | x | x | x | x | x | x | x |
Industrial Sector Risk | x | x | ||||||
Insurance Sector Risk | x | |||||||
Interest Rate Risk – Preferred Securities |
Fund Name | SPDR S&P Capital Markets ETF | SPDR S&P Insurance ETF | SPDR S&P Regional Banking ETF | SPDR Morgan Stanley Technology ETF | SPDR S&P Dividend ETF | SPDR S&P Aerospace & Defense ETF | SPDR S&P Biotech ETF | SPDR S&P Building & Construction ETF |
Issuer Risk – Preferred Securities | ||||||||
Large-Capitalization Securities Risk | ||||||||
Leisure Sector Risk | ||||||||
Low Volatility Risk | ||||||||
Market Risk | x | x | x | x | x | x | x | x |
Materials Sector Risk | ||||||||
Metals and Mining Sector Risk | ||||||||
Mid-Capitalization Securities Risk | ||||||||
Momentum Risk | ||||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | ||||||||
Russian Sanctions Risk | ||||||||
Oil and Gas Sector Risk | ||||||||
Outsourcing and Consulting Sector Risk | ||||||||
Passive Strategy/Index Risk | x | x | x | x | x | x | x | x |
Pharmaceuticals Sector Risk | ||||||||
Preferred Securities Risk | ||||||||
Quality Risk | ||||||||
Real Estate Securities Risk | ||||||||
REIT Risk | ||||||||
Retail Sector Risk | ||||||||
Semiconductor Sector Risk | ||||||||
Settlement Risk | ||||||||
Small-Capitalization Securities Risk | ||||||||
Technology Sector Risk | x | |||||||
Telecommunications Sector Risk | ||||||||
Transportation Sector Risk | ||||||||
Unconstrained Sector Risk | x | |||||||
Utilities Sector Risk | ||||||||
Valuation Risk | ||||||||
Value Stock Risk |
Fund Name | SPDR S&P Computer Hardware ETF | SPDR S&P Food & Beverage ETF | SPDR S&P Health Care Equipment ETF | SPDR S&P Health Care Services ETF | SPDR S&P Homebuilders ETF | SPDR S&P LeisureTime ETF | SPDR S&P Metals & Mining ETF | SPDR S&P Oil & Gas Equipment & Services ETF |
Aerospace and Defense Sector Risk | ||||||||
Banking Sector Risk | ||||||||
Biotechnology Sector Risk | ||||||||
Building and Construction Risk | ||||||||
Buyback Risk | ||||||||
Call Risk | ||||||||
Capital Markets Sector Risk | ||||||||
Computer Hardware Sector Risk | x | |||||||
Computer Sector Risk | ||||||||
Computer Software/Services Sector Risk | ||||||||
Consumer Discretionary Sector Risk | x | x | ||||||
Consumer Staples Sector Risk | x | |||||||
Currency Risk | ||||||||
Depositary Receipts Risk | ||||||||
Depositary Receipts may be Unregistered and Unlisted | ||||||||
Dividend Paying Securities Risk | ||||||||
Electronics Industry Risk | ||||||||
Emerging Markets Risk | ||||||||
Energy Sector Risk | x | |||||||
Equity Investing Risk | x | x | x | x | x | x | x | x |
Financial Institution Risk | ||||||||
Financial Sector Risk | ||||||||
Food and Beverage Sector Risk | x | |||||||
Geographic Focus Risk | ||||||||
European Economic Risk | ||||||||
Growth Stock Risk | ||||||||
Health Care Equipment Sector Risk | x | |||||||
Health Care Sector Risk | x | x | ||||||
Health Care Services Sector Risk | x | |||||||
Homebuilding Sector Risk | x | |||||||
Index Tracking Risk | x | x | x | x | x | x | x | x |
Industrial Sector Risk | x |
Fund Name | SPDR S&P Computer Hardware ETF | SPDR S&P Food & Beverage ETF | SPDR S&P Health Care Equipment ETF | SPDR S&P Health Care Services ETF | SPDR S&P Homebuilders ETF | SPDR S&P LeisureTime ETF | SPDR S&P Metals & Mining ETF | SPDR S&P Oil & Gas Equipment & Services ETF |
Insurance Sector Risk | ||||||||
Interest Rate Risk – Preferred Securities | ||||||||
Issuer Risk – Preferred Securities | ||||||||
Large-Capitalization Securities Risk | ||||||||
Leisure Sector Risk | x | |||||||
Low Volatility Risk | ||||||||
Market Risk | x | x | x | x | x | x | x | x |
Materials Sector Risk | x | |||||||
Metals and Mining Sector Risk | x | |||||||
Mid-Capitalization Securities Risk | ||||||||
Momentum Risk | ||||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | ||||||||
Russian Sanctions Risk | ||||||||
Oil and Gas Sector Risk | x | |||||||
Outsourcing and Consulting Sector Risk | ||||||||
Passive Strategy/Index Risk | x | x | x | x | x | x | x | x |
Pharmaceuticals Sector Risk | ||||||||
Preferred Securities Risk | ||||||||
Quality Risk | ||||||||
Real Estate Securities Risk | ||||||||
REIT Risk | ||||||||
Retail Sector Risk | x | x | x | |||||
Semiconductor Sector Risk | ||||||||
Settlement Risk | ||||||||
Small-Capitalization Securities Risk | ||||||||
Technology Sector Risk | x | |||||||
Telecommunications Sector Risk | ||||||||
Transportation Sector Risk | ||||||||
Unconstrained Sector Risk | ||||||||
Utilities Sector Risk | ||||||||
Valuation Risk | ||||||||
Value Stock Risk |
Fund Name | SPDR S&P Oil & Gas Exploration & Production ETF | SPDR S&P Outsourcing & IT Consulting ETF | SPDR S&P Pharmaceuticals ETF | SPDR S&P Retail ETF | SPDR S&P Semiconductor ETF | SPDR S&P Software & Services ETF | SPDR S&P Telecom ETF | SPDR S&P Transportation ETF |
Aerospace and Defense Sector Risk | ||||||||
Banking Sector Risk | ||||||||
Biotechnology Sector Risk | ||||||||
Building and Construction Risk | ||||||||
Buyback Risk | ||||||||
Call Risk | ||||||||
Capital Markets Sector Risk | ||||||||
Computer Hardware Sector Risk | ||||||||
Computer Sector Risk | x | |||||||
Computer Software/Services Sector Risk | x | |||||||
Consumer Discretionary Sector Risk | x | |||||||
Consumer Staples Sector Risk | x | |||||||
Currency Risk | ||||||||
Depositary Receipts Risk | ||||||||
Depositary Receipts may be Unregistered and Unlisted | ||||||||
Dividend Paying Securities Risk | ||||||||
Electronics Industry Risk | ||||||||
Emerging Markets Risk | ||||||||
Energy Sector Risk | x | |||||||
Equity Investing Risk | x | x | x | x | x | x | x | x |
Financial Institution Risk | ||||||||
Financial Sector Risk | ||||||||
Food and Beverage Sector Risk | ||||||||
Geographic Focus Risk | ||||||||
European Economic Risk | ||||||||
Growth Stock Risk | ||||||||
Health Care Equipment Sector Risk | ||||||||
Health Care Sector Risk | x | |||||||
Health Care Services Sector Risk | ||||||||
Homebuilding Sector Risk | ||||||||
Index Tracking Risk | x | x | x | x | x | x | x | x |
Industrial Sector Risk | x |
Fund Name | SPDR S&P Oil & Gas Exploration & Production ETF | SPDR S&P Outsourcing & IT Consulting ETF | SPDR S&P Pharmaceuticals ETF | SPDR S&P Retail ETF | SPDR S&P Semiconductor ETF | SPDR S&P Software & Services ETF | SPDR S&P Telecom ETF | SPDR S&P Transportation ETF |
Insurance Sector Risk | ||||||||
Interest Rate Risk – Preferred Securities | ||||||||
Issuer Risk – Preferred Securities | ||||||||
Large-Capitalization Securities Risk | ||||||||
Leisure Sector Risk | ||||||||
Low Volatility Risk | ||||||||
Market Risk | x | x | x | x | x | x | x | x |
Materials Sector Risk | ||||||||
Metals and Mining Sector Risk | ||||||||
Mid-Capitalization Securities Risk | ||||||||
Momentum Risk | ||||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | ||||||||
Russian Sanctions Risk | ||||||||
Oil and Gas Sector Risk | x | |||||||
Outsourcing and Consulting Sector Risk | x | |||||||
Passive Strategy/Index Risk | x | x | x | x | x | x | x | x |
Pharmaceuticals Sector Risk | x | |||||||
Preferred Securities Risk | ||||||||
Quality Risk | ||||||||
Real Estate Securities Risk | ||||||||
REIT Risk | ||||||||
Retail Sector Risk | x | |||||||
Semiconductor Sector Risk | x | |||||||
Settlement Risk | ||||||||
Small-Capitalization Securities Risk | ||||||||
Technology Sector Risk | x | x | x | |||||
Telecommunications Sector Risk | x | |||||||
Transportation Sector Risk | x | |||||||
Unconstrained Sector Risk | ||||||||
Utilities Sector Risk | ||||||||
Valuation Risk |
Fund Name | SPDR S&P Oil & Gas Exploration & Production ETF | SPDR S&P Outsourcing & IT Consulting ETF | SPDR S&P Pharmaceuticals ETF | SPDR S&P Retail ETF | SPDR S&P Semiconductor ETF | SPDR S&P Software & Services ETF | SPDR S&P Telecom ETF | SPDR S&P Transportation ETF |
Value Stock Risk |
Fund Name | SPDR S&P 1500 Value Tilt ETF | SPDR S&P 1500 Momentum Tilt ETF | SPDR S&P 1500 Volatility Tilt ETF | SPDR Russell 1000 Low Volatility ETF | SPDR Russell 2000 Low Volatility ETF | SPDR Wells Fargo Preferred Stock ETF | SPDR MSCI USA Quality Mix ETF |
Aerospace and Defense Sector Risk | |||||||
Banking Sector Risk | |||||||
Biotechnology Sector Risk | |||||||
Building and Construction Risk | |||||||
Buyback Risk | |||||||
Call Risk | x | ||||||
Capital Markets Sector Risk | |||||||
Computer Hardware Sector Risk | |||||||
Computer Sector Risk | |||||||
Computer Software/Services Sector Risk | |||||||
Consumer Discretionary Sector Risk | x | ||||||
Consumer Staples Sector Risk | |||||||
Currency Risk | |||||||
Depositary Receipts Risk | x | ||||||
Depositary Receipts may be Unregistered and Unlisted | x | ||||||
Dividend Paying Securities Risk | |||||||
Electronics Industry Risk | |||||||
Emerging Markets Risk | |||||||
Energy Sector Risk | |||||||
Equity Investing Risk | x | x | x | x | x | x | x |
Financial Institution Risk | |||||||
Financial Sector Risk | x | x | x | x | x | x | |
Food and Beverage Sector Risk | |||||||
Geographic Focus Risk | |||||||
European Economic Risk | |||||||
Growth Stock Risk | |||||||
Health Care Equipment Sector Risk | |||||||
Health Care Sector Risk | x | x | |||||
Health Care Services Sector Risk | |||||||
Homebuilding Sector Risk | |||||||
Index Tracking Risk | x | x | x | x | x | x | x |
Industrial Sector Risk | |||||||
Insurance Sector Risk | |||||||
Interest Rate Risk – Preferred Securities | x | ||||||
Issuer Risk – Preferred Securities | x |
Fund Name | SPDR S&P 1500 Value Tilt ETF | SPDR S&P 1500 Momentum Tilt ETF | SPDR S&P 1500 Volatility Tilt ETF | SPDR Russell 1000 Low Volatility ETF | SPDR Russell 2000 Low Volatility ETF | SPDR Wells Fargo Preferred Stock ETF | SPDR MSCI USA Quality Mix ETF |
Large-Capitalization Securities Risk | x | x | |||||
Leisure Sector Risk | |||||||
Low Volatility Risk | x | x | x | x | |||
Market Risk | x | x | x | x | x | x | x |
Materials Sector Risk | |||||||
Metals and Mining Sector Risk | |||||||
Mid-Capitalization Securities Risk | x | ||||||
Momentum Risk | x | ||||||
Non-Diversification Risk | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | x | ||||||
Russian Sanctions Risk | |||||||
Oil and Gas Sector Risk | |||||||
Outsourcing and Consulting Sector Risk | |||||||
Passive Strategy/Index Risk | x | x | x | x | x | x | x |
Pharmaceuticals Sector Risk | |||||||
Preferred Securities Risk | x | ||||||
Quality Risk | x | ||||||
Real Estate Securities Risk | |||||||
REIT Risk | |||||||
Retail Sector Risk | |||||||
Semiconductor Sector Risk | |||||||
Settlement Risk | |||||||
Small-Capitalization Securities Risk | x | ||||||
Technology Sector Risk | x | x | x | ||||
Telecommunications Sector Risk | |||||||
Transportation Sector Risk | |||||||
Unconstrained Sector Risk | x | x | x | x | x | x | x |
Utilities Sector Risk | |||||||
Valuation Risk | x | x | |||||
Value Stock Risk | x | x |
SPDR Russell 3000
ETF
|
0.10% |
SPDR Russell 1000
ETF
|
0.10% |
SPDR Russell 2000
ETF
|
0.12% |
SPDR S&P 500 Buyback
ETF
|
0.35% (1) |
SPDR S&P 500 High Dividend
ETF
|
0.12% (2) |
SPDR S&P 500 Growth
ETF
|
0.18% (3) |
SPDR S&P 500 Value
ETF
|
0.18% (3) |
SPDR Russell Small Cap Completeness
ETF
|
0.10% |
SPDR S&P 400 Mid Cap Growth
ETF
|
0.20% (3) |
SPDR S&P 400 Mid Cap Value
ETF
|
0.21% (3) |
SPDR S&P 600 Small Cap
ETF
|
0.18% (3) |
SPDR S&P 600 Small Cap Growth
ETF
|
0.20% (3) |
SPDR S&P 600 Small Cap Value
ETF
|
0.21% (3) |
SPDR Global Dow
ETF
|
0.50% |
SPDR Dow Jones REIT
ETF
|
0.25% |
SPDR S&P Bank
ETF
|
0.35% |
SPDR S&P Capital Markets
ETF
|
0.35% |
SPDR S&P Insurance
ETF
|
0.35% |
SPDR S&P Regional Banking
ETF
|
0.35% |
SPDR Morgan Stanley Technology
ETF
|
0.42% (3) |
SPDR S&P Dividend
ETF
|
0.35% |
SPDR S&P Aerospace & Defense
ETF
|
0.35% |
SPDR S&P Biotech
ETF
|
0.35% |
SPDR S&P Building & Construction
ETF
|
0.35% (2) |
SPDR S&P Computer Hardware
ETF
|
0.35% (2) |
SPDR S&P Food & Beverage
ETF
|
0.35% (2) |
SPDR S&P Health Care Equipment
ETF
|
0.35% |
SPDR S&P Health Care Services
ETF
|
0.35% |
SPDR S&P Homebuilders
ETF
|
0.35% |
SPDR S&P LeisureTime
ETF
|
0.35% (2) |
SPDR S&P Metals & Mining
ETF
|
0.35% |
SPDR S&P Oil & Gas Equipment & Services
ETF
|
0.35% |
(1) | The Fund commenced operations on February 4, 2015. |
(2) | The Fund had not commenced operations as of June 30, 2015. The Fund expects to pay the Adviser the annual fee based on the percentage of the Fund's average daily net assets once the Fund commences operations. |
(3) | Prior to February 3, 2015, the annual fee paid by the SPDR S&P 500 Growth ETF, SPDR S&P 500 Value ETF, SPDR S&P 400 Mid Cap Growth ETF, SPDR S&P 400 Mid Cap Value ETF, SPDR S&P 600 Small Cap ETF, SPDR S&P 600 Small Cap Growth ETF, SPDR S&P 600 Small Cap Value ETF, SPDR Morgan Stanley Technology ETF, SPDR S&P 1500 Value Tilt ETF, SPDR S&P 1500 Momentum Tilt ETF, SPDR Russell 1000 Low Volatility ETF and SPDR Russell 2000 Low Volatility ETF to the Adviser was 0.20%, 0.20%, 0.25%, 0.25%, 0.20%, 0.25%, 0.25%, 0.50%, 0.35%, 0.35%, 0.20% and 0.25% of the Fund's average daily net assets, respectively. |
(4) | The Fund commenced operations on April 15, 2015. |
SPDR Russell 3000 ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 147.69 | $ 120.30 | $ 101.45 | $ 99.24 | $ 76.77 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
2.71 | 2.53 | 2.25 | 1.90 | 1.59 | ||||
Net realized and unrealized gain
(loss)
(2)
|
8.56 | 27.38 | 18.83 | 1.89 | 22.46 | ||||
Total from investment
operations
|
11.27 | 29.91 | 21.08 | 3.79 | 24.05 | ||||
Net equalization credits and
charges
(1)
|
(0.73) | (0.00) (3) | (0.00) (3) | 0.21 | (0.01) | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(3.25) | (2.52) | (2.23) | (1.79) | (1.57) | ||||
Net realized
gains
|
— | — | — | — | — | ||||
Total
distributions
|
(3.25) | (2.52) | (2.23) | (1.79) | (1.57) | ||||
Net asset value, end of
period
|
$ 154.98 | $ 147.69 | $ 120.30 | $ 101.45 | $ 99.24 | ||||
Total
return
(4)
|
7.17% | 25.02% | 20.91% | 4.16% | 31.45% | ||||
Net assets, end of period (in
000's)
|
$247,978 | $612,924 | $499,249 | $426,109 | $193,526 | ||||
Ratio of expenses to average net
assets
|
0.11% | 0.10% | 0.20% | 0.20% | 0.22% | ||||
Ratio of net investment income (loss) to average net
assets
|
1.79% | 1.87% | 2.03% | 1.97% | 1.73% | ||||
Portfolio turnover
rate
(6)
|
3% | 19% | 1% | 3% | 2% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Russell 1000 ETF |
SPDR Russell 2000 ETF |
SPDR
S&P
500 Buyback ETF |
||||||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
Year Ended 6/30/11 |
Year Ended 6/30/15 |
For
the
Period 7/8/13*- 6/30/14 |
For
the
Period 2/4/15*- 6/30/15 |
|||||||
$ 92.46 | $ 75.29 | $ 63.75 | $ 62.09 | $ 48.17 | $ 70.93 | $ 60.00 | $ 50.00 | |||||||
1.82 | 1.63 | 1.46 | 1.21 | 1.04 | 1.02 | 0.95 | 0.26 | |||||||
4.82 | 17.17 | 11.56 | 1.62 | 13.92 | 3.36 | 10.77 | — | |||||||
6.64 | 18.80 | 13.02 | 2.83 | 14.96 | 4.38 | 11.72 | 0.26 | |||||||
0.09 | (0.00) (3) | (0.01) | 0.00 (3) | (0.00) (3) | 0.13 | 0.06 | 0.07 | |||||||
(1.81) | (1.63) | (1.47) | (1.17) | (1.04) | (1.15) | (0.83) | (0.24) | |||||||
— | — | — | — | — | (0.30) | (0.02) | — | |||||||
(1.81) | (1.63) | (1.47) | (1.17) | (1.04) | (1.45) | (0.85) | (0.24) | |||||||
$ 97.38 | $ 92.46 | $ 75.29 | $ 63.75 | $ 62.09 | $ 73.99 | $ 70.93 | $ 50.09 | |||||||
7.31% | 25.14% | 20.56% | 4.69% | 31.17% | 6.43% | 19.69% | 0.67% | |||||||
$73,036 | $46,230 | $37,646 | $41,437 | $37,253 | $73,986 | $53,198 | $15,028 | |||||||
0.11% | 0.11% | 0.20% | 0.20% | 0.22% | 0.12% | 0.12% (5) | 0.35% (5) | |||||||
1.89% | 1.92% | 2.11% | 1.99% | 1.80% | 1.44% | 1.42% (5) | 1.28% (5) | |||||||
3% | 8% | 6% | 4% | 5% | 17% | 19% | 18% |
SPDR S&P 500 Growth ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 90.95 | $ 72.83 | $ 63.63 | $ 60.18 | $ 45.21 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
1.45 | 1.28 | 1.25 | 1.01 | 0.67 | ||||
Net realized and unrealized gain
(loss)
(2)
|
7.48 | 18.08 | 9.19 | 3.45 | 14.96 | ||||
Total from investment
operations
|
8.93 | 19.36 | 10.44 | 4.46 | 15.63 | ||||
Net equalization credits and
charges
(1)
|
0.04 | 0.05 | (0.01) | 0.01 | 0.00 (3) | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(1.43) | (1.29) | (1.23) | (1.02) | (0.66) | ||||
Net realized
gains
|
— | — | — | — | — | ||||
Total
distributions
|
(1.43) | (1.29) | (1.23) | (1.02) | (0.66) | ||||
Net asset value, end of
period
|
$ 98.49 | $ 90.95 | $ 72.83 | $ 63.63 | $ 60.18 | ||||
Total
return
(4)
|
9.90% | 26.78% | 16.49% | 7.54% | 34.65% | ||||
Net assets, end of period (in
000's)
|
$556,464 | $427,451 | $247,627 | $219,541 | $192,586 | ||||
Ratio of expenses to average net
assets
|
0.18% | 0.20% | 0.20% | 0.20% | 0.22% | ||||
Ratio of net investment income (loss) to average net
assets
|
1.51% | 1.54% | 1.83% | 1.69% | 1.22% | ||||
Portfolio turnover
rate
(5)
|
22% | 23% | 26% | 21% | 46% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(5) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 500 Value ETF | SPDR Russell Small Cap Completeness ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 97.95 | $ 82.26 | $ 67.63 | $ 67.32 | $ 54.02 | $ 86.75 | $ 76.01 | $ 61.65 | $ 64.26 | $ 46.60 | |||||||||
2.32 | 2.04 | 1.85 | 1.52 | 1.51 | 1.17 | 1.14 | 1.18 | 0.80 | 0.76 | |||||||||
1.93 | 15.67 | 14.66 | 0.32 | 13.19 | 3.85 | 18.59 | 14.85 | (2.60) | 17.65 | |||||||||
4.25 | 17.71 | 16.51 | 1.84 | 14.70 | 5.02 | 19.73 | 16.03 | (1.80) | 18.41 | |||||||||
0.05 | (0.02) | 0.03 | (0.06) | 0.11 | 0.04 | (0.05) | 0.00 (3) | 0.00 (3) | 0.01 | |||||||||
(2.33) | (2.00) | (1.91) | (1.47) | (1.51) | (1.17) | (1.13) | (1.19) | (0.81) | (0.76) | |||||||||
— | — | — | — | — | (3.63) | (7.81) | (0.48) | — | — | |||||||||
(2.33) | (2.00) | (1.91) | (1.47) | (1.51) | (4.80) | (8.94) | (1.67) | (0.81) | (0.76) | |||||||||
$ 99.92 | $ 97.95 | $ 82.26 | $ 67.63 | $ 67.32 | $ 87.01 | $ 86.75 | $ 76.01 | $ 61.65 | $ 64.26 | |||||||||
4.40% | 21.67% | 24.70% | 2.81% | 27.58% | 6.03% | 26.70% | 26.19% | (2.73)% | 39.67% | |||||||||
$229,890 | $205,773 | $156,368 | $98,120 | $171,718 | $100,062 | $78,077 | $95,008 | $70,893 | $80,329 | |||||||||
0.18% | 0.20% | 0.20% | 0.20% | 0.22% | 0.10% | 0.11% | 0.25% | 0.25% | 0.27% | |||||||||
2.31% | 2.26% | 2.45% | 2.37% | 2.36% | 1.36% | 1.37% | 1.71% | 1.34% | 1.31% | |||||||||
24% | 23% | 30% | 25% | 41% | 17% | 75% | 29% | 20% | 23% |
SPDR S&P 400 Mid Cap Growth ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 116.83 | $ 95.79 | $ 78.68 | $ 82.38 | $ 57.07 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
1.26 | 0.89 | 0.94 | 0.50 | 0.36 | ||||
Net realized and unrealized gain
(loss)
(2)
|
9.05 | 21.02 | 17.14 | (3.62) | 25.31 | ||||
Total from investment
operations
|
10.31 | 21.91 | 18.08 | (3.12) | 25.67 | ||||
Net equalization credits and
charges
(1)
|
0.03 | 0.02 | 0.04 | (0.01) | (0.01) | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(1.27) | (0.89) | (1.01) | (0.57) | (0.35) | ||||
Net realized
gains
|
(0.85) | — | — | — | — | ||||
Total
distributions
|
(2.12) | (0.89) | (1.01) | (0.57) | (0.35) | ||||
Net asset value, end of
period
|
$ 125.05 | $ 116.83 | $ 95.79 | $ 78.68 | $ 82.38 | ||||
Total
return
(4)
|
8.92% | 22.94% | 22.96% | (3.66)% | 45.01% | ||||
Net assets, end of period (in
000's)
|
$243,839 | $175,250 | $91,003 | $62,947 | $74,140 | ||||
Ratio of expenses to average net
assets
|
0.21% | 0.25% | 0.25% | 0.25% | 0.28% | ||||
Ratio of net investment income (loss) to average net
assets
|
1.04% | 0.82% | 1.07% | 0.65% | 0.50% | ||||
Portfolio turnover
rate
(5)
|
53% | 43% | 43% | 33% | 88% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(5) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 400 Mid Cap Value ETF | SPDR S&P 600 Small Cap ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 86.27 | $ 68.97 | $ 55.54 | $ 57.18 | $ 44.81 | $ 105.40 | $ 86.83 | $ 70.53 | $ 70.54 | $ 51.57 | |||||||||
1.39 | 1.31 | 1.23 | 0.97 | 1.05 | 1.34 | 1.11 | 1.19 | 0.95 | 0.70 | |||||||||
1.48 | 17.19 | 13.39 | (1.60) | 12.42 | 5.46 | 20.68 | 16.31 | (0.20) | 19.03 | |||||||||
2.87 | 18.50 | 14.62 | (0.63) | 13.47 | 6.80 | 21.79 | 17.50 | 0.75 | 19.73 | |||||||||
(0.04) | 0.04 | 0.07 | (0.03) | (0.03) | (0.03) | 0.00 (3) | 0.01 | 0.14 | (0.01) | |||||||||
(1.38) | (1.23) | (1.26) | (0.98) | (1.07) | (1.39) | (1.09) | (1.21) | (0.90) | (0.71) | |||||||||
(2.03) | (0.01) | — | — | — | (2.53) | (2.13) | — | — | (0.04) | |||||||||
(3.41) | (1.24) | (1.26) | (0.98) | (1.07) | (3.92) | (3.22) | (1.21) | (0.90) | (0.75) | |||||||||
$ 85.69 | $ 86.27 | $ 68.97 | $ 55.54 | $ 57.18 | $ 108.25 | $ 105.40 | $ 86.83 | $ 70.53 | $ 70.54 | |||||||||
3.31% | 27.04% | 26.42% | (0.82)% | 30.15% | 6.55% | 25.23% | 24.98% | 1.35% | 38.37% | |||||||||
$124,247 | $112,157 | $48,282 | $22,215 | $22,871 | $411,346 | $426,877 | $316,922 | $183,382 | $77,593 | |||||||||
0.21% | 0.25% | 0.25% | 0.25% | 0.28% | 0.18% | 0.20% | 0.20% | 0.20% | 0.24% | |||||||||
1.62% | 1.67% | 1.94% | 1.81% | 2.00% | 1.28% | 1.12% | 1.52% | 1.40% | 1.11% | |||||||||
44% | 36% | 33% | 28% | 82% | 16% | 18% | 11% | 13% | 82% |
SPDR S&P 600 Small Cap Growth ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 181.62 | $ 145.80 | $ 121.07 | $ 120.92 | $ 82.62 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
1.91 | 1.24 | 1.57 | 0.97 | 0.61 | ||||
Net realized and unrealized gain
(loss)
(2)
|
14.55 | 35.70 | 24.73 | 0.28 | 38.10 | ||||
Total from investment
operations
|
16.46 | 36.94 | 26.30 | 1.25 | 38.71 | ||||
Net equalization credits and
charges
(1)
|
0.09 | 0.05 | 0.05 | (0.02) | (0.00) (3) | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(1.87) | (1.10) | (1.62) | (1.08) | (0.57) | ||||
Net realized
gains
|
(6.46) | (0.07) | — | — | — | ||||
Total
distributions
|
(8.33) | (1.17) | (1.62) | (1.08) | (0.57) | ||||
Voluntary contribution from
Adviser
|
— | — | — | — | 0.16 | ||||
Net asset value, end of
period
|
$ 189.84 | $ 181.62 | $ 145.80 | $ 121.07 | $ 120.92 | ||||
Total
return
(4)
|
9.40% | 25.40% | 21.89% | 1.07% | 47.08% (5) | ||||
Net assets, end of period (in
000's)
|
$560,024 | $399,562 | $226,000 | $151,354 | $187,432 | ||||
Ratio of expenses to average net
assets
|
0.20% | 0.25% | 0.25% | 0.25% | 0.27% | ||||
Ratio of net investment income (loss) to average net
assets
|
1.06% | 0.73% | 1.19% | 0.85% | 0.58% | ||||
Portfolio turnover
rate
(6)
|
49% | 54% | 45% | 37% | 102% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(5) | If the Adviser had not made a voluntary contribution during the Year Ended 6/30/11, the total return would have been 46.88%. |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 600 Small Cap Value ETF | SPDR Global Dow ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 110.22 | $ 89.75 | $ 71.24 | $ 71.29 | $ 55.88 | $ 72.15 | $ 58.79 | $ 51.21 | $ 59.50 | $ 48.39 | |||||||||
1.62 | 1.47 | 1.37 | 1.09 | 1.03 | 1.65 | 1.77 | 1.41 | 1.29 | 1.54 | |||||||||
2.15 | 20.92 | 18.57 | 0.01 | 15.55 | (2.55) | 13.34 | 7.67 | (8.35) | 10.91 | |||||||||
3.77 | 22.39 | 19.94 | 1.10 | 16.58 | (0.90) | 15.11 | 9.08 | (7.06) | 12.45 | |||||||||
0.05 | 0.04 | (0.02) | (0.04) | (0.07) | (0.01) | 0.02 | (0.06) | (0.04) | 0.07 | |||||||||
(1.68) | (1.41) | (1.41) | (1.11) | (1.10) | (1.57) | (1.77) | (1.44) | (1.19) | (1.41) | |||||||||
(6.29) | (0.55) | — | — | — | — | — | — | — | — | |||||||||
(7.97) | (1.96) | (1.41) | (1.11) | (1.10) | (1.57) | (1.77) | (1.44) | (1.19) | (1.41) | |||||||||
— | — | — | — | — | — | — | — | — | — | |||||||||
$ 106.07 | $ 110.22 | $ 89.75 | $ 71.24 | $ 71.29 | $ 69.67 | $ 72.15 | $ 58.79 | $ 51.21 | $ 59.50 | |||||||||
3.50% | 25.09% | 28.17% | 1.61% | 29.68% | (1.25)% | 25.86% | 17.68% | (11.90)% | 25.99% | |||||||||
$392,578 | $308,732 | $170,652 | $121,201 | $124,849 | $108,027 | $115,474 | $88,220 | $92,203 | $148,786 | |||||||||
0.21% | 0.25% | 0.25% | 0.25% | 0.27% | 0.50% | 0.51% | 0.50% | 0.50% | 0.52% | |||||||||
1.52% | 1.43% | 1.72% | 1.60% | 1.56% | 2.33% | 2.63% | 2.50% | 2.44% | 2.66% | |||||||||
42% | 41% | 39% | 34% | 88% | 13% | 10% | 13% | 11% | 108% |
SPDR Dow Jones REIT ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 82.99 | $ 75.91 | $ 72.90 | $ 66.59 | $ 51.05 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
2.28 | 2.03 | 1.85 | 1.71 | 1.47 | ||||
Net realized and unrealized gain
(loss)
(2)
|
1.91 | 7.56 | 3.44 | 6.67 | 15.98 | ||||
Total from investment
operations
|
4.19 | 9.59 | 5.29 | 8.38 | 17.45 | ||||
Net equalization credits and
charges
(1)
|
0.01 | 0.01 | 0.01 | 0.03 | 0.02 | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(2.81) | (2.52) | (2.29) | (2.10) | (1.93) | ||||
Total
distributions
|
(2.81) | (2.52) | (2.29) | (2.10) | (1.93) | ||||
Net asset value, end of
period
|
$ 84.38 | $ 82.99 | $ 75.91 | $ 72.90 | $ 66.59 | ||||
Total
return
(4)
|
4.97% | 13.02% | 7.36% | 13.05% | 34.55% | ||||
Net assets, end of period (in
000's)
|
$2,863,030 | $2,579,540 | $2,180,930 | $1,959,752 | $1,557,086 | ||||
Ratio of expenses to average net
assets
|
0.25% | 0.25% | 0.25% | 0.25% | 0.26% | ||||
Ratio of net investment income (loss) to average net
assets
|
2.55% | 2.66% | 2.45% | 2.60% | 2.40% | ||||
Portfolio turnover
rate
(5)
|
5% | 6% | 7% | 7% | 10% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(5) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Bank ETF | SPDR S&P Capital Markets ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 33.41 | $ 28.67 | $ 22.05 | $ 24.00 | $ 22.90 | $ 49.21 | $ 39.95 | $ 31.02 | $ 35.45 | $ 31.10 | |||||||||
0.55 | 0.49 | 0.52 | 0.41 | 0.23 | 0.94 | 0.95 | 1.16 | 0.73 | 0.73 | |||||||||
2.86 | 4.71 | 6.62 | (1.92) | 1.08 | 1.48 | 9.13 | 9.04 | (4.09) | 4.36 | |||||||||
3.41 | 5.20 | 7.14 | (1.51) | 1.31 | 2.42 | 10.08 | 10.20 | (3.36) | 5.09 | |||||||||
0.01 | (0.00) (3) | 0.02 | (0.02) | (0.01) | (0.01) | 0.02 | 0.09 | (0.09) | (0.07) | |||||||||
(0.56) | (0.46) | (0.54) | (0.42) | (0.20) | (0.93) | (0.84) | (1.36) | (0.98) | (0.67) | |||||||||
(0.56) | (0.46) | (0.54) | (0.42) | (0.20) | (0.93) | (0.84) | (1.36) | (0.98) | (0.67) | |||||||||
$ 36.27 | $ 33.41 | $ 28.67 | $ 22.05 | $ 24.00 | $ 50.69 | $ 49.21 | $ 39.95 | $ 31.02 | $ 35.45 | |||||||||
10.36% | 18.21% | 32.76% | (6.22)% | 5.63% | 4.92% | 25.39% | 33.67% | (9.53)% | 16.04% | |||||||||
$3,023,444 | $2,492,584 | $2,289,295 | $1,450,630 | $1,684,658 | $177,409 | $199,312 | $67,907 | $23,263 | $69,127 | |||||||||
0.35% | 0.35% | 0.35% | 0.35% | 0.36% | 0.35% | 0.35% | 0.35% | 0.36% | 0.38% | |||||||||
1.67% | 1.54% | 2.08% | 1.92% | 0.92% | 1.92% | 2.03% | 3.11% | 2.40% | 2.00% | |||||||||
18% | 29% | 28% | 55% | 16% | 28% | 33% | 56% | 64% | 14% |
SPDR S&P Insurance ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 64.15 | $ 54.03 | $ 40.74 | $ 41.73 | $ 35.26 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
1.21 | 0.97 | 0.98 | 0.69 | 0.67 | ||||
Net realized and unrealized gain
(loss)
(2)
|
3.83 | 10.09 | 13.31 | (0.98) | 6.49 | ||||
Total from investment
operations
|
5.04 | 11.06 | 14.29 | (0.29) | 7.16 | ||||
Net equalization credits and
charges
(1)
|
0.08 | (0.01) | 0.06 | (0.05) | 0.03 | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(1.18) | (0.93) | (1.06) | (0.65) | (0.72) | ||||
Total
distributions
|
(1.18) | (0.93) | (1.06) | (0.65) | (0.72) | ||||
Net asset value, end of
period
|
$ 68.09 | $ 64.15 | $ 54.03 | $ 40.74 | $ 41.73 | ||||
Total
return
(3)
|
8.05% | 20.52% | 35.60% | (0.65)% | 20.35% | ||||
Net assets, end of period (in
000's)
|
$377,924 | $272,622 | $318,774 | $93,698 | $214,897 | ||||
Ratio of expenses to average net
assets
|
0.35% | 0.35% | 0.35% | 0.35% | 0.37% | ||||
Ratio of net investment income (loss) to average net
assets
|
1.84% | 1.62% | 2.04% | 1.82% | 1.62% | ||||
Portfolio turnover
rate
(4)
|
17% | 16% | 30% | 62% | 9% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(4) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Regional Banking ETF | SPDR Morgan Stanley Technology ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 40.32 | $ 33.85 | $ 27.34 | $ 25.45 | $ 23.05 | $ 95.44 | $ 74.18 | $ 64.09 | $ 65.43 | $ 51.32 | |||||||||
0.71 | 0.61 | 0.60 | 0.45 | 0.37 | 0.95 | 0.95 | 0.75 | 0.50 | 0.36 | |||||||||
3.79 | 6.45 | 6.49 | 1.90 | 2.42 | 4.96 | 21.28 | 10.10 | (1.30) | 14.15 | |||||||||
4.50 | 7.06 | 7.09 | 2.35 | 2.79 | 5.91 | 22.23 | 10.85 | (0.80) | 14.51 | |||||||||
0.04 | 0.01 | 0.01 | 0.02 | (0.02) | 0.06 | (0.01) | (0.01) | (0.01) | (0.01) | |||||||||
(0.70) | (0.60) | (0.59) | (0.48) | (0.37) | (0.90) | (0.96) | (0.75) | (0.53) | (0.39) | |||||||||
(0.70) | (0.60) | (0.59) | (0.48) | (0.37) | (0.90) | (0.96) | (0.75) | (0.53) | (0.39) | |||||||||
$ 44.16 | $ 40.32 | $ 33.85 | $ 27.34 | $ 25.45 | $ 100.51 | $ 95.44 | $ 74.18 | $ 64.09 | $ 65.43 | |||||||||
11.40% | 20.94% | 26.20% | 9.59% | 12.00% | 6.27% | 30.05% | 16.93% | (1.21)% | 28.27% | |||||||||
$2,755,536 | $2,576,688 | $1,770,490 | $1,167,653 | $558,689 | $412,108 | $224,296 | $178,029 | $166,653 | $206,119 | |||||||||
0.35% | 0.35% | 0.35% | 0.35% | 0.36% | 0.42% | 0.50% | 0.50% | 0.50% | 0.53% | |||||||||
1.76% | 1.59% | 2.04% | 1.77% | 1.50% | 0.94% | 1.09% | 1.08% | 0.79% | 0.57% | |||||||||
27% | 28% | 29% | 44% | 13% | 9% | 24% | 27% | 21% | 10% |
SPDR S&P Dividend ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 76.57 | $ 66.41 | $ 55.66 | $ 54.06 | $ 45.13 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
1.88 | 1.69 | 1.79 | 1.80 | 1.73 | ||||
Net realized and unrealized gain
(loss)
(2)
|
1.59 | 11.42 | 10.78 | 1.53 | 8.80 | ||||
Total from investment
operations
|
3.47 | 13.11 | 12.57 | 3.33 | 10.53 | ||||
Net equalization credits and
charges
(1)
|
0.00 (3) | (0.02) | 0.01 | 0.06 | 0.14 | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(1.86) | (1.70) | (1.83) | (1.79) | (1.74) | ||||
Net realized
gains
|
(1.95) | (1.23) | — | — | — | ||||
Total
distributions
|
(3.81) | (2.93) | (1.83) | (1.79) | (1.74) | ||||
Net asset value, end of
period
|
$ 76.23 | $ 76.57 | $ 66.41 | $ 55.66 | $ 54.06 | ||||
Total
return
(4)
|
4.45% | 20.00% | 22.87% | 6.46% | 23.82% | ||||
Net assets, end of period (in
000's)
|
$12,925,516 | $12,806,768 | $11,936,789 | $9,123,307 | $5,982,242 | ||||
Ratio of expenses to average net
assets
|
0.35% | 0.35% | 0.35% | 0.35% | 0.36% | ||||
Ratio of net investment income (loss) to average net
assets
|
2.41% | 2.35% | 2.92% | 3.34% | 3.31% | ||||
Portfolio turnover
rate
(6)
|
28% | 33% | 44% | 94% | 52% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Aerospace & Defense ETF | SPDR S&P Biotech ETF | |||||||||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
For
the
Period 9/28/11*- 6/30/12 |
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
Year Ended 6/30/11 |
||||||||
$ 99.62 | $ 76.72 | $ 58.92 | $ 50.00 | $ 153.98 | $ 104.92 | $ 88.48 | $ 73.03 | $ 51.82 | ||||||||
1.02 | 1.75 | 1.14 | 0.52 | 1.57 | 1.12 | 0.29 | (0.11) | (0.20) | ||||||||
14.40 | 23.54 | 18.08 | 8.90 | 98.51 | 48.94 | 16.45 | 15.48 | 21.42 | ||||||||
15.42 | 25.29 | 19.22 | 9.42 | 100.08 | 50.06 | 16.74 | 15.37 | 21.22 | ||||||||
0.13 | 0.07 | 0.01 | (0.00) (3) | 0.02 | 0.07 | (0.01) | 0.08 | (0.01) | ||||||||
(0.94) | (1.57) | (1.09) | (0.50) | (1.74) | (1.07) | (0.29) | — | — | ||||||||
— | (0.89) | (0.34) | — | — | — | — | — | — | ||||||||
(0.94) | (2.46) | (1.43) | (0.50) | (1.74) | (1.07) | (0.29) | — | — | ||||||||
$ 114.23 | $ 99.62 | $ 76.72 | $ 58.92 | $ 252.34 | $ 153.98 | $ 104.92 | $ 88.48 | $ 73.03 | ||||||||
15.63% | 33.22% | 33.01% | 18.86% | 65.37% | 48.59% | 18.35% | 21.15% | 40.92% | ||||||||
$159,928 | $49,808 | $15,345 | $14,731 | $2,750,480 | $1,108,657 | $849,853 | $641,452 | $642,639 | ||||||||
0.35% | 0.35% | 0.35% | 0.35% (5) | 0.35% | 0.35% | 0.35% | 0.35% | 0.37% | ||||||||
0.93% | 1.81% | 1.75% | 1.18% (5) | 0.81% | 0.84% | 0.31% | (0.15)% | (0.31)% | ||||||||
42% | 33% | 34% | 23% | 78% | 86% | 61% | 61% | 74% |
SPDR S&P Health Care Equipment ETF | |||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
For
the
Period 1/26/11*- 6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 78.80 | $ 63.36 | $ 57.30 | $ 55.10 | $ 50.37 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
0.27 | 0.29 | 0.23 | 0.10 | 0.03 | ||||
Net realized and unrealized gain
(loss)
(2)
|
16.55 | 15.37 | 6.93 | 2.35 | 4.72 | ||||
Total from investment
operations
|
16.82 | 15.66 | 7.16 | 2.45 | 4.75 | ||||
Net equalization credits and
charges
(1)
|
0.01 | (0.00) (3) | (0.00) (3) | (0.00) (3) | 0.00 (3) | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(0.27) | (0.22) | (0.22) | (0.09) | (0.02) | ||||
Net realized
gains
|
(1.31) | — | (0.88) | (0.16) | — | ||||
Total
distributions
|
(1.58) | (0.22) | (1.10) | (0.25) | (0.02) | ||||
Net asset value, end of
period
|
$ 94.05 | $ 78.80 | $ 63.36 | $ 57.30 | $ 55.10 | ||||
Total
return
(4)
|
21.52% | 24.74% | 12.70% | 4.51% | 9.43% | ||||
Net assets, end of period (in
000's)
|
$47,027 | $31,522 | $19,009 | $22,919 | $19,284 | ||||
Ratio of expenses to average net
assets
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% (5) | ||||
Ratio of net investment income (loss) to average net
assets
|
0.31% | 0.39% | 0.39% | 0.20% | 0.12% (5) | ||||
Portfolio turnover
rate
(6)
|
40% | 46% | 34% | 42% | 21% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Health Care Services ETF | SPDR S&P Homebuilders ETF | |||||||||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
For
the
Period 9/28/11*- 6/30/12 |
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
Year Ended 6/30/11 |
||||||||
$ 100.01 | $ 80.96 | $ 62.01 | $50.00 | $ 32.75 | $ 29.45 | $ 21.36 | $ 18.05 | $ 14.32 | ||||||||
0.23 | 0.27 | 0.54 | 0.19 | 0.18 | 0.14 | 0.16 | 0.24 | 0.13 | ||||||||
32.15 | 19.26 | 21.02 | 11.99 | 3.86 | 3.30 | 8.08 | 3.29 | 3.93 | ||||||||
32.38 | 19.53 | 21.56 | 12.18 | 4.04 | 3.44 | 8.24 | 3.53 | 4.06 | ||||||||
(0.04) | (0.02) | 0.05 | 0.00 (3) | (0.01) | (0.01) | 0.01 | 0.01 | 0.01 | ||||||||
(0.20) | (0.23) | (0.63) | (0.17) | (0.18) | (0.13) | (0.16) | (0.23) | (0.34) | ||||||||
(1.06) | (0.23) | (2.03) | — | — | — | — | — | — | ||||||||
(1.26) | (0.46) | (2.66) | (0.17) | (0.18) | (0.13) | (0.16) | (0.23) | (0.34) | ||||||||
$ 131.09 | $100.01 | $ 80.96 | $62.01 | $ 36.60 | $ 32.75 | $ 29.45 | $ 21.36 | $ 18.05 | ||||||||
32.52% | 24.16% | 35.66% | 24.35% | 12.37% | 11.64% | 38.64% | 19.85% | 28.59% | ||||||||
$196,629 | $80,011 | $44,526 | $9,301 | $1,757,020 | $1,897,730 | $2,475,307 | $1,321,402 | $774,381 | ||||||||
0.35% | 0.35% | 0.35% | 0.35% (5) | 0.35% | 0.35% | 0.35% | 0.35% | 0.37% | ||||||||
0.21% | 0.30% | 0.75% | 0.42% (5) | 0.53% | 0.44% | 0.59% | 1.30% | 0.78% | ||||||||
37% | 33% | 48% | 25% | 25% | 31% | 36% | 46% | 38% |
SPDR S&P Metals & Mining ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 42.26 | $ 33.20 | $ 41.49 | $ 69.40 | $ 45.67 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
0.50 | 0.56 | 0.61 | 0.55 | 0.40 | ||||
Net realized and unrealized gain
(loss)
(2)
|
(17.82) | 9.07 | (8.29) | (27.86) | 23.76 | ||||
Total from investment
operations
|
(17.32) | 9.63 | (7.68) | (27.31) | 24.16 | ||||
Net equalization credits and
charges
(1)
|
(0.01) | (0.04) | 0.01 | (0.03) | (0.01) | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(0.59) | (0.53) | (0.62) | (0.57) | (0.42) | ||||
Total
distributions
|
(0.59) | (0.53) | (0.62) | (0.57) | (0.42) | ||||
Net asset value, end of
period
|
$ 24.34 | $ 42.26 | $ 33.20 | $ 41.49 | $ 69.40 | ||||
Total
return
(4)
|
(41.32)% | 28.96% | (18.75)% | (39.46)% | 52.93% | ||||
Net assets, end of period (in
000's)
|
$266,503 | $494,491 | $610,940 | $769,680 | $1,131,189 | ||||
Ratio of expenses to average net
assets
|
0.35% | 0.35% | 0.35% | 0.35% | 0.36% | ||||
Ratio of net investment income (loss) to average net
assets
|
1.55% | 1.41% | 1.45% | 1.06% | 0.63% | ||||
Portfolio turnover
rate
(5)
|
38% | 35% | 36% | 32% | 68% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(5) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Oil & Gas Equipment & Services ETF | SPDR S&P Oil & Gas Exploration & Production ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 49.28 | $ 39.15 | $ 30.74 | $ 41.48 | $ 25.04 | $ 82.28 | $ 58.23 | $ 50.40 | $ 58.77 | $ 39.02 | |||||||||
0.51 | 0.34 | 0.28 | 0.14 | 0.28 | 0.71 | 0.59 | 0.79 | 0.44 | 0.48 | |||||||||
(23.24) | 10.13 | 8.41 | (10.73) | 16.44 | (35.58) | 23.89 | 7.79 | (8.37) | 19.76 | |||||||||
(22.73) | 10.47 | 8.69 | (10.59) | 16.72 | (34.87) | 24.48 | 8.58 | (7.93) | 20.24 | |||||||||
(0.00) (3) | (0.00) (3) | (0.00) (3) | 0.00 (3) | 0.02 | 0.04 | 0.07 | 0.05 | 0.01 | (0.01) | |||||||||
(0.50) | (0.34) | (0.28) | (0.15) | (0.30) | (0.72) | (0.50) | (0.80) | (0.45) | (0.48) | |||||||||
(0.50) | (0.34) | (0.28) | (0.15) | (0.30) | (0.72) | (0.50) | (0.80) | (0.45) | (0.48) | |||||||||
$ 26.05 | $ 49.28 | $ 39.15 | $ 30.74 | $ 41.48 | $ 46.73 | $ 82.28 | $ 58.23 | $ 50.40 | $ 58.77 | |||||||||
(46.22)% | 26.84% | 28.34% | (25.56)% | 67.00% | (42.42)% | 42.27% | 17.18% | (13.49)% | 51.84% | |||||||||
$246,186 | $349,887 | $260,329 | $248,972 | $489,450 | $1,420,613 | $1,456,408 | $858,947 | $866,842 | $593,571 | |||||||||
0.35% | 0.35% | 0.35% | 0.35% | 0.37% | 0.35% | 0.35% | 0.35% | 0.35% | 0.36% | |||||||||
1.56% | 0.77% | 0.77% | 0.39% | 0.77% | 1.29% | 0.85% | 1.42% | 0.82% | 0.92% | |||||||||
36% | 26% | 31% | 30% | 96% | 44% | 46% | 40% | 42% | 87% |
SPDR S&P Pharmaceuticals ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 103.71 | $ 70.40 | $ 59.34 | $ 50.89 | $ 38.66 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
0.82 | 0.53 | 1.17 | 0.45 | 0.44 | ||||
Net realized and unrealized gain
(loss)
(2)
|
26.16 | 34.56 | 11.02 | 8.53 | 12.40 | ||||
Total from investment
operations
|
26.98 | 35.09 | 12.19 | 8.98 | 12.84 | ||||
Net equalization credits and
charges
(1)
|
0.00 (3) | 0.04 | (0.01) | 0.03 | (0.00) (3) | ||||
Other
capital
|
— | — | — | — | — | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(0.83) | (0.54) | (1.12) | (0.48) | (0.41) | ||||
Net realized
gains
|
(5.28) | (1.28) | — | (0.08) | (0.20) | ||||
Total
distributions
|
(6.11) | (1.82) | (1.12) | (0.56) | (0.61) | ||||
Voluntary contribution from
Adviser
|
0.09 | — | — | — | — | ||||
Net asset value, end of
period
|
$ 124.67 | $ 103.71 | $ 70.40 | $ 59.34 | $ 50.89 | ||||
Total
return
(4)
|
26.97% (5) | 50.33% | 20.81% | 17.86% | 33.35% | ||||
Net assets, end of period (in
000's)
|
$1,134,542 | $954,135 | $471,716 | $471,793 | $244,298 | ||||
Ratio of expenses to average net
assets
|
0.35% | 0.35% | 0.35% | 0.35% | 0.36% | ||||
Ratio of net investment income (loss) to average net
assets
|
0.72% | 0.60% | 1.92% | 0.86% | 0.96% | ||||
Portfolio turnover
rate
(6)
|
65% | 68% | 44% | 31% | 50% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(5) | If the Adviser had not made a voluntary contribution during the year ended 6/30/15, the total return would have been 26.88%. |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Retail ETF | SPDR S&P Semiconductor ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 86.75 | $ 76.56 | $ 59.03 | $ 53.48 | $ 35.65 | $ 75.16 | $ 53.36 | $ 44.65 | $ 56.02 | $ 41.86 | |||||||||
1.08 | 0.55 | 1.02 | 0.60 | 0.46 | 0.42 | 0.35 | 0.37 | 0.43 | 0.21 | |||||||||
11.70 | 10.25 | 17.60 | 5.50 | 17.69 | 10.94 | 21.76 | 8.72 | (11.41) | 14.30 | |||||||||
12.78 | 10.80 | 18.62 | 6.10 | 18.15 | 11.36 | 22.11 | 9.09 | (10.98) | 14.51 | |||||||||
0.10 | 0.01 | (0.03) | 0.03 | 0.14 | 0.02 | 0.03 | (0.03) | (0.02) | (0.02) | |||||||||
— | — | — | — | — | — | — | — | — | — | |||||||||
(0.98) | (0.62) | (1.06) | (0.58) | (0.46) | (0.42) | (0.34) | (0.35) | (0.37) | (0.33) | |||||||||
— | — | — | — | — | — | — | — | — | — | |||||||||
(0.98) | (0.62) | (1.06) | (0.58) | (0.46) | (0.42) | (0.34) | (0.35) | (0.37) | (0.33) | |||||||||
— | — | — | — | — | — | — | — | — | — | |||||||||
$ 98.65 | $ 86.75 | $ 76.56 | $ 59.03 | $ 53.48 | $ 86.12 | $ 75.16 | $ 53.36 | $ 44.65 | $ 56.02 | |||||||||
14.87% | 14.13% | 31.78% | 11.56% | 51.46% | 15.18% | 41.59% | 20.40% | (19.65)% | 34.66% | |||||||||
$1,173,933 | $628,931 | $1,175,195 | $720,212 | $548,165 | $219,604 | $165,348 | $50,695 | $37,952 | $114,841 | |||||||||
0.35% | 0.35% | 0.35% | 0.35% | 0.36% | 0.35% | 0.35% | 0.35% | 0.35% | 0.37% | |||||||||
1.15% | 0.67% | 1.53% | 1.10% | 1.01% | 0.53% | 0.55% | 0.77% | 0.89% | 0.40% | |||||||||
45% | 40% | 29% | 39% | 69% | 42% | 30% | 38% | 36% | 88% |
SPDR S&P Software & Services ETF | |||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
For
the
Period 9/28/11*- 6/30/12 |
||||
Net asset value, beginning of
period
|
$ 88.66 | $ 72.90 | $ 61.48 | $ 50.00 | |||
Income
(loss) from investment operations:
|
|||||||
Net investment income
(loss)
(1)
|
0.35 | 0.39 | 0.77 | 0.16 | |||
Net realized and unrealized gain
(loss)
(2)
|
13.80 | 17.32 | 12.94 | 11.47 | |||
Total from investment
operations
|
14.15 | 17.71 | 13.71 | 11.63 | |||
Net equalization credits and
charges
(1)
|
(0.01) | 0.03 | (0.07) | (0.01) | |||
Distributions
to shareholders from:
|
|||||||
Net investment
income
|
(0.34) | (0.34) | (0.75) | (0.14) | |||
Net realized
gains
|
(0.12) | (1.64) | (1.47) | — | |||
Return of
capital
|
— | — | — | — | |||
Total
distributions
|
(0.46) | (1.98) | (2.22) | (0.14) | |||
Net asset value, end of
period
|
$102.34 | $ 88.66 | $ 72.90 | $ 61.48 | |||
Total
return
(4)
|
16.00% | 24.31% | 22.66% | 23.25% | |||
Net assets, end of period (in
000's)
|
$51,168 | $31,030 | $14,580 | $18,445 | |||
Ratio of expenses to average net
assets
|
0.35% | 0.35% | 0.35% | 0.35% (5) | |||
Ratio of net investment income (loss) to average net
assets
|
0.37% | 0.46% | 1.18% | 0.35% (5) | |||
Portfolio turnover
rate
(6)
|
36% | 41% | 37% | 32% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Telecom ETF | SPDR S&P Transportation ETF | |||||||||||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
For
the
Period 1/26/11*- 6/30/11 |
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
For
the
Period 1/26/11*- 6/30/11 |
|||||||||
$ 56.90 | $ 48.70 | $41.14 | $ 51.59 | $ 51.00 | $ 93.69 | $ 66.30 | $ 49.56 | $ 53.08 | $ 50.88 | |||||||||
0.79 | 0.56 | 1.08 | 0.44 | 0.15 | 0.46 | 0.40 | 0.41 | 0.23 | 0.09 | |||||||||
0.43 | 8.01 | 7.86 | (10.42) | 0.45 | 3.27 | 27.34 | 16.79 | (3.51) | 2.18 | |||||||||
1.22 | 8.57 | 8.94 | (9.98) | 0.60 | 3.73 | 27.74 | 17.20 | (3.28) | 2.27 | |||||||||
0.03 | 0.15 | (0.16) | (0.07) | 0.13 | (0.00) (3) | 0.03 | 0.02 | (0.01) | 0.03 | |||||||||
(0.68) | (0.52) | (1.22) | (0.40) | (0.14) | (0.44) | (0.38) | (0.48) | (0.23) | (0.08) | |||||||||
— | — | — | — | — | (0.03) | — | — | — | — | |||||||||
— | — | — | — | — | — | — | — | — | (0.02) | |||||||||
(0.68) | (0.52) | (1.22) | (0.40) | (0.14) | (0.47) | (0.38) | (0.48) | (0.23) | (0.10) | |||||||||
$ 57.47 | $ 56.90 | $48.70 | $ 41.14 | $ 51.59 | $ 96.95 | $ 93.69 | $ 66.30 | $ 49.56 | $ 53.08 | |||||||||
2.21% | 17.92% | 21.47% | (19.47)% | 1.43% | 3.94% | 41.97% | 34.87% | (6.14)% | 4.52% | |||||||||
$71,843 | $25,604 | $7,305 | $ 4,114 | $10,318 | $368,395 | $224,865 | $46,411 | $12,391 | $15,923 | |||||||||
0.35% | 0.35% | 0.35% | 0.35% | 0.35% (5) | 0.35% | 0.35% | 0.35% | 0.35% | 0.35% (5) | |||||||||
1.34% | 1.03% | 2.38% | 1.01% | 0.67% (5) | 0.45% | 0.49% | 0.68% | 0.50% | 0.41% (5) | |||||||||
47% | 46% | 42% | 50% | 64% | 26% | 33% | 36% | 25% | 19% |
SPDR S&P 1500 Value Tilt ETF | |||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
For
the
Period 10/24/12*- 6/30/13 |
|||
Net asset value, beginning of
period
|
$ 84.11 | $70.33 | $60.00 | ||
Income
(loss) from investment operations:
|
|||||
Net investment income
(loss)
(1)
|
1.74 | 1.45 | 0.95 | ||
Net realized and unrealized gain
(loss)
(2)
|
2.19 | 15.16 | 10.31 | ||
Total from investment
operations
|
3.93 | 16.61 | 11.26 | ||
Net equalization credits and
charges
(1)
|
0.10 | — | — | ||
Distributions
to shareholders from:
|
|||||
Net investment
income
|
(1.71) | (1.45) | (0.93) | ||
Net realized
gains
|
(3.07) | (1.38) | — | ||
Total
distributions
|
(4.78) | (2.83) | (0.93) | ||
Net asset value, end of
period
|
$ 83.36 | $84.11 | $70.33 | ||
Total
return
(4)
|
4.76% | 23.91% | 18.85% | ||
Net assets, end of period (in
000's)
|
$12,504 | $8,411 | $7,033 | ||
Ratio of expenses to average net
assets
|
0.24% | 0.35% | 0.35% (5) | ||
Ratio of net investment income (loss) to average net
assets
|
2.06% | 1.87% | 2.12% (5) | ||
Portfolio turnover
rate
(6)
|
12% | 12% | 12% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 1500 Momentum Tilt ETF |
SPDR Russell 1000 Low Volatility ETF |
SPDR Russell 2000 Low Volatility ETF |
SPDR
MSCI USA
Quality Mix ETF |
|||||||||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
For
the
Period 10/24/12*- 6/30/13 |
Year Ended 6/30/15 |
Year Ended 6/30/14 |
For
the
Period 2/20/13*- 6/30/13 |
Year Ended 6/30/15 |
Year Ended 6/30/14 |
For
the
Period 2/20/13*- 6/30/13 |
For
the
Period 4/15/15*- 6/30/15 |
|||||||||
$ 83.39 | $ 67.80 | $ 60.00 | $ 72.96 | $ 62.81 | $60.00 | $ 73.85 | $ 62.28 | $60.00 | $60.00 | |||||||||
1.39 | 1.06 | 0.79 | 1.79 | 1.63 | 0.55 | 1.97 | 1.84 | 0.72 | 0.26 | |||||||||
4.85 | 15.94 | 7.75 | 2.93 | 10.80 | 2.67 | 3.40 | 12.33 | 2.07 | (1.44) | |||||||||
6.24 | 17.00 | 8.54 | 4.72 | 12.43 | 3.22 | 5.37 | 14.17 | 2.79 | (1.18) | |||||||||
(0.03) | (0.01) | 0.06 | 0.11 | — | 0.11 | (0.18) | 0.20 | 0.06 | — | |||||||||
(1.27) | (1.00) | (0.80) | (1.71) | (1.55) | (0.52) | (1.65) | (1.90) | (0.57) | (0.24) | |||||||||
(0.28) | (0.40) | — | (3.67) | (0.73) | — | (0.39) | (0.90) | — | — | |||||||||
(1.55) | (1.40) | (0.80) | (5.38) | (2.28) | (0.52) | (2.04) | (2.80) | (0.57) | (0.24) | |||||||||
$ 88.05 | $ 83.39 | $ 67.80 | $ 72.41 | $ 72.96 | $62.81 | $ 77.00 | $ 73.85 | $62.28 | $58.58 | |||||||||
7.47% | 25.21% | 14.39% | 6.50% | 20.06% | 5.55% | 7.06% | 23.32% | 4.74% | (1.98)% | |||||||||
$17,611 | $12,508 | $10,170 | $28,962 | $10,944 | $9,422 | $34,649 | $14,770 | $9,342 | $5,858 | |||||||||
0.25% | 0.35% | 0.35% (5) | 0.15% | 0.20% | 0.20% (5) | 0.18% | 0.25% | 0.25% (5) | 0.15% (5) | |||||||||
1.61% | 1.38% | 1.78% (5) | 2.41% | 2.40% | 2.46% (5) | 2.59% | 2.65% | 3.24% (5) | 2.11% (5) | |||||||||
70% | 55% | 36% | 75% | 59% | 31% | 38% | 54% | 29% | 10% |
SPDR Wells Fargo Preferred Stock ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 43.57 | $ 43.57 | $ 45.21 | $ 45.62 | $ 42.15 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
2.42 | 2.55 | 2.86 | 3.09 | 2.98 | ||||
Net realized and unrealized gain
(loss)
(2)
|
(0.23) | 0.39 | (1.72) | (0.84) | 3.32 | ||||
Total from investment
operations
|
2.19 | 2.94 | 1.14 | 2.25 | 6.30 | ||||
Net equalization credits and
charges
(1)
|
0.01 | (0.10) | 0.06 | 0.18 | 0.22 | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(2.45) | (2.84) | (2.84) | (2.84) | (3.05) | ||||
Total
distributions
|
(2.45) | (2.84) | (2.84) | (2.84) | (3.05) | ||||
Net asset value, end of
period
|
$ 43.32 | $ 43.57 | $ 43.57 | $ 45.21 | $ 45.62 | ||||
Total
return
(3)
|
5.11% | 7.07% | 2.70% | 5.70% | 15.64% | ||||
Net assets, end of period (in
000's)
|
$292,431 | $259,219 | $361,658 | $253,174 | $118,609 | ||||
Ratio of expenses to average net
assets
|
0.45% | 0.45% | 0.45% | 0.45% | 0.46% | ||||
Ratio of net investment income (loss) to average net
assets
|
5.48% | 6.08% | 6.27% | 6.99% | 6.57% | ||||
Portfolio turnover
rate
(4)
|
48% | 23% | 67% | 69% | 26% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(4) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDRSERTREQ | The Trust's Investment Company Act Number is 811-08839. |
Investment Objective |
The SPDR Barclays 1-3 Month T-Bill ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the 1-3 month sector of the United States Treasury Bill market. |
Management fees | 0.1345% |
Distribution and service (12b-1) fees 1 | 0.0000% |
Other expenses | 0.0015% |
Total annual Fund operating expenses | 0.1360% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$14 | $44 | $77 | $174 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -0.09%. |
One Year | Five Years |
Since
Inception
(5/25/07) |
|
Return Before Taxes | -0.10% | -0.05% | 0.55% |
Return After Taxes on Distributions | -0.10% | -0.05% | 0.36% |
Return After Taxes on Distributions and Sale of Fund Shares | -0.06% | -0.04% | 0.36% |
Barclays
1-3 Month U.S. Treasury Bill Index
(Index returns reflect no deduction for fees, expenses or taxes) |
0.02% | 0.07% | 0.65% |
Investment Objective |
The SPDR Barclays TIPS ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the inflation protected sector of the United States Treasury market. |
Management fees 1 | 0.15% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.15% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -1.22%. |
One Year | Five Years |
Since
Inception
(5/25/07) |
|
Return Before Taxes | 4.26% | 4.07% | 5.01% |
Return After Taxes on Distributions | 3.52% | 3.22% | 3.92% |
Return After Taxes on Distributions and Sale of Fund Shares | 2.41% | 2.83% | 3.50% |
Barclays
U.S. Government Inflation-Linked Bond Index
(Index returns reflect no deduction for fees, expenses or taxes) |
4.43% | 4.26% | 5.17% |
Investment Objective |
The SPDR Barclays 0-5 Year TIPS ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the 0-5 year inflation protected sector of the United States Treasury market. |
Management fees | 0.15% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
Investment Objective |
The SPDR Barclays 1-10 Year TIPS ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the 1-10 year inflation protected sector of the United States Treasury market. |
Management fees | 0.15% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 0.07%. |
One Year |
Since
Inception
(5/29/13) |
|
Return Before Taxes | 0.74% | -1.77% |
Return After Taxes on Distributions | 0.09% | -2.22% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.42% | -1.55% |
Barclays
1-10 Year Government Inflation-Linked Bond Index
(Index returns reflect no deduction for fees, expenses or taxes) |
0.87% | -1.65% |
Investment Objective |
The SPDR Barclays Short Term Treasury ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the short term sector of the United States Treasury market. |
Management fees 1 | 0.10% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.10% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$10 | $32 | $56 | $128 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 1.52%. |
One Year |
Since
Inception
(11/30/11) |
|
Return Before Taxes | 1.10% | 0.57% |
Return After Taxes on Distributions | 0.80% | 0.37% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.62% | 0.35% |
Barclays
1-5 Year U.S. Treasury Index
(Index returns reflect no deduction for fees, expenses or taxes) |
1.17% | 0.68% |
Investment Objective |
The SPDR Barclays Intermediate Term Treasury ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the 1-10 year sector of the United States Treasury market. |
Management fees 1 | 0.10% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.10% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$10 | $32 | $56 | $128 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 1.99%. |
One Year | Five Years |
Since
Inception
(5/23/07) |
|
Return Before Taxes | 2.45% | 2.81% | 4.04% |
Return After Taxes on Distributions | 1.99% | 2.16% | 3.22% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.39% | 1.94% | 2.85% |
Barclays
Intermediate U.S. Treasury Index
(Index returns reflect no deduction for fees, expenses or taxes) |
2.57% | 2.92% | 4.13% |
Investment Objective |
The SPDR Barclays Long Term Treasury ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the long term (10+ years) sector of the United States Treasury market. |
Management fees 1 | 0.10% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.10% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$10 | $32 | $56 | $128 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 0.11%. |
One Year | Five Years |
Since
Inception
(5/23/07) |
|
Return Before Taxes | 24.87% | 9.82% | 8.77% |
Return After Taxes on Distributions | 23.33% | 8.53% | 7.37% |
Return After Taxes on Distributions and Sale of Fund Shares | 14.00% | 7.17% | 6.36% |
Barclays
Long U.S. Treasury Index
(Index returns reflect no deduction for fees, expenses or taxes) |
25.07% | 9.96% | 8.86% |
Investment Objective |
The SPDR Barclays Short Term Corporate Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the short-term U.S. corporate bond market. |
Management fees 1 | 0.12% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.12% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 0.97%. |
One Year | Five Years |
Since
Inception
(12/16/09) |
|
Return Before Taxes | 0.88% | 2.18% | 2.01% |
Return After Taxes on Distributions | 0.34% | 1.56% | 1.39% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.50% | 1.45% | 1.31% |
Barclays
U.S. 1-3 Year Corporate Bond Index
(Index returns reflect no deduction for fees, expenses or taxes) |
1.19% | 2.70% | 2.63% |
Investment Objective |
The SPDR Barclays Intermediate Term Corporate Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the intermediate term (1-10 years) sector of the United States corporate bond market. |
Management fees 1 | 0.12% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.12% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 1.39%. |
One Year | Five Years |
Since
Inception
(2/10/09) |
|
Return Before Taxes | 4.13% | 4.97% | 5.90% |
Return After Taxes on Distributions | 2.94% | 3.67% | 4.52% |
Return After Taxes on Distributions and Sale of Fund Shares | 2.33% | 3.35% | 4.06% |
Barclays
U.S. Intermediate Corporate Bond Index
(Index returns reflect no deduction for fees, expenses or taxes) |
4.35% | 5.36% | 7.36% |
Investment Objective |
The SPDR Barclays Long Term Corporate Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the long term (10+ years) sector of the United States corporate bond market. |
Management fees 1 | 0.12% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.12% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -3.66%. |
One Year | Five Years |
Since
Inception
(3/10/09) |
|
Return Before Taxes | 15.62% | 9.00% | 11.60% |
Return After Taxes on Distributions | 13.44% | 6.80% | 9.32% |
Return After Taxes on Distributions and Sale of Fund Shares | 8.78% | 6.10% | 8.24% |
Barclays
U.S. Long Term Corporate Bond Index
(Index returns reflect no deduction for fees, expenses or taxes) |
15.73% | 9.60% | 13.05% |
Investment Objective |
The SPDR Barclays Issuer Scored Corporate Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the U.S. corporate bond market. |
Management fees | 0.16% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.16% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$16 | $52 | $90 | $205 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -0.13%. |
One Year |
Since
Inception
(4/6/11) |
|
Return Before Taxes | 7.07% | 5.52% |
Return After Taxes on Distributions | 5.57% | 4.08% |
Return After Taxes on Distributions and Sale of Fund Shares | 3.99% | 3.67% |
Barclays
Issuer Scored Corporate Index
(Index returns reflect no deduction for fees, expenses or taxes) |
6.91% | 5.87% |
Investment Objective |
The SPDR Barclays Convertible Securities ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks United States convertible securities markets with outstanding issue sizes greater than $500 million. |
Management fees | 0.40% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.40% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$41 | $128 | $224 | $505 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -2.64%. |
One Year | Five Years |
Since
Inception
(4/14/09) |
|
Return Before Taxes | 7.61% | 9.76% | 13.58% |
Return After Taxes on Distributions | 4.86% | 7.99% | 11.69% |
Return After Taxes on Distributions and Sale of Fund Shares | 4.82% | 7.03% | 10.18% |
Barclays
U.S. Convertible Bond >$500MM Index
(Index returns reflect no deduction for fees, expenses or taxes) |
8.23% | 10.45% | 15.06% |
Investment Objective |
The SPDR Barclays Mortgage Backed Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the U.S. agency mortgage pass-through sector of the U.S. investment grade bond market. |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Acquired fund fees and expenses” are not included in the Fund's financial statements, which provide a clearer picture of a Fund's actual operating costs. |
3 | SSGA Funds Management, Inc. (the “Adviser”) has contractually agreed to waive its management fee and/or reimburse expenses in an amount equal to any acquired fund fees and expenses (excluding holdings in acquired funds for cash management purposes, if any). This waiver and/or reimbursement does not provide for the recoupment by the Adviser of any amounts waived or reimbursed. This waiver and/or reimbursement may not be terminated except with the approval of the Fund's Board of Trustees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$20 | $73 | $131 | $302 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 1.38%. |
One Year | Five Years |
Since
Inception
(1/15/09) |
|
Return Before Taxes | 5.92% | 3.69% | 3.88% |
Return After Taxes on Distributions | 4.32% | 2.54% | 2.70% |
Return After Taxes on Distributions and Sale of Fund Shares | 3.34% | 2.40% | 2.54% |
Barclays
U.S. MBS Index
(Index returns reflect no deduction for fees, expenses or taxes) |
6.08% | 3.73% | 3.96% |
Investment Objective |
The SPDR Barclays Aggregate Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the U.S. dollar denominated investment grade bond market. |
1 | The Fund's “Management fees,”“Total annual Fund operating expenses” and “Net annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
3 | “Acquired fund fees and expenses” are not included in the Fund's financial statements, which provide a clearer picture of a Fund's actual operating costs. |
4 | SSGA Funds Management, Inc. (the “Adviser”) has contractually agreed to waive its management fee and/or reimburse expenses in an amount equal to any acquired fund fees and expenses (excluding holdings in acquired funds for cash management purposes, if any). This waiver and/or reimbursement does not provide for the recoupment by the Adviser of any amounts waived or reimbursed. This waiver and/or reimbursement may not be terminated except with the approval of the Fund's Board of Trustees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$9 | $29 | $51 | $115 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 1.08%. |
One Year | Five Years |
Since
Inception
(5/23/07) |
|
Return Before Taxes | 5.84% | 4.34% | 5.12% |
Return After Taxes on Distributions | 4.72% | 3.22% | 3.77% |
Return After Taxes on Distributions and Sale of Fund Shares | 3.30% | 2.93% | 3.48% |
Barclays
U.S. Aggregate Index
(Index returns reflect no deduction for fees, expenses or taxes) |
5.97% | 4.45% | 5.13% |
Investment Objective |
The SPDR Nuveen Barclays Municipal Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the U.S. municipal bond market and provides income that is exempt from federal income taxes. |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | SSGA Funds Management, Inc. (the “Adviser”) has contractually agreed to waive its advisory fee and reimburse certain expenses, until October 31, 2016, so that the Net annual Fund operating expenses of the Fund will be limited to 0.23% of the Fund's average daily net assets before application of any extraordinary expenses or acquired fund fees and expenses. The contractual fee waiver does not provide for the recoupment by the Adviser of any fees the Adviser previously waived. The Adviser may continue the waiver from year to year, but there is no guarantee that the Adviser will do so and after October 31, 2016, the waiver may be cancelled or modified at any time. |
Year 1 | Year 3 | Year 5 | Year 10 |
$24 | $89 | $162 | $374 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 1.58%. |
One Year | Five Years |
Since
Inception
(9/11/07) |
|
Return Before Taxes | 9.24% | 4.90% | 4.88% |
Return After Taxes on Distributions | 9.24% | 4.80% | 4.81% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.34% | 4.51% | 4.55% |
Barclays
Municipal Managed Money Index
(Index returns reflect no deduction for fees, expenses or taxes) |
9.24% | 5.17% | 5.21% |
Investment Objective |
The SPDR Nuveen Barclays California Municipal Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the California municipal bond market and provides income that is exempt from federal and California state income taxes. |
Management fees | 0.20% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.20% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$20 | $64 | $113 | $255 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 2.04%. |
One Year | Five Years |
Since
Inception
(10/10/07) |
|
Return Before Taxes | 10.45% | 6.11% | 5.54% |
Return After Taxes on Distributions | 10.45% | 5.87% | 5.38% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.07% | 5.53% | 5.14% |
Barclays
Managed Money Municipal California Index
(Index returns reflect no deduction for fees, expenses or taxes) |
10.41% | 6.07% | 5.59% |
Investment Objective |
The SPDR Nuveen Barclays New York Municipal Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the New York municipal bond market and provides income that is exempt from federal and New York state income taxes. |
Management fees | 0.20% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.20% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$20 | $64 | $113 | $255 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 1.69%. |
One Year | Five Years |
Since
Inception
(10/11/07) |
|
Return Before Taxes | 9.99% | 4.98% | 4.94% |
Return After Taxes on Distributions | 9.95% | 4.80% | 4.81% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.88% | 4.58% | 4.62% |
Barclays
Managed Money Municipal New York Index
(Index returns reflect no deduction for fees, expenses or taxes) |
10.09% | 5.35% | 5.18% |
Investment Objective |
The SPDR Nuveen Barclays Short Term Municipal Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the short term tax exempt municipal bond market and provides income that is exempt from federal income taxes. |
Management fees | 0.20% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.20% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$20 | $64 | $113 | $255 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 1.16%. |
One Year | Five Years |
Since
Inception
(10/10/07) |
|
Return Before Taxes | 0.92% | 1.59% | 2.74% |
Return After Taxes on Distributions | 0.91% | 1.57% | 2.72% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.92% | 1.52% | 2.50% |
Barclays
Managed Money Municipal Short Term Index
(Index returns reflect no deduction for fees, expenses or taxes) |
1.12% | 1.87% | 3.15% |
Investment Objective |
The SPDR Nuveen S&P High Yield Municipal Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the U.S. high yield municipal bond market and to provide income that is exempt from federal income taxes. |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | SSGA Funds Management, Inc. (the “Adviser”) has contractually agreed to waive its advisory fee and reimburse certain expenses, until October 31, 2016, so that the Net annual Fund operating expenses are limited to 0.45% of the Fund's average daily net assets before application of any extraordinary expenses or acquired fund fees and expenses. The contractual fee waiver does not provide for the recoupment by the Adviser of any fees the Adviser previously waived. The Adviser may continue the waiver from year to year, but there is no guarantee that the Adviser will do so and after October 31, 2016, it may be cancelled or modified at any time. |
Year 1 | Year 3 | Year 5 | Year 10 |
$46 | $155 | $275 | $623 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 1.48%. |
One Year |
Since
Inception
(4/13/11) |
|
Return Before Taxes | 16.44% | 9.22% |
Return After Taxes on Distributions | 16.44% | 9.18% |
Return After Taxes on Distributions and Sale of Fund Shares | 11.52% | 8.36% |
S&P
Municipal Yield Index
(Index returns reflect no deduction for fees, expenses or taxes) |
13.75% | 9.43% |
Investment Objective |
The SPDR Nuveen Barclays Build America Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the market for taxable municipal securities with respect to which the issuer has made an irrevocable election to designate the bonds as “Qualified Bonds” under the Build America Bond program created under the American Recovery and Reinvestment Act of 2009 or other legislation providing for the issuance of taxable municipal securities on which the issuer receives federal support of the interest paid (“direct pay Build America Bonds”). |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -1.68%. |
One Year |
Since
Inception
(5/12/10) |
|
Return Before Taxes | 20.46% | 10.13% |
Return After Taxes on Distributions | 18.34% | 8.19% |
Return After Taxes on Distributions and Sale of Fund Shares | 11.51% | 7.08% |
Barclays
Build America Bond Index
(Index returns reflect no deduction for fees, expenses or taxes) |
21.33% | 10.93% |
Investment Objective |
The SPDR DB International Government Inflation-Protected Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the inflation protected sector of the global bond market outside the United States. |
Management fees | 0.50% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.50% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$51 | $160 | $280 | $628 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -8.77%. |
One Year | Five Years |
Since
Inception
(3/13/08) |
|
Return Before Taxes | -0.35% | 3.43% | 1.75% |
Return After Taxes on Distributions | -1.29% | 2.35% | 0.69% |
Return After Taxes on Distributions and Sale of Fund Shares | -0.07% | 2.25% | 0.95% |
DB
Global Government ex-U.S. Inflation-Linked Bond Capped Index
(Index returns reflect no deduction for fees, expenses or taxes) |
-0.01% | 3.98% | 2.62% |
Investment Objective |
The SPDR Barclays Short Term International Treasury Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the short-term (1-3 year remaining maturity) fixed rate, investment grade debt issued by foreign governments of investment grade countries. |
Management fees | 0.35% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -6.35%. |
One Year | Five Years |
Since
Inception
(1/15/09) |
|
Return Before Taxes | -9.83% | -1.59% | 0.45% |
Return After Taxes on Distributions | -9.88% | -1.84% | 0.14% |
Return After Taxes on Distributions and Sale of Fund Shares | -5.54% | -1.27% | 0.26% |
Barclays
1-3 Year Global Treasury ex-US Capped Index
(Index returns reflect no deduction for fees, expenses or taxes) |
-9.63% | -1.19% | 0.88% |
Investment Objective |
The SPDR Barclays International Treasury Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the fixed-rate local currency sovereign debt of investment grade countries outside the United States. |
Management fees | 0.50% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.50% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$51 | $160 | $280 | $628 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -5.67%. |
One Year | Five Years |
Since
Inception
(10/2/07) |
|
Return Before Taxes | -2.48% | 1.42% | 2.98% |
Return After Taxes on Distributions | -3.10% | 0.69% | 2.25% |
Return After Taxes on Distributions and Sale of Fund Shares | -1.29% | 0.83% | 2.05% |
Barclays
Global Treasury ex-US Capped Index
(Index returns reflect no deduction for fees, expenses or taxes) |
-2.03% | 1.90% | 3.67% |
Investment Objective |
The SPDR Barclays International Corporate Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the investment grade corporate sector of the global bond market outside of the United States. |
Management fees 1 | 0.50% |
Distribution and service (12b-1) fees 2 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.50% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect a reduction in the Fund's “Management fees.” |
2 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$51 | $160 | $280 | $628 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -8.85%. |
One Year |
Since
Inception
(5/19/10) |
|
Return Before Taxes | -4.48% | 4.88% |
Return After Taxes on Distributions | -5.13% | 4.15% |
Return After Taxes on Distributions and Sale of Fund Shares | -2.51% | 3.50% |
Barclays
Global Aggregate ex-USD > $1B: Corporate Bond Index
(Index returns reflect no deduction for fees, expenses or taxes) |
-4.05% | 5.34% |
Investment Objective |
The SPDR Barclays Emerging Markets Local Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the fixed-rate local currency sovereign debt of emerging market countries. |
Management fees | 0.50% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.50% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$51 | $160 | $280 | $628 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -12.70%. |
One Year |
Since
Inception
(2/23/11) |
|
Return Before Taxes | -4.01% | 0.90% |
Return After Taxes on Distributions | -4.02% | -0.01% |
Return After Taxes on Distributions and Sale of Fund Shares | -2.18% | 0.40% |
Barclays
EM Local Currency Government Diversified Index
(Index returns reflect no deduction for fees, expenses or taxes) |
-3.40% | 1.83% |
Investment Objective |
The SPDR Barclays High Yield Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the U.S. high yield corporate bond market. |
Management fees | 0.40% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.40% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$41 | $128 | $224 | $505 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -4.29%. |
One Year | Five Years |
Since
Inception
(11/28/07) |
|
Return Before Taxes | 1.15% | 7.88% | 6.28% |
Return After Taxes on Distributions | -1.32% | 4.91% | 2.90% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.68% | 4.94% | 3.41% |
Barclays
High Yield Very Liquid Index
(Index returns reflect no deduction for fees, expenses or taxes) |
2.10% | 8.91% | 8.74% |
Investment Objective |
The SPDR Barclays International High Yield Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the high yield corporate bond market of non-US issuers. |
Management fees | 0.40% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.40% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$41 | $128 | $224 | $505 |
Investment Objective |
The SPDR Barclays Short Term High Yield Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the U.S. high yield short term corporate bond market. |
Management fees | 0.40% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.40% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$41 | $128 | $224 | $505 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -3.81%. |
One Year |
Since
Inception
(3/14/12) |
|
Return Before Taxes | -0.73% | 4.39% |
Return After Taxes on Distributions | -2.95% | 2.04% |
Return After Taxes on Distributions and Sale of Fund Shares | -0.39% | 2.38% |
Barclays
US High Yield 350MN Cash Pay 0-5YR 2% Capped Index
(Index returns reflect no deduction for fees, expenses or taxes) |
0.47% | 5.73% |
Investment Objective |
The SPDR Barclays Investment Grade Floating Rate ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the market for U.S. dollar-denominated, investment grade floating rate notes with maturities greater than or equal to one month and less than five years. |
Management fees | 0.15% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was 0.09%. |
One Year |
Since
Inception
(11/30/11) |
|
Return Before Taxes | 0.39% | 1.54% |
Return After Taxes on Distributions | 0.16% | 1.16% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.22% | 1.03% |
Barclays
U.S. Dollar Floating Rate Note < 5 Years Index
(Index returns reflect no deduction for fees, expenses or taxes) |
0.61% | 1.81% |
Investment Objective |
The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the emerging market senior and secured corporate debt market. |
Management fees | 0.50% |
Distribution and service (12b-1) fees 1 | 0.00% |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.50% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
Year 1 | Year 3 | Year 5 | Year 10 |
$51 | $160 | $280 | $628 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -1.91%. |
One Year |
Since
Inception
(6/18/12) |
|
Return Before Taxes | 3.25% | 3.13% |
Return After Taxes on Distributions | 1.35% | 1.13% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.86% | 1.53% |
BofA
Merrill Lynch Emerging Markets Diversified Corporate Index
(Index returns reflect no deduction for fees, expenses or taxes) |
3.22% | 3.71% |
Investment Objective |
The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the U.S. crossover corporate bond market. |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | SSGA Funds Management, Inc. (the “Adviser”) has contractually agreed to waive its advisory fee and reimburse certain expenses, until October 31, 2016, so that the Net annual Fund operating expenses of the Fund will be limited to 0.30% of the Fund's average daily net assets before application of any fees and expenses not paid by the Adviser under the Investment Advisory Agreement. Such fees and expenses paid by the Adviser are limited to certain direct operating expenses of the Fund and, therefore, do not include the Fund's “acquired fund fees and expenses,” if any. The contractual fee waiver does not provide for the recoupment by the Adviser of any fees the Adviser previously waived. The Adviser may continue the waiver from year to year, but there is no guarantee that the Adviser will do so and after October 31, 2016, it may be cancelled or modified at any time. |
Year 1 | Year 3 | Year 5 | Year 10 |
$31 | $118 | $214 | $495 |
* | As of September 30, 2015, the Fund's Calendar Year-To-Date return was -1.30%. |
One Year |
Since
Inception
(6/18/12) |
|
Return Before Taxes | 6.04% | 5.78% |
Return After Taxes on Distributions | 4.26% | 3.99% |
Return After Taxes on Distributions and Sale of Fund Shares | 3.42% | 3.64% |
BofA
Merrill Lynch US Diversified Crossover Corporate Index
(Index returns reflect no deduction for fees, expenses or taxes) |
6.44% | 6.11% |
Fund Name | SPDR Barclays 1-3 Month T-Bill ETF | SPDR Barclays TIPS ETF | SPDR Barclays 0-5 Year TIPS ETF | SPDR Barclays 1-10 Year TIPS ETF | SPDR Barclays Short Term Treasury ETF | SPDR Barclays Intermediate Term Treasury ETF | SPDR Barclays Long Term Treasury ETF | SPDR Barclays Short Term Corporate Bond ETF |
Below Investment Grade Securities Risk | ||||||||
Build America Bonds Risk | ||||||||
California State-Specific Risk | ||||||||
Call/Prepayment Risk | x | x | x | x | x | x | x | x |
Consumer Discretionary Sector Risk | ||||||||
Convertible Securities Risk | ||||||||
Counterparty Risk | ||||||||
Credit Risk | x | x | x | x | x | x | x | x |
Currency Risk | ||||||||
Debt Securities Risk | x | x | x | x | x | x | x | x |
Derivatives Risk | ||||||||
Emerging Markets Risk | ||||||||
Extension Risk | x | x | x | x | x | x | x | x |
Financial Sector Risk | x | |||||||
Geographic Focus Risk | ||||||||
European Economic Risk | ||||||||
Japan | ||||||||
United Kingdom | ||||||||
Health Care Sector Risk | ||||||||
Income Risk | x | x | x | x | x | x | x | x |
Index Tracking Risk | x | x | x | x | x | x | x | x |
Industrial Sector Risk | x | |||||||
Inflation-Indexed Securities Risk | x | x | x | |||||
Interest Rate Risk | x | x | x | x | x | x | x | x |
Interest Rate Risk – Preferred Securities | ||||||||
Issuer Risk – Preferred Securities | ||||||||
Liquidity Risk | x | x | x | x | x | x | x | x |
Market Risk | x | x | x | x | x | x | x | x |
Mortgage-Related and Other Asset-Backed Securities Risk | ||||||||
Municipal Obligations Risk | ||||||||
New York State-Specific Risk |
Fund Name | SPDR Barclays 1-3 Month T-Bill ETF | SPDR Barclays TIPS ETF | SPDR Barclays 0-5 Year TIPS ETF | SPDR Barclays 1-10 Year TIPS ETF | SPDR Barclays Short Term Treasury ETF | SPDR Barclays Intermediate Term Treasury ETF | SPDR Barclays Long Term Treasury ETF | SPDR Barclays Short Term Corporate Bond ETF |
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | x | |||||||
Russian Sanctions Risk | ||||||||
Passive Strategy/Index Risk | x | x | x | x | x | x | x | x |
Political Risk | ||||||||
Portfolio Turnover Risk | x | |||||||
Preferred Securities Risk | ||||||||
Private Activity Bonds Risk | ||||||||
Puerto Rico Specific Risk | ||||||||
Reinvestment Risk | x | x | x | x | x | x | x | x |
Restricted Securities Risk | ||||||||
Risk of Investments in Other Pools | ||||||||
Settlement Risk | x | |||||||
Sovereign Debt Obligations Risk | ||||||||
Tax Exemption Risk | ||||||||
Technology Sector Risk | ||||||||
Unconstrained Sector Risk | ||||||||
U.S. Government Securities Risk | ||||||||
U.S. Treasury Obligations Risk | x | x | x | x | x | x | x | |
Utilities Sector Risk | x | |||||||
Valuation Risk | x | x | x | x | x | x | x | x |
Variable and Floating Rate Securities Risk | ||||||||
When-Issued, TBA and Delayed Delivery Securities Risk |
Fund Name | SPDR Barclays Intermediate Term Corporate Bond ETF | SPDR Barclays Long Term Corporate Bond ETF | SPDR Barclays Issuer Scored Corporate Bond ETF | SPDR Barclays Convertible Securities ETF | SPDR Barclays Mortgage Backed Bond ETF | SPDR Barclays Aggregate Bond ETF | SPDR Nuveen Barclays Municipal Bond ETF | SPDR Nuveen Barclays California Municipal Bond ETF |
Below Investment Grade Securities Risk | ||||||||
Build America Bonds Risk | ||||||||
California State-Specific Risk | x | |||||||
Call/Prepayment Risk | x | x | x | x | x | x | x | x |
Consumer Discretionary Sector Risk | x | |||||||
Convertible Securities Risk | x | |||||||
Counterparty Risk | ||||||||
Credit Risk | x | x | x | x | x | x | x | x |
Currency Risk | ||||||||
Debt Securities Risk | x | x | x | x | x | x | x | x |
Derivatives Risk | ||||||||
Emerging Markets Risk | ||||||||
Extension Risk | x | x | x | x | x | x | x | x |
Financial Sector Risk | x | x | x | x | ||||
Geographic Focus Risk | ||||||||
European Economic Risk | ||||||||
Japan | ||||||||
United Kingdom | ||||||||
Health Care Sector Risk | ||||||||
Income Risk | x | x | x | x | x | x | x | x |
Index Tracking Risk | x | x | x | x | x | x | x | x |
Industrial Sector Risk | x | x | x | |||||
Inflation-Indexed Securities Risk | ||||||||
Interest Rate Risk | x | x | x | x | x | x | x | |
Interest Rate Risk – Preferred Securities | x | |||||||
Issuer Risk – Preferred Securities | x | |||||||
Liquidity Risk | x | x | x | x | x | x | x | x |
Market Risk | x | x | x | x | x | x | x | x |
Mortgage-Related and Other Asset-Backed Securities Risk | x | x | ||||||
Municipal Obligations Risk | x | x | ||||||
New York State-Specific Risk |
Fund Name | SPDR Barclays Intermediate Term Corporate Bond ETF | SPDR Barclays Long Term Corporate Bond ETF | SPDR Barclays Issuer Scored Corporate Bond ETF | SPDR Barclays Convertible Securities ETF | SPDR Barclays Mortgage Backed Bond ETF | SPDR Barclays Aggregate Bond ETF | SPDR Nuveen Barclays Municipal Bond ETF | SPDR Nuveen Barclays California Municipal Bond ETF |
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | x | x | x | x | ||||
Russian Sanctions Risk | ||||||||
Passive Strategy/Index Risk | x | x | x | x | x | x | x | x |
Political Risk | x | x | ||||||
Portfolio Turnover Risk | x | |||||||
Preferred Securities Risk | x | |||||||
Private Activity Bonds Risk | ||||||||
Puerto Rico Specific Risk | ||||||||
Reinvestment Risk | x | x | x | x | x | x | x | x |
Restricted Securities Risk | x | x | x | |||||
Risk of Investments in Other Pools | x | x | ||||||
Settlement Risk | x | x | x | x | ||||
Sovereign Debt Obligations Risk | ||||||||
Tax Exemption Risk | x | x | ||||||
Technology Sector Risk | x | |||||||
Unconstrained Sector Risk | x | |||||||
U.S. Government Securities Risk | x | x | ||||||
U.S. Treasury Obligations Risk | ||||||||
Utilities Sector Risk | x | x | x | |||||
Valuation Risk | x | x | x | x | x | x | x | x |
Variable and Floating Rate Securities Risk | ||||||||
When-Issued, TBA and Delayed Delivery Securities Risk | x | x |
Fund Name | SPDR Nuveen Barclays New York Municipal Bond ETF | SPDR Nuveen Barclays Short Term Municipal Bond ETF | SPDR Nuveen S&P High Yield Municipal Bond ETF | SPDR Nuveen Barclays Build America Bond ETF | SPDR DB International Government Inflation-Protected Bond ETF | SPDR Barclays Short Term International Treasury Bond ETF | SPDR Barclays International Treasury Bond ETF | SPDR Barclays International Corporate Bond ETF |
Below Investment Grade Securities Risk | x | |||||||
Build America Bonds Risk | x | |||||||
California State-Specific Risk | x | |||||||
Call/Prepayment Risk | x | x | x | x | x | x | x | x |
Consumer Discretionary Sector Risk | ||||||||
Convertible Securities Risk | ||||||||
Counterparty Risk | x | x | x | x | ||||
Credit Risk | x | x | x | x | x | x | x | x |
Currency Risk | x | x | x | x | ||||
Debt Securities Risk | x | x | x | x | x | x | x | x |
Derivatives Risk | x | x | x | x | ||||
Emerging Markets Risk | x | x | x | |||||
Extension Risk | x | x | x | x | x | x | x | x |
Financial Sector Risk | x | |||||||
Geographic Focus Risk | x | x | x | x | ||||
European Economic Risk | x | x | x | x | ||||
Japan | x | x | ||||||
United Kingdom | x | |||||||
Health Care Sector Risk | ||||||||
Income Risk | x | x | x | x | x | x | x | x |
Index Tracking Risk | x | x | x | x | x | x | x | x |
Industrial Sector Risk | x | |||||||
Inflation-Indexed Securities Risk | x | |||||||
Interest Rate Risk | x | x | x | x | x | x | x | x |
Interest Rate Risk – Preferred Securities | ||||||||
Issuer Risk – Preferred Securities | ||||||||
Liquidity Risk | x | x | x | x | x | x | x | x |
Market Risk | x | x | x | x | x | x | x | x |
Mortgage-Related and Other Asset-Backed Securities Risk |
Fund Name | SPDR Nuveen Barclays New York Municipal Bond ETF | SPDR Nuveen Barclays Short Term Municipal Bond ETF | SPDR Nuveen S&P High Yield Municipal Bond ETF | SPDR Nuveen Barclays Build America Bond ETF | SPDR DB International Government Inflation-Protected Bond ETF | SPDR Barclays Short Term International Treasury Bond ETF | SPDR Barclays International Treasury Bond ETF | SPDR Barclays International Corporate Bond ETF |
Municipal Obligations Risk | x | x | x | x | ||||
New York State-Specific Risk | x | x | ||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | x | x | x | x | ||||
Russian Sanctions Risk | x | x | ||||||
Passive Strategy/Index Risk | x | x | x | x | x | x | x | x |
Political Risk | x | x | x | |||||
Portfolio Turnover Risk | ||||||||
Preferred Securities Risk | ||||||||
Private Activity Bonds Risk | x | |||||||
Puerto Rico Specific Risk | x | |||||||
Reinvestment Risk | x | x | x | x | x | x | x | x |
Restricted Securities Risk | x | |||||||
Risk of Investments in Other Pools | ||||||||
Settlement Risk | x | x | x | x | ||||
Sovereign Debt Obligations Risk | x | x | x | |||||
Tax Exemption Risk | x | x | x | |||||
Technology Sector Risk | ||||||||
Unconstrained Sector Risk | x | |||||||
U.S. Government Securities Risk | ||||||||
U.S. Treasury Obligations Risk | ||||||||
Utilities Sector Risk | ||||||||
Valuation Risk | x | x | x | x | x | x | x | x |
Variable and Floating Rate Securities Risk | ||||||||
When-Issued, TBA and Delayed Delivery Securities Risk |
Fund Name | SPDR Barclays Emerging Markets Local Bond ETF | SPDR Barclays High Yield Bond ETF | SPDR Barclays International High Yield Bond ETF | SPDR Barclays Short Term High Yield Bond ETF | SPDR Barclays Investment Grade Floating Rate ETF | SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF | SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
Below Investment Grade Securities Risk | x | x | x | x | x | x | |
Build America Bonds Risk | |||||||
California State-Specific Risk | |||||||
Call/Prepayment Risk | x | x | x | x | x | x | x |
Consumer Discretionary Sector Risk | |||||||
Convertible Securities Risk | |||||||
Counterparty Risk | x | ||||||
Credit Risk | x | x | x | x | x | x | x |
Currency Risk | x | x | |||||
Debt Securities Risk | x | x | x | x | x | x | x |
Derivatives Risk | x | ||||||
Emerging Markets Risk | x | x | x | ||||
Extension Risk | x | x | x | x | x | x | x |
Financial Sector Risk | x | x | x | x | x | x | |
Geographic Focus Risk | x | x | x | x | x | ||
European Economic Risk | x | ||||||
Japan | |||||||
United Kingdom | |||||||
Health Care Sector Risk | |||||||
Income Risk | x | x | x | x | x | x | x |
Index Tracking Risk | x | x | x | x | x | x | x |
Industrial Sector Risk | x | x | x | x | x | x | |
Inflation-Indexed Securities Risk | |||||||
Interest Rate Risk | x | x | x | x | x | x | x |
Interest Rate Risk – Preferred Securities | |||||||
Issuer Risk – Preferred Securities | |||||||
Liquidity Risk | x | x | x | x | x | x | x |
Market Risk | x | x | x | x | x | x | x |
Mortgage-Related and Other Asset-Backed Securities Risk | |||||||
Municipal Obligations Risk |
Fund Name | SPDR Barclays Emerging Markets Local Bond ETF | SPDR Barclays High Yield Bond ETF | SPDR Barclays International High Yield Bond ETF | SPDR Barclays Short Term High Yield Bond ETF | SPDR Barclays Investment Grade Floating Rate ETF | SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF | SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
New York State-Specific Risk | |||||||
Non-Diversification Risk | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | x | x | x | x | x | ||
Russian Sanctions Risk | x | x | x | ||||
Passive Strategy/Index Risk | x | x | x | x | x | x | x |
Political Risk | |||||||
Portfolio Turnover Risk | |||||||
Preferred Securities Risk | |||||||
Private Activity Bonds Risk | |||||||
Puerto Rico Specific Risk | |||||||
Reinvestment Risk | x | x | x | x | x | x | x |
Restricted Securities Risk | x | x | x | ||||
Risk of Investments in Other Pools | |||||||
Settlement Risk | x | x | x | x | x | ||
Sovereign Debt Obligations Risk | x | ||||||
Tax Exemption Risk | |||||||
Technology Sector Risk | |||||||
Unconstrained Sector Risk | x | x | x | x | |||
U.S. Government Securities Risk | |||||||
U.S. Treasury Obligations Risk | |||||||
Utilities Sector Risk | x | x | |||||
Valuation Risk | x | x | x | x | x | x | x |
Variable and Floating Rate Securities Risk | x | ||||||
When-Issued, TBA and Delayed Delivery Securities Risk |
SPDR Barclays 1-3 Month T-Bill
ETF
|
0.1345 % |
SPDR Barclays TIPS
ETF
|
0.1700 % (4) |
SPDR Barclays 0-5 Year TIPS
ETF
|
0.1500 % |
SPDR Barclays 1-10 Year TIPS
ETF
|
0.1500 % |
SPDR Barclays Short Term Treasury
ETF
|
0.1100 % (4) |
SPDR Barclays Intermediate Term Treasury
ETF
|
0.1200 % (4) |
SPDR Barclays Long Term Treasury
ETF
|
0.1100 % (4) |
SPDR Barclays Short Term Corporate Bond
ETF
|
0.1200 % (4) |
SPDR Barclays Intermediate Term Corporate
|
|
Bond
ETF
|
0.1400 % (4) |
SPDR Barclays Long Term Corporate Bond
ETF
|
0.1300 % (4) |
SPDR Barclays Issuer Scored Corporate Bond
ETF
|
0.1600 % |
SPDR Barclays Convertible Securities
ETF
|
0.4000 % |
SPDR Barclays Mortgage Backed Bond
ETF
|
0.2000 % (3) |
SPDR Barclays Aggregate Bond
ETF
|
0.1400 % (3)(4) |
SPDR Nuveen Barclays Municipal Bond
ETF
|
0.3000 % (1) |
SPDR Nuveen Barclays California Municipal
|
|
Bond
ETF
|
0.2000 % |
SPDR Nuveen Barclays New York Municipal
|
|
Bond
ETF
|
0.2000 % |
SPDR Nuveen Barclays Short Term Municipal
|
|
Bond
ETF
|
0.2000 % |
SPDR Nuveen S&P High Yield Municipal Bond
ETF
|
0.5000 % (1) |
SPDR Nuveen Barclays Build America Bond
ETF
|
0.3500 % |
SPDR DB International Government Inflation-Protected Bond
ETF
|
0.5000 % |
SPDR Barclays Short Term International Treasury
|
|
Bond
ETF
|
0.3500 % |
SPDR Barclays International Treasury Bond
ETF
|
0.5000 % |
SPDR Barclays International Corporate Bond
ETF
|
0.5300 % (4) |
SPDR Barclays Emerging Markets Local Bond
ETF
|
0.5000 % |
SPDR Barclays High Yield Bond
ETF
|
0.4000 % |
SPDR Barclays International High Yield Bond
ETF
|
0.4000 % |
SPDR Barclays Short Term High Yield Bond
ETF
|
0.4000 % |
SPDR Barclays Investment Grade Floating Rate
ETF
|
0.1500 % |
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond
ETF
|
0.5000 % |
SPDR BofA Merrill Lynch Crossover Corporate Bond
ETF
|
0.4000 % (2) |
(1) | The Adviser has contractually agreed to waive its advisory fee and reimburse certain expenses, until October 31, 2016, so that the Net Annual Fund Operating Expenses of the SPDR Nuveen Barclays Municipal Bond ETF and SPDR Nuveen S&P High Yield Municipal Bond ETF are limited to 0.2300% and 0.4500%, respectively, of the applicable Fund's average daily net assets before application of any extraordinary expenses or acquired fund fees and expenses. The Adviser may continue each waiver from year to year, but there is no guarantee that the Adviser will do so and after October 31, 2016, any or all waivers may be cancelled or modified at any time. |
(2) | The Adviser has contractually agreed to waive its advisory fee and reimburse certain expenses, until October 31, 2016, so that the Net Annual Fund Operating Expenses of the SPDR BofA Merrill Lynch Crossover Corporate Bond ETF is limited to 0.30% of the Fund's average daily net assets before application of any fees and expenses not paid by the Adviser under the Investment Advisory Agreement. Such fees and expenses paid by the Adviser are limited to certain direct operating expenses of the Fund and, therefore, do not include the Fund's acquired fund fees and expenses, if any. The contractual fee waiver does not provide for the recoupment by the Adviser of any fees the Adviser previously waived. The Adviser may continue the waiver after the period, but there is no guarantee that the Adviser will do so and after October 31, 2016, it may be cancelled or modified at any time. |
(3) | Effective July 1, 2015, the Adviser has contractually agreed to waive its management fee and/or reimburse expenses in an amount equal to any acquired fund fees and expenses (excluding holdings in acquired funds for cash management purposes, if any). This waiver and/or reimbursement does not provide for the recoupment by the Adviser of any amounts waived or reimbursed. This waiver and/or reimbursement may not be terminated except with the approval of the Fund's Board of Trustees. |
(4) | Prior to February 3, 2015, the annual fee paid by the SPDR Barclays TIPS ETF, SPDR Barclays Short Term Treasury ETF, SPDR Barclays Intermediate Term Treasury ETF, SPDR Barclays Long Term Treasury ETF, SPDR Barclays Short Term Corporate Bond ETF, SPDR Barclays Intermediate Term Corporate Bond ETF, SPDR Barclays Long Term Corporate Bond ETF, SPDR Barclays Aggregate Bond ETF and SPDR Barclays International Corporate Bond ETF was 0.1845%, 0.1200%, 0.1345%, 0.1345%, 0.1245%, 0.1500%, 0.1500%, 0.1845% and 0.5500% of the Fund's average daily net assets, respectively. |
Portfolio Managers | Fund |
Todd Bean, Steve Meier and Jeff St.
Peters
|
SPDR Barclays 1-3 Month T-Bill ETF |
Portfolio Managers | Fund |
Peter Breault, Mahesh Jayakumar and Cynthia
Moy
|
SPDR Barclays TIPS ETF, SPDR Barclays 1-10 Year TIPS ETF, SPDR DB International Government Inflation-Protected Bond ETF, SPDR Barclays 0-5 Year TIPS ETF |
Patrick Bresnehan, Kyle Kelly and Christopher
DiStefano
|
SPDR Barclays Short Term Corporate Bond ETF, SPDR Barclays Intermediate Term Corporate Bond ETF, SPDR Barclays Long Term Corporate Bond ETF, SPDR Barclays Issuer Scored Corporate Bond ETF |
Mahesh Jayakumar, Joanna Mauro and Karen
Tsang
|
SPDR Barclays Short Term Treasury ETF, SPDR Barclays Intermediate Term Treasury ETF, SPDR Barclays Long Term Treasury ETF |
Marc DiCosimo, Karen Tsang and Michael
Przygoda
|
SPDR Barclays Mortgage Backed Bond ETF |
Peter Breault, Marc DiCosimo and Michael
Przygoda
|
SPDR Barclays Aggregate Bond ETF |
Peter Breault, Mahesh Jayakumar and Joanna
Mauro
|
SPDR Barclays Short Term International Treasury Bond ETF, SPDR Barclays International Treasury Bond ETF |
Timothy Ryan and Steven
Hlavin
|
Municipal Bond ETFs |
Daniel Close, Timothy Ryan and Steven
Hlavin
|
SPDR Nuveen Barclays Build America Bond ETF |
Iwan Marais, Richard Darby-Dowman and Peter
Spano
|
SPDR Barclays International Corporate Bond ETF |
Abhishek Kumar, Peter Spano and Victoria
Husemeyer
|
SPDR Barclays Emerging Markets Local Bond ETF |
Thomas Connelley, Christopher DiStefano and Kyle
Kelly
|
SPDR Barclays Investment Grade Floating Rate ETF |
Michael Brunell, Mahesh Jayakumar and Kyle
Kelly
|
SPDR Barclays Convertible Securities ETF |
Michael Brunell, Kyle Kelly, Iwan Marais and Paul
Brown
|
SPDR Barclays International High Yield Bond ETF |
Patrick Bresnehan, Michael Brunell and Kyle
Kelly
|
SPDR Barclays High Yield Bond ETF, SPDR Barclays Short Term High Yield Bond ETF, SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
Bradley Sullivan, Michael Brunell and Kyle
Kelly
|
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
SPDR Barclays 1-3 Month T-Bill ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 45.76 | $ 45.80 | $ 45.82 | $ 45.85 | $ 45.85 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
(0.05) | (0.04) | (0.02) | (0.04) | 0.00 (2) | ||||
Net realized and unrealized gain
(loss)
(3)
|
0.04 | (0.04) | 0.01 | 0.01 | 0.00 (2) | ||||
Total from investment
operations
|
(0.01) | (0.08) | (0.01) | (0.03) | 0.00 (2) | ||||
Net equalization credits and
charges
(1)
|
(0.04) | 0.04 | (0.01) | 0.00 (2) | 0.00 (2) | ||||
Other
capital
(1)
|
— | — | — | — | — | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
— | — | — | 0.00 (2) | — | ||||
Total
distributions
|
— | — | — | — | — | ||||
Net asset value, end of
period
|
$ 45.71 | $ 45.76 | $ 45.80 | $ 45.82 | $ 45.85 | ||||
Total
return
(4)
|
(0.11)% | (0.09)% | (0.04)% | (0.08)% | 0.01% | ||||
Net assets, end of period (in
000's)
|
$1,403,188 | $979,258 | $1,580,101 | $1,539,512 | $1,008,816 | ||||
Ratio of expenses to average net
assets
|
0.14% | 0.14% | 0.14% | 0.14% | 0.15% | ||||
Ratio of net investment income (loss) to average net
assets
|
(0.12)% | (0.09)% | (0.05)% | (0.09)% | 0.00% (6) | ||||
Portfolio turnover
rate
(7)
|
620% | 577% | 584% | 619% | 628% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amount is less than $0.005 per share. |
(3) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Amount is less than 0.005% per share. |
(7) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Barclays TIPS ETF | SPDR Barclays 0-5 Year TIPS ETF | SPDR Barclays 1-10 Year TIPS ETF | ||||||||||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
Year Ended 6/30/11 |
Year Ended 6/30/15 |
For
the
Period 2/26/14*- 6/30/14 |
Year Ended 6/30/15 |
Year Ended 6/30/14 |
For
the
Period 5/29/13*- 6/30/13 |
|||||||||
$ 57.38 | $ 55.65 | $ 59.59 | $ 54.76 | $ 52.74 | $20.06 | $20.00 | $ 19.93 | $19.39 | $ 20.00 | |||||||||
(0.07) | 1.00 | 0.60 | 1.53 | 2.21 | (0.34) | 0.22 | (0.06) | 0.21 | (0.03) | |||||||||
(0.94) | 1.51 | (3.72) | 4.93 | 1.70 | (0.25) | 0.02 | (0.11) | 0.45 | (0.58) | |||||||||
(1.01) | 2.51 | (3.12) | 6.46 | 3.91 | (0.59) | 0.24 | (0.17) | 0.66 | (0.61) | |||||||||
(0.04) | (0.01) | 0.01 | 0.05 | 0.01 | 0.18 | — | (0.25) | (0.00) (2) | (0.00) (2) | |||||||||
— | — | — | 0.00 (2) | — | — | — | — | — | — | |||||||||
(0.46) | (0.77) | (0.83) | (1.68) | (1.90) | (0.13) | (0.18) | (0.22) | (0.12) | — | |||||||||
(0.46) | (0.77) | (0.83) | (1.68) | (1.90) | (0.13) | (0.18) | (0.22) | (0.12) | — | |||||||||
$ 55.87 | $ 57.38 | $ 55.65 | $ 59.59 | $ 54.76 | $19.52 | $20.06 | $ 19.29 | $19.93 | $ 19.39 | |||||||||
(1.84)% | 4.52% | (5.32)% | 12.03% | 7.55% | (2.01)% | 1.18% | (2.10)% | 3.42% | (3.07)% | |||||||||
$653,662 | $596,730 | $651,133 | $732,984 | $438,091 | $3,904 | $6,017 | $19,293 | $9,963 | $11,632 | |||||||||
0.17% | 0.19% | 0.19% | 0.19% | 0.20% | 0.15% | 0.15% (5) | 0.15% | 0.15% | 0.15% (5) | |||||||||
(0.12)% | 1.79% | 1.00% | 2.62% | 4.12% | (1.76)% | 3.21% (5) | (0.32)% | 1.06% | (1.85)% (5) | |||||||||
18% | 20% | 20% | 23% | 21% | 26% | 10% | 28% | 24% | 1% |
SPDR Barclays Short Term Treasury ETF | |||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
For
the
Period 11/30/11*- 6/30/12 |
||||
Net asset value, beginning of
period
|
$ 30.08 | $ 29.95 | $30.10 | $30.00 | |||
Income
(loss) from investment operations:
|
|||||||
Net investment income
(loss)
(1)
|
0.23 | 0.17 | 0.12 | 0.06 | |||
Net realized and unrealized gain
(loss)
(2)
|
0.12 | 0.13 | (0.15) | 0.09 | |||
Total from investment
operations
|
0.35 | 0.30 | (0.03) | 0.15 | |||
Net equalization credits and
charges
(1)
|
0.02 | 0.00 (3) | 0.00 (3) | — | |||
Other
capital
(1)
|
0.00 (3) | — | — | — | |||
Distributions
to shareholders from:
|
|||||||
Net investment
income
|
(0.22) | (0.17) | (0.12) | (0.05) | |||
Net realized
gains
|
(0.00) (3) | (0.00) (3) | — | — | |||
Total
distributions
|
(0.22) | (0.17) | (0.12) | (0.05) | |||
Net asset value, end of
period
|
$ 30.23 | $ 30.08 | $29.95 | $30.10 | |||
Total
return
(4)
|
1.23% | 1.00% | (0.10)% | 0.49% | |||
Net assets, end of period (in
000's)
|
$54,413 | $12,033 | $5,990 | $6,019 | |||
Ratio of expenses to average net
assets
|
0.11% | 0.12% | 0.12% | 0.12% (5) | |||
Ratio of net investment income (loss) to average net
assets
|
0.76% | 0.57% | 0.39% | 0.34% (5) | |||
Portfolio turnover
rate
(6)
|
35% | 40% | 38% | 24% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Barclays Intermediate Term Treasury ETF | SPDR Barclays Long Term Treasury ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 59.72 | $ 59.66 | $ 61.31 | $ 59.42 | $ 59.19 | $ 66.31 | $ 64.34 | $ 72.05 | $ 56.22 | $ 59.15 | |||||||||
0.68 | 0.69 | 0.90 | 1.07 | 1.17 | 1.87 | 1.86 | 1.75 | 1.92 | 2.17 | |||||||||
0.31 | 0.14 | (1.34) | 2.07 | 0.37 | 2.23 | 1.91 | (7.70) | 15.76 | (2.94) | |||||||||
0.99 | 0.83 | (0.44) | 3.14 | 1.54 | 4.10 | 3.77 | (5.95) | 17.68 | (0.77) | |||||||||
0.02 | (0.01) | (0.01) | (0.01) | (0.01) | 0.04 | 0.04 | (0.01) | 0.14 | 0.01 | |||||||||
0.00 (3) | 0.00 (3) | — | 0.00 (3) | 0.00 (3) | 0.00 (3) | — | — | — | — | |||||||||
(0.67) | (0.71) | (0.91) | (1.08) | (1.18) | (1.90) | (1.84) | (1.75) | (1.99) | (2.17) | |||||||||
— | (0.05) | (0.29) | (0.16) | (0.12) | — | — | — | — | — | |||||||||
(0.67) | (0.76) | (1.20) | (1.24) | (1.30) | (1.90) | (1.84) | (1.75) | (1.99) | (2.17) | |||||||||
$ 60.06 | $ 59.72 | $ 59.66 | $ 61.31 | $ 59.42 | $ 68.55 | $ 66.31 | $ 64.34 | $ 72.05 | $ 56.22 | |||||||||
1.69% | 1.39% | (0.77)% | 5.30% | 2.62% | 6.21% | 6.16% | (8.44)% | 32.03% | (1.24)% | |||||||||
$294,311 | $167,232 | $173,012 | $196,216 | $213,929 | $164,531 | $86,209 | $57,908 | $64,844 | $22,488 | |||||||||
0.12% | 0.14% | 0.14% | 0.14% | 0.16% | 0.11% | 0.14% | 0.14% | 0.14% | 0.15% | |||||||||
1.13% | 1.16% | 1.48% | 1.75% | 1.98% | 2.60% | 2.95% | 2.49% | 2.85% | 3.79% | |||||||||
27% | 32% | 32% | 35% | 33% | 18% | 24% | 20% | 22% | 26% |
SPDR Barclays Short Term Corporate Bond ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 30.76 | $ 30.53 | $ 30.37 | $ 30.44 | $ 29.98 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
0.39 | 0.36 | 0.40 | 0.49 | 0.56 | ||||
Net realized and unrealized gain
(loss)
(2)
|
(0.16) | 0.29 | 0.17 | (0.06) | 0.48 | ||||
Total from investment
operations
|
0.23 | 0.65 | 0.57 | 0.43 | 1.04 | ||||
Net equalization credits and
charges
(1)
|
0.00 (3) | 0.00 (3) | 0.02 | 0.02 | 0.01 | ||||
Other
capital
(1)
|
0.00 (3) | 0.00 (3) | 0.01 | 0.04 | 0.00 (3) | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(0.38) | (0.36) | (0.41) | (0.50) | (0.56) | ||||
Net realized
gains
|
(0.03) | (0.06) | (0.03) | (0.06) | (0.03) | ||||
Total
distributions
|
(0.41) | (0.42) | (0.44) | (0.56) | (0.59) | ||||
Net asset value, end of
period
|
$ 30.58 | $ 30.76 | $ 30.53 | $ 30.37 | $ 30.44 | ||||
Total
return
(4)
|
0.74% | 2.14% | 1.99% | 1.63% | 3.60% | ||||
Net assets, end of period (in
000's)
|
$3,962,876 | $3,448,186 | $2,940,064 | $1,105,432 | $337,925 | ||||
Ratio of expenses to average net
assets
|
0.12% | 0.13% | 0.13% | 0.13% | 0.13% | ||||
Ratio of net investment income (loss) to average net
assets
|
1.27% | 1.18% | 1.30% | 1.61% | 1.83% | ||||
Portfolio turnover
rate
(5)
|
46% | 43% | 46% | 50% | 46% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(5) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Barclays Intermediate Term Corporate Bond ETF | SPDR Barclays Long Term Corporate Bond ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 34.34 | $ 33.53 | $ 33.89 | $ 33.03 | $ 32.50 | $ 40.46 | $ 37.41 | $ 39.92 | $ 35.55 | $ 36.57 | |||||||||
0.89 | 0.92 | 1.00 | 1.12 | 1.14 | 1.75 | 1.79 | 1.81 | 1.92 | 2.00 | |||||||||
(0.45) | 0.89 | (0.31) | 0.92 | 0.66 | (2.21) | 2.96 | (2.60) | 4.10 | (0.22) | |||||||||
0.44 | 1.81 | 0.69 | 2.04 | 1.80 | (0.46) | 4.75 | (0.79) | 6.02 | 1.78 | |||||||||
0.02 | 0.00 (3) | 0.02 | 0.02 | 0.03 | 0.05 | 0.04 | 0.01 | 0.07 | 0.02 | |||||||||
0.00 (3) | 0.00 (3) | 0.02 | 0.02 | 0.00 (3) | 0.08 | 0.06 | 0.22 | 0.20 | 0.02 | |||||||||
(0.90) | (0.92) | (1.02) | (1.12) | (1.15) | (1.75) | (1.80) | (1.82) | (1.92) | (2.01) | |||||||||
— | (0.08) | (0.07) | (0.10) | (0.15) | — | — | (0.13) | — | (0.83) | |||||||||
(0.90) | (1.00) | (1.09) | (1.22) | (1.30) | (1.75) | (1.80) | (1.95) | (1.92) | (2.84) | |||||||||
$ 33.90 | $ 34.34 | $ 33.53 | $ 33.89 | $ 33.03 | $ 38.38 | $ 40.46 | $ 37.41 | $ 39.92 | $ 35.55 | |||||||||
1.34% | 5.47% | 2.10% | 6.41% | 5.72% | (0.96)% | 13.44% | (1.74)% | 18.04% | 5.20% | |||||||||
$752,581 | $456,714 | $399,041 | $281,288 | $191,565 | $337,777 | $161,829 | $97,258 | $87,834 | $35,553 | |||||||||
0.14% | 0.15% | 0.15% | 0.15% | 0.16% | 0.14% | 0.15% | 0.15% | 0.15% | 0.17% | |||||||||
2.61% | 2.72% | 2.89% | 3.34% | 3.45% | 4.29% | 4.69% | 4.42% | 4.97% | 5.49% | |||||||||
13% | 13% | 16% | 15% | 37% | 10% | 8% | 24% | 21% | 58% |
SPDR Barclays Issuer Scored Corporate Bond ETF | |||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
For
the
Period 4/6/11*- 6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 32.28 | $ 31.22 | $ 32.02 | $ 30.52 | $ 30.00 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
0.96 | 1.08 | 1.08 | 1.11 | 0.24 | ||||
Net realized and unrealized gain
(loss)
(2)
|
(0.88) | 1.11 | (0.81) | 1.40 | 0.32 | ||||
Total from investment
operations
|
0.08 | 2.19 | 0.27 | 2.51 | 0.56 | ||||
Net equalization credits and
charges
(1)
|
0.01 | (0.00) (3) | 0.03 | 0.01 | — | ||||
Other
capital
(1)
|
0.14 | 0.03 | 0.08 | 0.09 | 0.11 | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(0.98) | (1.08) | (1.08) | (1.11) | (0.15) | ||||
Net realized
gains
|
— | (0.08) | (0.10) | — | — | ||||
Total
distributions
|
(0.98) | (1.16) | (1.18) | (1.11) | (0.15) | ||||
Net asset value, end of
period
|
$ 31.53 | $ 32.28 | $ 31.22 | $ 32.02 | $ 30.52 | ||||
Total
return
(4)
|
0.67% | 7.28% | 1.11% | 8.72% | 2.23% | ||||
Net assets, end of period (in
000's)
|
$25,220 | $32,285 | $34,340 | $22,417 | $12,208 | ||||
Ratio of expenses to average net
assets
|
0.16% | 0.16% | 0.16% | 0.16% | 0.16% (5) | ||||
Ratio of net investment income (loss) to average net
assets
|
2.98% | 3.42% | 3.34% | 3.53% | 3.42% (5) | ||||
Portfolio turnover
rate
(6)
|
8% | 22% | 11% | 17% | 6% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Barclays Convertible Securities ETF | SPDR Barclays Mortgage Backed Bond ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 50.30 | $ 42.54 | $ 37.67 | $ 41.55 | $ 36.06 | $ 27.41 | $ 26.61 | $ 27.68 | $ 27.35 | $ 27.36 | |||||||||
0.37 | (0.00) | (0.19) | 0.37 | 0.68 | 0.79 | 0.53 | 0.11 | 0.41 | 0.48 | |||||||||
0.22 | 9.20 | 6.39 | (2.45) | 6.52 | (0.22) | 0.69 | (0.62) | 0.85 | 0.50 | |||||||||
0.59 | 9.20 | 6.20 | (2.08) | 7.20 | 0.57 | 1.22 | (0.51) | 1.26 | 0.98 | |||||||||
(0.05) | 0.14 | 0.31 | (0.00) (3) | 0.04 | (0.01) | 0.01 | (0.00) (3) | 0.00 (3) | 0.02 | |||||||||
0.01 | 0.01 | 0.00 (3) | 0.01 | 0.00 (3) | (0.00) (3) | 0.02 | 0.02 | 0.02 | 0.06 | |||||||||
(2.12) | (1.59) | (1.64) | (1.29) | (1.63) | (0.77) | (0.44) | (0.13) | (0.43) | (0.51) | |||||||||
(1.29) | — | — | (0.52) | (0.12) | (0.27) | (0.01) | (0.45) | (0.52) | (0.56) | |||||||||
(3.41) | (1.59) | (1.64) | (1.81) | (1.75) | (1.04) | (0.45) | (0.58) | (0.95) | (1.07) | |||||||||
$ 47.44 | $ 50.30 | $ 42.54 | $ 37.67 | $ 41.55 | $ 26.93 | $ 27.41 | $ 26.61 | $ 27.68 | $ 27.35 | |||||||||
1.27% | 22.35% | 17.57% | (4.89)% | 20.38% | 2.03% | 4.75% | (1.80)% | 4.82% | 3.88% | |||||||||
$3,045,439 | $2,862,353 | $1,225,259 | $783,580 | $926,572 | $150,787 | $126,085 | $23,951 | $38,746 | $35,556 | |||||||||
0.40% | 0.40% | 0.40% | 0.40% | 0.41% | 0.20% | 0.20% | 0.20% | 0.20% | 0.21% | |||||||||
0.75% | 0.00% | (0.47)% | 0.98% | 1.68% | 2.88% | 1.96% | 0.40% | 1.47% | 1.77% | |||||||||
38% | 40% | 34% | 17% | 33% | 221% | 379% | 544% | 1,489% | 1,107% |
SPDR Barclays Aggregate Bond ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 57.90 | $ 56.76 | $ 58.57 | $ 56.40 | $ 56.67 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
1.44 | 1.34 | 0.97 | 1.26 | 1.55 | ||||
Net realized and unrealized gain
(loss)
(2)
|
(0.45) | 1.08 | (1.52) | 2.68 | 0.58 | ||||
Total from investment
operations
|
0.99 | 2.42 | (0.55) | 3.94 | 2.13 | ||||
Net equalization credits and
charges
(1)
|
0.02 | 0.01 | 0.00 (3) | 0.04 | 0.01 | ||||
Other
capital
(1)
|
0.01 | 0.02 | 0.01 | 0.05 | 0.00 (3) | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(1.43) | (1.31) | (0.96) | (1.35) | (1.59) | ||||
Net realized
gains
|
— | — | (0.31) | (0.51) | (0.82) | ||||
Total
distributions
|
(1.43) | (1.31) | (1.27) | (1.86) | (2.41) | ||||
Net asset value, end of
period
|
$ 57.49 | $ 57.90 | $ 56.76 | $ 58.57 | $ 56.40 | ||||
Total
return
(4)
|
1.77% | 4.38% | (0.95)% | 7.29% | 3.83% | ||||
Net assets, end of period (in
000's)
|
$988,792 | $735,309 | $669,829 | $597,435 | $259,438 | ||||
Ratio of expenses to average net
assets
|
0.11% | 0.13% | 0.13% | 0.13% | 0.15% | ||||
Ratio of expenses to average net assets before
waivers
|
0.14% | 0.19% | 0.19% | 0.19% | 0.20% | ||||
Ratio of net investment income (loss) to average net
assets
|
2.48% | 2.35% | 1.65% | 2.17% | 2.74% | ||||
Portfolio turnover
rate
(5)
|
69% | 91% | 165% | 428% | 310% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(5) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Nuveen Barclays Municipal Bond ETF | SPDR Nuveen Barclays California Municipal Bond ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 23.72 | $ 23.02 | $ 24.16 | $ 22.75 | $ 22.94 | $ 23.47 | $ 22.94 | $ 24.34 | $ 22.19 | $ 22.53 | |||||||||
0.57 | 0.59 | 0.65 | 0.74 | 0.79 | 0.58 | 0.60 | 0.70 | 0.87 | 0.87 | |||||||||
0.03 | 0.84 | (0.87) | 1.48 | (0.05) | 0.17 | 1.15 | (0.87) | 2.16 | (0.19) | |||||||||
0.60 | 1.43 | (0.22) | 2.22 | 0.74 | 0.75 | 1.75 | (0.17) | 3.03 | 0.68 | |||||||||
0.01 | (0.00) (3) | 0.00 (3) | 0.01 | 0.00 (3) | 0.00 (3) | (0.01) | 0.01 | 0.00 (3) | 0.01 | |||||||||
0.00 (3) | 0.00 (3) | 0.01 | 0.00 (3) | — | 0.00 (3) | 0.00 (3) | 0.00 (3) | 0.00 (3) | 0.00 (3) | |||||||||
(0.57) | (0.59) | (0.65) | (0.75) | (0.79) | (0.57) | (0.61) | (0.70) | (0.86) | (0.86) | |||||||||
— | (0.14) | (0.28) | (0.07) | (0.14) | — | (0.60) | (0.54) | (0.02) | (0.17) | |||||||||
(0.57) | (0.73) | (0.93) | (0.82) | (0.93) | (0.57) | (1.21) | (1.24) | (0.88) | (1.03) | |||||||||
$ 23.76 | $ 23.72 | $ 23.02 | $ 24.16 | $ 22.75 | $ 23.65 | $ 23.47 | $ 22.94 | $ 24.34 | $ 22.19 | |||||||||
2.56% | 6.41% | (1.01)% | 9.95% | 3.33% | 3.22% | 7.92% | (0.85)% | 13.91% | 3.23% | |||||||||
$1,304,277 | $1,034,219 | $1,084,129 | $1,135,596 | $873,455 | $85,144 | $75,111 | $100,938 | $85,193 | $73,226 | |||||||||
0.23% | 0.23% | 0.23% | 0.23% | 0.22% | 0.20% | 0.20% | 0.20% | 0.20% | 0.20% | |||||||||
0.30% | 0.30% | 0.30% | 0.30% | 0.30% | 0.20% | 0.20% | 0.20% | 0.20% | 0.20% | |||||||||
2.37% | 2.58% | 2.69% | 3.14% | 3.46% | 2.43% | 2.63% | 2.88% | 3.68% | 3.92% | |||||||||
20% | 28% | 18% | 17% | 16% | 13% | 21% | 40% | 14% | 29% |
SPDR Nuveen Barclays New York Municipal Bond ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 23.00 | $ 22.75 | $ 23.80 | $ 22.34 | $ 22.66 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
0.57 | 0.61 | 0.67 | 0.77 | 0.76 | ||||
Net realized and unrealized gain
(loss)
(2)
|
0.13 | 0.86 | (0.87) | 1.46 | (0.20) | ||||
Total from investment
operations
|
0.70 | 1.47 | (0.20) | 2.23 | 0.56 | ||||
Net equalization credits and
charges
(1)
|
0.00 (3) | (0.01) | 0.00 (3) | 0.00 (3) | 0.00 (3) | ||||
Other
capital
(1)
|
0.00 (3) | — | 0.00 (3) | — | 0.00 (3) | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(0.57) | (0.61) | (0.68) | (0.77) | (0.76) | ||||
Net realized
gains
|
(0.04) | (0.60) | (0.17) | — | (0.12) | ||||
Total
distributions
|
(0.61) | (1.21) | (0.85) | (0.77) | (0.88) | ||||
Net asset value, end of
period
|
$ 23.09 | $ 23.00 | $ 22.75 | $ 23.80 | $ 22.34 | ||||
Total
return
(4)
|
3.05% | 6.72% | (1.01)% | 10.10% | 2.55% | ||||
Net assets, end of period (in
000's)
|
$30,016 | $25,303 | $31,849 | $28,557 | $24,575 | ||||
Ratio of expenses to average net
assets
|
0.20% | 0.20% | 0.20% | 0.20% | 0.20% | ||||
Ratio of expenses to average net assets before
waivers
|
0.20% | 0.20% | 0.20% | 0.20% | 0.20% | ||||
Ratio of net investment income (loss) to average net
assets
|
2.45% | 2.69% | 2.77% | 3.30% | 3.40% | ||||
Portfolio turnover
rate
(6)
|
23% | 32% | 36% | 24% | 37% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Nuveen Barclays Short Term Municipal Bond ETF | SPDR Nuveen S&P High Yield Municipal Bond ETF | |||||||||||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
Year Ended 6/30/11 |
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
For
the
Period 4/13/11*- 6/30/11 |
|||||||||
$ 24.36 | $ 24.03 | $ 24.39 | $ 24.20 | $ 24.08 | $ 56.28 | $ 54.67 | $ 56.05 | $ 52.25 | $ 50.00 | |||||||||
0.22 | 0.23 | 0.26 | 0.33 | 0.36 | 2.62 | 2.72 | 2.81 | 3.12 | 0.64 | |||||||||
(0.11) | 0.33 | (0.30) | 0.23 | 0.19 | (0.17) | 1.47 | (1.49) | 3.70 | 1.96 | |||||||||
0.11 | 0.56 | (0.04) | 0.56 | 0.55 | 2.45 | 4.19 | 1.32 | 6.82 | 2.60 | |||||||||
0.00 (3) | 0.00 (3) | 0.00 (3) | 0.00 (3) | 0.00 (3) | 0.03 | 0.05 | 0.07 | 0.10 | — | |||||||||
0.00 (3) | 0.00 (3) | 0.00 (3) | 0.00 (3) | 0.00 (3) | 0.01 | 0.01 | 0.01 | 0.01 | — | |||||||||
(0.22) | (0.23) | (0.27) | (0.33) | (0.36) | (2.56) | (2.64) | (2.70) | (3.01) | (0.35) | |||||||||
(0.00) (3) | — | (0.05) | (0.04) | (0.07) | — | — | (0.08) | (0.12) | — | |||||||||
(0.22) | (0.23) | (0.32) | (0.37) | (0.43) | (2.56) | (2.64) | (2.78) | (3.13) | (0.35) | |||||||||
$ 24.25 | $ 24.36 | $ 24.03 | $ 24.39 | $ 24.20 | $ 56.21 | $ 56.28 | $ 54.67 | $ 56.05 | $ 52.25 | |||||||||
0.46% | 2.31% | (0.20)% | 2.36% | 2.33% | 4.47% | 8.16% | 2.33% | 13.71% | 5.21% | |||||||||
$2,609,387 | $2,219,335 | $1,927,465 | $1,539,304 | $1,299,603 | $382,259 | $275,752 | $218,686 | $95,283 | $47,025 | |||||||||
0.20% | 0.20% | 0.20% | 0.20% | 0.20% | 0.45% | 0.45% | 0.45% | 0.45% | 0.45% (5) | |||||||||
0.20% | 0.20% | 0.20% | 0.20% | 0.20% | 0.50% | 0.50% | 0.50% | 0.50% | 0.50% (5) | |||||||||
0.91% | 0.93% | 1.07% | 1.34% | 1.49% | 4.58% | 5.08% | 4.84% | 5.78% | 5.86% (5) | |||||||||
23% | 17% | 20% | 23% | 25% | 38% | 21% | 7% | 24% | 33% |
SPDR Nuveen Barclays Build America Bond ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 60.85 | $ 56.07 | $ 60.05 | $ 50.97 | $ 50.73 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
2.41 | 2.56 | 2.60 | 2.65 | 2.74 | ||||
Net realized and unrealized gain
(loss)
(2)
|
(0.88) | 4.90 | (4.07) | 8.92 | 0.16 | ||||
Total from investment
operations
|
1.53 | 7.46 | (1.47) | 11.57 | 2.90 | ||||
Net equalization credits and
charges
(1)
|
0.04 | (0.12) | (0.03) | 0.18 | 0.06 | ||||
Other
capital
(1)
|
0.03 | 0.01 | 0.11 | 0.04 | 0.02 | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(2.42) | (2.57) | (2.59) | (2.71) | (2.73) | ||||
Net realized
gains
|
— | — | — | — | (0.01) | ||||
Return of
capital
|
— | — | — | — | — | ||||
Total
distributions
|
(2.42) | (2.57) | (2.59) | (2.71) | (2.74) | ||||
Net asset value, end of
period
|
$ 60.03 | $ 60.85 | $ 56.07 | $ 60.05 | $ 50.97 | ||||
Total
return
(4)
|
2.57% | 13.60% | (2.60)% | 23.52% | 6.22% | ||||
Net assets, end of period (in
000's)
|
$72,034 | $42,596 | $78,493 | $102,078 | $30,583 | ||||
Ratio of expenses to average net
assets
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Ratio of net investment income (loss) to average net
assets
|
3.85% | 4.54% | 4.24% | 4.57% | 5.54% | ||||
Portfolio turnover
rate
(5)
|
59% | 9% | 46% | 112% | 58% |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Broker commission charges are not included in this calculation. |
(5) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR DB International Government Inflation-Protected Bond ETF | SPDR Barclays Short Term International Treasury Bond ETF | |||||||||||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||||||
$ 62.28 | $ 57.56 | $ 59.24 | $ 61.86 | $ 52.18 | $ 36.48 | $ 34.67 | $ 35.80 | $ 39.24 | $ 33.73 | |||||||||
1.36 | 1.99 | 1.86 | 2.56 | 3.19 | 0.19 | 0.30 | 0.40 | 0.54 | 0.51 | |||||||||
(8.43) | 4.20 | (1.44) | (3.10) | 7.90 | (5.91) | 1.53 | (1.53) | (2.73) | 4.97 | |||||||||
(7.07) | 6.19 | 0.42 | (0.54) | 11.09 | (5.72) | 1.83 | (1.13) | (2.19) | 5.48 | |||||||||
— | — | — | — | — | (0.01) | — | — | — | — | |||||||||
0.10 | 0.05 | 0.10 | 0.05 | 0.09 | 0.02 | 0.01 | 0.00 (3) | 0.01 | 0.03 | |||||||||
(0.43) | (1.49) | (1.62) | (2.13) | (1.50) | (0.01) | (0.00) (3) | (0.00) (3) | (1.26) | — | |||||||||
(0.27) | (0.03) | — | — | — | (0.05) | (0.03) | — | — | — | |||||||||
— | — | (0.58) | — | — | — | — | — | — | — | |||||||||
(0.70) | (1.52) | (2.20) | (2.13) | (1.50) | (0.06) | (0.03) | — | (1.26) | — | |||||||||
$ 54.61 | $ 62.28 | $ 57.56 | $ 59.24 | $ 61.86 | $ 30.71 | $ 36.48 | $ 34.67 | $ 35.80 | $ 39.24 | |||||||||
(11.25)% | 10.97% | 0.67% | (0.69)% | 21.61% | (15.67)% | 5.32% | (3.14)% | (5.59)% | 16.34% | |||||||||
$769,996 | $959,208 | $1,162,731 | $1,273,764 | $1,360,851 | $199,591 | $273,606 | $211,479 | $225,523 | $251,107 | |||||||||
0.50% | 0.50% | 0.50% | 0.50% | 0.52% | 0.35% | 0.35% | 0.35% | 0.35% | 0.36% | |||||||||
2.35% | 3.35% | 3.00% | 4.32% | 5.43% | 0.59% | 0.84% | 1.11% | 1.47% | 1.37% | |||||||||
36% | 19% | 43% | 40% | 23% | 83% | 83% | 71% | 116% | 85% |
SPDR Barclays International Treasury Bond ETF | |||||||||
Year
Ended
6/30/15 |
Year
Ended
6/30/14 |
Year
Ended
6/30/13 |
Year
Ended
6/30/12 |
Year
Ended
6/30/11 |
|||||
Net asset value, beginning of
period
|
$ 60.67 | $ 56.29 | $ 59.14 | $ 61.84 | $ 53.78 | ||||
Income
(loss) from investment operations:
|
|||||||||
Net investment income
(loss)
(1)
|
0.91 | 1.20 | 1.29 | 1.39 | 1.42 | ||||
Net realized and unrealized gain
(loss)
(2)
|
(8.73) | 4.09 | (2.93) | (1.79) | 7.09 | ||||
Total from investment
operations
|
(7.82) | 5.29 | (1.64) | (0.40) | 8.51 | ||||
Net equalization credits and
charges
(1)
|
(0.03) | — | — | — | — | ||||
Other
capital
(1)
|
0.01 | 0.01 | 0.01 | 0.03 | 0.04 | ||||
Distributions
to shareholders from:
|
|||||||||
Net investment
income
|
(0.35) | (0.91) | (1.22) | (2.33) | (0.49) | ||||
Net realized
gains
|
(0.33) | (0.01) | — | — | — | ||||
Return of
capital
|
— | — | — | — | — | ||||
Total
distributions
|
(0.68) | (0.92) | (1.22) | (2.33) | (0.49) | ||||
Contribution from
Custodian
|
— | — | — | — | — | ||||
Net asset value, end of
period
|
$ 52.15 | $ 60.67 | $ 56.29 | $ 59.14 | $ 61.84 | ||||
Total
return
(3)
|
(13.01)% | 9.52% | (2.86)% | (0.58)% | 15.95% | ||||
Net assets, end of period (in
000's)
|
$1,449,792 | $2,426,951 | $1,891,366 | $1,862,925 | $1,583,074 | ||||
Ratio of expenses to average net
assets
|
0.50% | 0.50% | 0.50% | 0.50% | 0.52% | ||||
Ratio of net investment income (loss) to average net
assets
|
1.62% | 2.05% | 2.16% | 2.32% | 2.41% | ||||
Portfolio turnover
rate
(6)
|
19% | 40% | 31% | 38% | 63% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(4) | If the custodian had not made a contribution during the Year Ended 6/30/13, the total return would have been 7.13%. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Barclays International Corporate Bond ETF | SPDR Barclays Emerging Markets Local Bond ETF | |||||||||||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
Year Ended 6/30/11 |
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
For
the
Period 2/23/11*- 6/30/11 |
|||||||||
$ 37.68 | $ 34.17 | $ 32.34 | $ 34.81 | $ 29.97 | $ 31.25 | $ 29.74 | $ 30.79 | $ 31.74 | $ 30.00 | |||||||||
0.49 | 0.64 | 0.77 | 0.97 | 0.93 | 1.43 | 1.51 | 1.57 | 1.57 | 0.55 | |||||||||
(6.50) | 3.44 | 1.43 | (2.85) | 4.44 | (5.64) | 0.47 | (1.13) | (2.55) | 1.06 | |||||||||
(6.01) | 4.08 | 2.20 | (1.88) | 5.37 | (4.21) | 1.98 | 0.44 | (0.98) | 1.61 | |||||||||
— | — | — | — | — | — | — | — | — | — | |||||||||
0.01 | 0.05 | 0.09 | 0.08 | 0.26 | 0.04 | 0.09 | 0.14 | 0.57 | 0.41 | |||||||||
(0.33) | (0.60) | (0.46) | (0.67) | (0.78) | — | (0.56) | (1.54) | (0.54) | (0.28) | |||||||||
(0.01) | (0.02) | (0.02) | — | (0.01) | — | — | (0.01) | — | — | |||||||||
— | — | — | — | — | — | — | (0.08) | — | — | |||||||||
(0.34) | (0.62) | (0.48) | (0.67) | (0.79) | — | (0.56) | (1.63) | (0.54) | (0.28) | |||||||||
— | — | 0.02 | — | — | — | — | — | — | — | |||||||||
$ 31.34 | $ 37.68 | $ 34.17 | $ 32.34 | $ 34.81 | $ 27.08 | $ 31.25 | $ 29.74 | $ 30.79 | $ 31.74 | |||||||||
(16.02)% | 12.32% | 7.18% (4) | (5.17)% | 19.01% | (13.35)% | 6.77% | 1.97% | (1.30)% | 6.70% | |||||||||
$191,155 | $316,502 | $184,513 | $71,144 | $52,208 | $97,487 | $100,014 | $107,055 | $197,030 | $28,564 | |||||||||
0.54% | 0.55% | 0.55% | 0.55% | 0.55% | 0.50% | 0.50% | 0.50% | 0.50% | 0.50% (5) | |||||||||
1.43% | 1.77% | 2.24% | 2.95% | 2.77% | 4.94% | 5.06% | 4.93% | 5.13% | 5.01% (5) | |||||||||
28% | 23% | 37% | 42% | 21% | 35% | 69% | 75% | 18% | 5% |
SPDR
Barclays International
High Yield Bond ETF |
|||
Year Ended 6/30/15 |
For
the
Period 3/12/14*- 6/30/14 |
||
Net asset value, beginning of
period
|
$ 25.53 | $ 25.00 | |
Income
(loss) from investment operations:
|
|||
Net investment income
(loss)
(1)
|
1.11 | 0.36 | |
Net realized and unrealized gain
(loss)
(2)
|
(3.30) | 0.30 | |
Total from investment
operations
|
(2.19) | 0.66 | |
Net equalization credits and
charges
(1)
|
(0.06) | — | |
Other
capital
(1)
|
0.01 | 0.10 | |
Distributions
to shareholders from:
|
|||
Net investment
income
|
(0.50) | (0.23) | |
Net realized
gains
|
(0.06) | — | |
Total
distributions
|
(0.56) | (0.23) | |
Net asset value, end of
period
|
$ 22.73 | $ 25.53 | |
Total
return
(4)
|
(8.86)% | 3.07% | |
Net assets, end of period (in
000's)
|
$25,005 | $43,406 | |
Ratio of expenses to average net
assets
|
0.40% | 0.40% (5) | |
Ratio of net investment income (loss) to average net
assets
|
4.69% | 4.76% (5) | |
Portfolio turnover
rate
(6)
|
50% | 26% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Barclays High Yield Bond ETF | SPDR Barclays Short Term High Yield Bond ETF | |||||||||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
Year Ended 6/30/12 |
Year Ended 6/30/11 |
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
For
the
Period 3/14/12*- 6/30/12 |
||||||||
$ 41.63 | $ 39.53 | $ 39.16 | $ 39.88 | $ 37.99 | $ 30.86 | $ 30.05 | $ 29.77 | $ 30.00 | ||||||||
2.26 | 2.38 | 2.59 | 2.85 | 3.25 | 1.51 | 1.59 | 1.75 | 0.56 | ||||||||
(3.31) | 2.11 | 0.38 | (0.53) | 2.53 | (2.04) | 0.75 | 0.23 | (0.60) | ||||||||
(1.05) | 4.49 | 2.97 | 2.32 | 5.78 | (0.53) | 2.34 | 1.98 | (0.04) | ||||||||
0.01 | 0.00 (3) | (0.01) | 0.06 | 0.05 | 0.00 (3) | 0.07 | 0.14 | 0.09 | ||||||||
0.01 | 0.00 (3) | 0.03 | 0.03 | 0.01 | 0.00 (3) | 0.00 (3) | 0.04 | 0.08 | ||||||||
(2.26) | (2.39) | (2.62) | (2.87) | (3.34) | (1.51) | (1.58) | (1.88) | (0.36) | ||||||||
— | 0.00 (3) | — | (0.26) | (0.61) | — | (0.02) | — | — | ||||||||
(2.26) | (2.39) | (2.62) | (3.13) | (3.95) | (1.51) | (1.60) | (1.88) | (0.36) | ||||||||
$ 38.34 | $ 41.63 | $ 39.53 | $ 39.16 | $ 39.88 | $ 28.82 | $ 30.86 | $ 30.05 | $ 29.77 | ||||||||
(2.50)% | 11.72% | 7.70% | 6.50% | 15.87% | (1.72)% | 8.21% | 7.40% | 0.44% | ||||||||
$9,797,126 | $9,762,390 | $9,300,031 | $10,780,535 | $6,915,538 | $4,237,219 | $4,341,352 | $1,349,305 | $133,966 | ||||||||
0.40% | 0.40% | 0.40% | 0.40% | 0.41% | 0.40% | 0.40% | 0.40% | 0.40% (5) | ||||||||
5.71% | 5.86% | 6.41% | 7.38% | 8.13% | 5.13% | 5.17% | 5.75% | 6.40% (5) | ||||||||
34% | 30% | 49% | 38% | 40% | 39% | 44% | 54% | 16% |
SPDR Barclays Investment Grade Floating Rate ETF | |||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
For
the
Period 11/30/11*- 6/30/12 |
||||
Net asset value, beginning of
period
|
$ 30.63 | $ 30.47 | $ 30.33 | $30.00 | |||
Income
(loss) from investment operations:
|
|||||||
Net investment income
(loss)
(1)
|
0.17 | 0.16 | 0.33 | 0.30 | |||
Net realized and unrealized gain
(loss)
(2)
|
(0.08) | 0.14 | 0.13 | 0.28 | |||
Total from investment
operations
|
0.09 | 0.30 | 0.46 | 0.58 | |||
Net equalization credits and
charges
(1)
|
0.00 (3) | 0.01 | 0.02 | 0.01 | |||
Other
capital
(1)
|
0.00 (3) | 0.01 | 0.05 | — | |||
Distributions
to shareholders from:
|
|||||||
Net investment
income
|
(0.17) | (0.16) | (0.39) | (0.26) | |||
Net realized
gains
|
(0.00) (3) | (0.00) (3) | (0.00) (3) | — | |||
Total
distributions
|
(0.17) | (0.16) | (0.39) | (0.26) | |||
Net asset value, end of
period
|
$ 30.55 | $ 30.63 | $ 30.47 | $30.33 | |||
Total
return
(4)
|
0.29% | 1.06% | 1.77% | 1.95% | |||
Net assets, end of period (in
000's)
|
$387,936 | $385,915 | $42,655 | $9,098 | |||
Ratio of expenses to average net
assets
|
0.15% | 0.15% | 0.15% | 0.15% (5) | |||
Ratio of expenses to average net assets before
waivers
|
0.15% | 0.15% | 0.15% | 0.15% (5) | |||
Ratio of net investment income (loss) to average net
assets
|
0.56% | 0.51% | 1.08% | 1.68% (5) | |||
Portfolio turnover
rate
(6)
|
21% | 12% | 11% | 5% |
* | Commencement of operations. |
(1) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(2) | Amounts shown in this caption for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period because of the timing of sales and repurchases of Fund shares in relation to fluctuating market values for the Fund. |
(3) | Amount is less than $0.005 per share. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of each period reported. Distributions are assumed, for the purpose of this calculation, to be reinvested at net asset value per share on the respective payment dates of each Fund. Total return for periods of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(5) | Annualized |
(6) | Portfolio Turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF | SPDR BofA Merrill Lynch Crossover Corporate Bond ETF | |||||||||||||
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
For
the
Period 6/18/12*- 6/30/12 |
Year Ended 6/30/15 |
Year Ended 6/30/14 |
Year Ended 6/30/13 |
For
the
Period 6/18/12*- 6/30/12 |
|||||||
$ 30.54 | $ 29.41 | $ 30.08 | $ 30.00 | $ 26.58 | $ 25.30 | $ 25.24 | $ 25.00 | |||||||
1.30 | 1.32 | 1.30 | 0.06 | 1.02 | 1.03 | 1.05 | 0.05 | |||||||
(1.44) | 1.39 | (0.75) | (0.20) | (0.97) | 1.35 | (0.16) | 0.19 | |||||||
(0.14) | 2.71 | 0.55 | (0.14) | 0.05 | 2.38 | 0.89 | 0.24 | |||||||
0.00 (3) | 0.01 | — | — | (0.02) | — | 0.06 | — | |||||||
0.02 | 0.06 | — | 0.22 | 0.07 | 0.02 | 0.11 | — | |||||||
(1.27) | (1.33) | (1.22) | — | (0.98) | (1.03) | (1.00) | — | |||||||
— | (0.32) | — | — | (0.02) | (0.09) | — | — | |||||||
(1.27) | (1.65) | (1.22) | — | (1.00) | (1.12) | (1.00) | — | |||||||
$ 29.15 | $ 30.54 | $ 29.41 | $ 30.08 | $ 25.68 | $ 26.58 | $ 25.30 | $ 25.24 | |||||||
(0.35)% | 9.81% | 1.63% | 0.27% | 0.42% | 9.76% | 4.11% | 0.95% | |||||||
$20,405 | $21,377 | $14,703 | $15,041 | $43,664 | $29,235 | $22,770 | $10,095 | |||||||
0.50% | 0.50% | 0.50% | 0.50% (5) | 0.30% | 0.30% | 0.30% | 0.30% (5) | |||||||
0.50% | 0.50% | 0.50% | 0.50% (5) | 0.40% | 0.40% | 0.40% | 0.40% (5) | |||||||
4.39% | 4.45% | 4.15% | 3.38% (5) | 3.88% | 4.00% | 4.01% | 3.64% (5) | |||||||
11% | 18% | 30% | 6% | 16% | 18% | 20% | 1% |
SPDRSERTRFI | The Trust's Investment Company Act Number is 811-08839. |
SPDR ® SERIES TRUST (THE TRUST)
STATEMENT OF ADDITIONAL INFORMATION
Dated October 31, 2015
This Statement of Additional Information (SAI) is not a prospectus. With respect to each of the Trusts series listed below, this SAI should be read in conjunction with the prospectuses dated October 31, 2015, as may be revised from time to time. Each of the foregoing prospectuses may be referred to herein as a Prospectus.
EQUITY ETFs | TICKER | FIXED INCOME ETFs | TICKER | |||
SPDR RUSSELL 3000 ® ETF | THRK | SPDR BARCLAYS 1-3 MONTH T-BILL ETF | BIL | |||
SPDR RUSSELL 1000 ® ETF | ONEK | SPDR BARCLAYS TIPS ETF | IPE | |||
SPDR RUSSELL 2000 ETF | TWOK | SPDR BARCLAYS 0-5 YEAR TIPS ETF | SIPE | |||
SPDR S&P ® 500 BUYBACK ETF | SPYB | SPDR BARCLAYS 1-10 YEAR TIPS ETF | TIPX | |||
SPDR S&P 500 HIGH DIVIDEND ETF | SPYD | SPDR BARCLAYS SHORT TERM TREASURY ETF | SST | |||
SPDR S&P 500 GROWTH ETF | SPYG | SPDR BARCLAYS INTERMEDIATE TERM TREASURY ETF | ITE | |||
SPDR S&P 500 VALUE ETF | SPYV | SPDR BARCLAYS LONG TERM TREASURY ETF | TLO | |||
SPDR RUSSELL SMALL CAP COMPLETENESS ETF | RSCO | SPDR BARCLAYS SHORT TERM CORPORATE BOND ETF | SCPB | |||
SPDR S&P 400 MID CAP GROWTH ETF | MDYG | SPDR BARCLAYS INTERMEDIATE TERM CORPORATE BOND ETF | ITR | |||
SPDR S&P 400 MID CAP VALUE ETF | MDYV | SPDR BARCLAYS LONG TERM CORPORATE BOND ETF | LWC | |||
SPDR S&P 600 SMALL CAP ETF | SLY | SPDR BARCLAYS ISSUER SCORED CORPORATE BOND ETF | CBND | |||
SPDR S&P 600 SMALL CAP GROWTH ETF | SLYG | SPDR BARCLAYS CONVERTIBLE SECURITIES ETF | CWB | |||
SPDR S&P 600 SMALL CAP VALUE ETF | SLYV | SPDR BARCLAYS MORTGAGE BACKED BOND ETF | MBG | |||
SPDR GLOBAL DOW ETF | DGT | SPDR BARCLAYS AGGREGATE BOND ETF | LAG | |||
SPDR DOW JONES REIT ETF | RWR | SPDR NUVEEN BARCLAYS MUNICIPAL BOND ETF | TFI | |||
SPDR S&P BANK ETF | KBE | SPDR NUVEEN BARCLAYS CALIFORNIA MUNICIPAL BOND ETF | CXA | |||
SPDR S&P CAPITAL MARKETS ETF | KCE | SPDR NUVEEN BARCLAYS NEW YORK MUNICIPAL BOND ETF | INY | |||
SPDR S&P INSURANCE ETF | KIE | SPDR NUVEEN BARCLAYS SHORT TERM MUNICIPAL BOND ETF | SHM | |||
SPDR S&P REGIONAL BANKING ETF | KRE | SPDR NUVEEN S&P HIGH YIELD MUNICIPAL BOND ETF | HYMB | |||
SPDR MORGAN STANLEY TECHNOLOGY ETF | MTK | SPDR NUVEEN BARCLAYS BUILD AMERICA BOND ETF | BABS | |||
SPDR S&P DIVIDEND ETF | SDY | SPDR DB INTERNATIONAL GOVERNMENT INFLATION- PROTECTED BOND ETF | WIP | |||
SPDR S&P AEROSPACE & DEFENSE ETF | XAR | SPDR BARCLAYS SHORT TERM INTERNATIONAL TREASURY BOND ETF | BWZ | |||
SPDR S&P BIOTECH ETF | XBI | SPDR BARCLAYS INTERNATIONAL TREASURY BOND ETF | BWX | |||
SPDR S&P BUILDING & CONSTRUCTION ETF | SPDR BARCLAYS INTERNATIONAL CORPORATE BOND ETF | IBND | ||||
SPDR S&P COMPUTER HARDWARE ETF | XHW | SPDR BARCLAYS EMERGING MARKETS LOCAL BOND ETF | EBND | |||
SPDR S&P FOOD & BEVERAGE ETF | SPDR BARCLAYS HIGH YIELD BOND ETF | JNK | ||||
SPDR S&P HEALTH CARE EQUIPMENT ETF | XHE | SPDR BARCLAYS INTERNATIONAL HIGH YIELD BOND ETF | IJNK | |||
SPDR S&P HEALTH CARE SERVICES ETF | XHS | SPDR BARCLAYS SHORT TERM HIGH YIELD BOND ETF | SJNK |
1
EQUITY ETFs | TICKER | FIXED INCOME ETFs | TICKER | |||
SPDR S&P HOMEBUILDERS ETF |
XHB | SPDR BARCLAYS INVESTMENT GRADE FLOATING RATE ETF | FLRN | |||
SPDR S&P LEISURETIME ETF |
SPDR BOFA MERRILL LYNCH EMERGING MARKETS CORPORATE BOND ETF | EMCD | ||||
SPDR S&P METALS & MINING ETF |
XME | SPDR BOFA MERRILL LYNCH CROSSOVER CORPORATE BOND ETF | CJNK | |||
SPDR S&P OIL & GAS EQUIPMENT & SERVICES ETF |
XES | |||||
SPDR S&P OIL & GAS EXPLORATION & PRODUCTION ETF |
XOP | |||||
SPDR S&P OUTSOURCING & IT CONSULTING ETF |
||||||
SPDR S&P PHARMACEUTICALS ETF |
XPH | |||||
SPDR S&P RETAIL ETF |
XRT | |||||
SPDR S&P SEMICONDUCTOR ETF |
XSD | |||||
SPDR S&P SOFTWARE & SERVICES ETF |
XSW | |||||
SPDR S&P TELECOM ETF |
XTL | |||||
SPDR S&P TRANSPORTATION ETF |
XTN | |||||
SPDR S&P 1500 VALUE TILT ETF |
VLU | |||||
SPDR S&P 1500 MOMENTUM TILT ETF |
MMTM | |||||
SPDR S&P 1500 VOLATILITY TILT ETF |
||||||
SPDR RUSSELL 1000 LOW VOLATILITY ETF |
LGLV | |||||
SPDR RUSSELL 2000 LOW VOLATILITY ETF |
SMLV | |||||
SPDR WELLS FARGO ® PREFERRED STOCK ETF |
PSK | |||||
SPDR MSCI USA Quality Mix ETF |
QUS |
Principal U.S. Listing Exchange for each ETF: NYSE Arca, Inc.
Capitalized terms used herein that are not defined have the same meaning as in the Prospectus, unless otherwise noted. Copies of the Prospectus and the Trusts Annual Reports to Shareholders dated June 30, 2015 may be obtained without charge by writing to State Street Global Markets, LLC, the Trusts principal underwriter (referred to herein as Distributor or Principal Underwriter), State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111, by visiting the Trusts website at www.spdrs.com or by calling 1-866-787-2257. The Reports of Independent Registered Public Accounting Firm, financial highlights and financial statements of the Funds included in the Trusts Annual Reports to Shareholders for the fiscal year ended June 30, 2015 are incorporated by reference into this Statement of Additional Information. Funds not included in the Trusts Annual Reports to Shareholders for the fiscal year ending June 30, 2015 had not commenced operations as of June 30, 2015, and therefore did not have any financial information to report for the Trusts June 30, 2015 fiscal year end.
SPDRSERIESSAI
2
4 | ||||
5 | ||||
34 | ||||
37 | ||||
39 | ||||
40 | ||||
57 | ||||
59 | ||||
88 | ||||
95 | ||||
95 | ||||
96 | ||||
104 | ||||
105 | ||||
105 | ||||
112 | ||||
A-1 | ||||
Appendix BNuveen Asset Managements Proxy Voting Policies and Procedures |
B-1 |
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GENERAL DESCRIPTION OF THE TRUST
The Trust is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (the 1940 Act), consisting of multiple investment series, including the Equity ETFs and Fixed Income ETFs (each, a Fund and, collectively, the Funds). The Trust was organized as a Massachusetts business trust on June 12, 1998. The offering of each Funds shares (Shares) is registered under the Securities Act of 1933, as amended (the Securities Act). The investment objective of each Fund is to provide investment results that, before fees and expenses, correspond generally to the total return (or in the case of the Fixed Income ETFs, the price and yield performance) of a specified market index (each an Index and together the Indexes). SSGA Funds Management, Inc. serves as the investment adviser for each Fund (the Adviser) and certain funds are sub-advised by a sub-adviser as further described herein (each, a Sub-Adviser). To the extent that a reference in this SAI refers to the Adviser, such reference should also be read to refer to the Sub-Adviser where the context requires.
Each Fund offers and issues Shares at their net asset value (sometimes referred to herein as NAV) only in aggregations of a specified number of Shares (each, a Creation Unit). Each Fund generally offers and issues Shares either in exchange for (i) a basket of securities included in its Index (Deposit Securities) together with the deposit of a specified cash payment (Cash Component) or (ii) a cash payment equal in value to the Deposit Securities (Deposit Cash) together with the Cash Component. The primary consideration accepted by a Fund ( i.e. , Deposit Securities or Deposit Cash) is set forth under Purchase and Redemption of Creation Units later in this SAI. The Trust reserves the right to permit or require the substitution of a cash in lieu amount to be added to the Cash Component to replace any Deposit Security and reserves the right to permit or require the substitution of Deposit Securities in lieu of Deposit Cash (subject to applicable legal requirements). The Shares have been approved for listing and secondary trading on a national securities exchange (the Exchange). The Shares will trade on the Exchange at market prices. These prices may differ from the Shares net asset values. The Shares are also redeemable only in Creation Unit aggregations, and generally in exchange either for (i) portfolio securities and a specified cash payment or (ii) cash (subject to applicable legal requirements). A Creation Unit of each Equity ETF consists of 50,000 Shares and a Creation Unit of each Fixed Income ETF consists of 100,000 Shares, except that a Creation Unit of SPDR Barclays High Yield Bond ETF consists of 250,000 Shares.
Shares may be issued in advance of receipt of Deposit Securities subject to various conditions including a requirement to maintain on deposit with the Trust cash at least equal to a specified percentage of the market value of the missing Deposit Securities as set forth in the Participant Agreement (as defined below). See Purchase and Redemption of Creation Units. The Trust may impose a transaction fee for each creation or redemption. In all cases, such fees will be limited in accordance with the requirements of the U.S. Securities and Exchange Commission (SEC) applicable to management investment companies offering redeemable securities. In addition to the fixed creation or redemption transaction fee, an additional transaction fee of up to three times the fixed creation or redemption transaction fee and/or an additional variable charge may apply.
The SPDR Barclays TIPS ETF, SPDR Barclays 0-5 TIPS ETF and SPDR Barclays 1-10 Year TIPS ETF may sometimes be referred to herein as the TIPS ETFs. The SPDR Barclays 1-3 Month T-Bill ETF, SPDR Barclays Short Term Treasury ETF, SPDR Barclays Intermediate Term Treasury ETF and SPDR Barclays Long Term Treasury ETF may sometimes be collectively referred to herein as the Treasury ETFs. The SPDR Barclays Aggregate Bond ETF may sometimes be referred to herein as the Aggregate Bond ETF. The SPDR Nuveen Barclays Municipal Bond ETF, SPDR Nuveen Barclays California Municipal Bond ETF, SPDR Nuveen Barclays New York Municipal Bond ETF, SPDR Nuveen Barclays Short Term Municipal Bond ETF, and SPDR Nuveen S&P High Yield Municipal Bond ETF may sometimes be referred to herein as the Municipal Bond ETFs. The SPDR Barclays International Treasury Bond ETF and the SPDR Barclays Short Term International Treasury Bond ETF may sometimes be referred to herein as the International Treasury Bond ETFs. The SPDR Barclays Convertible Securities ETF may sometimes be referred to herein as the Convertible Securities ETF. The SPDR Barclays Mortgage Backed Bond ETF may sometimes be referred to herein as the Mortgage Backed Bond ETF. The SPDR Barclays High Yield Bond ETF, SPDR Barclays International High Yield Bond ETF and SPDR Barclays Short Term High Yield Bond ETF may sometimes be referred to herein as the High Yield Bond ETFs. The SPDR Wells Fargo Preferred Stock ETF may sometimes be referred to herein as the Preferred Stock ETF. The SPDR Barclays International Corporate Bond ETF may sometimes be referred to herein as the International Corporate Bond ETF. The SPDR Barclays Short Term Corporate Bond ETF, SPDR Barclays Intermediate Term Corporate Bond ETF, SPDR Barclays Long Term Corporate Bond ETF, SPDR Barclays Issuer Scored Corporate Bond ETF, SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF and SPDR BofA Merrill Lynch Crossover Corporate Bond ETF may sometimes be referred to herein as the Corporate Bond ETFs.
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Each Fund may invest in the following types of investments, consistent with its investment strategies and objective. Please see a Funds Prospectus for additional information regarding its principal investment strategies.
DIVERSIFICATION STATUS
Each Fund is classified as a non-diversified investment company under the 1940 Act. A non-diversified classification means that a Fund is not limited by the 1940 Act with regard to the percentage of its assets that may be invested in the securities of a single issuer. This means that a Fund may invest a greater portion of its assets in the securities of a single issuer than a diversified fund. The securities of a particular issuer may constitute a greater portion of an Index of each Fund and, therefore, the securities may constitute a greater portion of a Funds portfolio. This may have an adverse effect on a Funds performance or subject a Funds Shares to greater price volatility than more diversified investment companies.
Although each Fund is non-diversified for purposes of the 1940 Act, each Fund intends to maintain the required level of diversification and otherwise conduct its operations so as to qualify as a regulated investment company for purposes of the Internal Revenue Code, and to relieve each Fund of any liability for federal income tax to the extent that its earnings are distributed to shareholders. Compliance with the diversification requirements of the Internal Revenue Code may severely limit the investment flexibility of a Fund and may make it less likely that a Fund will meet its investment objectives.
CONCENTRATION
Each Funds investments will generally be concentrated in a particular industry or group of industries to the extent that the Funds underlying Index is concentrated in a particular industry or group of industries. The securities of issuers in particular industries may dominate the benchmark Index of a Fund and consequently a Funds investment portfolio. This may adversely affect a Funds performance or subject its Shares to greater price volatility than that experienced by less concentrated investment companies. The Trusts general policy is to exclude securities of the U.S. government and its agencies or instrumentalities when measuring industry concentration.
In pursuing its objective, each Fund may hold the securities of a single issuer in an amount exceeding 10% of the market value of the outstanding securities of the issuer, subject to restrictions imposed by the Internal Revenue Code. In particular, as a Funds size grows and its assets increase, it will be more likely to hold more than 10% of the securities of a single issuer if the issuer has a relatively small public float as compared to other components in its benchmark Index.
COMMON STOCKS
Risks inherent in investing in equity securities include the risk that the financial condition of issuers may become impaired or that the general condition of the stock market may deteriorate (either of which may cause a decrease in the value of a Funds portfolio securities and therefore a decrease in the value of Shares of the Fund). Common stocks are susceptible to general stock market fluctuations and to volatile increases and decreases in value as market confidence and perceptions change. These investor perceptions are based on various and unpredictable factors, including expectations regarding government, economic, monetary and fiscal policies; inflation and interest rates; economic expansion or contraction; and global or regional political, economic or banking crises.
PREFERRED SECURITIES
Preferred securities pay fixed or adjustable rate dividends to investors, and have preference over common stock in the payment of dividends and the liquidation of a companys assets. This means that a company must pay dividends on preferred stock before paying any dividends on its common stock. In order to be payable, distributions on preferred securities must be declared by the issuers board of directors. Income payments on typical preferred securities currently outstanding are cumulative, causing dividends and distributions to accrue even if not declared by the board of directors or otherwise made payable. There is no assurance that dividends or distributions on the preferred securities in which a Fund invests will be declared or otherwise made payable.
The market value of preferred securities may be affected by favorable and unfavorable changes impacting companies in the utilities and financial services sectors, which are prominent issuers of preferred securities, and by actual and anticipated changes in tax laws.
Because the claim on an issuers earnings represented by preferred securities may become onerous when interest rates fall below the rate payable on such securities, the issuer may redeem the securities. Thus, in declining interest rate environments in particular, a Funds holdings of higher rate-paying fixed rate preferred securities may be reduced and a Fund would be unable to acquire securities paying comparable rates with the redemption proceeds.
5
CONVERTIBLE SECURITIES
Convertible securities are bonds, debentures, notes, preferred stocks or other securities that may be converted or exchanged (by the holder or by the issuer) into shares of the underlying common stock (or cash or securities of equivalent value) at a stated exchange ratio. A convertible security may also be called for redemption or conversion by the issuer after a particular date and under certain circumstances (including a specified price) established upon issue. If a convertible security held by a Fund is called for redemption or conversion, the Fund could be required to tender it for redemption, convert it into the underlying common stock, or sell it to a third party.
Convertible securities generally have less potential for gain or loss than common stocks. Convertible securities generally provide yields higher than the underlying common stocks, but generally lower than comparable non-convertible securities. Because of this higher yield, convertible securities generally sell at a price above their conversion value, which is the current market value of the stock to be received upon conversion. The difference between this conversion value and the price of convertible securities will vary over time depending on changes in the value of the underlying common stocks and interest rates. When the underlying common stocks decline in value, convertible securities will tend not to decline to the same extent because of the interest or dividend payments and the repayment of principal at maturity for certain types of convertible securities. However, securities that are convertible other than at the option of the holder generally do not limit the potential for loss to the same extent as securities convertible at the option of the holder. When the underlying common stocks rise in value, the value of convertible securities may also be expected to increase. At the same time, however, the difference between the market value of convertible securities and their conversion value will narrow, which means that the value of convertible securities will generally not increase to the same extent as the value of the underlying common stocks. Because convertible securities may also be interest-rate sensitive, their value may increase as interest rates fall and decrease as interest rates rise. Convertible securities are also subject to credit risk, and are often lower-quality securities.
BONDS
A bond is an interest-bearing security issued by a company, governmental unit or, in some cases, a non-U.S. entity. The issuer of a bond has a contractual obligation to pay interest at a stated rate on specific dates and to repay principal (the bonds face value) periodically or on a specified maturity date; provided, however, a zero coupon bond pays no interest to its holder during its life. The value of a zero coupon bond to a Fund consists of the difference between such bonds face value at the time of maturity and the price for which it was acquired, which may be an amount significantly less than its face value (sometimes referred to as a deep discount price).
An issuer may have the right to redeem or call a bond before maturity, in which case the investor may have to reinvest the proceeds at lower market rates. Most bonds bear interest income at a coupon rate that is fixed for the life of the bond. The value of a fixed rate bond usually rises when market interest rates fall, and falls when market interest rates rise. Accordingly, a fixed rate bonds yield (income as a percent of the bonds current value) may differ from its coupon rate as its value rises or falls. Fixed rate bonds generally are also subject to inflation risk, which is the risk that the value of the bond or income from the bond will be worth less in the future as inflation decreases the value of money. This could mean that, as inflation increases, the real value of the assets of a Fund holding fixed rate bonds can decline, as can the value of the Funds distributions. Other types of bonds bear income at an interest rate that is adjusted periodically. Because of their adjustable interest rates, the value of floating-rate or variable-rate bonds fluctuates much less in response to market interest rate movements than the value of fixed rate bonds. A Fund may treat some of these bonds as having a shorter maturity for purposes of calculating the weighted average maturity of its investment portfolio. Bonds may be senior or subordinated obligations. Senior obligations generally have the first claim on a corporations earnings and assets and, in the event of liquidation, are paid before subordinated obligations. Bonds may be unsecured (backed only by the issuers general creditworthiness) or secured (also backed by specified collateral).
The investment return of corporate bonds reflects interest on the bond and changes in the market value of the bond. The market value of a corporate bond may be affected by the credit rating of the corporation, the corporations performance and perceptions of the corporation in the market place. There is a risk that the issuers of the securities may not be able to meet their obligations on interest or principal payments at the time called for by such a security.
HIGH YIELD SECURITIES
Investment in high yield securities generally provides greater income and increased opportunity for capital appreciation than investments in higher quality securities, but they also typically entail greater price volatility and credit risk. These high yield securities are regarded as predominantly speculative with respect to the issuers continuing ability to meet principal and interest payments. Analysis of the creditworthiness of issuers of debt securities that are high yield may be more complex than for issuers of higher quality debt securities. In addition, high yield securities are often issued by smaller, less creditworthy companies or by highly leveraged (indebted) firms, but can also be issued by governments. Such issuers are generally less able than more financially stable issuers to make scheduled payments of interest and principal. The risks posed by securities issued under such circumstances are substantial.
6
Investing in high yield debt securities involves risks that are greater than the risks of investing in higher quality debt securities. These risks include: (i) changes in credit status, including weaker overall credit conditions of issuers and risks of default; (ii) industry, market and economic risk; and (iii) greater price variability and credit risks of certain high yield securities such as zero coupon and payment-in-kind securities. While these risks provide the opportunity for maximizing return over time, they may result in greater volatility of the value of the Fund than a fund that invests in higher-rated securities.
Furthermore, the value of high yield securities may be more susceptible to real or perceived adverse economic, company or industry conditions than is the case for higher quality securities. The market values of certain of these lower-rated and unrated debt securities tend to reflect individual issuer developments to a greater extent than do higher-rated securities which react primarily to fluctuations in the general level of interest rates, and tend to be more sensitive to economic conditions than are higher-rated securities. Adverse market, credit or economic conditions could make it difficult at certain times to sell certain high yield securities held by the Fund.
The secondary market on which high yield securities are traded may be less liquid than the market for higher grade securities. Less liquidity in the secondary trading market could adversely affect the price at which a Fund could sell a high yield security, and could adversely affect the daily net asset value per share of a Fund. When secondary markets for high yield securities are less liquid than the market for higher grade securities, it may be more difficult to value the securities because there is less reliable, objective data available. However, an Index seeks to include primarily high yield securities that the Index provider believes have greater liquidity than the broader high yield securities market as a whole.
The use of credit ratings as a principal method of selecting high yield securities can involve certain risks. For example, credit ratings evaluate the safety of principal and interest payments, not the market value risk of high yield securities. Also, credit rating agencies may fail to change credit ratings in a timely fashion to reflect events since the security was last rated.
SOVEREIGN DEBT OBLIGATIONS
Sovereign debt obligations are issued or guaranteed by foreign governments or their agencies. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. Governmental entities responsible for repayment of the debt may be unable or unwilling to repay principal and pay interest when due, and may require renegotiation or reschedule of debt payments. In addition, prospects for repayment of principal and payment of interest may depend on political as well as economic factors. Although some sovereign debt, such as Brady Bonds, is collateralized by U.S. Government securities, repayment of principal and payment of interest is not guaranteed by the U.S. Government.
VARIABLE AND FLOATING RATE SECURITIES
Variable rate securities are instruments issued or guaranteed by entities such as (1) US Government, or an agency or instrumentality thereof, (2) corporations, (3) financial institutions, (4) insurance companies or (5) trusts that have a rate of interest subject to adjustment at regular intervals but less frequently than annually. A variable rate security provides for the automatic establishment of a new interest rate on set dates. Variable rate obligations whose interest is readjusted no less frequently than annually will be deemed to have a maturity equal to the period remaining until the next readjustment of the interest rate. The Funds may also purchase floating rate securities. A floating rate security provides for the automatic adjustment of its interest rate whenever a specified interest rate changes. Interest rates on these securities are ordinarily tied to, and are a percentage of, a widely recognized interest rate, such as the yield on 90-day US Treasury bills or the prime rate of a specified bank. These rates may change as often as twice daily. Generally, changes in interest rates will have a smaller effect on the market value of variable and fixed rate floating rate securities than on the market value of comparable fixed rate fixed income obligations. Thus, investing in variable and fixed rate floating rate securities generally allows less opportunity for capital appreciation and depreciation than investing in comparable fixed rate fixed income securities.
U.S. GOVERNMENT OBLIGATIONS
U.S. Government obligations are a type of bond. U.S. Government obligations include securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities.
One type of U.S. Government obligation, U.S. Treasury obligations, are backed by the full faith and credit of the U.S. Treasury and differ only in their interest rates, maturities, and times of issuance. U.S. Treasury bills have initial maturities of one-year or less; U.S. Treasury notes have initial maturities of one to ten years; and U.S. Treasury bonds generally have initial maturities of greater than ten years.
Other U.S. Government obligations are issued or guaranteed by agencies or instrumentalities of the U.S. Government including, but not limited to, Federal National Mortgage Association (Fannie Mae), the Government National Mortgage Association (Ginnie Mae), the Small Business Administration, the Federal Farm Credit Administration, the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal Home Loan Banks (FHLB), Banks for Cooperatives (including the Central Bank for Cooperatives),
7
the Federal Land Banks, the Federal Intermediate Credit Banks, the Tennessee Valley Authority, the Export-Import Bank of the United States, the Commodity Credit Corporation, the Federal Financing Bank, the Student Loan Marketing Association, the National Credit Union Administration and the Federal Agricultural Mortgage Corporation (Farmer Mac). Some obligations issued or guaranteed by U.S. Government agencies and instrumentalities, including, for example, Ginnie Mae pass-through certificates, are supported by the full faith and credit of the U.S. Treasury. Other obligations issued by or guaranteed by federal agencies, such as those securities issued by Fannie Mae, are supported by the discretionary authority of the U.S. Government to purchase certain obligations of the federal agency, while other obligations issued by or guaranteed by federal agencies, such as those of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Treasury. While the U.S. Government provides financial support to such U.S. Government-sponsored federal agencies, no assurance can be given that the U.S. Government will always do so, since the U.S. Government is not so obligated by law.
In September 2008, the U.S. Treasury announced a federal takeover of Fannie Mae and Freddie Mac, placing the two federal instrumentalities in conservatorship. Under the terms of the takeover, the U.S. Treasury agreed to acquire $1 billion of senior preferred stock of each instrumentality and obtained warrants for the purchase of common stock of each instrumentality. Under these Senior Preferred Stock Purchase Agreements (SPAs), the U.S. Treasury has pledged to provide a limited amount of capital per instrumentality as needed, including the contribution of cash capital to the instrumentalities in the event their liabilities exceed their assets. In May 2009, the U.S. Treasury increased its maximum commitment to each instrumentality under the SPAs from $100 billion to $200 billion per instrumentality. In December 2009, the U.S. Treasury amended the SPAs to provide Fannie Mae and Freddie Mac with some additional flexibility to meet the requirement to reduce their mortgage portfolios. Also in December 2009, the U.S. Treasury further amended the SPAs to allow the cap on the U.S. Treasurys funding commitment to increase as necessary to accommodate any cumulative reduction in Fannie Maes and Freddie Macs net worth through the end of 2012. On August 17, 2012, the U.S. Treasury announced that it was again amending the Agreement to terminate the requirement that Fannie Mae and Freddie Mac each pay a 10% dividend annually on all amounts received under the funding commitment. Instead, they will transfer to the U.S. Treasury on a quarterly basis all profits earned during a quarter that exceed a capital reserve amount of $3 billion. The U.S. Treasury stated that the purpose of the change was to wind down Freddie Mac and Fannie Mae and to benefit taxpayers. At the start of 2013, the unlimited support the U.S. Treasury extended to the two companies expiredFannie Maes bailout is now capped at $125 billion and Freddie Mac has a limit of $149 billion. In August 2013, President Obama announced his proposal to shut down Freddie Mac and Fannie Mae as part of a plan to overhaul the U.S.s mortgage finance system. Until further action is taken, the actions of the U.S. Treasury are intended to ensure that Fannie Mae and Freddie Mac maintain a positive net worth and meet their financial obligations, preventing mandatory triggering of receivership. No assurance can be given that the U.S. Treasury initiatives will be successful.
MUNICIPAL SECURITIES
Municipal securities are securities issued by states, municipalities and other political subdivisions, agencies, authorities and instrumentalities of states and multi-state agencies or authorities. Municipal securities share the attributes of debt/fixed income securities in general, but are generally issued by states, municipalities and other political subdivisions, agencies, authorities and instrumentalities of states and multi-state agencies or authorities. The municipal securities which the Funds may purchase include general obligation bonds and limited obligation bonds (or revenue bonds), including industrial development bonds issued pursuant to former federal tax law. General obligation bonds are obligations involving the credit of an issuer possessing taxing power and are payable from such issuers general revenues and not from any particular source. Limited obligation bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source. Tax-exempt industrial development bonds generally are also revenue bonds and thus are not payable from the issuers general revenues. The credit and quality of industrial development bonds are usually related to the credit of the corporate user of the facilities. Payment of interest on and repayment of principal of such bonds is the responsibility of the corporate user (and/or any guarantor).
Some longer-term municipal securities give the investor the right to put or sell the security at par (face value) within a specified number of days following the investors requestusually one to seven days. This demand feature enhances a securitys liquidity by shortening its effective maturity and enables it to trade at a price equal to or very close to par. If a demand feature terminates prior to being exercised, a Fund would hold the longer-term security, which could experience substantially more volatility.
The market for municipal bonds may be less liquid than for taxable bonds. This means that it may be harder to buy and sell municipal securities, especially on short notice, than non-municipal securities. There may also be less information available on the financial condition of issuers of municipal securities than for public corporations. This means that it may be harder to buy and sell municipal securities, especially on short notice, and municipal securities may be more difficult for the Funds to value accurately than securities of public corporations. A Fund that invests a significant portion of its portfolio in municipal securities, such as the Municipal Bond ETFs, may have greater exposure to liquidity risk than a fund that invests in non-municipal securities. In addition, the municipal securities market is generally characterized as a buy and hold investment strategy. As a result, the accessibility of municipal securities in the market is generally greater closer to the original date of issue of the securities and lessens as the securities move further away from such issuance date.
Municipal securities are subject to credit and market risk. Generally, prices of higher quality issues tend to fluctuate more with changes in market interest rates than prices of lower quality issues and prices of longer maturity issues tend to fluctuate more than prices of shorter maturity issues.
Prices and yields on municipal securities are dependent on a variety of factors, including general money-market conditions, the financial condition of the issuer, general conditions of the municipal security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. A number of these factors, including the ratings of particular issues, are subject to change from time to time. Information about the financial condition of an issuer of municipal securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. As a result, municipal securities may be more difficult to value than securities of public corporations.
8
Obligations of issuers of municipal securities are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors. Congress or state legislatures may seek to extend the time for payment of principal or interest, or both, or to impose other constraints upon enforcement of such obligations. In addition, municipal securities are subject to the risk that their tax treatment could be changed by Congress or state legislatures, thereby affecting the value of outstanding municipal securities. There is also the possibility that as a result of litigation or other conditions, the power or ability of issuers to meet their obligations for the payment of interest and principal on their municipal securities may be materially affected or their obligations may be found to be invalid or unenforceable. Such litigation or conditions may from time to time have the effect of introducing uncertainties in the market for municipal securities or certain segments thereof, or of materially affecting the credit risk with respect to particular bonds. Adverse economic, business, legal or political developments might affect all or a substantial portion of a Funds municipal securities in the same manner.
Municipal Leases and Certificates of Participation. Also included within the general category of municipal securities described in the Municipal Bond ETFs Prospectus are municipal leases, certificates of participation in such lease obligations or installment purchase contract obligations (hereinafter collectively called Municipal Lease Obligations) of municipal authorities or entities. Although a Municipal Lease Obligation does not constitute a general obligation of the municipality for which the municipalitys taxing power is pledged, a Municipal Lease Obligation is ordinarily backed by the municipalitys covenant to budget for, appropriate and make the payments due under the Municipal Lease Obligation. However, certain Municipal Lease Obligations contain non-appropriation clauses which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In the case of a non-appropriation lease, a Funds ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, without recourse to the general credit of the lessee, and disposition or releasing of the property might prove difficult.
Municipal Insurance. A municipal security may be covered by insurance that guarantees the bonds scheduled payment of interest and repayment of principal. This type of insurance may be obtained by either (i) the issuer at the time the bond is issued (primary market insurance), or (ii) another party after the bond has been issued (secondary market insurance).
Both primary and secondary market insurance guarantee timely and scheduled repayment of all principal and payment of all interest on a municipal security in the event of default by the issuer, and cover a municipal security to its maturity, enhancing its credit quality and value.
Municipal security insurance does not insure against market fluctuations or fluctuations in a Funds share price. In addition, a municipal security insurance policy will not cover: (i) repayment of a municipal security before maturity (redemption), (ii) prepayment or payment of an acceleration premium (except for a mandatory sinking fund redemption) or any other provision of a bond indenture that advances the maturity of the bond, or (iii) nonpayment of principal or interest caused by negligence or bankruptcy of the paying agent. A mandatory sinking fund redemption may be a provision of a municipal security issue whereby part of the municipal security issue may be retired before maturity.
Because a significant portion of the municipal securities issued and outstanding is insured by a small number of insurance companies, an event involving one or more of these insurance companies could have a significant adverse effect on the value of the securities insured by that insurance company and on the municipal markets as a whole.
Municipal Market Disruption Risk. The value of municipal securities may be affected by uncertainties in the municipal market related to legislation or litigation involving the taxation of municipal securities or the rights of municipal securities holders in the event of a bankruptcy. Proposals to restrict or eliminate the federal income tax exemption for interest on municipal securities are introduced before Congress from time to time. Proposals also may be introduced before state legislatures that would affect the state tax treatment of a municipal funds distributions. If such proposals were enacted, the availability of municipal securities and the value of a municipal funds holdings would be affected, and the Trustees would reevaluate a Municipal Bond ETFs investment objectives and policies. Municipal bankruptcies are relatively rare, and certain provisions of the U.S. Bankruptcy Code governing such bankruptcies are unclear and remain untested. Further, the application of state law to municipal issuers could produce varying results among the states or among municipal securities issuers within a state. These legal uncertainties could affect the municipal securities market generally, certain specific segments of the market, or the relative credit quality of particular securities. Any of these effects could have a significant impact on the prices of some or all of the municipal securities held by a Fund.
CONSIDERATIONS REGARDING INVESTMENT IN CALIFORNIA MUNICIPAL SECURITIES
A Fund investing in California municipal securities may be particularly affected by political, economic or regulatory developments affecting the ability of California tax-exempt issuers to pay interest or repay principal. Provisions of the California Constitution and State statutes that limit the taxing and spending authority of California governmental entities may impair the ability of California governmental issuers to maintain debt service on their obligations. Future California political and economic developments, constitutional amendments, legislative measures, executive orders, administrative regulations, litigation and voter initiatives could have an adverse effect on the debt obligations of California issuers.
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The following information constitutes only a brief summary of a number of the complex factors which may impact issuers of California municipal securities and does not purport to be a complete or exhaustive description of all adverse conditions to which issuers of California municipal securities may be subject. Such information is derived from official statements utilized in connection with the issuance of California municipal securities, as well as from other publicly available documents. Such an official statement, together with any updates or supplements thereto, generally may be obtained upon request to the Treasurers office of the State of California. Such information has not been independently verified by the Funds and the Funds assume no responsibility for the completeness or accuracy of such information. The summary below does not include all of the information pertaining to the budget, receipts and disbursements of the State of California that would ordinarily be included in various public documents issued thereby, such as an official statement prepared in connection with the issuance of general obligation bonds of the State of California. Additionally, many factors, including national, economic, social and environmental policies and conditions, which are not within the control of such issuers, could have an adverse impact on the financial condition of such issuers. The Funds cannot predict whether or to what extent such factors or other factors may affect the issuers of California municipal securities, the market value or marketability of such securities or the ability of the respective issuers of such securities to pay interest on or principal of such securities. The creditworthiness of obligations issued by local California issuers may be unrelated to the creditworthiness of obligations issued by the State of California, and there is no assurance on the part of the State of California to make payments on such local obligations. There may be specific factors that are applicable in connection with investment in the obligations of particular issuers located within the State of California, and it is possible the Funds will invest in obligations of particular issuers as to which such specific factors are applicable. However, the information set forth below is intended only as a general summary and not as a discussion of any specific factors that may affect any particular issuer of California municipal securities.
General Economic Conditions
The State of Californias economy, the largest among the 50 states and one of the largest in the world, has major components in high technology, trade, entertainment, agriculture, manufacturing, tourism, construction and services. The relative proportion of the various components of the States economy closely resembles the make-up of the national economy, and, as a result, events which negatively affect such industries may have a similar impact on the State and national economies.
During the recent recession, which officially ended in 2009, the State experienced the most significant economic downturn since the Great Depression. During the downturn, California experienced high unemployment, a steep contraction in housing construction and home values, a drop in Statewide assessed valuation of property for the first time on record, a year-over-year decline in personal income in the State for the first time in 60 years and a sharp drop in taxable sales. As a result, State tax revenues declined precipitously, resulting in large budget gaps and occasional cash shortfalls in the period from 2008 to 2011. The State enacted and maintained significant spending reductions in recent budgets and voters in 2012 approved Proposition 30, providing increased revenues through the next several fiscal years.
Californias economy continued its slow recovery in 2014 and 2015. The States unemployment rate was 6.1 percent (seasonally adjusted) in August 2015, compared to 5.1 percent nationally. This was 6.3 percent lower than its peak of 12.4 percent in July-October 2012, but 1.3 percent higher than the pre-recession low of 4.8 percent in November 2006. Industry employment has been forecasted to grow 4.5 percent between 2014 and 2016. Personal income is projected to grow 4.7 percent in 2015 and 5.3 percent in 2016.
The precipitous decline of the States housing sector appears to have ended, though recovery in the real estate market has been uneven. Home building has been gradually improving but is still relatively weak compared to pre-crises levels and historical averages. Distressed sales have continued to drop. Foreclosure resales and short sales represented 12.2 percent of total sales in July 2014, which was down from close to 60 percent in February 2009. The medium home price in July 2015 was $488,470, which is higher than the medium price of $464,750 in July 2014.
Despite the recent significant budgetary improvements and moderate growth, there remain a number of major risks and pressures that threaten the States financial condition, including the need to repay billions of dollars of obligations that were deferred to balance budgets during the economic downturn. In addition, the persistence of unemployment has meant slow income growth for a broad section of the population and slow wage growth. This impacts the ability of people to save and invest, and makes it difficult for consumption growth to support broader economic growth. In addition, the States revenues (particularly, personal income tax) can be volatile and correlate to overall economic conditions. The State will likely face fiscal stress and cash pressures again, and changes in the State or national economies may materially adversely affect the financial condition of the State. Economic expansions do not last forever; in the post-war period, the average expansion length has been almost 5 years and the longest expansion was 10 years. As of August 2015, the current expansion has lasted approximately 6 years, and it would be an historical anomaly for the U.S. not to see another recession before 2020.
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State of CaliforniaGovernment
The State of Californias Constitution provides for three separate branches of government: the legislative, the judicial and the executive. The Constitution guarantees the electorate the right to make basic decisions, including amending the Constitution and local government charters. In addition, the State of Californias voters may directly influence the State of Californias government through the initiative, referendum and recall processes.
Local Governments
The primary units of local government in California are its 58 counties, which range in population from approximately 1,200 in Alpine County to approximately 10 million in Los Angeles County. Counties are responsible for the provision of many basic services, including indigent health care, welfare, jails, and public safety in unincorporated areas. There are also 482 incorporated cities in California and thousands of special districts formed for education, utilities, and other services. Spending and revenues collected by the State or by local governments has shifted over the past decades.
The fiscal condition of local governments has been constrained since Proposition 13, which added Article XIII A to the State Constitution, was approved by California voters in 1978. Proposition 13 reduced and limited the future growth of property taxes and limited the ability of local governments to impose special taxes (those devoted to a specific purpose) without two-thirds voter approval. Proposition 218, another constitutional amendment enacted by initiative in 1996, further limited the ability of local governments to raise taxes, fees, and other exactions. Counties, in particular, have had fewer options to raise revenues than many other local government entities, while they have been required to maintain many services.
In the aftermath of Proposition 13, the State provided aid to local governments from the General Fund to make up some of the loss of property tax moneys, including assuming principal responsibility for funding K-12 schools and community colleges. During the recession of the early 1990s, the Legislature reduced the post-Proposition 13 aid to local government entities other than K-12 schools and community colleges by requiring cities and counties to transfer some of their property tax revenues to school districts. However, the Legislature also provided additional funding sources, such as sales taxes, and reduced certain mandates for local services funded by cities and counties.
The 2004 Budget Act, related legislation and the enactment of Proposition 1A in 2004 and Proposition 22 in 2010 dramatically changed the State-local fiscal relationship. These constitutional and statutory changes implemented an agreement negotiated between the Governor and local government officials (the state-local agreement) in connection with the 2004 Budget Act.
As part of the state-local agreement, voters at the November 2004 election approved Proposition 1A. This proposition amended the State Constitution to, among other things, reduce the Legislatures authority over local government revenue sources by placing restrictions on the States access to local governments property, sales, and vehicle license fees (VLF) revenues as of November 3, 2004. This proposition permitted the State to borrow from local government funds. Proposition 22, adopted on November 2, 2010, supersedes Proposition 1A and completely prohibits any future borrowing by the State from local government funds, and generally prohibits the Legislature from making changes in local government funding sources. Allocation of local transportation funds cannot be changed without an extensive process.
In addition, the 2011 Budget Act realigned the State-local relationship, and shifted approximately $5.6 billion in State program costs to local governments (primarily to counties), and provided a comparable amount of funds to support these new local government commitments. The programs shifted included health and human services programs (like child welfare services and mental health programs) and criminal justice programs. The 2011 Budget Act established various formulas to determine how much revenue from State sales tax and State and local VLF revenues is deposited into accounts for local programs, several of which have annual caps on how much funding they can receive. The 2012 Budget Act continued the shifting of program costs from the State to the local level.
Proposition 26, adopted on November 2, 2010, makes it harder for the State to generate revenue from increasing taxes as the proposition by expanding the definition of taxes under existing Constitutional provisions. A two-thirds vote of the Legislature is required to approve a tax increase.
State of California Finances
The moneys of the State of California are segregated into the General Fund and over 900 other funds, including special, bond and trust funds. The General Fund consists of revenues received by the State of California Treasury and is not required by law to be credited to any fund and earnings from the investment of State of California moneys not allocable to another Fund. The General Fund is the principal operating fund for the majority of governmental activities and is the depository of most of the major revenue sources of the State of California.
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The following is a summary of the State of Californias major revenue sources:
Personal Income Tax. The California personal income tax is closely modeled after the federal income tax law. It is imposed on net taxable income (gross income less exclusions and deductions), with rates ranging from 1 to 13.3 percent for the 2015 tax year. The personal income tax is adjusted annually by the change in the consumer price index. Personal, dependent, and other credits are allowed against the gross tax liability. Taxpayers may be subject to an alternative minimum tax (AMT), which is much like the federal AMT.
In addition, Proposition 63, approved by the voters in November 2004, imposes a 1 percent surtax on taxable income over $1 million. The surtax became effective January 1, 2005. The proceeds of the tax surcharge are required to be used to expand county mental health programs.
Taxes on capital gains realizations, which are largely linked to stock market performance, can add a significant dimension of volatility to personal income tax receipts. Forecasting capital gains is extremely difficult, as the forecasts can change rapidly during a year due to abrupt changes in asset markets and the overall economy. Capital gains tax receipts accounted for nearly 12 percent of General Fund revenues and transfers in 1999-00 and 2000-01, but dropped to below 4 percent in 2002-03 and 2009-10. The 2015-16 Governors Budget projects that capital gains will account for 11 percent of General Fund revenues and transfers in fiscal year 2014-15 and 9.4 percent in fiscal year 2015-16.
Sales Tax. The sales tax is imposed upon retailers for the privilege of selling tangible personal property in California. Most retail sales and leases are subject to the tax. However, exemptions have been provided for certain essentials such as food for home consumption, prescription drugs, gas delivered through mains and electricity. Other exemptions provide relief for a variety of sales ranging from custom computer software to aircraft. Effective January 1, 2014, the base State and local sales tax was increased to, and remains at, 7.50 percent. Certain cities and counties have increased the sales tax percentage in their jurisdiction above the base amount.
Corporation Tax. The State of Californias corporate tax revenue is derived from franchise tax, corporate income tax, additional taxes on banks and other financial corporations, an AMT similar to the federal AMT and a tax on the profits of Sub-Chapter S corporations. On November 6, 2012, voters approved Proposition 39, which changes the way some taxes are calculated for multistate businesses, and likely will result in increased revenues as some multistate business will pay more taxes.
Insurance Tax. The majority of insurance written in the State of California, subject to certain exceptions, is subject to a 2.35 percent gross premium tax.
Other Taxes. Other sources of General Fund revenue include inheritance and gift taxes, cigarette taxes, alcoholic beverage taxes, horse racing license fees and trailer coach license fees.
State of California Budget Process
The State of Californias fiscal year begins on July 1st and ends on June 30th of the following year. Under the State of California Constitution, money may be drawn from the Treasury only through an appropriation made by law. The primary source of the annual expenditure is the annual Budget Act as approved by the Legislature and signed by the Governor. The annual budget is proposed by the Governor by January 10 of each year for the next fiscal year (the Governors Budget). State of California law requires the annual proposed Governors Budget to provide for projected revenues equal to or in excess of projected expenditures for the ensuing fiscal year. Following the submission of the Governors Budget, the Legislature takes up the proposal. During late spring, usually in May, the Department of Finance submits revised revenue and expenditure estimates (known as the May Revision) for both the current and budget years to the Legislature. The Budget Act, which follows the May Revision, must be approved by a majority vote of each House of the Legislature.
Appropriations also may be included in legislation other than the Budget Act. With limited exceptions, bills containing General Fund appropriations must be approved by a two-thirds majority vote in each House of the Legislature and be signed by the Governor. Continuing appropriations, available without regard to fiscal year, may also be provided by statute or the State of Californias Constitution.
The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line-item vetoes are subject to override by a two-thirds majority vote of each House of the Legislature.
Over the years, a number of laws and constitutional amendments have been enacted, often through voter initiatives, which have made it more difficult for the State to raise taxes, restricted the use of the General Fund or special fund revenues, or otherwise limited the
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Legislature and the Governors discretion in enacting budgets. The Balanced Budget Amendment (Proposition 58, approved by the voters in 2004) requires the State of California to enact a balanced budget, establishes a special reserve in the General Fund, restricts future borrowings to cover budget deficits, and provides for mid-year budget adjustments if the budget falls out of balance. The Legislature may not pass a budget bill in which General Fund expenditures exceed estimated General Fund revenues and fund balances at the time of passage and as set forth in the budget bill. As a result of the requirements of Proposition 58, the State of California must, in some cases, take more immediate actions to correct budgetary shortfalls. For example, if, after passage of the Budget Act, the Governor determines that the State is facing substantial revenue shortfalls or spending deficiencies, the Governor is authorized to declare a fiscal emergency and propose legislation to address the emergency. The Legislature is called in to special session to address this proposal. If the Legislature fails to send legislation to the Governor to address the fiscal emergency within 45 days, it is prohibited from acting on any other bills or adjourning until fiscal legislation is passed. Such fiscal emergencies were declared in 2008, 2009, 2010, and 2011, and the Legislature was called into various special sessions to address budget shortfalls. Proposition 58 also prohibits certain future borrowings to cover budget deficits. These restrictions apply to general obligation bonds, revenue bonds and certain other forms of long-term borrowings, but do not apply to certain other types of borrowing, such as (i) short-term borrowing to cover cash shortfalls in the General Fund (including revenue anticipation notes or revenue anticipation warrants currently used by the State), or (ii) inter-fund borrowings.
Other examples of constraints on the budget process include Proposition 13 (requiring a two-thirds vote in each House of the Legislature to change State of California taxes enacted for the purpose of increasing revenues collected), Proposition 98 (requiring a minimum percentage of General Fund revenues be spent on local education), Proposition 49 (requiring expanded State of California funding for before and after school programs), Proposition 10 (raising taxes on tobacco products but mandating the expenditure of such revenues), Proposition 63 (imposing a 1 percent tax surcharge on taxpayers with annual taxable income of more than $1 million in order to fund mental health services and limiting the Legislature or Governor from redirecting funds now used for mental health services), Proposition 1A of 2006 (protecting funds from suspensions) and Proposition 22 (restricts the ability of the State to use or borrow money from local governments and moneys dedicated to transportation financing, and prohibits the use of excise taxes on motor vehicle fuels to offset General Fund costs of debt service on certain transportation bonds). Proposition 25 was intended to end delays in the adoption of the annual budget by changing the legislative vote necessary to pass the budget bill from two-thirds to majority vote and requiring the legislators to forgo their pay if the Legislature fails to pass the budget bill on time.
State of California Budget
Budget deficits in California have recurred from year-to-year for over a decade. Weakness in the State economy caused State tax revenues to decline precipitously, resulting in large budget gaps and cash shortfalls. In addition to the recent economic downturn, Californias chronic budget crises are also a result of State spending commitments funded by temporary spikes in revenues. Once revenues return to their normal trend or drop precipitously, these commitments cannot be sustained, and dramatic cuts to programs and/or tax increases sometimes have been required. Budgets also have repeatedly been balanced using, at least in part, unrealized assumptions and one-time or temporary measures.
Californias budget challenges have been exacerbated by a wall of debt, which is an unprecedented level of debt, deferrals and budgetary obligations that have accumulated for over a decade. As a result, the State is paying for the expenses of the past and will do so for the foreseeable future.
The General Fund for the fiscal year 2014-15 ended with a $2.4 billion cash, which is the second time since June 30, 2007 that the fiscal year did not end in the red. Many challenges to having a balanced budget, however, remain. The budget is balanced by only a narrow margin. There may be pressure to increase spending if the federal government shifts additional program costs to the State and as health care costs rise. Further, the federal government and courts could interfere with authorized budget cuts. In addition, the State has huge unfunded liabilities associated with the States retirement systems and State retiree health benefits.
The discussion herein of the fiscal year 2015-16 and 2014-15 budget is based on estimates and projections of revenues and expenditures by the Governors administration, and must not be construed as statements of fact. These estimates and projections are based upon various assumptions, which may be affected by numerous factors, including future economic conditions in California and the nation, and there can be no assurance that the estimates will be achieved.
Fiscal Year 2015-16 State Budget
The 2015-16 budget was enacted on June 25, 2015 (the 2015 Budget) and, as with the 2014 Budget, provides for a multi-year General Fund plan that is balanced. The 2015 Budget assumes total State spending of $167.6 billion, an increase of 6.9 percent over the pre-revised totals for 2014-15. Bond spending is projected to decline by 53 percent in 2015-16. The 2015 Budget also assumes that the State will enter the 2015-16 fiscal year with a balance of $2.5 billion and have revenues of $113.4 billion. The 2015 Budget estimates that the 2015 fiscal year will end with a surplus of $2.8 billion, which will be deposited into a budget stabilization account/rainy day fund.
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The California Legislative Analysts Office (LAO) stated that the 2015 Budget has identified and addressed generally prudent priorities. The LAO stated that the 2015 Budgets reluctance in proposing new significant program commitments, outside of Proposition 98, will allow the State to avoid its instable boom and bust budgeting of the past and remain prepared to manage the next significant State revenue downturn.
The 2015 Budget continues to shore up the retirement liabilities of CalSTRS. Barring State action, an updated estimate predicts that CalSTRS will run out of money in 30 years. The 2015 Budget utilizes a multi-decade plan to eliminate the CalSTRS $72 billion unfunded liability through increased funding by the State, districts and teachers. The 2015 Budget includes $1.9 billion of the General Fund for CalSTRS. Based on a model of shared responsibility, contributions to the system in 2015-2016 from the State, school districts, and teachers will increase to 4.9 percent, 10.7 percent, and 9.2 percent, respectively.
The 2015 Budget projects that the General Funds three major taxes collectively will increase by over $5.6 billion in 2015-16. In response to such strong economic data and an increase in state income tax collections, the LOA forecasts the State collecting more revenue than currently projected in the 2015 Budget, barring a sustained stock market drop. Additional revenues in 2014-15 will be primarily or entirely distributed to schools and community colleges, potentially resulting in higher ongoing state payments to schools.
In addition, the 2015 Budget continues a reinvestment in schools by providing $7.8 billion in new Proposition 98 funding. The 2015 Budget provides $2,600 more per K-12 student in 2015-16 compared to 2011-12. Medi-Cal enrollment is expected to rise from 11.5 million in 2014-15 to 12.2 million in 2015-16. The 2015 Budget estimates that General Fund Medi-Cal costs will increase by $1.3 billion from the prior fiscal year.
Californias budget is highly dependent on the performance of the stock market and resulting capital gains. In response to this volatility, the Legislature passed Proposition 2, a constitutional amendment that deposits funds in the States rainy day fund to pay down liabilities and save for a rainy day. Capital gain revenues above 8 percent of General Fund tax revenue are required to be deposited into the rainy day fund, up to 10 percent of General Fund revenue. Proposition 2 also sets requirements as to how the money in the rainy day fund is used and requires that the State provide multi-year budget forecasts to help better manage the States longer term finances. The 2015 Budget projects that Proposition 2 will yield a $1.2 billion fund deposit into the rainy day fund. The LOA advises the legislature to identify certain priority debt payments and to subsequently develop both a short- and long-term plan to allocate these funds towards these payments.
The 2015 Budget continues to pay down the States wall of debt, anticipating the elimination of all remaining school payment deferrals. Proposition 2 funds reserved for debt payment have been proposed to exclusively address the States non-retirement liabilities.
Fiscal Year 2014-15 State Budget
The 2014-15 budget was enacted on June 20, 2014 (the 2014 Budget) and, as with the 2013 Budget, provides for a multi-year General Fund plan that is balanced. The 2014 Budget assumes total State spending of $152.3 billion, an increase of 8.6 percent over the revised totals for 2013-14. The 2014 Budget also assumes that the State will enter the 2014-15 fiscal year with a balance of $3.9 billion and have revenues of $105 billion. The 2014 Budget estimates that the 2014 fiscal year will end with a surplus of $1.6 billion, which will be deposited into a budget stabilization account/rainy day fund.
The LAO stated that the 2014 Budget largely aligns with the LAOs recommendation that the State begin preparations for its next budget downturn by building reserves and paying down debts, as well as begin efforts to address the States large retirement and other liabilities. The LAO states that with this approach, the State will improve its chances of managing the next significant State revenue downturn with little in the way of the drastic budget cuts required in the last few recessions.
The 2014 Budget pays down more than $10 billion of the States wall of debt. If revenues rise higher than anticipated, the first call on additional funds will be for further debt payments. Beyond the wall of debt, the State faces more than $300 billion in retirement, deferred maintenance and other long-term liabilities.
The 2014 Budget proposes to shore up the retirement liabilities of CalSTRS. In its 101-year history, CalSTRS has rarely been adequately funded (meaning that expected contributions and investment returns are equal to expected pension payouts). Barring State action, it is estimated that CalSTRS will run out of money in 33 years. The 2014 Budget begins a multi-decade plan to eliminate the CalSTRS $74 billion unfunded liability through increased funding by the State, districts and teachers. The LAO stated that this is a bold proposal, and recommends that the Legislature use the plan as a starting point to adopt a comprehensive, long-term funding program as the costs to address this problem will only grow the longer the State waits.
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In addition, the 2014 Budget continues a reinvestment in schools by providing more than $10 billion in new Proposition 98 funding. The 2014 Budget provides $1,954 more per K-12 student in 2014-15 compared to 2011-12. The States adoption to an expanded Medi-Cal under the Affordable Care Act is a major new spending commitment; Medi-Cal enrollment is expected to raise from 7.9 million before implementation to 11.5 million in 2014-15, covering about 30 percent of the States population. The 2014 Budget estimates that General Fund Medi-Cal costs will increase by $2.4 billion from the prior fiscal year.
Californias budget is highly dependent on the performance of the stock market and the resulting capital gains. In response to this volatility, the Legislature placed a constitutional amendment on the November ballot for a strong rainy day fund to pay down liabilities and save for a rainy day. If passed, capital gain revenues above 8 percent of General Fund tax revenue would be required to be deposited into the rainy day fund, up to 10 percent of General Fund revenue. The legislation would also set requirements as to how the money in the rainy day fund would be used and require that the State provide multi-year budget forecasts to help better manage the States longer term finances. Under current projections, the proposed rainy day fund would result in over $3 billion in savings and $3 billion in additional debt payments in its first 3 years of operation.
Municipal Bankruptcies
Municipalities in California may declare bankruptcy, which increases the risk of default on municipal bonds. According to the LAO, except for K-12 education, the State does not have a significant role in monitoring the fiscal health of localities. Instead, the responsibility for reviewing local government fiscal conditions rests with local communities.
Federal bankruptcy law permits local governmentscounties, cities, special districts, school districts and community college districtsto file for relief under Chapter 9 provided that their state government authorizes this action. California provides its local governments with broad authority to file Chapter 9, but generally requires cities, counties and special districts to engage in a neutral evaluation process prior to filing for Chapter 9 relief. When a local government files for Chapter 9, the locality receives an automatic stay that stops the collection activity by creditors and protects the locality from litigation. A court must determine if the locality is eligible for Chapter 9 protection, and, if so, the locality must develop a plan of adjustment. Creditors and the court must approve the plan adjustment. Once the court approves the plan of adjustment, it creates a new contractual agreement between the locality and its creditors.
Three California localities made Chapter 9 bankruptcy filings in 2012, which occurred just months after another California locality had completed its three-year Chapter 9 process. Three of these bankruptcies were filed for similar reasons, including: long-term imbalances in revenues and spending; reduced tax revenues associated with the downturn in the economy; constraints to reducing expenditures in the short-term; and increasing costs for retiree benefits. The other bankruptcy was mostly due to a legal judgment that required the locality to pay an amount to a creditor that was more than twice its annual general fund budget.
In April 2013, a Bankruptcy Judge held that one of the California localities, the City of Stockton, satisfied the eligibility requirements for a Chapter 9 debtor. Effective February 2015, the City of Stockton exited bankruptcy. The use of Chapter 9 bankruptcy filings by local governments could have an impact on creditors and parties with whom they contract, including bondholders. In addition, bankruptcies at the local level could impact the States overall fiscal outlook.
Ratings
The States fiscal situation increases the risk of investing in California municipal securities, including the risk of potential issuer default, and also heightens the risk that the prices of California municipal securities will experience greater volatility.
S&P, Fitch, and Moodys assign ratings to Californias long-term general obligation bonds, which represent their opinions as to the quality of the municipal bonds they rate. The ratings are general and not absolute standards of quality. Consequently, municipal bonds with the same maturity, coupon and rating may have different yields while obligations with the same maturity and coupon with different ratings may have the same yields. In 2009 and 2010, Californias general obligation bond ratings were significantly downgraded by Moodys (to Baa1), S&P (to A), and Fitch (to BBB). The States credit ratings had not been this low since 2003 and 2004 and the State had one of the lowest bond ratings of any state. In January 2013, S&P raised the States general obligation credit rating to A. In August 2013, Fitch raised the States general obligation rating to A. In June 2014, Moodys raised the States general obligation rating to Aa3. In February 2015, Fitch further raised the States general obligation rating to A+. In August 2015, S&P raised the States general obligation rating to AA-. These upward revisions reflected a recalibration of certain public finance ratings and did not reflect a change in credit quality of the issuer or issuers.
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There can be no assurance that such ratings will be maintained in the future. The States credit rating, and any future revisions or withdrawal of a credit rating, could have a negative effect on the market price of the States general obligation bonds, as well as notes and bonds issued by Californias public authorities and local governments. Lower credit ratings make it more expensive for the State to raise revenue, and in some cases, could prevent the State from issuing general obligation bonds in the quantity otherwise desired. Further, downgrades can negatively impact the marketability and price of securities in a Funds portfolio.
Some municipal issuers either have been unable to issue bonds or access the market to sell their issues or, if able to access the market, have issued bonds at much higher rates. Should the State or municipalities fail to sell bonds when and at the rates projected, the State could experience significantly increased costs in the General Fund and a weakened overall cash position in the current fiscal year.
State of California Indebtedness and Other Obligations
The State of California Treasurer is responsible for the sale of debt obligations of the State and its various authorities and agencies. The State uses General Fund revenues to pay debt-service costs for principal and interest payments on two types of bonds used primarily to fund infrastructurevoter-approved general obligations bonds and lease-revenue bonds approved by the Legislature. The debt service ratio (DSR) is the ratio of annual General Fund debt-service costs to annual General Fund revenues and transfers, and is often used as an indicator of the States debt burden. The higher the DSR and the more rapidly it rises, the more closely bond raters, financial analysts and investors tend to look at the States debt practices. Also, higher debt-service expenses limit the use of revenue for other programs.
The States DSR grew in the 1990s when its use of infrastructure bonds increased. Since 2006, a significant amount of new general obligation bonds and lease revenue bonds have been authorized by voters and/or the Legislature. These authorizations have led to a substantial increase in the amount of General Fund supported debt outstanding, from $44.9 billion as of July 1, 2006 to $87.0 billion as of July 1, 2014, while still leaving current authorized and unissued bonds of about $30.5 billion. In the first half of calendar year 2014, $3.16 billion of new money general obligation and lease revenue bonds were sold and $795 billion of refunding general obligation and lease revenue bonds were sold.
Based on estimates in the Governors proposed 2015-16 Budget and bond issuance estimates from the State Treasurers office, the DSR is estimated to equal approximately 5.78 percent in fiscal year 2014-15 and 5.63 percent in fiscal year 2015-16. These amounts do not reflect adjustments for receipts from the U.S. Treasury for the States current outstanding general obligation and lease-revenue BABs or the availability of any special funds that may be used to pay a portion of the debt service to help reduce General Fund costs. The actual DSR will depend on a variety of factors, including actual debt issuance (which may include additional issuance approved in the future by the Legislature and, for general obligation bonds, the voters), actual interest rates, debt service structure, and actual General Fund revenues and transfers.
Current State of California debt obligations include:
General Obligation Bonds. The State of Californias Constitution prohibits the creation of general obligation indebtedness of California unless a bond measure is approved by a majority of the electorate voting at a general election or direct primary. Each general obligation bond act provides a continuing appropriation from the General Fund of amounts for the payment of debt service on the related general obligation bonds, subject only to the prior application of moneys in the General Fund to support the public school system and public institutions of higher education. Under the State of Californias Constitution, the appropriation to pay debt service on the general obligation bonds cannot be repealed until the principal and interest on the bonds have been paid. Certain general obligation bond programs, called self-liquidating bonds, receive revenues from specified sources so that moneys from the General Fund are not expected to pay debt service, but the General Fund will pay the debt service, pursuant to the continuing appreciation contained in the bond act, if the specified revenue source is not sufficient. The principal self-liquidating bond programs are the ERBs, supported by a special sales tax, and veteran general obligation bonds, supported by mortgage repayments from housing loans made to military veterans.
As of January 1, 2015, the State had outstanding approximately $79.0 billion aggregate principal amount of long-term general obligation bonds, of which approximately $76.7 billion were payable primarily from the States General Fund, and approximately $2.3 billion were self-liquidating bonds payable first from other special revenue funds. As of January 1, 2015, there were unused voter authorizations for the future issuance of approximately $31.7 billion of long-term general obligation bonds, some of which may first be issued as commercial paper notes. Of this unissued amount, approximately $596.2 million is for general obligation bonds payable first from other revenue sources.
In June 2014, voters passed Proposition 41, which approves $600 million of general obligation bonds to finance rental housing programs for military veterans. This measure also cancelled $600 million of existing authorization from a 2008 veterans home ownership bond act, which is payable primarily from mortgage payments made by veteran homeowners.
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In November 2014, State voters approved a ballot measure that authorized the issuance of a total of approximately $7.5 billion in general obligation bonds for a wide variety of purposes relating to Californias water supply systems, water quality improvements and water infrastructure improvements. Of this amount, approximately $7.1 billion is new bond authorization, and the balance is a reallocation of unused authority from previously-approved bond measures. Additional bond measures may be included on future election ballots, but any proposed bond measure must first be approved by a 2/3 vote of the Legislature or placed on the ballot through the initiative process.
Variable Rate General Obligations Bonds. The general obligation bond law permits the State to issue as variable rate indebtedness up to 20 percent of the aggregate amount of long-term general obligation bonds outstanding. These bonds represent about 5 percent of the States total outstanding general obligation bonds. With respect to the $850 million of variable rate general obligation bonds having mandatory tender dates, if these bonds cannot be remarketed on their respective scheduled mandatory tender dates, there is no default but the interest rate on the series of such bonds not remarketed on such date would be increased in installments thereafter until such bonds can be remarketed or refunded, ultimately reaching either 11 percent on the 181st day or 10 percent on the 180th day, as applicable. As of July 1, 2015, the State had outstanding approximately $3.62 billion in variable rate general obligation bonds (which includes a portion of the Economic Recovery Bonds (ERBs)), representing about 4.7% of the States total outstanding general obligation bonds as of that date.
Under State law, except for ERBs, certain mandatory tender bonds and certain indexed floating rate bonds without credit enhancement, the State must pay the principal and interest of any general obligation bonds which are subject to optional or mandatory tender, and which are not remarketed or, if applicable, purchased by financial institutions which provide liquidity support to the State. The State has not entered into any interest rate hedging contracts in relation to any of its variable rate general obligation bonds, and it no longer has any auction rate bonds outstanding.
General Obligation Commercial Paper Program. Pursuant to legislation enacted in 1995, voter-approved general obligation indebtedness may, in some cases, be issued as commercial paper notes. Commercial paper notes may be renewed or refunded by the issuance of long-term bonds. It is currently the States policy to use commercial paper notes to provide flexibility for bond programs, such as to provide interim funding of voter-approved projects and to facilitate refunding of variable rate bonds into fixed rate bonds. Commercial paper notes are not included in the calculation of permitted variable rate indebtedness described above under Variable Rate General Obligation Bonds. A total of $2.225 billion of commercial paper is now authorized under agreements with various banks. A total of $594 million of commercial paper was outstanding as of January 1, 2015.
Enhanced Transportation Bonds. Self-liquidating general obligation bonds have a dedicated revenue source which is expected to pay all of the debt service, but if the revenue source is for some reason insufficient, the General Fund pays the debt service on the same priority level as all other general obligation bonds. In 2013, the Legislature enacted a bill which created an additional self-liquidating general obligation bond. The new program, called Enhanced Transportation Bonds, uses Vehicle Weight Fees (VWF) charged on commercial trucks and vans to pay the debt service on certain general obligation bonds for transportation purposes previously approved by voters in 2006, with the States general obligation pledge as a secondary source of payment. VWF is an excise tax, not part of the General Fund, and totaled about $900 million to $1 billion per year in the recent past, although there can be no assurance of future VWF amounts. VWF moneys are currently transferred to the General Fund to offset the debt service costs of transportation bonds. The new program authorized under the 2013 bill would not have any effect on any general obligation transportation bonds already issued. The State Treasurer currently has no plans to issue Enhanced Transportation Bonds.
Bank Arrangements. In connection with the letters of credit or other credit facilities obtained by the State in connection with variable rate demand obligations (VRDOs) and the commercial paper program (CP), the State has entered into a number of reimbursement agreements or other credit agreements with a variety of financial institutions. These agreements include various representations and covenants of the State, and the terms by which the State would be required to repay any drawings on respective letters of credit or other credit enhancement to which such credit agreements relate. To the extent that VRDOs or CP cannot be remarketed over an extended period, interest payable by the State pursuant to the reimbursement agreement or credit agreement would generally increase over current market levels relating to the VRDOs or CP, and the principal repayment period would generally be shorter than the period otherwise applicable to the VRDOs or CP. On occasion, the States VRDOs or CP were not remarketed, resulting in draws on the applicable credit facilities, but this has not occurred since 2009.
Lease-Purchase Obligations. In addition to general obligation bonds, the State has acquired and constructed capital facilities through the use of lease-revenue borrowing (also referred to as lease-purchase borrowing). Such borrowing must be authorized by the Legislature in a separate act or appropriation. Under these arrangements, the State of California Public Works Board (SPWB), another State or local agency or a joint powers authority issues bonds to pay for the construction of facilities, such as office buildings, university buildings or correctional institutions. These facilities are leased to State agencies, the California State University, or the Judicial Council under a long-term lease that provides the source of payment of the debt service on the lease-purchase bonds. In some cases, there was not a separate bond issue, but a trustee directly created certificates of participation of the States lease obligation,
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which were then marketed to investors. Under applicable court decisions, such lease arrangements do not constitute the creation of indebtedness within the meaning of State Constitutional provisions that require voter approval. The State had approximately $11.1 billion in lease-revenue obligations outstanding as of January, 2015. The SPWB, which is authorized to sell lease-revenue bonds, had approximately $3.89 billion of authorized and unissued bonds as of January 1, 2015.
Non-Recourse Debt. Certain State agencies and authorities issue revenue obligations for which the General Fund has no liability. Revenue bonds represent obligations payable from the States revenue-producing enterprises and projects, which are not payable from the General Fund, and conduit obligations payable only from revenues paid by private users or local governments of facilities financed by the revenue bonds. The enterprises and projects include transportation projects, various public works projects, public and private educational facilities, housing, health facilities and pollution control facilities. State agencies and authorities had approximately $58.05 billion aggregate principal amount of revenue bonds and notes which are non-recourse to the General Fund outstanding as of December 31, 2014.
Build America Bonds. In February 2009, the U.S. Congress enacted certain new municipal bond provisions as part of the American Recovery and Reinvestment Act (the ARRA). One provision of the ARRA allows municipal issuers such as the State to issue Build America Bonds (BABs) for new infrastructure investments. BABs are bonds whose interest is subject to federal income tax, but pursuant to ARRA, the U.S. Treasury was to repay the issuer an amount equal to 35 percent of the interest cost on any BABs issued during 2009 and 2010. The BAB subsidy payments from general obligation bonds are General Fund revenues to the State, while subsidy payments for SPWB lease revenue bonds are deposited into a fund which is made available to the SPWB for any lawful purpose. In neither instance are the subsidy payments specifically pledged to repayment of the BABs to which they relate. The cash subsidy payment with respect to the BABs, to which the State is entitled, is treated by the Internal Revenue Service as a refund of a tax credit and such refund may be offset by the Department of Treasury by any liability of the State payable to the federal government. None of the States BAB subsidy payments to date have been reduced because of such an offset.
Between April 2009 and December 2010, the State issued approximately $13.5 billion of BAB general obligation bonds and the SPWB issued $551 million of BAB lease-revenue bonds. $149.6 million of the SPWB BABs were redeemed in November 2013. The aggregate amount of the subsidy payments to be received from fiscal year 2014-15 through the maturity of these bonds (usually, 20 to 30 years) based on the 35% rate is approximately $7.9 billion for the general obligations BABs and $209 million for the SPWB lease-revenue BABs.
Pursuant to federal budget legislation, beginning on March 1, 2013, the federal governments BAB subsidy payments were reduced as part of a sequestration of many program expenditures. The reduction of the BAB subsidy payment is presently scheduled to continue until 2024, although U.S. Congress can terminate or modify it sooner, or extend it. Each BAB subsidy payment was reduced by 8.7 percent for the federal 2013 fiscal year (ended September 30, 2013) and 7.2 percent for the federal 2014 fiscal year (ended September 30, 2014). This resulted in a reduction of approximately $26.58 million in subsidies from a total of $363.86 million expected to be received during the federal 2014 fiscal year. The sequestration percentage is recalculated for each fiscal year, and has been set at 7.3 percent for the federal 2015 fiscal year. None of the BAB subsidy payments are pledged to pay debt service, so this reduction will not affect the States ability to pay all of its BABs on time, nor have any material impact on the General Fund.
Future Issuance Plans. Since 2006, a significant amount of new general obligation bonds, lease-revenue bonds and Proposition 1A bonds have been authorized by voters and/or the Legislature. These authorizations led to a substantial increase in the amount of General Fund-supported debt outstanding, from $44.9 billion as of July 1, 2006 to $87.0 billion as of July 1, 2014, while still leaving current authorized and unissued bonds of about $30.5 billion. Based on estimates from the 2015-16 proposed budget and updates from the Department of Finance, approximately $3.55 billion of new money general obligation bonds (some of which may initially be in the form of commercial paper notes) and approximately $282 million of lease-revenue bonds will be issued in calendar year 2015. These projections will be updated based on updated funding needs and actual spending. The actual amount of bonds sold will depend on other factors such as overall budget constraints and market conditions. The State also expects to issue refunding bonds as market conditions warrant.
The ratio of debt service on general obligation and lease-revenue bonds supported by the General Fund to annual General Fund revenues and transfers (the General Fund Debt Ratio) can be expected to fluctuate from year to year. As assumptions for future debt issuance and revenue projections are updated from time to time, any changes to these amounts will impact the projected General Fund Debt Ratio. Based on the revenue estimates contained in the 2015-16 proposed budget and bond issuance estimates, the General Fund Debt Ratio is estimated to equal approximately 7.07 percent in fiscal year 2014-15 and 6.97 percent in fiscal year 2015-16.
The General Fund Debt Ratio is calculated based on actual gross debt service, without adjusting for receipts from the U.S. Treasury for the States current outstanding general obligation and SPWB lease revenue BABs or the availability of any special funds that may be used to pay a portion of the debt service to help reduce General Fund costs. The total of these offsets for general obligation bond and lease revenue debt service is estimated to equal approximately $1.40 billion for fiscal year 2014-15 and $1.52 billion for fiscal
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year 2015-16. Including the estimated offsets reduced the General Fund Debt Ratio to 5.78 percent in fiscal year 2014-15 and 5.63 percent in fiscal year 2015-16. The actual General Fund Debt Ratio in future fiscal years will depend on a variety of factors, including actual debt issuance (which may include additional issuance approved in the future by the Legislature and, for general obligation bonds, the voters), actual interest rates, debt service structure, and actual General Fund revenues and transfers.
Economic Recovery Bonds. The California Economic Recovery Bond Act (Proposition 57) was approved by the voters on March 2, 2004. Proposition 57 authorizes the issuance of up to $15 billion in ERBs to finance the negative General Fund reserve balance as of June 30, 2004 and other General Fund obligations undertaken prior to June 30, 2004. Repayment of the ERBs is secured by a pledge of revenues from a one-quarter cent increase in the States sales and use tax starting July 1, 2004. In addition, as voter-approved general obligation bonds, the ERBs are secured by the States full faith and credit and are payable from the General Fund in the event the dedicated sales and use tax revenue is insufficient to repay the bonds. The entire authorized amount of ERBs has been issued, and no further ERBs can be issued under Proposition 57, except for refunding bonds. The State issued refunding ERBs in 2009 to restructure the program in response to a drop in taxable sales and in 2011 for debt service savings.
Three different sources of funds are required to be applied to the early retirement (generally by purchase or redemption) of ERBs: (i) all proceeds from the dedicated quarter cent sales tax in excess of the amounts needed, on a semi-annual basis, to pay debt service and other required costs of the bonds, (ii) all proceeds from the sale of surplus State property, and (iii) fifty percent of each annual deposit, up to $5 billion in the aggregate, of deposits in a Budget Stabilization Account (BSA) created by the California Balanced Budget Act. As of January1, 2015, funds from these sources have been used for early retirement of approximately $7.83 billion of bonds during fiscal years 2005-06 through the first half of fiscal year 2014-15. The State accumulated approximately $727 million in excess special sales tax up to January 1, 2015 and used those funds to retire $634.4 billion of ERBs on February 3, 2015.
The Governor suspended the BSA transfers in each of the fiscal years 2008-09 through 2013-14 due to the condition of the General Fund. The Governor announced in the 2014-15 Budget that the BSA transfers will be resumed in 2014-15, which will provide an estimated $1.6 billion of additional funds for early retirement of ERBs. The State anticipated that all outstanding ERBs will be effectively retired in the first quarter of fiscal year 2015-16.
Tobacco Settlement Revenue Bonds. In 1998 the State signed a settlement agreement (the MSA) with four major cigarette manufacturers (the participating manufacturers). Under the MSA, the participating manufacturers agreed to make payments to the State in perpetuity, which payments were predicted at the time to total approximately $25 billion over the first 25 years. Under a separate Memorandum of Understanding, half of the payments made by the cigarette manufacturers will be paid to the State and half to local governments. The specific amount to be received by the State and local governments is subject to adjustment. The MSA requires a reduction of the participating manufacturers payments for decreases in cigarette shipment volumes by the participating manufacturers, payments owed to certain Previously Settled States and certain other types of offsets for disputed payments.
The Tobacco Securitization Law, enacted in 2002, authorized the establishment of a special purpose trust to purchase those assets and to issue revenue bonds secured by the tobacco settlement revenues received beginning in the 2003-04 fiscal year. Legislation in 2003 amended the Tobacco Securitization Law to authorize a back-up state guaranty that requires the Governor to request an appropriation from the General Fund in the annual budget act to pay debt service and other related costs of the tobacco settlement revenue bonds secured by the second 2003 sale of tobacco settlement revenues when such tobacco settlement revenues are insufficient. The back-up state guarantee was applied only to the second 2003 sale of bonds and was continued when those bonds were refunded in 2005 and 2013 (the 2005 Bonds and 2013 Bonds). The back-up state guaranty only applies to the outstanding principal amount of $2.7 billion of the 2005 and 2013 Bonds.
Tobacco settlement revenue bonds are neither general nor legal obligations of the State or any of its political subdivisions and neither the faith and credit nor the taxing power nor any other assets or revenues of the State or of any political subdivision is or shall be pledged to the payment of any such bonds; provided that, in connection with the issuance of the 2005 and 2013 Bonds, the State covenanted to request the legislature for a General Fund appropriation in the event tobacco settlement revenues fall short and other available amounts are depleted. This appropriation has been requested and approved by the Legislature; however, the use of appropriated moneys has never been required.
One of the reserve funds relating to the 2005 Bonds was used to make required debt service interest payments on the 2005 bonds in 2011 and 2012 in part due to the withholding related to declining tobacco consumptions and disputes over declining market share by the participating manufacturers. The total amount of the draws was approximately $7.9 million. In April 2013, the reserve fund was replenished in full following the disbursements of the non-participating manufacturer settlement funds and receipt of the scheduled tobacco settlement revenues. As of December 1, 2014, the amount remaining in the tobacco reserve funds relating to the 2005 and 2013 Bonds was approximately $246.5 million. If, in any future year, the tobacco settlement revenues are less than the required debt service payments on the 2005 and 2013 Bonds, additional draws on the reserve funds will be required. Future revenues in excess of debt service requirements, if any, will be used to replenish the reserve funds of the bonds. The General Fund is not obligated to replenish the reserve funds, nor request an appropriation to replenish the reserve funds.
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Unemployment Insurance Fund Borrowing. Commencing in fiscal year 2011-12, the State has been required to pay interest on loans made by the federal government to the States Unemployment Insurance Fund. The principal amount of these loans was about $8.7 billion at the end of 2014, and is projected to be about $7.4 billion at the end of 2015. The September 2014 interest payments of $217.4 million was paid to the General Fund. The 2015-16 proposed budget allocated $184.4 million from the General Fund to make the 2015 interest payment.
Office of Statewide Health Planning and Development Guarantees. The Office of Statewide Health Planning and Development of the State of California (OSHPD) insures loans and bond issues for the financing and refinancing of construction and renovation projects for nonprofits and publically-owned healthcare facilities. This program is currently authorized in statute to insure up to $3 billion for health facility projects. As of October 31, 2014, OSHPD insured approximately 110 loans to nonprofit or publicly owned health facilities throughout California for approximately $1.77 billion. The cash balance of the fund was approximately $169.7 million as of October 31, 2014.
Equipment Lease/Purchase Program. The States Department of General Services operates a centralized program which allows State departments to acquire equipment, software or services under financing programs with approved vendors. The departments make annual payments for the equipment from their support budgets, which are subject to annual appropriation by the Legislature. If, for any reason, the annual payments are not appropriated, the department is obligated to return the equipment to the vendor. These contracts are represented as capital leases in the States financial statements. As of January 1, 2015, the aggregate total contracts under this program was approximately $112.6 million.
Cash Flow Borrowings. As part of its cash management program, the State has regularly issued short-term obligations to meet cash flow needs. The State has issued revenue anticipation notes (RANs or Notes) in all but one fiscal year since the mid-1980s to partially fund timing differences between receipts and disbursements, as the majority of General Fund revenues are received in the last part of the fiscal year. RANs mature prior to the end of the fiscal year of issuance. If additional external cash flow borrowings are required, the State has issued revenue anticipation warrants (RAWs), which can mature in a subsequent fiscal year.
RANs and RAWs are both payable from any Unapplied Money in the General Fund on their maturity date, subject to the prior application of such money in the General Fund to pay Priority Payments. Priority Payments are payments as and when due to: (i) support the public school system and public institutions of higher education (as provided in Section 8 of Article XVI of the State Constitution); (ii) pay principal of and interest on general obligation bonds and general obligation commercial paper notes of the State; (iii) reimburse local governments for certain reductions in ad valorem property taxes or make required payments for borrowings secured by such repayment obligation; (iv) provide reimbursement from the General Fund to any special fund or account to the extent such reimbursement is legally required to be made to repay borrowings therefrom pursuant to California Government Code Sections 16310 or 16418; and (v) pay State employees wages and benefits, State payments to pension and other State employee benefit trust funds, State Medi-Cal claims, lease rentals to support lease revenue bonds, and any amounts determined by a court of competent jurisdiction to be required by federal law or the State Constitution to be paid with State warrants that can be cashed immediately.
State fiscal officers constantly monitor the States cash position and if it appears that cash resources may become inadequate, they will consider the use of other cash management techniques, including seeking additional legislation. As of June 30, 2014, the State General Fund had a cash surplus of $1.9 billion and did not owe any monies to any special fund or other State fund for cash management purposes. The Governors Fiscal Year 2015-16 Budget projects that the State will not need to use any external borrowings in Fiscal Year 2015-2016.
Retirement Liabilities. The States two main pension funds, CalPERS and CalSTRS, have sustained substantial investment losses in recent years and face large unfunded future liabilities. Currently, the law provides no means for CalSTRS to address its unfunded liabilities. If the State does not take action concerning these liabilities soon, the extra costs needed to retire these unfunded liabilities over the next few decades will likely increase dramatically. Lower than expected investment returns have been a primary reason for the growth of unfunded pension liabilities in the last decade. There has also been benefit increases that are implemented retroactively, and demographic and pay changes among employees and retirees. In addition, the State has very little flexibility under case law to alter benefit and funding arrangements for current employees. Generally, pension benefit packages, once promised to an employee, cannot be reduced, either retrospectively or prospectively. The States annual required contributions to CalPERS and CalSTRS may need to significantly increase in the future. In addition, governments typically do not pre-fund their retiree health liabilities. This means that future taxpayers may bear a larger cost burden for these benefits. Unlike pensions, there are no investment returns under this type of funding structure to cover a large portion of benefit costs.
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Litigation
The State of California is a party to numerous legal proceedings, many of which normally occur in governmental operations. In addition, the State of California is involved in certain other legal proceedings (described in the State of Californias recent financial statements) that, if decided against the State of California might require the State of California to make significant future expenditures or substantially impair future revenue sources. Because of the prospective nature of these proceedings, it is not presently possible to predict the outcome of such litigation, estimate the potential impact on the ability of the State to pay debt service costs on its obligations, or determine what impact, if any, such proceedings may have on a Fund.
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CONSIDERATIONS REGARDING INVESTMENT IN NEW YORK MUNICIPAL SECURITIES
A Fund investing in New York municipal securities may be particularly affected by political, economic or regulatory developments affecting the ability of New York tax-exempt issuers to pay interest or repay principal. Investors should be aware that certain issuers of New York tax-exempt securities have at times experienced serious financial difficulties. A reoccurrence of these difficulties may impair the ability of certain New York issuers to maintain debt service on their obligations. The following information provides only a brief summary of the complex factors affecting the financial situation in New York, and does not include factors that may occur on a national and/or international level that may also have an adverse effect on issuers ability to maintain debt service on their obligations. The information is primarily derived from the Annual Information Statement of the State of New York (AIS) and updates and supplements thereto. These sources are prepared by the Department of Budget (DOB) and are available to investors at www.budget.ny.gov. The information is intended to give a recent historical description and is not intended to indicate future or continuing trends in the financial or other positions of New York. Such information has not been independently verified by the Trust or its legal counsel and the Trust and its legal counsel assume no responsibility for the completeness or accuracy of such information. It should be noted that the creditworthiness of obligations issued by local New York issuers may be unrelated to the creditworthiness of obligations issued by New York city and state agencies, and that there is no obligation on the part of New York State to make payment on such local obligations in the event of default.
The Annual Information Statement of the State of New York is provided by the Department of Budget subsequent to the fiscal year end of March 31. The AIS constitutes the official disclosure statement regarding the financial condition of the State of New York. The AIS is updated on a quarterly basis. No such information is intended to be incorporated by reference in this Statement of Additional Information.
The States economy and finances are subject to many complex, economic, social, environmental and political risks and uncertainties, many of which are outside of the ability of the State to control. These include, but are not limited to, the performance of the national and State economies and the impact of continuing write-downs and other costs on the profitability of the financial services sector, and the concomitant effect on bonus income and capital gains realizations; access to the capital markets in light of the disruption in the municipal bond market; litigation against the State, including challenges to certain tax actions and other actions authorized in the Enacted Budget; and actions taken by the federal government, including audits, disallowances, and change in aid levels. Such risks and uncertainties may affect the Enacted Budget unpredictably from fiscal year to fiscal year.
Fiscal Year 2015-2016 Enacted Budget Financial Plan
The State accounts for all of its spending and revenues by the fund in which the activity takes place and the broad category or purpose of that activity. Funds include the General Fund and other funds specified for dedicated purposes (collectively, State Operating Funds). The General Fund finances various state programs including, among other programs, school aid, Medicaid and higher education. The General Fund receives the majority of the States tax money, specifically revenue from personal income, sales and business taxes, and all income not earmarked for a particular program or activity.
The State Constitution requires the Governor to submit an Executive Budget that is balanced on a cash basis in the General Fund. Since the Governor is statutorily required to balance the General Fund, it is often the focus of the States budget discussion. Each year, the Legislature and the Governor enact an Enacted Budget Financial Plan (Enacted Budget) which is prepared by the DOB and contains estimates for the upcoming fiscal year and projections for the next two fiscal years. This year, the Enacted Budget contains estimates for the 2015-16 fiscal year (FY) and projections for fiscal years 2016 through 2019.
In FY 2016, General Fund receipts, including transfers from other funds, are projected to total $68.3 billion, an annual increase of $364 million. Tax collections, including transfers of tax receipts to the General Fund after payment of debt service, are expected to total $62.6 billion, an increase of 6.8% over FY 2015. Non-tax transfers to the General Fund are expected to total $1.3 billion, an increase of $433 million, largely due to the timing of transfers from other funds and changes in the level of resources expected to be available from other funds. General Fund receipts are affected by the deposit of dedicated taxes in other funds for debt service and other purposes, the transfer of balances between funds of the State, and other factors.
General Fund disbursements, including transfers to other funds, are expected to total $72.1 billion in FY 2016, an increase of $9.2 million from the Enacted Budget Financial Plan. The increase includes one-time extraordinary transfers of $4.55 billion in monetary settlements from the General Fund to the proposed Dedicated Infrastructure Investment Fund (DIIF), and $850 million to fund the initial payment of a multi-year repayment agreement for the resolution of the Federal Office for People with Developmental Disabilities (OPWDD) Disallowance. General State Charges are expected to total $5.2 billion in FY 2016, an annual increase of $196 million (3.9%) from FY 2015. Health insurance costs are projected to increase by $132 million (4%), and the States annual pension payment is expected to increase by $89 million. This growth, which was partly offset by the pre-payment of certain obligations in FY 2014, reflects increased normal costs and repayments of amounts amortized in prior years. The State expects to
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continue to amortize pension costs in excess of the amortization thresholds established in law. General Fund transfers to other funds are expected to total $14.3 billion in FY 2016, an increase of $5.7 billion from FY 2015, which is attributable to the Capital Projects transfer in support of the DIIF.
DOB expects the State to end FY 2016 with a General Fund closing balance of $3.5 billion, a decrease of $3.8 billion from the Enacted Budget Financial Plan. The decline mainly reflects the planned transfers of monetary settlement funds to the DIIF ($4.6 billion) and the funding of the Federal OPWDD Disallowance ($850 million), partly offset by unbudgeted monetary settlements. The estimated year-end balances for statutory reserves and designated purposes in the General Fund remain unchanged from the Enacted Budget Financial Plan. These include $1.79 billion in the States principal rainy day reserves, the Tax Stabilization Reserve and the Rainy Day Reserve; $500 million designated for debt management purposes; $50 million to cover the costs of potential retroactive labor settlements with unions that have not agreed to terms for contract periods prior to April 2011; and $21 million in the Contingency Reserve. The budget surpluses projected for future years are approximately $.2 billion in FY 2017, $1.7 billion for FY 2018, and $1.6 for FY 2019.]
State Debt and Other Financing Activities
State-related debt consists of State-supported debt, where the State, subject to an appropriation, is directly responsible for paying debt service, as well as State-guaranteed debt (to which the full faith and credit of the State has been pledged), moral obligation financings and certain contingent-contractual obligation financings, where debt service is expected to be paid from other sources and State appropriations are contingent in that they may be made and used only under certain circumstances. State-supported debt is a subset of State-related debt. It includes general obligation debt, to which the full faith and credit of the State has been pledged, and lease-purchase and contractual obligations of public authorities and municipalities where the States legal obligation to make payments to those public authorities and municipalities is subject to and paid from annual appropriations made by the Legislature. General obligation debt and lease-purchase obligations are discussed in greater detail below. The State also issues interest rate exchange agreements and variable rate obligations.
The State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees.
General Obligation Bonds
There is no constitutional limit on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State. However, the Debt Reform Act of 2000 (Debt Reform Act) imposed statutory limitations on new State-supported debt issued on and after April 1, 2000. The State Constitution provides that general obligation bonds must be paid in equal annual principal installment or installments that result in substantially level or declining debt service payments, mature within 40 years of issuance, and begin to amortize not more than one year after the issuance of such bonds. General obligation housing bonds must be paid within 50 years of issuance, with principal commencing no more than three years after issuance. The Debt Reform Act limits the maximum term of State-supported bonds to thirty years. Under the State Constitution, the State may undertake short-term borrowings without voter approval. Long-term general obligation borrowing is prohibited unless authorized for a specified amount and purpose by the Legislature and approved by the voters.
In the State, general obligation debt is currently authorized for transportation, environment and housing purposes. As of March 31, 2015, the total amount of general obligation debt outstanding was $3.02 billion ($3.2 billion for the prior year). The states general obligation bonds are rated Aa1 by Moodys, AA+ by S&P and AA+ by Fitch.
Lease-Purchase and Contractual Obligation Financings and Personal Income Tax Revenue Bonds
The State utilizes certain long-term financing mechanisms, lease-purchase and contractual-obligation financings which involve obligations of public authorities or municipalities where debt service is payable by the State, but which are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance certain payments to local governments, various capital programs, including those which finance the States highway and bridge program, SUNY and CUNY educational facilities, health and mental hygiene facilities, prison construction and rehabilitation, economic development projects, State buildings and housing programs, and equipment acquisitions, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State.
Debt service payable to certain public authorities from State appropriations for such lease-purchase and contractual obligation financings may be paid from general resources of the State or from dedicated tax and other sources (e.g., State personal income taxes, motor vehicle and motor fuel related-taxes, dormitory facility rentals, and patient charges). Although these financing arrangements
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involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the States obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments.
Under legislation enacted for the 2010-11 fiscal year, the State is authorized to set aside monies in reserve for debt service on general obligation, lease-purchase, and service contract bonds. Pursuant to a certificate filed by the Director of the Budget with the State Comptroller, the Comptroller is required to transfer from the General Fund such reserved amounts on a quarterly basis in advance of required debt service payment dates. The state continues to reserve money on a quarterly basis for debt service payments that are financed with General Fund resources. Money to pay debt service on bonds secured by dedicated receipts, including Personal Income Tax (PIT) Revenue Bonds, continues to be set aside as required by law and covenants.
The State also issues PIT Revenue Bonds through authorized issuers of the State that are used as the primary financing vehicle to fund various capital programs. State PIT Revenue Bonds have been issued to support programs related to six general purposes: Education, Economic Development and Housing, Environment, State Facilities and Equipment, Transportation and Health and Mental Hygiene. In 2009, pursuant to State law, State PIT Revenue Bonds began to be issued under new General Purpose resolutions that permitted the issuance of bonds on a consolidated basis for all purposes. This enhanced flexibility has improved the marketability of the State PIT Revenue Bonds, particularly in the taxable market where State PIT Revenue Bonds have been issued as Build America Bonds. The State expects to continue to use the General Purpose approach for future issuances of State PIT Revenue Bonds, except for Transportation.
Net Variable Rate Obligations and Interest Rate Exchange Agreements
Issuers of State-supported debt are also authorized to issue limited amounts of variable rate debt instruments and enter into a limited amount of interest rate exchange agreements. The current limit on debt instruments which result in a net variable rate exposure (i.e., both variable rate debt and interest rate exchange agreements) is no more than 15 percent of total outstanding state-supported debt. Interest rate exchange agreements are also limited to a total notional amount of no more than 15 percent of total outstanding state-supported debt. The outstanding state-supported debt of $51.9 billion as of March 31, 2015 results in a cap on variable rate exposure and a cap on interest rate exchange agreements of about $8 billion each (15 percent of total outstanding state-supported debt). According to the AIS, as of March 31, 2015, both the amount of outstanding variable rate debt instruments and interest rate exchange agreements are less than the authorized totals of 15 percent of total outstanding State-supported debt.
Debt Reduction and Debt Reform Cap
The Debt Reform Act imposes phased-in caps on new debt outstanding and new debt service costs, limits the use of debt to capital works and purposes only, and establishes a maximum term of 30 years on such debt. The cap on new State-supported debt outstanding began at 0.75 percent of personal income in 2000-01 and was fully phased in at 4 percent of personal income in fiscal year 2011. The cap on new State-supported debt service costs began at 0.75 percent of total governmental funds receipts in fiscal year 2001 and was fully phased in at 5 percent in fiscal year 2014. For FY 2014, the last year for which a calculation has been completed, the State was in compliance with the statutory caps based on calendar year 2013 personal income and FY 2014 debt outstanding. Current projections estimate that debt outstanding and debt service costs will continue to remain below the limits imposed by the Act throughout the next several years. However, the State has entered into a period of significantly declining debt capacity. Based on the most recent personal income and debt outstanding forecasts, the available room under the debt outstanding cap is expected to decline from $4.1 billion in FY 2015 to $498 million in FY 2019.
Conclusion
The fiscal stability of New York State is related to the fiscal stability of the States municipalities, its agencies and public authorities. This is due in part to the fact that agencies, authorities and local governments in financial trouble often seek State financial assistance.
Public authorities are the States public benefit corporations, created pursuant to State law. These authorities have various responsibilities, including those that finance, construct and/or operate revenue-producing public facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt that apply to the State itself, and may issue bonds and notes within the amounts and restrictions set forth in their legislative authorization. The States access to public credit markets could be impaired and the market price of its outstanding debt may be materially and adversely affected if certain of its public authorities were to default on their respective obligations, particularly those using State-supported and State-related debt. As of December 31, 2014, the aggregate outstanding debt, including refunding bonds, of these public authorities was approximately $178 billion, only a portion of what constitutes State-supported or State-related debt. The State has numerous public authorities with various responsibilities, including those which finance, construct and/or operate revenue-producing public facilities. Public authorities generally pay their operating expenses and debt service costs from revenues generated by the projects they finance or operate, such as tolls charged for the use of
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highways, bridges or tunnels, charges for public power, electric and gas utility services, rentals charged for housing units, and charges for occupancy at medical care facilities. In addition, State legislation authorizes several financing techniques for public authorities. Also, there are statutory arrangements providing for State local assistance payments otherwise payable to localities, to be made under certain circumstances directly to the authorities. Although the State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to authorities under these arrangements, if local assistance payments are diverted the affected localities could seek additional State assistance. Some authorities also receive monies from State appropriations to pay for the operating costs of certain of their programs.
According to the AIS, the fiscal demands on the State may be affected by the fiscal condition of New York City and other localities. New York City relies in part on State aid to balance its budget and meet its cash requirements. Certain other localities outside New York City have experienced financial problems and have requested and received additional State assistance during the last several State fiscal years. Ultimately, localities or any of their respective public authorities may suffer from serious financial difficulties that could jeopardize local access to the public credit markets, which may adversely affect the marketability of notes and bonds issued by localities within the State.
The State is also a party to various legal proceedings and claims, some of which include potential monetary claims that the State deems to be material (generally in excess of $100 million or involving significant challenges to or impacts on the states financial policies or practices). Such proceedings and claims could adversely affect the States finances in the 2015-2016 fiscal year or thereafter.
CONSIDERATIONS REGARDING INVESTMENT IN MUNICIPAL SECURITIES ISSUED BY PUERTO RICO
Each Fund may invest in Puerto Rico municipal bonds and, therefore, may be impacted by political, economic, or regulatory developments that affect issuers in Puerto Rico and their ability to pay principal and interest on their obligations. Puerto Rico, the fourth largest of the Caribbean islands, is located approximately 1,000 miles southeast of Miami, Florida. Puerto Ricos constitutional status is that of a territory of the United States, and, pursuant to the territorial clause of the U.S. Constitution, the ultimate source of power over Puerto Rico is the U.S. Congress. Residents of Puerto Rico are citizens of the United States but do not vote in national elections.
Puerto Ricos economy, historically dominated by government and manufacturing employment, has been in recession since 2006. Gross State Product (GSP) fell annually between 2006 and 2011, declining a total of 11.5%, and then stabilized in 2012 and 2013. The Puerto Rico Planning Board reports that GSP contracted by 0.9% in 2014. A similar contraction is forecast for 2015 and a 1.2% decline is forecasted for fiscal year 2016. As of July 2015, the islands unemployment rate was 11.9%, well above the national average. Unemployment has improved marginally as the rate was over 15% for all of 2010 and 2011, but recent declines are partially attributed to a shrinking labor force, not job creation. Unemployment has not been below 10% in the last ten years. High unemployment and weak job growth have encouraged an increase in outmigration of Puerto Rican residents to the mainland U.S. since 2006. Between 2010 and 2014 the population fell 4.7%, and by 2012 there were more Puerto Ricans living in the U.S. mainland than on the island. Puerto Ricos Planning Board estimates the population will continue to fall about 1% per year through 2020, further depleting economic growth prospects.
Protracted economic decline and population losses have directly impacted Puerto Ricos tax base and operating budget. Puerto Ricos operating budget has been structurally unbalanced for the past decade and the government has relied on deficit financing for annual operations. Structural operating deficits have incrementally improved annually since 2009, but have not been eliminated. The fiscal year 2015 adopted budget was not considered structurally balanced as it relied on questionable revenue projections, capitalized interest and deferring employer pension contributions.
The government now projects fiscal year 2015 revenues will fall short of the budget by nearly $700 million, or nearly 7% of budgeted revenues. The fiscal year 2016 budget relies on a significant increase in the sales tax to 11.5% from 7%, a new 4% surcharge on businesses, and substantial expenditure reductions yet to be determined. Under the current law, the sales tax transitions to a Value Added Tax on April 1, 2016. The fiscal year 2016 budget includes a total $1.4 billion for debt service, equivalent to approximately 15% of general fund expenditures.
Recent borrowing has contributed to Puerto Ricos out-sized debt burden, which is very high in comparison to most states. Puerto Ricos debt per capita is an inflated $15,637, in comparison to the national median of $1,012. Similarly, net tax-supported debt as a percentage of personal income is 87.5%, in comparison to the national median of 2.5%, based on Moodys 2015 State Debt Medians Report. Between 2000 and 2015, Puerto Ricos public debt grew from $24.2 billion to over $73 billion, an increase of over 200%. When all public sector debt is included, the island estimates total debt is over 100% of gross national product, well over the national median of 2.2%. The islands enormous debt burden is largely attributed to a decade of financing annual operating costs with long term debt. Puerto Rico issues debt under many different securities, but many of the security pledges are ultimately dependent on the islands General Fund, creating an interdependency between credits.
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Reflecting the limited resources available to meet the islands obligations in the current fiscal year, the legislature failed to include funding for all appropriation-backed debt due in fiscal year 2016, and in mid-August one of Puerto Ricos public corporations defaulted on a debt service payment, marking Puerto Ricos first debt payment default. The default was not entirely unexpected. At the end of June 2015, Puerto Ricos Governor, Alejandro Garcĺa Padilla, announced a major shift in his administrations long-standing position on the governments commitment to debt repayment, declaring that Puerto Ricos debt is not payable and Puerto Rico will no longer borrow to address annual budget deficits. The governors announcement was immediately followed by the release of a government-commissioned report from several former International Monetary Fund officials examining Puerto Ricos fiscal and economic condition. In September 2015, a working group also commissioned by the governor released a five-year Fiscal and Economic Growth Plan. Both reports project significant a fiscal gap over the next five years and recommend Puerto Rico pursue a voluntary, distressed-debt exchange with creditors. A more specific proposal and creditor negotiations are expected in the near term.
A liquidity shortage will influence creditor negotiations and how the government prioritizes expenditures over the remainder of the year. In September 2015, a government-commissioned report projected the Commonwealth will have a negative cash balance by November 2015. Absent any new liquidity or short-term financing, the government may be forced to make difficult payment prioritization decisions before year end. This recent estimate was not the first projection of a liquidity shortfall. In May 2015, Puerto Ricos Government Development Bank warned of a severe liquidity crisis by the end of the year. The report outlines measures the government could take, which include a potential government shutdown, a moratorium on the payment of debt service, a debt adjustment, or shifting revenues assigned public corporation debt to support the islands debt.
Puerto Rico has warned investors since 2014 that the islands debt burden may be unsustainable. Debt restructuring legislation passed in mid-2014 aimed at restructuring public corporations was deemed unconstitutional by a federal court in February 2015 and again on appeal in July 2015. In response to the court ruling, the islands representative in Washington, D.C. introduced a bill allowing Puerto Ricos public corporations to be eligible for Chapter 9 bankruptcy filing. This measure requires approval from the Congress. Whether Puerto Rico will be granted access to Chapter 9 is unlikely to be resolved in time to be relevant to the current fiscal crisis. Puerto Rico has engaged multiple firms with expertise in restructuring sovereign debt since 2014.
Puerto Ricos general obligation credit rating was downgraded by Standard & Poors following the release of the Fiscal and Economic Growth plan in early September 2015. Standard & Poors downgraded all of the governments ratings to CC from CCC- based on the expectation that a default or restructuring is highly likely. The only exception is debt issued by the Public Finance Corporation, which is rated D following a payment default in August 2015. Fitch downgraded Puerto Ricos general obligation and related ratings to CC from B in June 2015. Moodys last downgraded Puerto Ricos general obligation rating to Caa3 from Caa2 in July 2015. Debt secured by the governments appropriation pledge and debt considered vulnerable to payment prioritization is currently rated Ca. All three agencies maintain a negative outlook on Puerto Rico.
CONSIDERATIONS REGARDING INVESTMENT IN SECURITIES ISSUED BY GREECE
Recent geopolitical events in the European Union (EU), specifically in Greece, may disrupt securities markets and adversely affect global economies and markets. This may lead to increased short-term market volatility and may have adverse long-term effects on world economies and markets generally. Those events as well as other changes in Eurozone economic and political conditions could adversely affect individual issuers or related groups of issuers, securities markets, interest rates, credit ratings, inflation, investor sentiment, and other factors affecting the value of a Funds investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region might adversely affect markets, issuers, and/or foreign exchange rates in other countries.
There is uncertainty as to which scenario may unfold but discussions have centered around possible default, implementation of capital controls and a potential exit from the Eurozone. Each of these scenarios has potential implications to the markets and a Funds investments.
Greeces ability to repay its sovereign debt is in question, and the possibility of default is not unlikely, which could limit its ability to borrow in the future. Greece has been required to impose austerity measures on its population in order to receive financial aid from the International Monetary Fund and EU member countries. The recent success of political parties in Greece opposed to austerity measures may increase the possibility that Greece will not implement these austerity measures and consequently fail to receive further financial aid from these institutions. The persistence of these factors may seriously reduce the economic performance of Greece and pose risks for the countrys economy. Any implementation of capital controls could further exacerbate current economic issues in Greece.
A default or debt restructuring by any European country, including Greece, would adversely impact holders of that countrys debt, and sellers of credit default swaps linked to that countrys creditworthiness (which may be located in other countries). These events may have an adverse effect on the value and exchange rate of the euro and may continue to significantly affect the economies of every country in Europe, including EU member countries that do not use the euro and non-EU member countries.
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There is the possibility that Greece may exit the European Monetary Union, which would result in immediate devaluation of the Greek currency and potential for default. If this were to occur, Greece would face significant risks related to the process of full currency redenomination as well as the resulting instability of Europe in general, which would have a severe adverse effect on the value of securities held by a Fund.
If Greece opts to leave the Eurozone, the economic consequences could be severe for Greece and harmful to its trading partners and banks and others around the world that hold Greek debt. The outcome of the current situation cannot be predicted at this time. The impact of these actions, especially if they occur in a disorderly fashion, is not clear but could be significant and far-reaching.
INFLATION-PROTECTED OBLIGATIONS
An inflation-protected debt security is a type of security issued by a government that is designed to provide inflation protection to investors. Inflation-protected debt securities are income-generating instruments whose interest and principal payments are adjusted for inflationa sustained increase in prices that erodes the purchasing power of money. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the Consumer Price Index. A fixed coupon rate is applied to the inflation-adjusted principal so that as inflation rises or falls, both the principal value and the interest payments will increase or decrease. This can provide investors with a hedge against inflation, as it helps preserve the purchasing power of an investment. Because of this inflation adjustment feature, inflation-protected bonds typically have lower yields than conventional fixed-rate bonds.
MORTGAGE PASS-THROUGH SECURITIES
The term U.S. agency mortgage pass-through security refers to a category of pass-through securities backed by pools of mortgages and issued by one of several U.S. government-sponsored enterprises: the Ginnie Mae, Fannie Mae or FHLMC. In the basic mortgage pass-through structure, mortgages with similar issuer, term and coupon characteristics are collected and aggregated into a pool consisting of multiple mortgage loans. The pool is assigned a CUSIP number and undivided interests in the pool are traded and sold as pass-through securities. The holder of the security is entitled to a pro rata share of principal and interest payments (including unscheduled prepayments) from the pool of mortgage loans.
An investment in a specific pool of pass-through securities requires an analysis of the specific prepayment risk of mortgages within the covered pool (since mortgagors typically have the option to prepay their loans). The level of prepayments on a pool of mortgage securities is difficult to predict and can impact the subsequent cash flows and value of the mortgage pool. In addition, when trading specific mortgage pools, precise execution, delivery and settlement arrangements must be negotiated for each transaction. These factors combine to make trading in mortgage pools somewhat cumbersome.
For the foregoing and other reasons, the Aggregate Bond ETF and Mortgage Backed Bond ETF seek to obtain exposure to U.S. agency mortgage pass-through securities primarily through the use of to-be-announced or TBA transactions. TBA refers to a commonly used mechanism for the forward settlement of U.S. agency mortgage pass-through securities, and not to a separate type of mortgage-backed security. Most transactions in mortgage pass-through securities occur through the use of TBA transactions. TBA transactions generally are conducted in accordance with widely-accepted guidelines which establish commonly observed terms and conditions for execution, settlement and delivery. In a TBA transaction, the buyer and seller decide on general trade parameters, such as agency, settlement date, par amount, and price. The actual pools delivered generally are determined two days prior to settlement date. Each Fund intends to use TBA transactions in several ways. For example, each Fund expects that it will regularly enter into TBA agreements and roll over such agreements prior to the settlement date stipulated in such agreements. This type of TBA transaction is sometimes known as a TBA roll. In a TBA roll a Fund generally will sell the obligation to purchase the pools stipulated in the TBA agreement prior to the stipulated settlement date and will enter into a new TBA agreement for future delivery of pools of mortgage pass-through securities. In addition, a Fund may enter into TBA agreements and settle such transactions on the stipulated settlement date by accepting actual receipt or delivery of the pools of mortgage pass-through securities stipulated in the TBA agreement.
Default by or bankruptcy of a counterparty to a TBA transaction would expose a Fund to possible loss because of adverse market action, expenses or delays in connection with the purchase or sale of the pools of mortgage pass-through securities specified in the TBA transaction. To minimize this risk, a Fund will enter into TBA transactions only with established counterparties (such as major broker-dealers) and the Adviser will monitor the creditworthiness of such counterparties. In addition, a Fund may accept assignments of TBA transactions from Authorized Participants (as defined below) from time to time. A Funds use of TBA rolls may cause the Fund to experience higher portfolio turnover, higher transaction costs and to pay higher capital gain distributions to shareholders (which may be taxable) than the other Funds described herein.
The Aggregate Bond ETF and Mortgage Backed Bond ETF intend to invest cash pending settlement of any TBA transactions in money market instruments, repurchase agreements, commercial paper (including asset-backed commercial paper) or other high-quality, liquid short-term instruments, which may include money market funds affiliated with the Adviser.
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ASSET-BACKED AND COMMERCIAL MORTGAGE-BACKED SECURITIES
Asset-backed securities are securities backed by installment contracts, credit-card receivables or other assets. Commercial mortgage-backed securities are securities backed by commercial real estate properties. Both asset-backed and commercial mortgage-backed securities represent interests in pools of assets in which payments of both interest and principal on the securities are made on a regular basis. The payments are, in effect, passed through to the holder of the securities (net of any fees paid to the issuer or guarantor of the securities). The average life of asset-backed and commercial mortgage-backed securities varies with the maturities of the underlying instruments and, as a result of prepayments, can often be less than the original maturity of the assets underlying the securities. For this and other reasons, an asset-backed and commercial mortgage-backed securitys stated maturity may be shortened, and the securitys total return may be difficult to predict precisely.
FOREIGN CURRENCY TRANSACTIONS
Each Fund may conduct foreign currency transactions on a spot ( i.e. , cash) or forward basis ( i.e. , by entering into forward contracts to purchase or sell foreign currencies). Although foreign exchange dealers generally do not charge a fee for such conversions, they do realize a profit based on the difference between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency at one rate, while offering a lesser rate of exchange should the counterparty desire to resell that currency to the dealer. Forward contracts are customized transactions that generally require a specific amount of a currency to be delivered at a specific exchange rate on a specific date or range of dates in the future although the Fund may also enter into non-deliverable currency forward contracts (NDFs) that contractually require the netting of the parties liabilities. Forwards, including NDFs, can have substantial price volatility. Forward contracts are generally traded in an interbank market directly between currency traders (usually large commercial banks) and their customers. The parties to a forward contract may agree to offset or terminate the contract before its maturity, or may hold the contract to maturity and complete the contemplated currency exchange. At the discretion of the Adviser, the Funds may enter into forward currency exchange contracts for hedging purposes to help reduce the risks and volatility caused by changes in foreign currency exchange rates, or to gain exposure to certain currencies in an effort to track the composition of the applicable Index. When used for hedging purposes, they tend to limit any potential gain that may be realized if the value of the Funds foreign holdings increases because of currency fluctuations.
BUILD AMERICA BONDS
Build America Bonds offer an alternative form of financing to state and local governments whose primary means for accessing the capital markets has historically been through the issuance of tax-free municipal bonds. The Build America Bond program allows state and local governments to issue taxable bonds for capital projects and to receive a direct federal subsidy payment from the Treasury Department for a portion of their borrowing costs. There are two general types of Build America Bonds. The first type of Build America Bond provides a Federal subsidy through Federal tax credits to investors in the bonds in an amount equal to 35 percent of the total coupon interest payable by the issuer on taxable governmental bonds (net of the tax credit), which represents a Federal subsidy to the state or local governmental issuer equal to approximately 25 percent of the total return to the investor (including the coupon interest paid by the issuer and the tax credit). The second type of Build America Bond provides a Federal subsidy through a refundable tax credit paid to state or local governmental issuers by the Treasury Department and the Internal Revenue Service (the IRS) in an amount equal to 35 percent (or 45 percent in the case of Recovery Zone Economic Development Bonds) of the total coupon interest payable to investors in these taxable bonds.
Issuance of Build America Bonds ceased on December 31, 2010. The Build America Bonds outstanding continue to be eligible for the federal interest rate subsidy, which continues for the life of the Build America Bonds; however, no bonds issued following expiration of the Build America Bond program are eligible for the federal tax subsidy.
FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS
Each Fund may invest up to 20% of its assets in derivatives, including exchange-traded futures on Treasuries or Eurodollars, U.S. exchange-traded or OTC put and call options contracts and exchange-traded or OTC swap agreements (including interest rate swaps, total return swaps, excess return swaps, and credit default swaps). A Fund will segregate cash and/or appropriate liquid assets if required to do so by SEC or Commodity Futures Trading Commission (CFTC) regulation or interpretation.
Futures contracts generally provide for the future sale by one party and purchase by another party of a specified commodity or security at a specified future time and at a specified price. Index futures contracts are settled daily with a payment by one party to the other of a cash amount based on the difference between the level of the index specified in the contract from one day to the next. Futures contracts are standardized as to maturity date and underlying instrument and are traded on futures exchanges.
A Fund is required to make a good faith margin deposit in cash or U.S. government securities with a broker or custodian to initiate and maintain open positions in futures contracts. A margin deposit is intended to assure completion of the contract (delivery or acceptance of the underlying commodity or payment of the cash settlement amount) if it is not terminated prior to the specified delivery date. Brokers may establish deposit requirements which are higher than the exchange minimums. Futures contracts are customarily purchased and sold on margin deposits which may range upward from less than 5% of the value of the contract being traded.
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After a futures contract position is opened, the value of the contract is marked to market daily. If the futures contract price changes to the extent that the margin on deposit does not satisfy margin requirements, payment of additional variation margin will be required. Conversely, change in the contract value may reduce the required margin, resulting in a repayment of excess margin to the contract holder. Variation margin payments are made to and from the futures broker for as long as the contract remains open. In such case, a Fund would expect to earn interest income on its margin deposits. Closing out an open futures position is done by taking an opposite position (buying a contract which has previously been sold, or selling a contract previously purchased) in an identical contract to terminate the position. Brokerage commissions are incurred when a futures contract position is opened or closed.
A Fund may purchase and sell put and call options. Such options may relate to particular securities and may or may not be listed on a national securities exchange and issued by the Options Clearing Corporation. Options trading is a highly specialized activity that entails greater than ordinary investment risk. Options on particular securities may be more volatile than the underlying securities, and therefore, on a percentage basis, an investment in options may be subject to greater fluctuation than an investment in the underlying securities themselves.
Each Fund intends to use futures and options in accordance with Rule 4.5 of the Commodity Exchange Act (CEA). A Fund may use exchange-traded futures and options, together with positions in cash and money market instruments, to simulate full investment in its underlying Index. Exchange-traded futures and options contracts may not be currently available for an Index. Under such circumstances, the Adviser may seek to utilize other instruments that it believes to be correlated to the applicable Index components or a subset of the components. The Trust, on behalf of a Fund, has filed a notice of eligibility for exclusion from the definition of the term commodity pool operator in accordance with Rule 4.5 so that the Fund is not subject to registration or regulation as a commodity pool operator under the CEA.
Restrictions on the Use of Futures and Options. In connection with its management of the Funds, the Adviser has claimed an exclusion from registration as a commodity trading advisor under the CEA and, therefore, is not subject to the registration and regulatory requirements of the CEA. Each Fund reserves the right to engage in transactions involving futures and options thereon to the extent allowed by the CFTC regulations in effect from time to time and in accordance with a Funds policies. Each Fund would take steps to prevent its futures positions from leveraging its securities holdings. When it has a long futures position, it will maintain with its custodian bank, cash or equivalents. When it has a short futures position, it will maintain with its custodian bank assets substantially identical to those underlying the contract or cash and equivalents (or a combination of the foregoing) having a value equal to the net obligation of the Fund under the contract (less the value of any margin deposits in connection with the position).
Swap Agreements. Each Fund may enter into swap agreements, including interest rate, index and total return swap agreements. Swap agreements are contracts between parties in which one party agrees to make periodic payments to the other party based on the change in market value or level of a specified rate, index or asset. In return, the other party agrees to make payments to the first party based on the return of a different specified rate, index or asset. Swap agreements will usually be done on a net basis, i.e. , where the two parties make net payments with a Fund receiving or paying, as the case may be, only the net amount of the two payments. The net amount of the excess, if any, of a Funds obligations over its entitlements with respect to each swap is accrued on a daily basis and an amount of cash or equivalents having an aggregate value at least equal to the accrued excess is maintained by the Fund.
In the case of a credit default swap (CDS), the contract gives one party (the buyer) the right to recoup the economic value of a decline in the value of debt securities of the reference issuer if the credit event (a downgrade or default) occurs. This value is obtained by delivering a debt security of the reference issuer to the party in return for a previously agreed payment from the other party (frequently, the par value of the debt security). As the seller of a CDS contract, a Fund would be required to pay the par (or other agreed upon) value of a referenced debt obligation to the counterparty in the event of a default or other credit event by the reference issuer, such as a U.S. or foreign corporate issuer, with respect to debt obligations. In return, the Fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, a Fund would keep the stream of payments and would have no payment obligations. As the seller, the Fund would be subject to investment exposure on the notional amount of the swap.
CDSs may require initial premium (discount) payments as well as periodic payments (receipts) related to the interest leg of the swap or to the default of a reference obligation. A Fund will segregate assets necessary to meet any accrued payment obligations when it is the buyer of CDSs. In cases where a Fund is a seller of a CDS, if the CDS is physically settled, the Fund will be required to segregate the full notional amount of the CDS. Such segregation will not limit a Funds exposure to loss.
CDS agreements involve greater risks than if a Fund had invested in the reference obligation directly since, in addition to general market risks, illiquidity risk associated with a particular issuer, and credit risk, each of which will be similar in either case, CDSs are subject to the risk of illiquidity within the CDS market on the whole, as well as counterparty risk. A Fund will enter into CDS agreements only with counterparties that meet certain standards of creditworthiness. A Fund will only enter into CDSs for purposes of better tracking the performance of its Index.
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FUTURE DEVELOPMENTS
A Fund may take advantage of opportunities in the area of options and futures contracts, options on futures contracts, warrants, swaps and any other investments which are not presently contemplated for use by the Fund or which are not currently available but which may be developed, to the extent such opportunities are both consistent with the Funds investment objective and legally permissible for the Fund. Before entering into such transactions or making any such investment, a Fund will provide appropriate disclosure.
REAL ESTATE INVESTMENT TRUSTS (REITs)
REITs pool investors funds for investment primarily in income producing real estate or real estate loans or interests. A REIT is not taxed on income distributed to shareholders if it complies with several requirements relating to its organization, ownership, assets, and income and a requirement that it distribute to its shareholders at least 90% of its taxable income (other than net capital gains) for each taxable year. REITs can generally be classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest the majority of their assets directly in real property, derive their income primarily from rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs, which invest the majority of their assets in real estate mortgages, derive their income primarily from interest payments. Hybrid REITs combine the characteristics of both Equity REITs and Mortgage REITs. The Funds will not invest in real estate directly, but only in securities issued by real estate companies. However, the Funds may be subject to risks similar to those associated with the direct ownership of real estate (in addition to securities markets risks) because of its policy of concentration in the securities of companies in the real estate industry. These include declines in the value of real estate, risks related to general and local economic conditions, dependency on management skill, heavy cash flow dependency, possible lack of availability of mortgage funds, overbuilding, extended vacancies of properties, increased competition, increases in property taxes and operating expenses, changes in zoning laws, losses due to costs resulting from the clean-up of environmental problems, liability to third parties for damages resulting from environmental problems, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants and changes in interest rates. Investments in REITs may subject Fund shareholders to duplicate management and administrative fees.
In addition to these risks, Equity REITs may be affected by changes in the value of the underlying property owned by the trusts, while Mortgage REITs may be affected by the quality of any credit extended. Further, Equity and Mortgage REITs are dependent upon management skills and generally may not be diversified. Equity and Mortgage REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, Equity and Mortgage REITs could possibly fail to qualify for the beneficial tax treatment available to REITs under the Internal Revenue Code, or to maintain their exemptions from registration under the 1940 Act. The above factors may also adversely affect a borrowers or a lessees ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting investments.
RESTRICTED SECURITIES
Restricted Securities are securities that are not registered under the Securities Act, but which can be offered and sold to qualified institutional buyers under Rule 144A under the Securities Act. Institutional markets for restricted securities have developed as a result of the promulgation of Rule 144A under the Securities Act, which provides a safe harbor from Securities Act registration requirements for qualifying sales to institutional investors. When Rule 144A restricted securities present an attractive investment opportunity and meet other selection criteria, a Fund may make such investments whether or not such securities are illiquid depending on the market that exists for the particular security. The Board has delegated the responsibility for determining the liquidity of Rule 144A restricted securities that a Fund may invest in to the Adviser. In reaching liquidity decisions, the Adviser may consider the following factors: the frequency of trades and quotes for the security; the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; dealer undertakings to make a market in the security; and the nature of the security and the nature of the marketplace in which it trades ( e.g. , the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer).
U.S. REGISTERED SECURITIES OF FOREIGN ISSUERS
Investing in U.S. registered, dollar-denominated, securities issued by non-U.S. issuers involves some risks and considerations not typically associated with investing in U.S. companies. These include differences in accounting, auditing and financial reporting standards, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations, political instability which could affect U.S. investments in foreign countries, and potential restrictions of the flow of international capital. Foreign companies may be subject to less governmental regulation than U.S. issuers. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payment positions.
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A Funds investment in common stock of foreign corporations may also be in the form of American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs) (collectively Depositary Receipts). Depositary Receipts are receipts, typically issued by a bank or trust company, which evidence ownership of underlying securities issued by a foreign corporation. For ADRs, the depository is typically a U.S. financial institution and the underlying securities are issued by a foreign issuer. For other Depositary Receipts, the depository may be a foreign or a U.S. entity, and the underlying securities may have a foreign or a U.S. issuer. Depositary Receipts will not necessarily be denominated in the same currency as their underlying securities. Generally, ADRs, in registered form, are designed for use in the U.S. securities market, and EDRs, in bearer form, are designated for use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world. The Fund may invest in unsponsored Depositary Receipts. The issuers of unsponsored Depositary Receipts are not obligated to disclose material information in the United States, and, therefore, there may be less information available regarding such issuers and there may not be a correlation between such information and the market value of the Depositary Receipts.
INVESTMENT COMPANIES
Each Fund mayinvest in the securities of other investment companies, including affiliated funds and money market funds, subject to applicable limitations under Section 12(d)(1) of the 1940 Act. Pursuant to Section 12(d)(1), a Fund may invest in the securities of another investment company (the acquired company) provided that the Fund, immediately after such purchase or acquisition, does not own in the aggregate: (i) more than 3% of the total outstanding voting stock of the acquired company; (ii) securities issued by the acquired company having an aggregate value in excess of 5% of the value of the total assets of the Fund; or (iii) securities issued by the acquired company and all other investment companies (other than Treasury stock of the Fund) having an aggregate value in excess of 10% of the value of the total assets of the Fund. To the extent allowed by law, regulation, a Funds investment restrictions and the Trusts exemptive relief, a Fund may invest its assets in securities of investment companies that are affiliated funds and/or money market funds in excess of the limits discussed above.
If a Fund invests in and, thus, is a shareholder of, another investment company, the Funds shareholders will indirectly bear the Funds proportionate share of the fees and expenses paid by such other investment company, including advisory fees, in addition to both the management fees payable directly by the Fund to the Funds own investment adviser and the other expenses that the Fund bears directly in connection with the Funds own operations.
LENDING PORTFOLIO SECURITIES
Each Fund may lend portfolio securities to certain creditworthy borrowers in U.S. and non-U.S. markets in an amount not to exceed one quarter (25%) of the value of its total assets. The borrowers provide collateral that is marked to market daily in an amount at least equal to the current market value of the securities loaned. A Fund may terminate a loan at any time and obtain the securities loaned. A Fund receives the value of any interest or cash or non-cash distributions paid on the loaned securities. A Fund cannot vote proxies for securities on loan, but may recall loans to vote proxies if a material issue affecting the Funds economic interest in the investment is to be voted upon. Distributions received on loaned securities in lieu of dividend payments ( i.e., substitute payments) would not be considered qualified dividend income.
With respect to loans that are collateralized by cash, the borrower will be entitled to receive a fee based on the amount of cash collateral. A Fund is compensated by the difference between the amount earned on the reinvestment of cash collateral and the fee paid to the borrower. In the case of collateral other than cash, a Fund is compensated by a fee paid by the borrower equal to a percentage of the market value of the loaned securities. Any cash collateral may be reinvested in certain short-term instruments either directly on behalf of the lending Fund or through one or more joint accounts or money market funds, which may include those managed by the Adviser.
A Fund may pay a portion of the interest or fees earned from securities lending to a borrower as described above, and to one or more securities lending agents approved by the Board of Trustees of the Trust (the Board) who administer the lending program for the Funds in accordance with guidelines approved by the Board. In such capacity, the lending agent causes the delivery of loaned securities from a Fund to borrowers, arranges for the return of loaned securities to the Fund at the termination of a loan, requests deposit of collateral, monitors the daily value of the loaned securities and collateral, requests that borrowers add to the collateral when required by the loan agreements, and provides recordkeeping and accounting services necessary for the operation of the program. State Street Bank and Trust Company (State Street), an affiliate of the Trust, has been approved by the Board to serve as securities lending agent for a Fund and the Trust has entered into an agreement with State Street for such services. Among other matters, the Trust has agreed to indemnify State Street for certain liabilities. State Street has received an order of exemption from the SEC under Sections 17(a) and 12(d)(1) under the 1940 Act to serve as the lending agent for affiliated investment companies such as the Trust and to invest the cash collateral received from loan transactions to be invested in an affiliated cash collateral fund.
Securities lending involves exposure to certain risks, including operational risk ( i.e. , the risk of losses resulting from problems in the settlement and accounting processespecially so in certain international markets such as Taiwan), gap risk ( i.e. , the risk of a mismatch between the return on cash collateral reinvestments and the fees a Fund has agreed to pay a borrower), risk of loss of
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collateral, credit, legal, counterparty and market risk. Although State Street has agreed to provide a Fund with indemnification in the event of a borrower default, a Fund is still exposed to the risk of losses in the event a borrower does not return a Funds securities as agreed. For example, delays in recovery of lent securities may cause a Fund to lose the opportunity to sell the securities at a desirable price.
LEVERAGING
While the Funds do not anticipate doing so, a Fund may borrow money in an amount greater than 5% of the value of the Funds total assets. However, under normal circumstances, a Fund will not borrow money from a bank in an amount greater than 10% of the value of the Funds total assets. Borrowing for investment purposes is one form of leverage. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk, but also increases investment opportunity. Because substantially all of a Funds assets will fluctuate in value, whereas the interest obligations on borrowings may be fixed, the NAV of a Fund will increase more when such Funds portfolio assets increase in value and decrease more when the Funds portfolio assets decrease in value than would otherwise be the case. Moreover, interest costs on borrowings may fluctuate with changing market rates of interest and may partially offset or exceed the returns on the borrowed funds.
REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements with commercial banks, brokers or dealers to generate income from its excess cash balances and to invest securities lending cash collateral. A repurchase agreement is an agreement under which a Fund acquires a financial instrument ( e.g. , a security issued by the U.S. government or an agency thereof, a bankers acceptance or a certificate of deposit) from a seller, subject to resale to the seller at an agreed upon price and date (normally, the next Business Dayas defined below). A repurchase agreement may be considered a loan collateralized by securities. The resale price reflects an agreed upon interest rate effective for the period the instrument is held by a Fund and is unrelated to the interest rate on the underlying instrument.
In these repurchase agreement transactions, the securities acquired by a Fund (including accrued interest earned thereon) must have a total value in excess of the value of the repurchase agreement and are held by the Custodian until repurchased. No more than an aggregate of 15% of a Funds net assets will be invested in illiquid securities, including repurchase agreements having maturities longer than seven days and securities subject to legal or contractual restrictions on resale, or for which there are no readily available market quotations.
The use of repurchase agreements involves certain risks. For example, if the other party to the agreement defaults on its obligation to repurchase the underlying security at a time when the value of the security has declined, a Fund may incur a loss upon disposition of the security. If the other party to the agreement becomes insolvent and subject to liquidation or reorganization under the U.S. Bankruptcy Code or other laws, a court may determine that the underlying security is collateral for a loan by a Fund not within the control of the Fund and, therefore, the Fund may not be able to substantiate its interest in the underlying security and may be deemed an unsecured creditor of the other party to the agreement.
REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into reverse repurchase agreements, which involve the sale of securities with an agreement to repurchase the securities at an agreed-upon price, date and interest payment and have the characteristics of borrowing. The securities purchased with the funds obtained from the agreement and securities collateralizing the agreement will have maturity dates no later than the repayment date. Generally the effect of such transactions is that a Fund can recover all or most of the cash invested in the portfolio securities involved during the term of the reverse repurchase agreement, while in many cases a Fund is able to keep some of the interest income associated with those securities. Such transactions are only advantageous if a Fund has an opportunity to earn a greater rate of interest on the cash derived from these transactions than the interest cost of obtaining the same amount of cash. Opportunities to realize earnings from the use of the proceeds equal to or greater than the interest required to be paid may not always be available and a Fund intends to use the reverse repurchase technique only when the Adviser believes it will be advantageous to the Fund. The use of reverse repurchase agreements may exaggerate any interim increase or decrease in the value of a Funds assets. A Funds exposure to reverse repurchase agreements will be covered by securities having a value equal to or greater than such commitments. Under the 1940 Act, reverse repurchase agreements are considered borrowings. Although there is no limit on the percentage of Fund assets that can be used in connection with reverse repurchase agreements, the Funds do not expect to engage, under normal circumstances, in reverse repurchase agreements with respect to more than 10% of their respective total assets.
COMMERCIAL PAPER
Each Fund may invest in commercial paper. Commercial paper consists of short-term, promissory notes issued by banks, corporations and other entities to finance short-term credit needs. These securities generally are discounted but sometimes may be interest bearing.
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OTHER SHORT-TERM INSTRUMENTS
In addition to repurchase agreements, each Fund may invest in short-term instruments, including money market instruments, (including money market funds advised by the Adviser), cash and cash equivalents, on an ongoing basis to provide liquidity or for other reasons. Money market instruments are generally short-term investments that may include but are not limited to: (i) shares of money market funds (including those advised by the Adviser); (ii) obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities (including government-sponsored enterprises); (iii) negotiable certificates of deposit (CDs), bankers acceptances, fixed time deposits and other obligations of U.S. and foreign banks (including foreign branches) and similar institutions; (iv) commercial paper rated at the date of purchase Prime-1 by Moodys Investors Service (Moodys) or A-1 by Standard & Poors (S&P), or if unrated, of comparable quality as determined by the Adviser; (v) non-convertible corporate debt securities ( e.g. , bonds and debentures) with remaining maturities at the date of purchase of not more than 397 days and that satisfy the rating requirements set forth in Rule 2a-7 under the 1940 Act; and (vi) short-term U.S. dollar-denominated obligations of foreign banks (including U.S. branches) that, in the opinion of the Adviser, are of comparable quality to obligations of U.S. banks which may be purchased by a Fund. Any of these instruments may be purchased on a current or a forward-settled basis. Money market instruments also include shares of money market funds. Time deposits are non-negotiable deposits maintained in banking institutions for specified periods of time at stated interest rates. Bankers acceptances are time drafts drawn on commercial banks by borrowers, usually in connection with international transactions.
VARIABLE RATE DEMAND OBLIGATIONS
Variable rate demand obligations (VRDOs) are short-term tax exempt fixed income instruments whose yield is reset on a periodic basis. VRDO securities tend to be issued with long maturities of up to 30 or 40 years; however, they are considered short-term instruments because they include a put feature which coincides with the periodic yield reset. For example, a VRDO whose yield resets weekly will have a put feature that is exercisable upon seven days notice. VRDOs are put back to a bank or other entity that serves as a liquidity provider, who then tries to resell the VRDOs or, if unable to resell, holds them in its own inventory. VRDOs are generally supported by either a Letter of Credit or a Stand-by Bond Purchase Agreement to provide credit enhancement.
RATINGS
An investment grade rating means the security or issuer is rated investment grade by Moodys, S&P, Fitch, Inc., Dominion Bond Rating Service Limited, or another credit rating agency designated as a nationally recognized statistical rating organization by the SEC, or is unrated but considered to be of equivalent quality by the Adviser or applicable Sub-Adviser.
Subsequent to purchase by a Fund, a rated security may cease to be rated or its investment grade rating may be reduced below an investment grade rating. Bonds rated lower than Baa3 by Moodys or BBB- by S&P are below investment grade quality and are obligations of issuers that are considered predominantly speculative with respect to the issuers capacity to pay interest and repay principal according to the terms of the obligation and, therefore, carry greater investment risk, including the possibility of issuer default and bankruptcy and increased market price volatility. Such securities (lower rated securities) are commonly referred to as junk bonds and are subject to a substantial degree of credit risk. Lower rated securities are often issued by smaller, less creditworthy companies or by highly leveraged (indebted) firms, which are generally less able than more financially stable firms to make scheduled payments of interest and principal. The risks posed by securities issued under such circumstances are substantial. Bonds rated below investment grade tend to be less marketable than higher-quality bonds because the market for them is less broad. The market for unrated bonds is even narrower. See HIGH YIELD SECURITIES above for more information relating to the risks associated with investing in lower rated securities.
(Remainder of Page Intentionally Left Blank)
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SPECIAL CONSIDERATIONS AND RISKS
A discussion of the risks associated with an investment in each Fund is contained in the Prospectus. The discussion below supplements, and should be read in conjunction with, the Prospectus.
GENERAL
Investment in a Fund should be made with an understanding that the value of a Funds portfolio securities may fluctuate in accordance with changes in the financial condition of the issuers of the portfolio securities, the value of securities generally and other factors.
An investment in a Fund should also be made with an understanding of the risks inherent in an investment in securities, including the risk that the financial condition of issuers may become impaired or that the general condition of the securities markets may deteriorate (either of which may cause a decrease in the value of the portfolio securities and thus in the value of Shares). Securities are susceptible to general market fluctuations and to volatile increases and decreases in value as market confidence in and perceptions of their issuers change. These investor perceptions are based on various and unpredictable factors including expectations regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political, economic and banking crises. Securities of issuers traded on exchanges may be suspended on certain exchanges by the issuers themselves, by an exchange or by government authorities. The likelihood of such suspensions may be higher for securities of issuers in emerging or less-developed market countries than in countries with more developed markets. Trading suspensions may be applied from time to time to the securities of individual issuers for reasons specific to that issuer, or may be applied broadly by exchanges or governmental authorities in response to market events. Suspensions may last for significant periods of time, during which trading in the securities and instruments that reference the securities, such as participatory notes (or P-notes) or other derivative instruments, may be halted.
Holders of common stocks incur more risk than holders of preferred stocks and debt obligations because common stockholders, as owners of the issuer, have generally inferior rights to receive payments from the issuer in comparison with the rights of creditors of, or holders of debt obligations or preferred stocks issued by, the issuer. Further, unlike debt securities which typically have a stated principal amount payable at maturity (whose value, however, will be subject to market fluctuations prior thereto), or preferred stocks which typically have a liquidation preference and which may have stated optional or mandatory redemption provisions, common stocks have neither a fixed principal amount nor a maturity. Common stock values are subject to market fluctuations as long as the common stock remains outstanding.
The principal trading market for some of the securities in an Index may be in the over-the-counter market. The existence of a liquid trading market for certain securities may depend on whether dealers will make a market in such securities. There can be no assurance that a market will be made or maintained or that any such market will be or remain liquid. The price at which securities may be sold and the value of a Funds Shares will be adversely affected if trading markets for a Funds portfolio securities are limited or absent or if bid/ask spreads are wide.
FUTURES AND OPTIONS TRANSACTIONS
There can be no assurance that a liquid secondary market will exist for any particular futures contract or option at any specific time. Thus, it may not be possible to close a futures or options position. In the event of adverse price movements, a Fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if a Fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when it may be disadvantageous to do so. In addition, a Fund may be required to make delivery of the instruments underlying futures contracts it has sold.
Each Fund will minimize the risk that it will be unable to close out a futures or options contract by only entering into futures and options for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts or uncovered call options in some strategies ( e.g. , selling uncovered index futures contracts) is potentially unlimited. The Funds do not plan to use futures and options contracts, when available, in this manner. The risk of a futures position may still be large as traditionally measured due to the low margin deposits required. In many cases, a relatively small price movement in a futures contract may result in immediate and substantial loss or gain to the investor relative to the size of a required margin deposit. A Fund, however, may utilize futures and options contracts in a manner designed to limit its risk exposure to that which is comparable to what it would have incurred through direct investment in securities.
Utilization of futures transactions by a Fund involves the risk of imperfect or even negative correlation to its benchmark Index if the index underlying the futures contracts differs from the benchmark Index or if the futures contracts do not track the benchmark Index as expected. There is also the risk of loss by a Fund of margin deposits in the event of bankruptcy of a broker with whom a Fund has an open position in the futures contract or option.
Certain financial futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous days
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settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting some futures traders to substantial losses.
RISKS OF SWAP AGREEMENTS
Swap agreements are subject to the risk that the swap counterparty will default on its obligations. If such a default occurs, a Fund will have contractual remedies pursuant to the agreements related to the transaction, but such remedies may be subject to bankruptcy and insolvency laws which could affect the Funds rights as a creditor.
The use of interest-rate and index swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. The use of a swap requires an understanding not only of the referenced asset, reference rate or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions. These transactions generally do not involve the delivery of securities or other underlying assets or principal.
The absence of a regulated execution facility or contract market and lack of liquidity for swap transactions has led, in some instances, to difficulties in trading and valuation, especially in the event of market disruptions. Under recently adopted rules and regulations, transactions in some types of swaps are required to be centrally cleared. In a cleared derivatives transaction, a Funds counterparty to the transaction is a central derivatives clearing organization, or clearing house, rather than a bank or broker. Because each Fund is not a member of a clearing house, and only members of a clearing house can participate directly in the clearing house, the Fund holds cleared derivatives through accounts at clearing members. In cleared derivatives transactions, a Fund will make payments (including margin payments) to and receive payments from a clearing house through its accounts at clearing members. Clearing members guarantee performance of their clients obligations to the clearing house. Centrally cleared derivative arrangements may be less favorable to a Fund than bilateral (non-cleared) arrangements. For example, a Fund may be required to provide greater amounts of margin for cleared derivatives transactions than for bilateral derivatives transactions. Also, in contrast to bilateral derivatives transactions, in some cases following a period of notice to a Fund, a clearing member generally can require termination of existing cleared derivatives transactions at any time or an increase in margin requirements above the margin that the clearing member required at the beginning of a transaction. Clearing houses also have broad rights to increase margin requirements for existing transactions or to terminate transactions at any time. A Fund is subject to risk if it enters into a derivatives transaction that is required to be cleared (or which SSGA expects to be cleared), and no clearing member is willing or able to clear the transaction on the Funds behalf. In that case, the transaction might have to be terminated, and the Fund could lose some or all of the benefit of the transaction, including loss of an increase in the value of the transaction and loss of hedging protection. In addition, the documentation governing the relationship between a Fund and clearing members is drafted by the clearing members and generally is less favorable to the Fund than typical bilateral derivatives documentation.
These clearing rules and other new rules and regulations could, among other things, restrict a Funds ability to engage in, or increase the cost to the Fund of, derivatives transactions, for example, by making some types of derivatives no longer available to the Fund, increasing margin or capital requirements, or otherwise limiting liquidity or increasing transaction costs. These regulations are new and evolving, so their potential impact on a Fund and the financial system are not yet known.
Because they are two party contracts that may be subject to contractual restrictions on transferability and termination and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid and subject to a Funds limitation on investments in illiquid securities. To the extent that a swap is not liquid, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. Like most other investments, swap agreements are subject to the risk that the market value of the instrument will change in a way detrimental to a Funds interest.
If a Fund uses a swap as a hedge against, or as a substitute for, a portfolio investment, the Fund will be exposed to the risk that the swap will have or will develop imperfect or no correlation with the portfolio investment. This could cause substantial losses for the Fund. While hedging strategies involving swap instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other Fund investments. Many swaps are complex and often valued subjectively.
TAX RISKS
As with any investment, you should consider how your investment in Shares of a Fund will be taxed. The tax information in the Prospectus and this SAI is provided as general information. You should consult your own tax professional about the tax consequences of an investment in Shares of a Fund.
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Unless your investment in Shares is made through a tax-exempt entity or tax-advantaged retirement account, such as an individual retirement account, you need to be aware of the possible tax consequences when a Fund makes distributions or you sell Fund Shares.
CONFLICTS OF INTEREST RISK
An investment in a Fund may be subject to a number of actual or potential conflicts of interest. For example, the Adviser or its affiliates may provide services to a Fund, such as securities lending agency services, custodial, administrative, bookkeeping, and accounting services, transfer agency and shareholder servicing, securities brokerage services, and other services for which the Fund would compensate the Adviser and/or such affiliates. A Fund may invest in other pooled investment vehicles sponsored, managed, or otherwise affiliated with the Adviser. There is no assurance that the rates at which a Fund pays fees or expenses to the Adviser or its affiliates, or the terms on which it enters into transactions with the Adviser or its affiliates, will be the most favorable available in the market generally or as favorable as the rates the Adviser makes available to other clients. Because of its financial interest, the Adviser may have an incentive to enter into transactions or arrangements on behalf of a Fund with itself or its affiliates in circumstances where it might not have done so in the absence of that interest.
CONTINUOUS OFFERING
The method by which Creation Units of Shares are created and traded may raise certain issues under applicable securities laws. Because new Creation Units of Shares are issued and sold by the Trust on an ongoing basis, at any point a distribution, as such term is used in the Securities Act, may occur. Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus delivery and liability provisions of the Securities Act.
For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with the Distributor, breaks them down into constituent Shares, and sells such Shares directly to customers, or if it chooses to couple the creation of a supply of new Shares with an active selling effort involving solicitation of secondary market demand for Shares. A determination of whether one is an underwriter for purposes of the Securities Act must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that could lead to a categorization as an underwriter.
Broker-dealer firms should also note that dealers who are not underwriters but are effecting transactions in Shares, whether or not participating in the distribution of Shares, are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(3) of the Securities Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. Firms that incur a prospectus-delivery obligation with respect to Shares of a Fund are reminded that under Securities Act Rule 153, a prospectus-delivery obligation under Section 5(b)(2) of the Securities Act owed to an exchange member in connection with a sale on the Exchange is satisfied by the fact that a Funds Prospectus is available at the Exchange upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to transactions on an exchange.
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The Trust has adopted the following investment restrictions as fundamental policies with respect to each Fund. These restrictions cannot be changed without the approval of the holders of a majority of a Funds outstanding voting securities. For purposes of the 1940 Act, a majority of the outstanding voting securities of a Fund means the vote, at an annual or a special meeting of the security holders of the Trust, of the lesser of (1) 67% or more of the voting securities of the Fund present at such meeting, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy, or (2) more than 50% of the outstanding voting securities of the Fund. Except with the approval of a majority of the outstanding voting securities, each Fund may not:
1. | Concentrate its investments in securities of issuers in the same industry, except as may be necessary to approximate the composition of the Funds underlying Index 1 ; |
2. | Make loans to another person except as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund; |
3. | Issue senior securities or borrow money except as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund; |
4. | Invest directly in real estate unless the real estate is acquired as a result of ownership of securities or other instruments. This restriction shall not preclude the Fund from investing in companies that deal in real estate or in instruments that are backed or secured by real estate; |
5. | Act as an underwriter of another issuers securities, except to the extent the Fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in connection with the Funds purchase and sale of portfolio securities; or |
6. | Invest in commodities except as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund. |
7. | With respect to the SPDR Nuveen Barclays Municipal Bond ETF, the SPDR Nuveen Barclays Short Term Municipal Bond ETF, and the SPDR Nuveen S&P High Yield Municipal Bond ETF invest, under normal circumstances, less than 80% of its assets in investments the income of which is exempt from federal income tax. |
8. | With respect to the SPDR Nuveen Barclays California Municipal Bond ETF, invest, under normal circumstances, less than 80% of its assets in investments the income of which is exempt from both federal income tax and California income tax. |
9. | With respect to the SPDR Nuveen Barclays New York Municipal Bond ETF, invest, under normal circumstances, less than 80% of its assets in investments the income of which is exempt from both federal income tax and New York income tax. |
In addition to the investment restrictions adopted as fundamental policies as set forth above, each Fund observes the following restrictions, which may be changed by the Board without a shareholder vote. Each Fund will not:
1. | Invest in the securities of a company for the purpose of exercising management or control, provided that the Trust may vote the investment securities owned by the Fund in accordance with its views; |
2. | Hold illiquid assets in excess of 15% of its net assets. An illiquid asset is any asset which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Fund has valued the investment; or |
3. | With respect to each Fund, under normal circumstances, invest less than 80% of its total assets in securities that comprise its relevant Index. Securities that have economic characteristics substantially identical to the economic characteristics of the securities that comprise the Index are included within this 80% investment policy for Fixed Income ETFs. Prior to any change in a Funds 80% investment policy, such Fund will provide shareholders with 60 days written notice. |
4. | With respect to each High Yield Bond ETF, invest, under normal circumstances, less than 80% of its net assets, plus the amount of borrowings for investment purposes, in bonds that are rated below investment grade. Prior to any change in this 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
1 | The SEC Staff considers concentration to involve more than 25% of a funds assets to be invested in an industry or group of industries. |
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5. | With respect to the Aggregate Bond ETF, Corporate Bond ETFs, Build America Bond ETF, SPDR DB International Government Inflation-Protected Bond ETF, SPDR Barclays Emerging Markets Local Bond ETF and SPDR Nuveen S&P High Yield Municipal Bond ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in debt securities. Prior to any change in a Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
6. | With respect to the SPDR Barclays 1-3 Month T-Bill ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in U.S. Treasury bills. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
7. | With respect to the SPDR Barclays Short Term Treasury ETF, SPDR Barclays Intermediate Term Treasury ETF and SPDR Barclays Long Term Treasury ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in U.S. Treasury securities. Prior to any change in a Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
8. | With respect to each International Treasury Bond ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in government bonds. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
9. | With respect to the TIPS ETFs, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in inflation-indexed debt securities issued by the U.S. Treasury Department and backed by the full faith and credit of the U.S. Government. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
10. | With respect to the Mortgage Backed Bond ETF, invest, under normal circumstances, less than 80% of its net assets, plus the amount of borrowings for investment purposes, in mortgage backed bonds. Prior to any change in this 80% investment policy, the Fund will provide shareholders with 60 days written notice. For purposes of this policy, TBA Transactions are considered mortgage backed securities. |
11. | With respect to the Convertible Securities ETF, invest, under normal circumstances, less than 80% of its net assets, plus the amount of borrowings for investment purposes, in convertible securities. Prior to any change in this 80% investment policy, the fund will provide shareholders with 60 days written notice. |
12. | With respect to the Build America Bond ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in Build America Bonds. Prior to any change in this 80% investment policy, the fund will provide shareholders with 60 days written notice. |
13. | With respect to the SPDR Barclays Investment Grade Floating Rate ETF, invest, under normal circumstances, less than 80% of its net assets, plus the amount of borrowings for investment purposes, in investment grade floating rate securities. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
14. | With respect to the International Corporate Bond ETF and each Corporate Bond ETF, invest, under normal circumstances, less than 80% of its net assets, plus the amount of borrowings for investment purposes, in corporate bonds. Prior to any change in this 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
15. | With respect to SPDR Global Dow ETF, SPDR Barclays Short Term Corporate Bond ETF, SPDR Barclays International High Yield Bond ETF, and SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF, each Fund will not invest in securitized instruments (including asset-backed securities, mortgage-backed securities, or asset-backed commercial paper) or sweep excess cash into any non-governmental money market fund. |
The Funds define the foregoing terms in accordance with the definition of such terms per the applicable Index. If a percentage limitation is adhered to at the time of investment or contract, a later increase or decrease in percentage resulting from any change in value or total or net assets will not result in a violation of such restriction, except that the percentage limitations with respect to the borrowing of money and illiquid securities will be observed continuously. With respect to the limitation on borrowing, in the event that a subsequent change in net assets or other circumstances cause a Fund to exceed its limitation, the Fund will take steps to bring the aggregate amount of borrowing back within the limitations within three days thereafter (not including Sundays and holidays). With respect to the limitation on illiquid securities, in the event that a subsequent change in net assets or other circumstances cause a Fund to exceed its limitation, the Fund will take steps to bring the aggregate amount of illiquid instruments back within the limitations as soon as reasonably practicable.
The 1940 Act currently permits the Funds to loan up to 33 1/3% of its total assets. With respect to borrowing, the 1940 Act presently allows the Funds to: (1) borrow from any bank (including pledging, mortgaging or hypothecating assets) in an amount up to 25% of its total assets, (2) borrow money for temporary purposes in an amount not exceeding 5% of the value of a Funds total assets at the time of the loan, and (3) enter into reverse repurchase agreements. However, under normal circumstances any borrowings by the Fund will not exceed 10% of the Funds total assets. The 1940 Act generally prohibits funds from issuing senior securities, although it does not
38
treat certain transactions as senior securities, such as certain borrowings, short sales, reverse repurchase agreements, firm commitment agreements and standby commitments, with appropriate earmarking or segregation of assets to cover such obligation. With respect to investments in commodities, the 1940 Act presently permits the Funds to invest in commodities in accordance with investment policies contained in its prospectus and SAI. Any such investment shall also comply with the Commodity Exchange Act and the rules and regulations thereunder. The 1940 Act does not directly restrict an investment companys ability to invest in real estate, but does require that every investment company have the fundamental investment policy governing such investments. The Fund will not purchase or sell real estate, except that the Fund may invest in companies that deal in real estate (including REITs) or in instruments that are backed or secured by real estate.
A discussion of exchange listing and trading matters associated with an investment in a Fund is contained in the Prospectus under PURCHASE AND SALE INFORMATION and ADDITIONAL PURCHASE AND SALE INFORMATION. The discussion below supplements, and should be read in conjunction with, such sections of the Prospectus.
The Shares of each Fund are approved for listing and trading on the Exchange, subject to notice of issuance. The Shares trade on the Exchange at prices that may differ to some degree from their net asset value. There can be no assurance that the requirements of the Exchange necessary to maintain the listing of Shares of a Fund will continue to be met.
The Exchange may, but is not required to, remove the Shares of a Fund from listing if: (1) following the initial twelve-month period beginning upon the commencement of trading of the Fund, there are fewer than 50 beneficial holders of the Shares for 30 or more consecutive trading days; (2) the value of its underlying Index or portfolio of securities on which the Fund is based is no longer calculated or available; (3) the indicative optimized portfolio value (IOPV) of the Fund is no longer calculated or available; or (4) such other event shall occur or condition exists that, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. In addition, the Exchange will remove the Shares from listing and trading upon termination of the Trust or a Fund.
The Trust reserves the right to adjust the Share price of a Fund in the future to maintain convenient trading ranges for investors. Any adjustments would be accomplished through stock splits or reverse stock splits, which would have no effect on the net assets of the Fund.
As in the case of other publicly traded securities, brokers commissions on transactions will be based on negotiated commission rates at customary levels.
The base and trading currencies of each Fund is the U.S. dollar. The base currency is the currency in which a Funds net asset value per Share is calculated and the trading currency is the currency in which Shares of a Fund are listed and traded on the Exchange.
39
The following information supplements and should be read in conjunction with the section in the Prospectus entitled MANAGEMENT.
Board Responsibilities. The management and affairs of the Trust and its series, including the Funds described in this SAI, are overseen by the Trustees. The Board has approved contracts, as described in this SAI, under which certain companies provide essential management services to the Trust.
Like most mutual funds, the day-to-day business of the Trust, including the management of risk, is performed by third party service providers, such as the Adviser, Sub-Advisers, Distributor, Administrator, and Sub-Administrator. The Trustees are responsible for overseeing the Trusts service providers and, thus, have oversight responsibility with respect to risk management performed by those service providers. Risk management seeks to identify and address risks, i.e ., events or circumstances that could have material adverse effects on the business, operations, shareholder services, investment performance or reputation of the Funds. The Funds and their service providers employ a variety of processes, procedures and controls to identify various of those possible events or circumstances, to lessen the probability of their occurrence and/or to mitigate the effects of such events or circumstances if they do occur. Each service provider is responsible for one or more discrete aspects of the Trusts business ( e.g. , a Sub-Adviser is responsible for the day-to-day management of a Funds portfolio investments) and, consequently, for managing the risks associated with that business. The Board has emphasized to the Funds service providers the importance of maintaining vigorous risk management.
The Trustees role in risk oversight begins before the inception of a Fund, at which time the Funds Adviser and, if applicable, Sub-Adviser presents the Board with information concerning the investment objectives, strategies and risks of the Fund, as well as proposed investment limitations for the Fund. Additionally, the Funds Adviser and Sub-Adviser provide the Board with an overview of, among other things, their investment philosophies, brokerage practices and compliance infrastructures. Thereafter, the Board continues its oversight function as various personnel, including the Trusts Chief Compliance Officer, as well as personnel of the Adviser and other service providers, such as the Funds independent accountants, make periodic reports to the Audit Committee or to the Board with respect to various aspects of risk management. The Board and the Audit Committee oversee efforts by management and service providers to manage risks to which a Fund may be exposed.
The Board is responsible for overseeing the nature, extent and quality of the services provided to the Funds by the Adviser and Sub-Adviser and receives information about those services at its regular meetings. In addition, on an annual basis, in connection with its consideration of whether to renew the Advisory Agreement and Sub-Advisory Agreement with the Adviser and Sub-Adviser, respectively, the Board meets with the Adviser and Sub-Adviser to review such services. Among other things, the Board regularly considers the Advisers and Sub-Advisers adherence to the Funds investment restrictions and compliance with various Fund policies and procedures and with applicable securities regulations. The Board also reviews information about each Funds investments.
The Trusts Chief Compliance Officer reports regularly to the Board to review and discuss compliance issues. At least annually, the Trusts Chief Compliance Officer provides the Board with a report reviewing the adequacy and effectiveness of the Trusts policies and procedures and those of its service providers, including the Adviser and any Sub-Adviser. The report addresses the operation of the policies and procedures of the Trust and each service provider since the date of the last report; any material changes to the policies and procedures since the date of the last report; any recommendations for material changes to the policies and procedures; and any material compliance matters since the date of the last report.
The Board receives reports from the Funds service providers regarding operational risks and risks related to the valuation and liquidity of portfolio securities. Regular reports are made to the Board concerning investments for which market quotations are not readily available. Annually, the independent registered public accounting firm reviews with the Audit Committee its audit of each Funds financial statements, focusing on major areas of risk encountered by the Funds and noting any significant deficiencies or material weaknesses in the Funds internal controls. Additionally, in connection with its oversight function, the Board oversees Fund managements implementation of disclosure controls and procedures, which are designed to ensure that information required to be disclosed by the Trust in its periodic reports with the SEC are recorded, processed, summarized, and reported within the required time periods. The Board also oversees the Trusts internal controls over financial reporting, which comprise policies and procedures designed to provide reasonable assurance regarding the reliability of the Trusts financial reporting and the preparation of the Trusts financial statements.
From their review of these reports and discussions with the Adviser and Sub-Adviser, the Chief Compliance Officer, the independent registered public accounting firm and other service providers, the Board and the Audit Committee learn in detail about the material risks of the Fund, thereby facilitating a dialogue about how management and service providers identify and mitigate those risks.
The Board recognizes that not all risks that may affect a Fund can be identified and/or quantified, that it may not be practical or cost-effective to eliminate or mitigate certain risks, that it may be necessary to bear certain risks (such as investment-related risks) to achieve a Funds goals, and that the processes, procedures and controls employed to address certain risks may be limited in their
40
effectiveness. Moreover, reports received by the Trustees as to risk management matters are typically summaries of the relevant information. Most of the Funds investment management and business affairs are carried out by or through the Funds Adviser, Sub-Adviser and other service providers, each of which has an independent interest in risk management but whose policies and the methods by which one or more risk management functions are carried out may differ from the Funds and each others in the setting of priorities, the resources available or the effectiveness of relevant controls. As a result of the foregoing and other factors, the Boards ability to monitor and manage risk, as a practical matter, is subject to limitations.
Trustees and Officers. There are six members of the Board of Trustees, five of whom are not interested persons of the Trust, as that term is defined in the 1940 Act (Independent Trustees). Frank Nesvet, an Independent Trustee, serves as Chairman of the Board. The Board has determined its leadership structure is appropriate given the specific characteristics and circumstances of the Trust. The Board made this determination in consideration of, among other things, the fact that the Independent Trustees constitute a super-majority (greater than 75%) of the Board, the fact that the chairperson of each Committee of the Board is an Independent Trustee, the amount of assets under management in the Trust, and the number of funds (and classes of shares) overseen by the Board. The Board also believes that its leadership structure facilitates the orderly and efficient flow of information to the Independent Trustees from fund management.
The Board of Trustees has two standing committees: the Audit Committee and Trustee Committee. The Audit Committee and Trustee Committee are each chaired by an Independent Trustee and composed of all of the Independent Trustees.
Set forth below are the names, year of birth, position with the Trust, length of term of office, and the principal occupations during the last five years and other directorships held of each of the persons currently serving as a Trustee or Officer of the Trust.
TRUSTEES
NAME, ADDRESS AND YEAR OF BIRTH |
POSITION(S)
WITH FUNDS |
TERM OF
OFFICE AND LENGTH OF TIME SERVED |
PRINCIPAL
OCCUPATION(S) DURING PAST 5 YEARS |
NUMBER OF
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE |
OTHER DIRECTORSHIPS HELD BY TRUSTEE DURING THE PAST 5 YEARS |
|||||
INDEPENDENT TRUSTEES |
||||||||||
FRANK NESVET c/o SPDR Series Trust State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1943 |
Independent Trustee,
Chairman,
|
Term: Unlimited Served: since
September
|
Chief Executive
|
197 |
SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee). |
|||||
DAVID M. KELLY c/o SPDR Series Trust State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1938 |
Independent
Trustee,
|
Term: Unlimited
Served: since
|
Retired. |
197 |
Chicago Stock Exchange (Former Director, retired); Penson Worldwide Inc. (Former Director, retired); SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee). |
|||||
BONNY EUGENIA BOATMAN c/o SPDR Series Trust State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1950 |
Independent Trustee |
Term: Unlimited Served: since April 2010 |
Retired. |
197 |
SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee). |
41
NAME, ADDRESS AND YEAR OF BIRTH |
POSITION(S)
WITH FUNDS |
TERM OF
OFFICE AND LENGTH OF TIME SERVED |
PRINCIPAL
OCCUPATION(S) DURING PAST 5 YEARS |
NUMBER OF
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE |
OTHER DIRECTORSHIPS HELD BY TRUSTEE DURING THE PAST 5 YEARS |
|||||
DWIGHT D. CHURCHILL c/o SPDR Series Trust State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1953 |
Independent
Trustee |
Term:
Unlimited Served: since April 2010 |
Self-employed
consultant since 2010; CEO and President, CFA Institute (June 2014-January 2015). |
197 | SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee); Affiliated Managers Group, Inc. (Director). | |||||
CARL G. VERBONCOEUR c/o SPDR Series Trust State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1952 |
Independent Trustee |
Term: Unlimited Served: since April 2010 |
Self-employed
|
197 |
The Motley Fool Funds Trust (Trustee); SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee). |
|||||
INTERESTED TRUSTEE |
|
|
|
|
||||||
JAMES E. ROSS* SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1965 |
Interested
Trustee |
Term:
Unlimited Served as Trustee: since April 2010 |
Chairman and
Director, SSGA Funds Management,
Inc. (2005-present);
Principal, State Street
|
261 |
SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee); Select Sector SPDR Trust (Trustee); State Street Master Funds (Trustee); and State Street Institutional Investment Trust (Trustee). |
* | Mr. Ross is an Interested Trustee because of his employment with the Adviser and ownership interest in an affiliate of the Adviser. Mr. Ross previously served as an Interested Trustee from November 2005 to December 2009. |
42
OFFICERS
NAME, ADDRESS AND YEAR OF BIRTH |
POSITION(S)
WITH FUNDS |
TERM OF
OFFICE AND LENGTH OF TIME SERVED |
PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS |
|||
ELLEN M. NEEDHAM SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1967 |
President |
Term: Unlimited
Served: since October 2012 |
President and Director, SSGA Funds Management, Inc. (June 2012-present); Chief Operating Officer, SSGA Funds Management, Inc. (May 2010-June 2012); Senior Managing Director, SSGA Funds Management, Inc. (1992-2012)*; Senior Managing Director, State Street Global Advisors (1992-present).* | |||
ANN M. CARPENTER SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1966 |
Vice President;
Assistant
|
Term: Unlimited Served: since August 2012; Term: Unlimited Served: since April 2015 |
Chief Operating Officer, SSGA Funds Management, Inc. (April 2014-present); Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (2005-present).* |
|||
MICHAEL P. RILEY SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1969 |
Vice President |
Term: Unlimited Served: since February 2005 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (2008-present); Principal, State Street Global Advisors and SSGA Funds Management, Inc. (2005-2008). |
|||
JOSHUA A. WEINBERG SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1978 |
Chief Legal
|
Term: Unlimited
Served: since
|
Vice President and Managing Counsel, State Street Global Advisors (2011-present); Clerk, SSGA Funds Management, Inc. (2013-present); Associate, Financial Services Group, Dechert LLP (2006-2011). |
|||
CHRISTOPHER A. MADDEN State Street Bank and Trust Company One Hundred Huntington Avenue, CPH0326 Boston, MA 02116 1967 |
Secretary |
Term: Unlimited Served: since August 2013 |
Vice President and Senior Counsel, State Street Bank and Trust Company (2013-present); Counsel, Atlantic Fund Services (2009-2013); Vice President, Citigroup Fund Services, LLC (2005-2009).* |
|||
PATRICIA A. MORISETTE State Street Bank and Trust Company One Hundred Huntington Avenue, CPH0326 Boston, MA 02116 1973 |
Assistant Secretary |
Term: Unlimited Served: since February 2015 |
Vice President and Counsel, State Street Bank and Trust Company (2014-present); Assistant Vice President and Counsel, John Hancock Financial Services (2011-2013); Independent legal consultant (2009-2011); Associate, Bingham McCutchen LLP (2003-2009).* , ** |
|||
CHAD C. HALLETT SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1969 |
Treasurer |
Term: Unlimited Served: since November 2010 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (November 2014 - present); Vice President, State Street Bank and Trust Company (2001-November 2014).* |
43
NAME, ADDRESS AND YEAR OF BIRTH |
POSITION(S)
WITH FUNDS |
TERM OF
OFFICE AND LENGTH OF TIME SERVED |
PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS |
|||
BRIAN HARRIS SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1973 |
Chief
Compliance Officer |
Term: Unlimited
Served: since November 2013 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (2013-Present); Senior Vice President and Global Head of Investment Compliance, BofA Global Capital Management (2010-2013); Director of Compliance, AARP Financial Inc. (2008-2010). |
|||
TREVOR SWANBERG SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1979 |
Code of Ethics
|
Term: Unlimited
Served: since
|
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (January 2015-Present); Senior Manager-Mutual Fund Compliance, ICMA-Retirement Corporation (December 2011-January 2015); Assistant Vice President, J.P. Morgan (September 2007-December 2011). |
* | Served in various capacities and/or with various affiliated entities during noted time period. |
** | Served in various capacities and/or with unaffiliated mutual funds or closed-end funds for which State Street Bank and Trust Company or its affiliates act as a provider of services during the noted time period. |
Individual Trustee Qualifications
The Board has concluded that each of the Trustees should serve on the Board because of his or her ability to review and understand information about the Funds provided to him or her by management, to identify and request other information he or she may deem relevant to the performance of his or her duties, to question management and other service providers regarding material factors bearing on the management and administration of the Funds, and to exercise his or her business judgment in a manner that serves the best interests of each Funds shareholders. The Board has concluded that each of the Trustees should serve as a Trustee based on his or her own experience, qualifications, attributes and skills as described below.
The Board has concluded that Mr. Nesvet should serve as Trustee because of the experience he has gained serving as the Chief Executive Officer of a financial services consulting company, serving on the boards of other investment companies, and serving as chief financial officer of a major financial services company; his knowledge of the financial services industry, and the experience he has gained serving as Trustee of the Trust since 2000.
The Board has concluded that Mr. Kelly should serve as Trustee because of the experience he gained serving as the President and Chief Executive Officer of the National Securities Clearing Corporation, his previous directorship experience, and the experience he has gained serving as Trustee of the Trust since 2000.
The Board has concluded that Ms. Boatman should serve as Trustee because of the experience she gained serving as Managing Director of the primary investment division of one of the nations leading financial institutions and her knowledge of the financial services industry. Ms. Boatman was elected to serve as Trustee of the Trust in April 2010.
The Board has concluded that Mr. Churchill should serve as Trustee because of the experience he gained serving as the Chief Executive Officer and President of the CFA Institute, serving as the Head of the Fixed Income Division of one of the nations leading mutual fund companies and provider of financial services and his knowledge of the financial services industry. Mr. Churchill was elected to serve as Trustee of the Trust in April 2010.
The Board has concluded that Mr. Verboncoeur should serve as Trustee because of the experience he gained serving as the Chief Executive Officer of a large financial services and investment management company, his knowledge of the financial services industry and his experience serving on the boards of other investment companies. Mr. Verboncoeur was elected to serve as Trustee of the Trust in April 2010.
The Board has concluded that Mr. Ross should serve as Trustee because of the experience he has gained in his various roles with the Adviser, his knowledge of the financial services industry, and the experience he has gained serving as Trustee of the Trust since 2005 (Mr. Ross did not serve as Trustee from December 2009 until April 2010).
44
In its periodic assessment of the effectiveness of the Board, the Board considers the complementary individual skills and experience of the individual Trustees primarily in the broader context of the Boards overall composition so that the Board, as a body, possesses the appropriate (and appropriately diverse) skills and experience to oversee the business of the Funds.
REMUNERATION OF THE TRUSTEES AND OFFICERS
No officer, director or employee of the Adviser, its parent or subsidiaries receives any compensation from the Trust for serving as an officer or Trustee of the Trust. The Trust, SSGA Master Trust, SSGA Active Trust and SPDR Index Shares Funds (together with the Trust, the Trusts) pay, in the aggregate, each Independent Trustee an annual fee of $200,000 plus $10,000 per in-person meeting attended and $1,250 for each telephonic or video conference meeting attended. The Chairman of the Board receives an additional annual fee of $50,000 and the Chairman of the Audit Committee receives an additional annual fee of $20,000. Prior to July 1, 2015, each Independent Trustee received an annual fee of $185,000 plus $10,000 per in-person meeting attended and $1,250 for each telephonic or video conference meeting attended. The Chairman of the Board received an additional annual fee of $50,000 and the Chairman of the Audit Committee received an additional annual fee of $20,000. The Trust also reimburses each Independent Trustee for travel and other out-of-pocket expenses incurred by him/her in connection with attending such meetings and in connection with attending industry seminars and meetings. Trustee fees are allocated between the Trusts and each of their respective series in such a manner as deemed equitable, taking into consideration the relative net assets of the series.
The table below shows the compensation that the Independent Trustees received during the Trusts fiscal year ended June 30, 2015.
NAME OF INDEPENDENT TRUSTEE |
AGGREGATE
COMPENSATION FROM THE TRUST |
PENSION OR
RETIREMENT BENEFITS ACCRUED AS PART OF TRUST EXPENSES |
ESTIMATED
ANNUAL BENEFITS UPON RETIREMENT |
TOTAL
COMPENSATION FROM THE TRUST AND FUND COMPLEX PAID TO TRUSTEES(1) |
||||||||||||
Frank Nesvet |
$ | 224,871 | N/A | N/A | $ | 298,750 | ||||||||||
Bonny Boatman |
$ | 186,169 | N/A | N/A | $ | 247,500 | ||||||||||
Dwight Churchill |
$ | 187,105 | N/A | N/A | $ | 248,750 | ||||||||||
David M. Kelly |
$ | 202,150 | N/A | N/A | $ | 268,750 | ||||||||||
Carl Verboncoeur |
$ | 187,105 | N/A | N/A | $ | 248,750 |
(1) | The Fund Complex includes the Trust. |
STANDING COMMITTEES
Audit Committee. The Board has an Audit Committee consisting of all Independent Trustees. Mr. Kelly serves as Chairman. The Audit Committee meets with the Trusts independent auditors to review and approve the scope and results of their professional services; to review the procedures for evaluating the adequacy of the Trusts accounting controls; to consider the range of audit fees; and to make recommendations to the Board regarding the engagement of the Trusts independent auditors. The Audit Committee met four (4) times during the fiscal year ended June 30, 2015.
Trustee Committee. The Board has established a Trustee Committee consisting of all Independent Trustees. Mr. Nesvet serves as Chairman. The responsibilities of the Trustee Committee are to: 1) nominate Independent Trustees; 2) review on a periodic basis the governance structures and procedures of the Funds; 3) review proposed resolutions and conflicts of interest that may arise in the business of the Funds and may have an impact on the investors of the Funds; 4) review matters that are referred to the Committee by the Chief Legal Officer or other counsel to the Trust; and 5) provide general oversight of the Funds on behalf of the investors of the Funds. The Trustee Committee does not have specific procedures in place with respect to the consideration of nominees recommended by security holders, but may consider such nominees in the event that one is recommended. The Trustee Committee met four (4) times during the fiscal year ended June 30, 2015.
OWNERSHIP OF FUND SHARES
As of October 1, 2015, neither the Independent Trustees nor their immediate family members owned beneficially or of record any securities in the Adviser, Sub-Advisers, Principal Underwriter or any person controlling, controlled by, or under common control with the Adviser, Sub-Adviser or Principal Underwriter.
45
The following table shows, as of December 31, 2014, the amount of equity securities beneficially owned by the Trustees in the Trust.
Name of Trustee |
Fund |
Dollar Range of
Equity Securities in the Trust |
Aggregate Dollar Range of
Equity Securities in All Funds Overseen by Trustee in Family of Investment Companies |
|||
Independent Trustees: |
||||||
Frank Nesvet |
None | None | None | |||
David M. Kelly |
None | None | None | |||
Bonny Eugenia Boatman |
None | None | None | |||
Dwight D. Churchill |
None | None | None | |||
Carl G. Verboncoeur |
SPDR S&P Dividend ETF | $1 to $10,000 | $1 to $10,000 | |||
Interested Trustee: |
||||||
James Ross |
SPDR S&P Metals & Mining ETF SPDR Russell Small Cap Completeness ETF SPDR Russell 1000 ETF SPDR S&P Biotech ETF SPDR S&P Dividend ETF SPDR S&P 600 Small Cap Growth ETF SPDR S&P 400 Mid Cap Growth ETF SPDR Dow Jones REIT ETF SPDR Barclays Short Term High Yield Bond ETF SPDR Barclays High Yield Bond ETF SPDR Barclays International Corporate Bond ETF SPDR Barclays Short Term High Yield Bond ETF SPDR Nuveen Barclays Short Term Municipal Bond ETF SPDR Nuveen S&P High Yield Municipal Bond ETF SPDR Barclays 1-3 Month T-Bill ETF SPDR Barclays Short Term Corporate Bond ETF SPDR Barclays Investment Grade Floating Rate ETF |
$1 to $10,000
$10,001 - $50,000 $50,001 - $100,000 $10,001 - $50,000 $10,001 - $50,000 $10,001 - $50,000 $10,001 - $50,000 $10,001 - $50,000 $10,001 - $50,000 $10,001 - $50,000 $10,001 - $50,000 $10,001 - $50,000 Over $100,000 Over $100,000 $10,001 - $50,000 Over $100,000 Over $100,000 |
Over $100,000 |
CODES OF ETHICS
The Trust, the Adviser (which includes applicable reporting personnel of the Distributor) and the Sub-Advisers each have adopted a code of ethics as required by applicable law, which is designed to prevent affiliated persons of the Trust, the Adviser, the Sub-Advisers and the Distributor from engaging in deceptive, manipulative or fraudulent activities in connection with securities held or to be acquired by the Funds (which may also be held by persons subject to the codes of ethics). Each Code of Ethics permits personnel, subject to that Code of Ethics, to invest in securities for their personal investment accounts, subject to certain limitations, including securities that may be purchased or held by the Funds.
There can be no assurance that the codes of ethics will be effective in preventing such activities. Each code of ethics, filed as exhibits to this registration statement, may be examined at the office of the SEC in Washington, D.C. or on the Internet at the SECs website at www.sec.gov.
PROXY VOTING POLICIES
The Board believes that the voting of proxies on securities held by each Fund is an important element of the overall investment process. As such, the Board has delegated the responsibility to vote such proxies to the Adviser for all Funds, other than the Municipal ETFs and the Build America Bond ETF which are sub-advised by Nuveen Asset Management, LLC (Nuveen Asset Management) and the International Corporate Bond ETF, SPDR Barclays International High Yield Bond ETF and SPDR Barclays Emerging Markets Local Bond ETF, for which it has delegated responsibility to their sub-adviser, State Street Global Advisors Limited (SSGA LTD). The Advisers proxy voting policy is attached at the end of this SAI. SSGA LTDs proxy voting policy is substantially and materially the same as the Advisers proxy voting policy. Information regarding how a Fund voted proxies relating to its portfolio securities during the most recent twelve-month period ended June 30 is available: (1) without charge by calling 1-866-787-2257; (2) on the Funds website at www.spdrs.com; and (3) on the SECs website at http://www.sec.gov.
PROXY VOTING POLICIESMunicipal Bond ETFs
The Municipal Bond ETFs invest their assets primarily in municipal bonds and cash management securities. On rare occasions a Fund may acquire, directly or through a special purpose vehicle, equity securities of a municipal bond issuer whose bonds the Fund already owns when such bonds have deteriorated or are expected shortly to deteriorate significantly in credit quality. The purpose of acquiring equity securities generally will be to acquire control of the municipal bond issuer and to seek to prevent the credit deterioration or
46
facilitate the liquidation or other workout of the distressed issuers credit problem. In the course of exercising control of a distressed municipal issuer, Nuveen Asset Management may pursue the Funds interests in a variety of ways, which may entail negotiating and executing consents, agreements and other arrangements, and otherwise influencing the management of the issuer. Nuveen Asset Management does not consider such activities proxy voting for purposes of Rule 206(4)-6 under the Investment Advisers Act of 1940.
In the rare event that a municipal issuer were to issue a proxy or that a Fund were to receive a proxy issued by a cash management security, Nuveen Asset Management would either engage an independent third party to determine how the proxy should be voted or vote the proxy with the consent, or based on the instructions, of the Funds Board or its representative. A member of Nuveen Asset Managements legal department would oversee the administration of the voting, and ensure that records were maintained in accordance with Rule 206(4)-6, reports were filed with the Securities and Exchange Commission (SEC) on Form N-PX, and the results provided to the Funds Board and made available to shareholders as required by applicable rules.
DISCLOSURE OF PORTFOLIO HOLDINGS POLICY
The Trust has adopted a policy regarding the disclosure of information about the Trusts portfolio holdings. The Board must approve all material amendments to this policy. The Funds portfolio holdings are publicly disseminated each day a Fund is open for business through financial reporting and news services including publicly accessible Internet web sites. In addition, a basket composition file, which includes the security names and share quantities to deliver in exchange for Fund Shares, together with estimates and actual cash components, is publicly disseminated daily prior to the opening of the Exchange via the National Securities Clearing Corporation (NSCC). The basket represents one Creation Unit of a Fund. The Trust, the Adviser, the Sub-Advisers or State Street will not disseminate non-public information concerning the Trust, except: (i) to a party for a legitimate business purpose related to the day-to-day operations of the Funds or (ii) to any other party for a legitimate business or regulatory purpose, upon waiver or exception.
THE INVESTMENT ADVISER
SSGA FM acts as investment adviser to the Trust and, subject to the supervision of the Board, is responsible for the investment management of each Fund. As of June 30, 2015, the Adviser managed approximately $376.28 billion in assets. The Advisers principal address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111. The Adviser, a Massachusetts corporation, is a wholly owned subsidiary of State Street Corporation, a publicly held bank holding company. State Street Global Advisors (SSGA), consisting of the Adviser and other investment advisory affiliates of State Street Corporation, is the investment management arm of State Street Corporation.
The Adviser serves as investment adviser to each Fund pursuant to an investment advisory agreement (Investment Advisory Agreement) between the Trust and the Adviser. The Investment Advisory Agreement, with respect to each Fund, continues in effect for two years from its effective date, and thereafter is subject to annual approval by (1) the Board or (2) vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, provided that in either event such continuance also is approved by a majority of the Board who are not interested persons (as defined in the 1940 Act) of the Trust by a vote cast in person at a meeting called for the purpose of voting on such approval. The Investment Advisory Agreement with respect to each Fund is terminable without penalty, on 60 days notice, by the Board or by a vote of the holders of a majority (as defined in the 1940 Act) of a Funds outstanding voting securities. The Investment Advisory Agreement is also terminable upon 60 days notice by the Adviser and will terminate automatically in the event of its assignment (as defined in the 1940 Act).
Under the Investment Advisory Agreement, the Adviser, subject to the supervision of the Board and in conformity with the stated investment policies of each Fund, manages the investment of each Funds assets. The Adviser is responsible for placing purchase and sale orders and providing continuous supervision of the investment portfolio of each Fund. Pursuant to the Investment Advisory Agreement, the Adviser is not liable for certain liabilities, including certain liabilities arising under the federal securities laws, unless such loss or liability results from willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard of its obligations and duties.
Under the Advisory Agreement, the Adviser performs certain oversight and supervisory functions with respect to Nuveen Asset Management and SSGA LTD as sub-advisers to their respective Funds, including: (i) conduct periodic analysis and review of the performance by Nuveen Asset Management and SSGA LTD of their obligations to their respective Funds and provide periodic reports to the Board regarding such performance; (ii) review any changes to Nuveen Asset Management and SSGA LTDs ownership, management, or personnel responsible for performing its obligations to their respective Funds; and make appropriate reports to the Board (iii) perform periodic due diligence meetings with representatives of Nuveen Asset Management and SSGA LTD; and (iv) assist the Board and management of the Trust, as applicable, concerning the initial approval, continued retention or replacement of Nuveen Asset Management and SSGA LTD as sub-advisers to their respective Funds.
A discussion regarding the basis for the Boards approval of the Investment Advisory Agreement regarding the Funds is available in the Trusts Annual Report to Shareholders for the period ended June 30, 2015.
47
For the services provided to the Funds under the Investment Advisory Agreement, each Fund pays the Adviser monthly fees based on a percentage of each Funds average daily net assets as set forth in each Funds Prospectus. From time to time, the Adviser may waive all or a portion of its fee. The Adviser pays all expenses of each Fund other than the management fee, distribution fees pursuant to the Distribution and Service Plan, if any, brokerage, taxes, interest, fees and expenses of the Independent Trustees (including any Trustees counsel fees), acquired fund fees and expenses, litigation expenses and other extraordinary expenses.
For the past three fiscal years ended June 30, the Funds paid the following amounts to the Adviser:
FUND* |
2015 | 2014 | 2013 | |||||||||
SPDR Russell 3000 ETF |
$ | 290,076 | $ | 565,945 | $ | 909,956 | ||||||
SPDR Russell 1000 ETF |
$ | 57,509 | $ | 45,216 | $ | 85,121 | ||||||
SPDR Russell 2000 ETF |
$ | 77,730 | $ | 48,868 | (2) | N/A | (1) | |||||
SPDR S&P 500 Buyback ETF |
$ | 15,216 | (8) | N/A | (1) | N/A | (1) | |||||
SPDR S&P 500 Growth ETF |
$ | 881,102 | $ | 645,618 | $ | 465,251 | ||||||
SPDR S&P 500 Value ETF |
$ | 410,866 | $ | 350,530 | $ | 241,857 | ||||||
SPDR Russell Small Cap Completeness ETF |
$ | 85,806 | $ | 87,637 | $ | 204,997 | ||||||
SPDR S&P 400 Mid Cap Growth ETF |
$ | 412,538 | $ | 358,766 | $ | 176,929 | ||||||
SPDR S&P 400 Mid Cap Value ETF |
$ | 226,681 | $ | 188,408 | $ | 78,333 | ||||||
SPDR S&P 600 Small Cap ETF |
$ | 664,775 | $ | 814,657 | $ | 487,003 | ||||||
SPDR S&P 600 Small Cap Growth ETF |
$ | 890,192 | $ | 825,218 | $ | 442,070 | ||||||
SPDR S&P 600 Small Cap Value ETF |
$ | 675,754 | $ | 610,785 | $ | 358,944 | ||||||
SPDR Global Dow ETF |
$ | 551,429 | $ | 515,912 | $ | 463,183 | ||||||
SPDR Dow Jones REIT ETF |
$ | 7,482,028 | $ | 5,678,054 | $ | 5,110,819 | ||||||
SPDR S&P Bank ETF |
$ | 9,008,439 | $ | 8,644,671 | $ | 6,198,407 | ||||||
SPDR S&P Capital Markets ETF |
$ | 646,627 | $ | 484,652 | $ | 136,179 | ||||||
SPDR S&P Insurance ETF |
$ | 1,088,932 | $ | 1,198,155 | $ | 632,260 | ||||||
SPDR S&P Regional Banking ETF |
$ | 7,208,156 | $ | 8,465,867 | $ | 4,558,157 | ||||||
SPDR Morgan Stanley Technology ETF |
$ | 1,232,827 | $ | 1,028,908 | $ | 855,627 | ||||||
SPDR S&P Dividend ETF |
$ | 47,133,133 | $ | 43,743,745 | $ | 35,540,314 | ||||||
SPDR S&P Aerospace & Defense ETF |
$ | 329,645 | $ | 124,660 | $ | 50,978 | ||||||
SPDR S&P Biotech ETF |
$ | 5,771,382 | $ | 3,817,351 | $ | 2,523,885 | ||||||
SPDR S&P Health Care Equipment ETF |
$ | 138,868 | $ | 94,778 | $ | 66,880 | ||||||
SPDR S&P Health Care Services ETF |
$ | 460,478 | $ | 217,049 | $ | 64,308 | ||||||
SPDR S&P Homebuilders ETF |
$ | 5,878,687 | $ | 6,836,827 | $ | 7,807,711 | ||||||
SPDR S&P Metals & Mining ETF |
$ | 1,498,054 | $ | 2,081,197 | $ | 2,851,104 | ||||||
SPDR S&P Oil & Gas Equipment & Services ETF |
$ | 867,899 | $ | 1,037,175 | $ | 1,017,330 | ||||||
SPDR S&P Oil & Gas Exploration & Production ETF |
$ | 4,784,315 | $ | 3,300,401 | $ | 2,931,561 | ||||||
SPDR S&P Pharmaceuticals ETF |
$ | 3,724,098 | $ | 2,472,057 | $ | 1,383,217 | ||||||
SPDR S&P Retail ETF |
$ | 3,658,416 | $ | 3,315,499 | $ | 2,790,462 | ||||||
SPDR S&P Semiconductor ETF |
$ | 631,803 | $ | 351,192 | $ | 156,094 | ||||||
SPDR S&P Software & Services ETF |
$ | 110,892 | $ | 96,734 | $ | 52,950 | ||||||
SPDR S&P Telecom ETF |
$ | 171,810 | $ | 44,247 | $ | 16,714 | ||||||
SPDR S&P Transportation ETF |
$ | 1,564,232 | $ | 314,670 | $ | 82,359 | ||||||
SPDR S&P 1500 Value Tilt ETF |
$ | 23,541 | $ | 27,229 | $ | 15,661 | (5) | |||||
SPDR S&P 1500 Momentum Tilt ETF |
$ | 40,761 | $ | 40,465 | $ | 19,169 | (5) | |||||
SPDR Russell 1000 Low Volatility ETF |
$ | 28,204 | $ | 20,348 | $ | 5,275 | (3) | |||||
SPDR Russell 2000 Low Volatility ETF |
$ | 39,078 | $ | 25,645 | $ | 6,820 | (3) | |||||
SPDR Wells Fargo Preferred Stock ETF |
$ | 1,249,883 | $ | 1,152,878 | $ | 1,505,467 | ||||||
SPDR MSCI USA Quality Mix ETF |
$ | 1,874 | (9) | N/A | (1) | N/A | (1) | |||||
SPDR Barclays 1-3 Month T-Bill ETF |
$ | 1,690,004 | $ | 1,579,730 | $ | 1,625,340 | ||||||
SPDR Barclays TIPS ETF |
$ | 1,056,567 | $ | 1,134,992 | $ | 1,377,770 | ||||||
SPDR Barclays 0-5 Year TIPS ETF |
$ | 7,994 | $ | 3,054 | (6) | N/A | (1) | |||||
SPDR Barclays 1-10 Year TIPS ETF |
$ | 19,474 | $ | 15,289 | $ | 1,431 | (4) | |||||
SPDR Barclays Short Term Treasury |
$ | 27,565 | $ | 21,341 | $ | 5,263 | ||||||
SPDR Barclays Intermediate Term Treasury ETF |
$ | 232,877 | $ | 220,310 | $ | 237,555 | ||||||
SPDR Barclays Long Term Treasury ETF |
$ | 223,855 | $ | 71,416 | $ | 75,320 | ||||||
SPDR Barclays Short Term Corporate Bond ETF |
$ | 4,665,943 | $ | 3,887,496 | $ | 2,141,433 | ||||||
SPDR Barclays Intermediate Term Corporate Bond ETF |
$ | 739,885 | $ | 653,011 | $ | 524,876 | ||||||
SPDR Barclays Long Term Corporate Bond ETF |
$ | 416,103 | $ | 141,871 | $ | 181,827 | ||||||
SPDR Barclays Issuer Scored Corporate Bond ETF |
$ | 36,009 | $ | 47,920 | $ | 48,904 | ||||||
SPDR Barclays Convertible Securities ETF |
$ | 11,696,202 | $ | 8,167,973 | $ | 3,858,625 | ||||||
SPDR Barclays Mortgage Backed Bond ETF |
$ | 265,756 | $ | 209,120 | $ | 77,099 | ||||||
SPDR Barclays Aggregate Bond ETF |
$ | 1,149,113 | $ | 1,259,063 | $ | 1,195,282 | ||||||
SPDR Nuveen Barclays Municipal Bond ETF |
$ | 3,505,361 | $ | 2,920,079 | $ | 3,644,667 | ||||||
SPDR Nuveen Barclays California Municipal Bond ETF |
$ | 161,287 | $ | 161,119 | $ | 203,270 | ||||||
SPDR Nuveen Barclays New York Municipal Bond ETF |
$ | 55,609 | $ | 53,342 | $ | 62,879 |
48
SPDR Nuveen Barclays Short Term Municipal Bond ETF |
$ | 4,859,696 | $ | 4,174,043 | $ | 3,402,932 | ||||||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
$ | 1,851,793 | $ | 1,038,089 | $ | 927,328 | ||||||
SPDR Nuveen Barclays Build America Bond ETF |
$ | 364,881 | $ | 179,814 | $ | 379,835 | ||||||
SPDR DB International Government Inflation-Protected Bond ETF |
$ | 4,005,199 | $ | 5,111,803 | $ | 7,344,431 | ||||||
SPDR Barclays Short Term International Treasury Bond ETF |
$ | 935,156 | $ | 861,279 | $ | 790,245 | ||||||
SPDR Barclays International Treasury Bond ETF |
$ | 9,914,287 | $ | 10,449,544 | $ | 9,602,908 | ||||||
FUND* |
2015 | 2014 | 2013 | |||||||||
SPDR Barclays International Corporate Bond ETF |
$ | 1,407,352 | $ | 1,308,755 | $ | 639,016 | ||||||
SPDR Barclays Emerging Markets Local Bond ETF |
$ | 547,505 | $ | 668,270 | $ | 910,013 | ||||||
SPDR Barclays High Yield Bond ETF |
$ | 40,619,269 | $ | 38,954,427 | $ | 47,302,723 | ||||||
SPDR Barclays International High Yield Bond ETF |
$ | 114,884 | $ | 52,088 | (7) | N/A | (1) | |||||
SPDR Barclays Short Term High Yield Bond ETF |
$ | 16,798,537 | $ | 12,101,557 | $ | 2,832,907 | ||||||
SPDR Barclays Investment Grade Floating Rate ETF |
$ | 582,345 | $ | 471,167 | $ | 26,432 | ||||||
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
$ | 111,781 | $ | 79,705 | $ | 78,311 | ||||||
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
$ | 154,389 | $ | 111,760 | $ | 60,763 |
* | Funds not listed in the table above had not commenced operations as of June 30, 2015. |
(1) | The Fund was not operational. |
(2) | The Fund commenced operations on July 9, 2013. |
(3) | The Fund commenced operations on February 20, 2013. |
(4) | The Fund commenced operations on May 29, 2013. |
(5) | The Fund commenced operations on October 24, 2012. |
(6) | The Fund commenced operations on February 26, 2014. |
(7) | The Fund commenced operations on March 12, 2014. |
(8) | The Fund commenced operations on February 4, 2015. |
(9) | The Fund commenced operations on April 15, 2015. |
Pursuant to the Advisory Agreement between the Funds and the Adviser, the Adviser is authorized to engage one or more sub-advisers for the performance of any of the services contemplated to be rendered by the Adviser. The Adviser has engaged the following sub-advisers.
INVESTMENT SUB-ADVISER- Municipal Bond ETFs
The Adviser has retained Nuveen Asset Management as sub-adviser, to be responsible for the day to day management of the Municipal Bond ETFs investments, subject to supervision of the Adviser and the Board. The Adviser provides administrative, compliance and general management services to the Municipal Bond ETFs. Nuveen Asset Management offers advisory and investment management services to a broad range of mutual fund clients and has extensive experience in managing municipal securities. As of June 30, 2015, Nuveen Asset Management managed approximately $137.1 billion in assets. Nuveen Asset Managements principal business address is 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen Asset Management is a subsidiary of Nuveen Fund Advisors, LLC, which is a subsidiary of Nuveen Investments, Inc. (Nuveen Investments).
On November 13, 2007, Nuveen Investments was acquired by investors led by Madison Dearborn Partners, LLC, which is a private equity investment firm based in Chicago, Illinois. On October 1, 2014, Nuveen Investments was acquired by Teachers Insurance and Annuity Association of America (TIAA-CREF), a national financial services organization. Nuveen Investments is a wholly-owned subsidiary of TIAA-CREF and operates as a separate subsidiary within TIAA-CREFs asset management business.
In accordance with the Sub-Advisory Agreement between the Adviser and Nuveen Asset Management, the Adviser pays Nuveen Asset Management an annual investment sub-advisory fee equal to 45% of the advisory fees paid by the Municipal Bond ETFs to the Adviser after deducting the payments to fund service providers and fund expenses. For the past three fiscal years ended June 30, the Adviser paid the following amounts to Nuveen Asset Management for its services:
FUND | 2015 | 2014 | 2013 | |||||||||
SPDR Nuveen Barclays Municipal Bond ETF |
$ | 862,384 | $ | 684,622 | $ | 868,610 | ||||||
SPDR Nuveen Barclays California Municipal Bond ETF |
$ | 26,928 | $ | 43,328 | $ | 59,271 | ||||||
SPDR Nuveen Barclays New York Municipal Bond ETF |
$ | 7,201 | $ | 13,071 | $ | 18,274 | ||||||
SPDR Nuveen Barclays Short Term Municipal Bond ETF |
$ | 1,526,609 | $ | 1,209,068 | $ | 993,490 | ||||||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
$ | 633,244 | $ | 371,344 | $ | 312,623 | ||||||
SPDR Nuveen Barclays Build America Bond ETF |
$ | 102,347 | $ | 60,703 | $ | 135,919 |
49
A discussion regarding the basis for the Boards approval of the Sub-Advisory Agreement is available in the Trusts Annual Report to Shareholders for the period ending June 30, 2015.
INVESTMENT SUB-ADVISERSPDR Barclays International Corporate Bond ETF, SPDR Barclays International High Yield Bond ETF and SPDR Barclays Emerging Markets Local Bond ETF.
The Adviser has retained SSGA LTD, as sub-adviser, to be responsible for the day to day management of the International Corporate Bond ETF, SPDR Barclays International High Yield Bond ETF and SPDR Barclays Emerging Markets Local Bond ETFs investments, subject to supervision of the Adviser and the Board. The Adviser provides administrative, compliance and general management services to the International Corporate Bond ETF, SPDR Barclays International High Yield Bond ETF and SPDR Barclays Emerging Markets Local Bond ETF. Since 1990, SSGA LTD has been providing investment management services including managing indexed fixed income portfolios. As of June 30, 2015, SSGA LTD managed approximately $340.5 billion in assets. SSGA LTDs principal business address is 20 Churchill Place, Canary Wharf, London, United Kingdom E14 5HJ.
In accordance with the Sub-Advisory Agreement between the Adviser and SSGA LTD, the Adviser will pay SSGA LTD an annual investment sub-advisory fee equal to 40% of the advisory fees paid by the International Corporate Bond ETF, SPDR Barclays International High Yield Bond ETF and SPDR Barclays Emerging Markets Local Bond ETF to the Adviser after deducting the payments to fund service providers and fund expenses. For the past three fiscal years ended June 30, the Adviser paid the following amounts to SSGA LTD for its services:
FUND* | 2015 | 2014 | 2013 | |||||||||
International Corporate Bond ETF |
$ | 403,394 | $ | 368,683 | $ | 95,351 | ||||||
SPDR Barclays International High Yield Bond ETF(1) |
$ | 6,366 | 0 | N/A | ||||||||
SPDR Barclays Emerging Markets Local Bond ETF |
$ | 101,522 | $ | 106,034 | $ | 99,842 |
(1) | The Fund commenced operations on March 12, 2014. |
A discussion regarding the basis for the Boards approval of the Sub-Advisory Agreement is available in the Trusts Annual Report to Shareholders for the period ended June 30, 2015.
PORTFOLIO MANAGERS
The Adviser manages the Funds, Nuveen Asset Management manages the Municipal Bond ETFs, and SSGA LTD manages the SPDR Barclays International Corporate Bond ETF, SPDR Barclays International High Yield Bond ETF and SPDR Barclays Emerging Markets Local Bond ETF using a team of investment professionals. The professionals primarily responsible for the day-to-day portfolio management of each Fund are:
Fund |
Portfolio Managers |
|
All Equity ETFs |
Mike Feehily, John Tucker and Karl Schneider | |
SPDR Barclays 1-3 Month T-Bill ETF |
Todd Bean, Steve Meier and Jeff St. Peters | |
SPDR Barclays 1-10 Year TIPS ETF SPDR Barclays TIPS ETF SPDR Barclays 0-5 Year TIPS ETF SPDR DB International Government Inflation-Protected Bond ETF |
Peter Breault, Mahesh Jayakumar and Cynthia Moy | |
SPDR Barclays Short Term Treasury ETF SPDR Barclays Intermediate Term Treasury ETF SPDR Barclays Long Term Treasury ETF |
Mahesh Jayakumar, Joanna Mauro and Karen Tsang | |
SPDR Barclays Mortgage Backed Bond ETF |
Marc DiCosimo, Karen Tsang and Michael Przygoda | |
SPDR Barclays Aggregate Bond ETF |
Peter Breault, Marc DiCosimo and Michael Przygoda | |
SPDR Barclays Convertible Securities ETF |
Michael Brunell, Mahesh Jayakumar and Kyle Kelly | |
SPDR Barclays International High Yield Bond ETF |
Michael Brunell, Kyle Kelly, Iwan Marais and Paul Brown | |
SPDR Barclays High Yield Bond ETF SPDR Barclays Short Term High Yield Bond ETF SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
Patrick Bresnehan, Michael Brunell and Kyle Kelly | |
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
Bradley Sullivan, Michael Brunell and Kyle Kelly | |
SPDR Barclays Short Term International Treasury Bond ETF SPDR Barclays International Treasury Bond ETF |
Peter Breault, Mahesh Jayakumar and Joanna Mauro | |
Municipal Bond ETFs (except SPDR Nuveen Barclays Build America Bond ETF) |
Timothy Ryan and Steven Hlavin | |
SPDR Nuveen Barclays Build America Bond ETF |
Daniel Close, Timothy Ryan and Steven Hlavin | |
SPDR Barclays Short Term Corporate Bond ETF SPDR Barclays Intermediate Term Corporate Bond ETF |
Patrick Bresnehan, Kyle Kelly and Christopher DiStefano |
50
Fund |
Portfolio Managers |
|
SPDR Barclays Long Term Corporate Bond ETF SPDR Barclays Issuer Scored Corporate Bond ETF |
||
SPDR Barclays International Corporate Bond ETF |
Iwan Marais, Richard Darby-Dowman and Peter Spano | |
SPDR Barclays Emerging Markets Local Bond ETF |
Abhishek Kumar, Victoria Husemeyer and Peter Spano | |
SPDR Barclays Investment Grade Floating Rate ETF |
Thomas Connelley, Christopher DiStefano and Kyle Kelly |
All ETFs except Municipal Bond ETFs, SPDR Barclays International Corporate Bond ETF, SPDR Barclays International High Yield Bond ETF and SPDR Barclays Emerging Markets Local Bond ETF. The following table lists the number and types of accounts managed by each of the key professionals involved in the day-to-day portfolio management for each Fund and assets under management in those accounts. The total number of accounts and assets have been allocated to each respective manager. Therefore, some accounts and assets have been counted twice.
Other Accounts Managed as of June 30, 2015
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions) * |
Pooled
Investment Vehicle Accounts |
Assets
Managed (billions) * |
Other
Accounts |
Assets
Managed (billions) * |
Total
Assets Managed (billions) * |
|||||||||||||||||||||
Mike Feehily |
101 | $ | 152.86 | 768 | $ | 959.64 | 620 | $ | 508.16 | $ | 1,620.66 | |||||||||||||||||
John Tucker |
101 | $ | 152.86 | 768 | $ | 959.64 | 620 | $ | 508.16 | $ | 1,620.66 | |||||||||||||||||
Karl Schneider |
101 | $ | 152.86 | 768 | $ | 959.64 | 620 | $ | 508.16 | $ | 1,620.66 | |||||||||||||||||
Todd Bean |
14 | $ | 124.47 | 24 | $ | 112.09 | 104 | $ | 144.15 | $ | 380.71 | |||||||||||||||||
Steven Meier |
14 | $ | 124.47 | 24 | $ | 112.09 | 104 | $ | 144.15 | $ | 380.71 | |||||||||||||||||
Jeff St. Peters |
14 | $ | 124.47 | 24 | $ | 112.09 | 104 | $ | 144.15 | $ | 380.71 | |||||||||||||||||
Michael Brunell |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Kyle Kelly |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Peter Breault |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Karen Tsang |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Patrick Bresnehan |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Mahesh Jayakumar |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Bradley Sullivan |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Thomas Connelley |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Marc DiCosimo |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Christopher DiStefano |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Joanna Mauro |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Cynthia Moy |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 | |||||||||||||||||
Michael Przygoda |
8 | $ | 26.04 | 104 | $ | 56.00 | 176 | $ | 50.71 | $ | 132.75 |
* | There are no performance fees associated with these portfolios. |
The following table lists the dollar range of Fund Shares beneficially owned by portfolio managers listed above as of June 30, 2015:
Portfolio Manager |
Fund |
Dollar Range of Trust Shares Beneficially Owned |
||
Mike Feehily |
SPDR S&P Dividend ETF | $50,0001 - $100,000 | ||
SPDR S&P 1500 Value Tilt ETF | $50,0001 - $100,000 | |||
SPDR Russell 1000 Low Volatility ETF | $50,0001 - $100,000 | |||
SPDR Dow Jones REIT ETF | $50,0001 - $100,000 | |||
John Tucker |
None | None | ||
Karl Schneider |
None | None | ||
Todd Bean |
None | None | ||
Steven Meier |
None | None | ||
Jeff St. Peters |
None | None | ||
Michael Brunell |
SPDR Barclays Short Term High Yield Bond ETF | $0 - $10,000 | ||
SPDR Barclays High Yield Bond ETF | $0 - $10,000 | |||
Kyle Kelly |
None | None | ||
Peter Breault |
None | None | ||
Karen Tsang |
None | None | ||
Patrick Bresnehan |
None | None | ||
Mahesh Jayakumar |
None | None | ||
Bradley Sullivan |
SPDR Barclays Short Term High Yield Bond ETF | $10,0001 - $50,000 | ||
Thomas Connelley |
None | None | ||
Marc DiCosimo |
None | None |
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Portfolio Manager |
Fund |
Dollar Range of Trust Shares Beneficially Owned |
||
Christopher DiStefano |
None | None | ||
Joanna Mauro |
None | None | ||
Cynthia Moy |
None | None | ||
Michael Przygoda |
None | None |
A portfolio manager that has responsibility for managing more than one account may be subject to potential conflicts of interest because he or she is responsible for other accounts in addition to the Funds. Those conflicts could include preferential treatment of one account over others in terms of: (a) the portfolio managers execution of different investment strategies for various accounts; or (b) the allocation of resources or of investment opportunities. The Adviser has adopted policies and procedures designed to address these potential material conflicts. For instance, portfolio managers are normally responsible for all accounts within a certain investment discipline, and do not, absent special circumstances, differentiate among the various accounts when allocating resources. Additionally, the Adviser, and its advisory affiliates have processes and procedures for allocating investment opportunities among portfolios that are designed to provide a fair and equitable allocation among the portfolio managers accounts with the same strategy.
Portfolio managers may manage numerous accounts for multiple clients. These accounts may include registered investment companies, other types of pooled accounts ( e.g. , collective investment funds), and separate accounts ( i.e. , accounts managed on behalf of individuals or public or private institutions). Portfolio managers make investment decisions for each account based on the investment objectives and policies and other relevant investment considerations applicable to that portfolio. A potential conflict of interest may arise as a result of the portfolio managers responsibility for multiple accounts with similar investment guidelines. Under these circumstances, a potential investment may be suitable for more than one of the portfolio managers accounts, but the quantity of the investment available for purchase is less than the aggregate amount the accounts would ideally devote to the opportunity. Similar conflicts may arise when multiple accounts seek to dispose of the same investment. The portfolio managers may also manage accounts whose objectives and policies differ from that of the Funds. These differences may be such that under certain circumstances, trading activity appropriate for one account managed by the portfolio manager may have adverse consequences for another account managed by the portfolio manager. For example, an account may sell a significant position in a security, which could cause the market price of that security to decrease, while a Fund maintained its position in that security.
A potential conflict may arise when the portfolio managers are responsible for accounts that have different advisory feesthe difference in fees could create an incentive for the portfolio manager to favor one account over another, for example, in terms of access to investment opportunities. Another potential conflict may arise when the portfolio manager has an investment in one or more accounts that participate in transactions with other accounts. His or her investment(s) may create an incentive for the portfolio manager to favor one account over another. The Adviser has adopted policies and procedures reasonably designed to address these potential material conflicts. For instance, portfolio managers are normally responsible for all accounts within a certain investment discipline, and do not, absent special circumstances, differentiate among the various accounts when allocating resources. Additionally, the Adviser and its advisory affiliates have processes and procedures for allocating investment opportunities among portfolios that are designed to provide a fair and equitable allocation.
The compensation of the Advisers investment professionals is based on a number of factors. The first factor considered is external market. Through a compensation survey process, the Adviser seeks to understand what its competitors are paying people to perform similar roles. This data is then used to determine a competitive baseline in the areas of base pay, bonus, and long term incentive ( i.e. equity). The second factor taken into consideration is the size of the pool available for this compensation. The Adviser is a part of State Street Corporation, and therefore works within its corporate environment on determining the overall level of its incentive compensation pool. Once determined, this pool is then allocated to the various locations and departments of the Adviser and its affiliates. The discretionary determination of the allocation amounts to these locations and departments is influenced by the competitive market data, as well as the overall performance of the group, and in the case of investment teams, the investment performance of their strategies. The pool is then allocated on a discretionary basis to individual employees based on their individual performance. There is no fixed formula for determining these amounts, nor is anyones compensation directly tied to the investment performance or asset value of a product or strategy. The same process is followed in determining incentive equity allocations.
Municipal Bond ETFs . The following table lists the number and types of other accounts managed by each of the key professionals primarily involved in the day-to-day portfolio management for each Municipal Bond ETF and assets under management in those accounts. The total number of accounts and assets have been allocated to each respective manager. Therefore, some accounts and assets have been counted twice.
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Other Accounts Managed as of June 30, 2015:
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions) * |
Pooled
Investment Vehicle Accounts |
Assets
Managed (millions) * |
Other
Accounts |
Assets
Managed (millions) * |
Total
Assets Managed (billions) * |
|||||||||||||||||||||
Daniel J. Close |
18 | $ | 5.495 | 3 | $ | 297 | 10 | $ | 157 | $ | 5.95 | |||||||||||||||||
Timothy T. Ryan |
9 | $ | 8.328 | 0 | $ | 0 | 5 | $ | 682 | $ | 9.01 | |||||||||||||||||
Steven M. Hlavin |
12 | $ | 9.063 | 0 | $ | 0 | 1 | $ | 4.12 | $ | 9.07 |
* | There are no performance fees associated with these portfolios. |
The following table lists the dollar range of Fund Shares beneficially owned by portfolio managers listed above as of June 30, 2015:
Portfolio Manager |
Fund |
Dollar Range of Trust
Shares Beneficially Owned |
||
Daniel J. Close |
None | None | ||
Timothy T. Ryan |
None | None | ||
Steven M. Hlavin |
None | None |
Compensation . Portfolio manager compensation at Nuveen Asset Management consists primarily of base pay, an annual cash bonus and long-term incentive payments.
Base pay is determined based upon an analysis of the portfolio managers general performance, experience, and market levels of base pay for such position.
The portfolio managers are eligible for an annual cash bonus determined based on the particular portfolio managers investment performance, qualitative evaluation and financial performance of Nuveen Asset Management.
A portion of each portfolio managers annual cash bonus is based on a funds pre-tax investment performance, generally measured over the past one-, three- or five-year periods unless the portfolio managers tenure is shorter. Investment performance for each fund generally is determined by evaluating the funds performance relative to its benchmark(s) and/or Lipper industry peer group.
A portion of the cash bonus is based on a qualitative evaluation made by each portfolio managers supervisor taking into consideration a number of factors, including the portfolio managers team collaboration, expense management, support of personnel responsible for asset growth, and his or her compliance with Nuveen Asset Managements policies and procedures.
The final factor influencing a portfolio managers cash bonus is the financial performance of Nuveen Asset Management based on its operating earnings.
Certain key employees of Nuveen Investments and its affiliates, including certain portfolio managers, participate in a long-term performance plan designed to provide compensation opportunities that links a portion of each participants compensation to Nuveen Investments financial and operational performance. In addition, certain key employees of Nuveen Asset Management, including certain portfolio managers, have received profits interests in Nuveen Asset Management which entitle their holders to participate in the firms growth over time.
Material Conflicts of Interest . Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, portfolio managers who manage multiple accounts are presented a number of potential conflicts, including, among others, those discussed below.
The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. Nuveen Asset Management seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most accounts managed by a portfolio manager in a particular investment strategy are managed using the same investment models.
If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one account, an account may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these situations, Nuveen Asset Management has adopted procedures for allocating limited opportunities across multiple accounts.
With respect to many of its clients accounts, Nuveen Asset Management determines which broker to use to execute transaction orders, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts, Nuveen
53
Asset Management may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Nuveen Asset Management may place separate, non-simultaneous, transactions for a Fund and other accounts which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the Fund or the other accounts.
Some clients are subject to different regulations. As a consequence of this difference in regulatory requirements, some clients may not be permitted to engage in all the investment techniques or transactions or to engage in these transactions to the same extent as the other accounts managed by the portfolio manager. Finally, the appearance of a conflict of interest may arise where Nuveen Asset Management has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which a portfolio manager has day-to-day management responsibilities.
Nuveen Asset Management has adopted certain compliance procedures which are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
Other Accounts Managed as of June 30, 2015:
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions) * |
Pooled
Investment Vehicle Accounts |
Assets
Managed (billions) * |
Other
Accounts |
Assets
Managed (billions) * |
Total
Assets Managed (billions) * |
|||||||||||||||||||||
Abhishek Kumar |
0 | $ | 0 | 3 | $ | 0.31 | 4 | $ | 2.19 | $ | 2.50 | |||||||||||||||||
Iwan Marais |
0 | $ | 0 | 4 | $ | 0.68 | 4 | $ | 5.67 | $ | 6.35 | |||||||||||||||||
Victoria Husemeyer |
0 | $ | 0 | 10 | $ | 3.19 | 10 | $ | 12.78 | $ | 15.97 | |||||||||||||||||
Richard Darby-Dowman |
2 | $ | 2.42 | 7 | $ | 1.05 | 5 | $ | 2.54 | $ | 6.01 | |||||||||||||||||
Peter Spano |
0 | $ | 0 | 15 | $ | 3.73 | 69 | $ | 15.05 | $ | 18.78 | |||||||||||||||||
Paul Brown |
0 | $ | 0 | 5 | $ | 1.73 | 8 | $ | 4.54 | $ | 6.27 |
* | There are no performance fees associated with these portfolios. |
The following table lists the dollar range of Fund Shares beneficially owned by the portfolio managers of the International Corporate Bond ETF, SPDR Barclays International High Yield Bond ETF and SPDR Barclays Emerging Markets Local Bond ETF as of June 30, 2015:
Dollar Range of Fund
Shares Beneficially Owned |
||
Abhishek Kumar |
None | |
Iwan Marais |
None | |
Victoria Husemeyer |
None | |
Richard Darby-Dowman |
None | |
Peter Spano |
None | |
Paul Brown |
None |
The compensation of SSGA LTDs investment professionals is based on a number of factors. The first factor considered is external market. Through a compensation survey process, the Adviser seeks to understand what its competitors are paying people to perform similar roles. This data is then used to determine a competitive baseline in the areas of base pay, bonus, and long term incentive ( i.e. equity). The second factor taken into consideration is the size of the pool available for this compensation. SSGA LTD is a part of State Street Corporation, and therefore works within its corporate environment on determining the overall level of its incentive compensation pool. Once determined, this pool is then allocated to the various locations and departments of the Adviser and its affiliates. The discretionary determination of the allocation amounts to these locations and departments is influenced by the competitive market data, as well as the overall performance of the group. The pool is then allocated on a discretionary basis to individual employees based on their individual performance. There is no fixed formula for determining these amounts, nor is anyones compensation directly tied to the investment performance or asset value of a product or strategy. The same process is followed in determining incentive equity allocations.
A portfolio manager that has responsibility for managing more than one account may be subject to potential conflicts of interest because he or she is responsible for other accounts in addition to the fund. Those conflicts could include preferential treatment of one account over others in terms of: (a) the portfolio managers execution of different investment strategies for various accounts; or (b) the allocation of resources or of investment opportunities. SSGA LTD has adopted policies and procedures designed to address these potential material conflicts. For instance, portfolio managers are normally responsible for all accounts within a certain investment discipline, and do not, absent special circumstances, differentiate among the various accounts when allocating resources. Additionally,
54
SSGA LTD and its advisory affiliates have processes and procedures for allocating investment opportunities among portfolios that are designed to provide a fair and equitable allocation among the portfolio managers accounts with the same strategy.
Portfolio managers may manage numerous accounts for multiple clients. These accounts may include registered investment companies, other types of pooled accounts ( e.g. , collective investment funds), and separate accounts ( i.e. , accounts managed on behalf of individuals or public or private institutions). Portfolio managers make investment decisions for each account based on the investment objectives and policies and other relevant investment considerations applicable to that portfolio. A potential conflict of interest may arise as a result of the portfolio managers responsibility for multiple accounts with similar investment guidelines. Under these circumstances, a potential investment may be suitable for more than one of the portfolio managers accounts, but the quantity of the investment available for purchase is less than the aggregate amount the accounts would ideally devote to the opportunity. Similar conflicts may arise when multiple accounts seek to dispose of the same investment. The portfolio managers may also manage accounts whose objectives and policies differ from that of the Fund. These differences may be such that under certain circumstances, trading activity appropriate for one account managed by the portfolio manager may have adverse consequences for another account managed by the portfolio manager. For example, an account may sell a significant position in a security, which could cause the market price of that security to decrease, while the Fund maintained its position in that security.
A potential conflict may arise when portfolio managers are responsible for accounts that have different advisory feesthe difference in fees could create an incentive for the portfolio manager to favor one account over another, for example, in terms of access to investment opportunities. This conflict may be heightened if an account is subject to a performance-based fee. Another potential conflict may arise when the portfolio manager has an investment in one or more accounts that participate in transactions with other accounts. His or her investment(s) may create an incentive for the portfolio manager to favor one account over another. SSGA LTD has adopted policies and procedures reasonably designed to address these potential material conflicts. For instance, portfolio managers are normally responsible for all accounts within a certain investment discipline, and do not, absent special circumstances, differentiate among the various accounts when allocating resources. Additionally, SSGA LTD and its advisory affiliates have processes and procedures for allocating investment opportunities among portfolios that are designed to provide a fair and equitable allocation.
THE ADMINISTRATOR, SUB-ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
Administrator . SSGA FM serves as the administrator to each series of the Trust, pursuant to an Administration Agreement dated June 1, 2015 (the SSGA Administration Agreement). Pursuant to the SSGA Administration Agreement, SSGA FM is obligated to continuously provide business management services to the Trust and its series and will generally, subject to the general oversight of the Trustees and except as otherwise provided in the SSGA Administration Agreement, manage all of the business and affairs of the Trust.
Sub-Administrator, Custodian and Transfer Agent . Prior to June 1, 2015, State Street Bank and Trust Company (State Street) served as the Trusts administrator, pursuant to an Administration Agreement dated September 22, 2000 (the SSB Administration Agreement). As compensation for its services under the SSB Administration Agreement, State Street received a fee for its services, calculated based on the average aggregate net assets of the Trust and SPDR Index Shares Funds (SIS), of 0.0225% on the first $12.5 billion and 0.0075% thereafter.
State Street serves as the sub-administrator to each series of the Trust, pursuant to a Sub-Administration Agreement dated June 1, 2015 (the Sub-Administration Agreement). Under the Sub-Administration Agreement, State Street is obligated to provide certain sub-administrative services to the Trust and its series. State Street is a wholly owned subsidiary of State Street Corporation, a publicly held bank holding company, and is affiliated with the Adviser. State Streets mailing address is 100 Huntington Avenue, Tower 2, 3rd Floor, Boston, MA 02116.
State Street also serves as Custodian for the Trusts series pursuant to a custodian agreement (Custodian Agreement). As Custodian, State Street holds Fund assets, calculates the net asset value of the Fund Shares and calculates net income and realized capital gains or losses. State Street and the Trust will comply with the self-custodian provisions of Rule 17f-2 under the 1940 Act.
State Street also serves as Transfer Agent for each series of the Trust pursuant to a transfer agency agreement (Transfer Agency Agreement).
Compensation. As compensation for their services provided under the SSGA Administration and Sub-Administration agreements, SSGA FM and State Street, respectively, shall receive fees for the services, calculated based on the average aggregate net assets of the Trust and SPDR Index Shares Funds, of 0.0225% on the first $12.5 billion and 0.0075% thereafter.
As compensation for its services under the Custodian Agreement and Transfer Agency Agreement, State Street shall receive a fee for its services, calculated based on the average aggregate net assets of the Trust and SPDR Index Shares Funds. Pursuant to the Custody Agreement, State Street shall receive 0.0025% on the first $50 billion, 0.0020% on the next $50 billion and 0.0010% thereafter. In addition, under the Custody Agreement State Street shall be entitled to fees for fund accounting services and shall receive 0.0150% for
55
the first $12.5 billion and 0.0025% thereafter. State Street shall also be entitled to specialized custody, ETF accounting services and transfer agency fees and shall receive 0.0050% on the first $12.5 billion and 0.0030% thereafter. For each series of the Trust, a $110,000 annual minimum fee applies. The greater of the minimum fee or the asset based fee will be charged. In addition, State Street shall receive global safekeeping and transaction fees, which are calculated on a per-country basis, in-kind creation (purchase) and redemption transaction fees (as described below) and revenue on certain cash balances. State Street may be reimbursed by the series of the Trust for its out-of-pocket expenses. The Investment Advisory Agreement provides that the Adviser will pay certain operating expenses of the Trust, including the fees due to State Street under the Custodian Agreement and the Transfer Agency Agreement.
THE DISTRIBUTOR
State Street Global Markets, LLC is the principal underwriter and Distributor of Shares. Its principal address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111. Investor information can be obtained by calling 1-866-787-2257. The Distributor has entered into a distribution agreement (Distribution Agreement) with the Trust pursuant to which it distributes Shares of each Fund. The Distribution Agreement will continue for two years from its effective date and is renewable annually thereafter. Shares will be continuously offered for sale by the Trust through the Distributor only in Creation Units, as described in the Prospectus and below under PURCHASE AND REDEMPTION OF CREATION UNITS. Shares in less than Creation Units are not distributed by the Distributor. The Distributor will deliver the Prospectus to persons purchasing Creation Units and will maintain records of both orders placed with it and confirmations of acceptance furnished by it. The Distributor is a broker-dealer registered under the Securities Exchange Act of 1934 (the Exchange Act) and a member of the Financial Industry Regulatory Authority (FINRA). The Distributor has no role in determining the investment policies of the Trust or which securities are to be purchased or sold by the Trust. The Distributor may assist Authorized Participants (as defined below) in assembling shares to purchase Creation Units or upon redemption, for which it may receive commissions or other fees from such Authorized Participants. The Distributor also receives compensation from State Street for providing on-line creation and redemption functionality to Authorized Participants through its Fund Connect application.
The Adviser or Distributor, or an affiliate of the Adviser or Distributor, may directly or indirectly make cash payments to certain broker-dealers for participating in activities that are designed to make registered representatives and other professionals more knowledgeable about exchange traded products, including the Funds, or for other activities, such as participation in marketing activities and presentations, educational training programs, conferences, the development of technology platforms and reporting systems. As of February 7, 2013, the Adviser and/or Distributor had arrangements to make payments, other than for the educational programs and marketing activities described above, only to Charles Schwab & Co., Inc. (Schwab). Pursuant to the arrangement with Schwab, Schwab has agreed to promote certain SPDR Funds to Schwabs customers and not to charge certain of its customers any commissions when those customers purchase or sell shares of certain SPDR Funds. Payments to a broker-dealer or intermediary may create potential conflicts of interest between the broker-dealer or intermediary and its clients. These amounts, which may be significant, are paid by the Adviser and/or Distributor from their own resources and not from the assets of the Funds. In addition, the Adviser or Distributor, or an affiliate of the Adviser or Distributor, as well as an index provider that is not affiliated with the Adviser or Distributor, may also reimburse expenses or make payments from their own assets to other persons in consideration of services or other activities that they believe may benefit the SPDR business or facilitate investment in SPDR funds.
Each Fund, except for the SPDR Russell 3000 ETF, has adopted a Distribution and Service (Rule 12b-1) Plan (a Plan) pursuant to which payments of up to 0.25% may be made. No payments pursuant to the Plan will be made during the next twelve (12) months of operation. Under its terms, the Plan remains in effect from year to year, provided such continuance is approved annually by vote of the Board, including a majority of the Independent Trustees (Trustees who are not interested persons of the Funds (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of the Plan or any agreement related to the Plan). The Plan may not be amended to increase materially the amount to be spent for the services provided by the Distributor without approval by the shareholders of the relevant Fund to which the Plan applies, and all material amendments of the Plan also require Board approval (as described above). The Plan may be terminated at any time, without penalty, by vote of a majority of the Independent Trustees, or, by a vote of a majority of the outstanding voting securities of a Fund (as such vote is defined in the 1940 Act). Pursuant to the Distribution Agreement, the Distributor will provide the Board with periodic reports of any amounts expended under the Plan and the purpose for which such expenditures were made.
The Distribution Agreement provides that it may be terminated at any time, without the payment of any penalty, as to a Fund: (i) by vote of a majority of the Independent Trustees or (ii) by vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund, on at least 60 days written notice to the Distributor. The Distribution Agreement is also terminable upon 60 days notice by the Distributor and will terminate automatically in the event of its assignment (as defined in the 1940 Act).
Pursuant to agreements entered into with such persons, the Distributor will make payments under the Plan to certain broker-dealers or other persons (Investor Services Organizations) that enter into agreements with the Distributor in the form approved by the Board to provide distribution assistance and shareholder support, account maintenance and educational and promotional services (which may include compensation and sales incentives to the registered brokers or other sales personnel of the broker-dealer or other financial
56
entity that is a party to an investor services agreement) (Investor Services Agreements). No such Investor Services Agreements will be entered into during the first twelve months of operation. Each Investor Services Agreement will be a related agreement under the Plan. No Investor Services Agreement will provide for annual fees of more than 0.25% of a Funds average daily net assets per annum attributable to Shares subject to such agreement.
Subject to an aggregate limitation of 0.25% of a Funds average net assets per annum, the fees paid by the Fund under the Plan will be compensation for distribution, investor services or marketing services for the Fund. To the extent the Plan fees aggregate less than 0.25% per annum of the average daily net assets of a Fund, the Fund may also reimburse the Distributor and other persons for their respective costs incurred in printing prospectuses and producing advertising or marketing material prepared at the request of the Fund. The aggregate payments under the Plan will not exceed, on an annualized basis, 0.25% of average daily net assets of a Fund.
The continuation of the Distribution Agreement, any Investor Services Agreements and any other related agreements is subject to annual approval of the Board, including by a majority of the Independent Trustees, as described above.
Each of the Investor Services Agreements will provide that it may be terminated at any time, without the payment of any penalty, (i) by vote of a majority of the Independent Trustees or (ii) by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the relevant Fund, on at least 60 days written notice to the other party. Each of the Distribution Agreement and the Investor Services Agreements is also terminable upon 60 days notice by the Distributor and will terminate automatically in the event of its assignment (as defined in the 1940 Act). Each Investor Services Agreement is also terminable by the applicable Investor Service Organization upon 60 days notice to the other party thereto.
The allocation among the Trusts series of fees and expenses payable under the Distribution Agreement and the Investor Services Agreements will be made pro rata in accordance with the daily net assets of the respective series.
The Distributor may also enter into agreements with securities dealers (Soliciting Dealers) who will solicit purchases of Creation Unit aggregations of Fund Shares. Such Soliciting Dealers may also be Participating Parties (as defined in the Book Entry Only System section below), DTC Participants (as defined below) and/or Investor Services Organizations.
Pursuant to the Distribution Agreement, the Trust has agreed to indemnify the Distributor, and may indemnify Soliciting Dealers and Authorized Participants (as described below) entering into agreements with the Distributor, for certain liabilities, including certain liabilities arising under the federal securities laws, unless such loss or liability results from willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard of its obligations and duties under the Distribution Agreement or other agreement, as applicable.
The policy of the Trust regarding purchases and sales of securities for each Fund is that primary consideration will be given to obtaining the most favorable prices and efficient executions of transactions. Consistent with this policy, when securities transactions are effected on a stock exchange, the Trusts policy is to pay commissions which are considered fair and reasonable without necessarily determining that the lowest possible commissions are paid in all circumstances. The Trust believes that a requirement always to seek the lowest possible commission cost could impede effective portfolio management and preclude a Fund and the Adviser from obtaining a high quality of brokerage and research services. In seeking to determine the reasonableness of brokerage commissions paid in any transaction, the Adviser relies upon its experience and knowledge regarding commissions generally charged by various brokers and on its judgment in evaluating the brokerage and research services received from the broker effecting the transaction. Such determinations are necessarily subjective and imprecise, as in most cases an exact dollar value for those services is not ascertainable. The Trust has adopted policies and procedures that prohibit the consideration of sales of a Funds Shares as a factor in the selection of a broker or dealer to execute its portfolio transactions.
In selecting a broker/dealer for each specific transaction, the Adviser chooses the broker/dealer deemed most capable of providing the services necessary to obtain the most favorable execution and does not take the sale of Fund Shares into account. The Adviser considers the full range of brokerage services applicable to a particular transaction that may be considered when making this judgment, which may include, but is not limited to: liquidity, price, commission, timing, aggregated trades, capable floor brokers or traders, competent block trading coverage, ability to position, capital strength and stability, reliable and accurate communications and settlement processing, use of automation, knowledge of other buyers or sellers, arbitrage skills, administrative ability, underwriting and provision of information on a particular security or market in which the transaction is to occur. The specific criteria will vary depending upon the nature of the transaction, the market in which it is executed, and the extent to which it is possible to select from among multiple broker/dealers. The Adviser will also use electronic crossing networks when appropriate.
57
The Adviser does not currently use the Funds assets for, or participate in, third party soft dollar arrangements, although the Adviser may receive proprietary research from various full service brokers, the cost of which is bundled with the cost of the brokers execution services. The Adviser does not pay up for the value of any such proprietary research. The Adviser may aggregate trades with clients of SSGA, whose commission dollars may be used to generate soft dollar credits for SSGA. Although the Advisers clients commissions are not used for third party soft dollars, the Advisers and SSGAs clients may benefit from the soft dollar products/services received by SSGA.
The Adviser assumes general supervision over placing orders on behalf of the Trust for the purchase or sale of portfolio securities. If purchases or sales of portfolio securities of the Trust and one or more other investment companies or clients supervised by the Adviser are considered at or about the same time, transactions in such securities are allocated among the several investment companies and clients in a manner deemed equitable and consistent with its fiduciary obligations to all by the Adviser. In some cases, this procedure could have a detrimental effect on the price or volume of the security so far as the Trust is concerned. However, in other cases, it is possible that the ability to participate in volume transactions and to negotiate lower brokerage commissions will be beneficial to the Trust. The primary consideration is prompt execution of orders at the most favorable net price.
Nuveen. Nuveen Asset Management is responsible for decisions to buy and sell securities for certain Funds, the negotiation of the prices to be paid or received for principal trades, and the allocation of its transactions among various dealer firms. Portfolio securities will normally be purchased directly from an underwriter in a new issue offering or in the over-the-counter secondary market from the principal dealers in such securities, unless it appears that a better price or execution may be obtained elsewhere. Portfolio securities will not be purchased from Nuveen Asset Management or its affiliates except in compliance with the 1940 Act.
Nuveen Asset Management expects that substantially all portfolio transactions will be effected on a principal (as opposed to an agency) basis and, accordingly, do not expect to pay significant amounts of brokerage commissions. Brokerage will not be allocated based on the sale of a Funds shares. Purchases from underwriters will include a commission or concession paid by the issuer to the underwriter, and purchases from dealers will include the spread between the bid and asked price. It is the policy of Nuveen Asset Management to seek the best execution under the circumstances of each trade. Nuveen Asset Management evaluates price as the primary consideration, with the financial condition, reputation and responsiveness of the dealer considered secondarily in determining best execution. Given the best execution obtainable, it may be Nuveen Asset Managements practice to select dealers that, in addition, furnish research information (primarily credit analyses of issuers and general economic reports) and statistical and other services to Nuveen Asset Management. It is not possible to place a dollar value on information and statistical and other services received from dealers. Since it is only supplementary to Nuveen Asset Managements own research efforts, the receipt of research information is not expected to reduce significantly Nuveen Asset Managements expenses. For certain secondary market transactions where the execution capability of two brokers is judged to be of substantially similar quality, Nuveen Asset Management may randomly select one of them. Nuveen Asset Management may manage other investment companies and investment accounts for other clients that have investment objectives similar to certain Funds. Subject to applicable laws and regulations, Nuveen Asset Management seeks to allocate portfolio transactions equitably whenever concurrent decisions are made to purchase or sell securities by a Fund and another advisory account. In making such allocations the main factors to be considered will be the respective investment objectives, the relative size of the portfolio holdings of the same or comparable securities, the availability of cash for investment or need to raise cash, and the size of investment commitments generally held. While this procedure could have a detrimental effect on the price or amount of the securities (or, in the case of dispositions, the demand for securities) available to a Fund from time to time, Nuveen Asset Management believes that the benefits available will outweigh any disadvantage that may arise from exposure to simultaneous transactions.
The Funds will not deal with affiliates in principal transactions unless permitted by exemptive order or applicable rule or regulation.
The table below shows the aggregate dollar amount of brokerage commissions paid by the Equity ETFs for the fiscal years ended June 30. None of the brokerage commissions paid were paid to affiliated brokers and the Fixed Income ETFs (except SPDR Barclays Convertible Securities ETF) did not pay any brokerage commissions. Brokerage commissions paid by a Fund may be substantially different from year to year for multiple reasons, including market volatility and the demand for a particular Fund.
FUND(1) |
2015 | 2014 | 2013 | |||||||||
SPDR Russell 3000 ETF |
$ | 3,819 | $ | 1,688 | $ | 3,466 | ||||||
SPDR Russell 1000 ETF |
$ | 255 | $ | 41 | $ | 87 | ||||||
SPDR Russell 2000 ETF(2) |
$ | 1,908 | $ | 383 | N/A | |||||||
SPDR S&P 500 Buyback ETF(3) |
$ | 195 | N/A | N/A | ||||||||
SPDR S&P 500 Growth ETF |
$ | 1,252 | $ | 606 | $ | 278 | ||||||
SPDR S&P 500 Value ETF |
$ | 1,252 | $ | 1,040 | $ | 960 | ||||||
SPDR Russell Small Cap Completeness ETF |
$ | 2,719 | $ | 2,183 | $ | 329 | ||||||
SPDR S&P 400 Mid Cap Growth ETF |
$ | 6,477 | $ | 2,109 | $ | 1,102 | ||||||
SPDR S&P 400 Mid Cap Value ETF |
$ | 3,973 | $ | 805 | $ | 836 | ||||||
SPDR S&P 600 Small Cap ETF |
$ | 8,327 | $ | 1,073 | $ | 117 | ||||||
SPDR S&P 600 Small Cap Growth ETF |
$ | 11,203 | $ | 0 | $ | 793 | ||||||
SPDR S&P 600 Small Cap Value ETF |
$ | 9,290 | $ | 793 | $ | 164 | ||||||
SPDR Global Dow ETF |
$ | 6,511 | $ | 2,892 | $ | 4,794 | ||||||
SPDR Dow Jones REIT ETF |
$ | 14,435 | $ | 11,437 | $ | 8,460 | ||||||
SPDR S&P Bank ETF |
$ | 40,257 | $ | 11,492 | $ | 16,300 | ||||||
SPDR S&P Capital Markets ETF |
$ | 4,912 | $ | 362 | $ | 784 | ||||||
SPDR S&P Insurance ETF |
$ | 3,560 | $ | 1,429 | $ | 827 | ||||||
SPDR S&P Regional Banking ETF |
$ | 70,535 | $ | 4,535 | $ | 7,124 | ||||||
SPDR Morgan Stanley Technology ETF |
$ | 9,245 | $ | 502 | $ | 921 | ||||||
SPDR S&P Dividend ETF |
$ | 355,602 | $ | 71,928 | $ | 40,830 | ||||||
SPDR S&P Aerospace & Defense ETF |
$ | 3,266 | $ | 53 | $ | 35 | ||||||
SPDR S&P Biotech ETF |
$ | 258,432 | $ | 14,487 | $ | 710 | ||||||
SPDR S&P Health Care Equipment ETF |
$ | 2,826 | $ | 1 | $ | 8 | ||||||
SPDR S&P Health Care Services ETF |
$ | 4,873 | $ | 632 | $ | 128 | ||||||
SPDR S&P Homebuilders ETF |
$ | 29,030 | $ | 4,918 | $ | 13,335 | ||||||
SPDR S&P Metals & Mining ETF |
$ | 38,069 | $ | 6,522 | $ | 7,693 | ||||||
SPDR S&P Oil & Gas Equipment & Services ETF |
$ | 22,897 | $ | 0 | $ | 0 | ||||||
SPDR S&P Oil & Gas Exploration & Production ETF |
$ | 256,099 | $ | 1,554 | $ | 4,067 | ||||||
SPDR S&P Pharmaceuticals ETF |
$ | 93,363 | $ | 1,235 | $ | 1,989 | ||||||
SPDR S&P Retail ETF |
$ | 46,662 | $ | 1,780 | $ | 6,813 | ||||||
SPDR S&P Semiconductor ETF |
$ | 11,655 | $ | 0 | $ | 1,469 | ||||||
SPDR S&P Software Services ETF |
$ | 1,452 | $ | 6 | $ | 59 | ||||||
SPDR S&P Telecom ETF |
$ | 7,431 | $ | 373 | $ | 0 | ||||||
SPDR S&P Transportation ETF |
$ | 9,131 | $ | 113 | $ | 182 | ||||||
SPDR S&P 1500 Value Tilt ETF(4) |
$ | 166 | $ | 44 | $ | 36 | ||||||
SPDR S&P 1500 Momentum Tilt ETF(4) |
$ | 1,042 | $ | 822 | $ | 72 | ||||||
SPDR Russell 1000 Low Volatility ETF(5) |
$ | 827 | $ | 23 | $ | 14 |
58
FUND(1) |
2015 | 2014 | 2013 | |||||||||
SPDR Russell 2000 Low Volatility ETF(5) |
$ | 943 | $ | 266 | $ | 126 | ||||||
SPDR Wells Fargo Preferred Stock |
$ | 21,694 | $ | 3,426 | $ | 6,396 | ||||||
SPDR MSCI USA Quality Mix ETF(6) |
$ | 53 | N/A | N/A | ||||||||
SPDR Barclays Convertible Securities ETF |
$ | 2,250 | $ | 64,411 | $ | 114,739 |
(1) | Equity ETFs not listed in the table above had not commenced operations as of June 30, 2015. |
(2) | The Fund commenced operations on July 8, 2013. |
(3) | The Fund commenced operations on February 4, 2015. |
(4) | The Fund commenced operations on October 24, 2012. |
(5) | The Fund commenced operations on February 20, 2013. |
(6) | The Fund commenced operations on April 15, 2015. |
Securities of Regular Broker-Dealer. Each Fund is required to identify any securities of its regular brokers and dealers (as such term is defined in the 1940 Act) which it may hold at the close of its most recent fiscal year. Regular brokers or dealers of the Trust are the ten brokers or dealers that, during the most recent fiscal year: (i) received the greatest dollar amounts of brokerage commissions from the Trusts portfolio transactions; (ii) engaged as principal in the largest dollar amounts of portfolio transactions of the Trust; or (iii) sold the largest dollar amounts of the Trusts shares.
Holdings in Securities of Regular Broker-Dealers as of June 30, 2015.
Wells Fargo & Co. |
$ | 339,173,177 | ||
Bank of America Corp. |
$ | 331,596,844 | ||
JPMorgan Chase & Co. |
$ | 263,773,395 | ||
Citigroup, Inc. |
$ | 201,024,228 | ||
Goldman Sachs & Co. |
$ | 146,888,052 | ||
Morgan Stanley & Co. |
$ | 138,689,867 | ||
UBS |
$ | 58,449,979 | ||
Royal Bank of Canada |
$ | 48,040,885 | ||
Deutsche Bank |
$ | 45,913,179 | ||
Barclays Bank PLC |
$ | 21,859,644 | ||
Jefferies Group, Inc. |
$ | 15,644,008 | ||
Merrill Lynch & Co., Inc. |
$ | 14,838,029 | ||
National Financial Partners Corp. |
$ | 8,690,000 | ||
Nomura Holdings, Inc. |
$ | 7,493,724 | ||
Investment Technology Group, Inc. |
$ | 5,424,231 |
Portfolio turnover may vary from year to year, as well as within a year. High turnover rates are likely to result in comparatively greater brokerage expenses or transaction costs. The portfolio turnover rate for each Fund is expected to be under 100%, except with respect to the SPDR Barclays Aggregate Bond ETF, SPDR Barclays 1-3 Month T-Bill ETF, SPDR Barclays Mortgage Backed Bond ETF, SPDR Nuveen Barclays Build America Bond ETF and SPDR Barclays Short Term Intermediate Treasury ETF which may experience significantly higher turnover. The Funds may also experience higher portfolio turnover when migrating to a different benchmark index. The overall reasonableness of brokerage commissions and transaction costs is evaluated by the Adviser based upon its knowledge of available information as to the general level of commissions and transaction costs paid by other institutional investors for comparable services.
The following information supplements and should be read in conjunction with the section in the Prospectus entitled ADDITIONAL PURCHASE AND SALE INFORMATION.
The Depository Trust Company (DTC) acts as securities depositary for the Shares. Shares of each Fund are represented by securities registered in the name of DTC or its nominee, Cede & Co., and deposited with, or on behalf of, DTC. Except in the limited circumstance provided below, certificates will not be issued for Shares.
DTC, a limited-purpose trust company, was created to hold securities of its participants (the DTC Participants) and to facilitate the clearance and settlement of securities transactions among the DTC Participants in such securities through electronic book-entry changes in accounts of the DTC Participants, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some
59
of whom (and/or their representatives) own DTC. More specifically, DTC is owned by a number of its DTC Participants and by the New York Stock Exchange (NYSE) and the FINRA. Access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the Indirect Participants).
Beneficial ownership of Shares is limited to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership of beneficial interests in Shares (owners of such beneficial interests are referred to herein as Beneficial Owners) is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC Participants) and on the records of DTC Participants (with respect to Indirect Participants and Beneficial Owners that are not DTC Participants). Beneficial Owners will receive from or through the DTC Participant a written confirmation relating to their purchase of Shares.
Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the Trust and DTC, DTC is required to make available to the Trust upon request and for a fee to be charged to the Trust a listing of the Shares of each Fund held by each DTC Participant. The Trust, either directly or through a third party service, shall inquire of each such DTC Participant as to the number of Beneficial Owners holding Shares, directly or indirectly, through such DTC Participant. The Trust, either directly or through a third party service, shall provide each such DTC Participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC Participant may reasonably request, in order that such notice, statement or communication may be transmitted by such DTC Participant, directly or indirectly, to such Beneficial Owners. In addition, the Trust shall pay to each such DTC Participant and/or third party service a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements.
Share distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all Shares. DTC or its nominee, upon receipt of any such distributions, shall credit immediately DTC Participants accounts with payments in amounts proportionate to their respective beneficial interests in Shares of a Fund as shown on the records of DTC or its nominee. Payments by DTC Participants to Indirect Participants and Beneficial Owners of Shares held through such DTC Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in a street name, and will be the responsibility of such DTC Participants.
The Trust has no responsibility or liability for any aspects of the records relating to or notices to Beneficial Owners, or payments made on account of beneficial ownership interests in such Shares, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between DTC and the DTC Participants or the relationship between such DTC Participants and the Indirect Participants and Beneficial Owners owning through such DTC Participants.
DTC may determine to discontinue providing its service with respect to Shares at any time by giving reasonable notice to the Trust and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Trust shall take action either to find a replacement for DTC to perform its functions at a comparable cost or, if such a replacement is unavailable, to issue and deliver printed certificates representing ownership of Shares, unless the Trust makes other arrangements with respect thereto satisfactory to the Exchange.
60
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Although the Funds do not have information concerning their beneficial ownership held in the names of DTC Participants, as of October 2, 2015, the names, addresses and percentage ownership of each DTC Participant that owned of record 5% or more of the outstanding Shares of the Funds were as follows:
Fund | Name and Address |
Percentage
Ownership |
||||
SPDR RUSSELL 3000 ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
23.87 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
14.36 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
12.18 | % | ||||
The Bank of New York Mellon/ Mellon Trust of New England, National Association Three Mellon Bank Center Pittsburgh, PA 15259 |
6.15 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
5.44 | % | ||||
SPDR RUSSELL 1000 ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
24.78 | % | |||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
23.91 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
9.09 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.50 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
5.36 | % | ||||
SPDR RUSSELL 2000 ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
23.62 | % | |||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
10.71 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
10.28 | % |
61
Fund | Name and Address |
Percentage
Ownership |
||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.06 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
8.63 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
8.37 | % | ||||
SPDR S&P 500 Buyback ETF |
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
44.15 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.09 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
8.37 | % | ||||
Virtu Financial BD LLC 900 Third Avenue 29 th Floor New York, NY 10022 |
5.90 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
5.60 | % | ||||
SPDR S&P 500 GROWTH ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
31.64 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
12.25 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
8.12 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
6.05 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
5.15 | % | ||||
SPDR S&P 500 VALUE ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
23.17 | % |
62
Fund | Name and Address |
Percentage
Ownership |
||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
14.25 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
10.95 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
8.59 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
5.42 | % | ||||
SPDR RUSSELL SMALL CAP COMPLETENESS ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
15.44 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
13.63 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
8.58 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.84 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
5.06 | % | ||||
SPDR S&P 400 MID CAP GROWTH ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
15.44 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
13.63 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
8.58 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.84 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
5.06 | % | ||||
SPDR S&P 400 MID CAP VALUE ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
48.96 | % |
63
Fund | Name and Address |
Percentage
Ownership |
||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
9.32 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
7.14 | % | ||||
SPDR S&P 600 SMALL CAP ETF |
The Bank of New York Mellon/ Mellon Trust of New England, National Association Three Mellon Bank Center Pittsburgh, PA 15259 |
16.20 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
14.64 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.99 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.60 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
6.53 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
5.06 | % | ||||
SPDR S&P 600 SMALL CAP GROWTH ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
53.48 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.57 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
5.16 | % | ||||
SPDR S&P 600 SMALL CAP VALUE ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
54.91 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.82 | % | ||||
SPDR GLOBAL DOW ETF |
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
16.63 | % | |||
SEI Private Trust Company 1 Freedom Valley Drive Oaks, PA 19456 |
8.47 | % |
64
Fund | Name and Address |
Percentage
Ownership |
||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
7.87 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
7.58 | % | ||||
CDS Clearing and Depository Services Inc. 85 Richmond Street West Toronto, ON M5H 2C9 CANADA |
7.44 | % | ||||
American Enterprise Investment Services Inc. 2723 Ameriprise Financial Center Minneapolis, MN 55474 |
6.27 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
6.06 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.75 | % | ||||
SPDR DOW JONES REIT ETF |
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
12.68 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
11.63 | % | ||||
Northern Trust Company (The) 50 South LaSalle Street Chicago, IL 60675 |
10.36 | % | ||||
Wells Fargo Bank, National Association 733 Marquette Avenue South Minneapolis, MN 55479 |
9.99 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.71 | % | ||||
Bank of America N.A./ GWIM TRUST OPERATIONS 414 N. Akard Street, 5 th Floor Dallas, TX 75201 |
5.75 | % | ||||
Goldman, Sachs & Co. 180 Maiden Lane New York, NY 10038 |
5.70 | % | ||||
SPDR S&P BANK ETF |
Goldman, Sachs & Co. 180 Maiden Lane New York, NY 10038 |
24.31 | % | |||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
11.92 | % |
65
Fund | Name and Address |
Percentage
Ownership |
||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
9.86 | % | ||||
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
8.88 | % | ||||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
7.55 | % | ||||
JPMorgan Chase Bank, National Association 14201 Dallas Parkway Chase International Plaza Dallas, TX 75254 |
6.26 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
5.22 | % | ||||
SPDR S&P CAPITAL MARKETS ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
56.12 | % | |||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
18.47 | % | ||||
SPDR S&P INSURANCE ETF |
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
19.59 | % | |||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
16.62 | % | ||||
BMO Nesbitt Burns Inc./CDS 1 First Canadian Place, Suite 1300 Toronto, ON M5X 1H3 CANADA |
13.36 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
5.75 | % | ||||
SPDR S&P REGIONAL BANKING ETF |
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
8.78 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.12 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
8.06 | % |
66
Fund | Name and Address |
Percentage
Ownership |
||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.72 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
6.47 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
6.01 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
5.52 | % | ||||
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
5.27 | % | ||||
SPDR MORGAN STANLEY TECHNOLOGY ETF |
Northern Trust Company (The) 50 South LaSalle Street Chicago, IL 60675 |
24.62 | % | |||
Robert W. Baird & Co. Inc. 777 East Wisconsin Avenue Milwaukee, WI 53202 |
15.66 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
11.16 | % | ||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
10.14 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
5.04 | % | ||||
SPDR S&P DIVIDEND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
19.58 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
11.92 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
10.68 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
7.35 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
5.09 | % |
67
Fund | Name and Address |
Percentage
Ownership |
||||
SPDR S&P AEROSPACE & DEFENSE ETF |
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
13.24 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.44 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
10.08 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
9.44 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
6.01 | % | ||||
SPDR S&P BIOTECH ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
17.20 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.85 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
6.26 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.26 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
5.12 | % | ||||
SPDR S&P HEALTH CARE EQUIPMENT ETF |
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
40.20 | % | |||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
21.26 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
9.79 | % | ||||
SPDR S&P HEALTH CARE SERVICES ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
20.51 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.77 | % |
68
Fund | Name and Address |
Percentage
Ownership |
||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
9.12 | % | ||||
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
8.10 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
6.52 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
5.98 | % | ||||
Northern Trust Company (The) 50 South LaSalle Street Chicago, IL 60675 |
5.23 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.21 | % | ||||
SPDR S&P HOMEBUILDERS ETF |
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
20.61 | % | |||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
8.99 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
7.92 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
7.74 | % | ||||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
5.58 | % | ||||
SPDR S&P METALS & MINING ETF |
State Street Bank & Trust Company- State Street Total ETF 1776 Heritage Drive North Quincy, MA 02171 |
12.80 | % | |||
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
10.80 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.46 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
6.74 | % |
69
Fund | Name and Address |
Percentage
Ownership |
||||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
6.37 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.12 | % | ||||
SPDR S&P OIL & GAS EQUIPMENT & SERVICES ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
14.15 | % | |||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
12.88 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.59 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
7.14 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
6.54 | % | ||||
SPDR S&P OIL & GAS EXPLORATION & PRODUCTION ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.56 | % | |||
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
8.46 | % | ||||
Deutsche Bank AG New York 60 Wall Street 25 th Floor New York, NY 10005 |
8.26 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
6.54 | % | ||||
The Bank of New York Mellon/ Mellon Trust of New England, National Association Three Mellon Bank Center Pittsburgh, PA 15259 |
5.69 | % | ||||
SPDR S&P PHARMACEUTICALS ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
14.85 | % | |||
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
13.54 | % |
70
Fund | Name and Address |
Percentage
Ownership |
||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
9.46 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
6.89 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
6.16 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
5.82 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.57 | % | ||||
SPDR S&P RETAIL ETF |
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
11.33 | % | |||
State Street Bank & Trust Company-State Street Total ETF 1776 Heritage Drive North Quincy, MA 02171 |
10.13 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.87 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
7.72 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
7.16 | % | ||||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
5.90 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
5.16 | % | ||||
SPDR S&P SEMICONDUCTOR ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
18.53 | % | |||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
9.85 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.84 | % |
71
Fund | Name and Address |
Percentage
Ownership |
||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
7.85 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
6.72 | % | ||||
State Street Bank & Trust Company-State Street Total ETF 1776 Heritage Drive North Quincy, MA 02171 |
5.08 | % | ||||
SPDR S&P SOFTWARE & SERVICES ETF |
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
20.22 | % | |||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
13.12 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.28 | % | ||||
Deutsche Bank AG New York 60 Wall Street 25 th Floor New York, NY 10005 |
8.23 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
6.67 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
6.43 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
5.68 | % | ||||
SPDR S&P TELECOM ETF |
SEI Private Trust Company 1 Freedom Valley Drive Oaks, PA 19456 |
11.69 | % | |||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
8.93 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.36 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
8.14 | % |
72
Fund | Name and Address |
Percentage
Ownership |
||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.08 | % | ||||
JPMorgan Clearing Corp. 3 Chase Metrotech Center 7 th Floor Brooklyn, NY 11245 |
8.03 | % | ||||
SG Americas Securities, LLC 480 Washington Blvd. Jersey City, NJ 07310 |
5.88 | % | ||||
SPDR S&P TRANSPORTATION ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
25.34 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
11.30 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
8.15 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
5.78 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
5.57 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
5.11 | % | ||||
SPDR S&P 1500 VALUE TILT ETF |
Barclays Capital, Inc./LE 222 Broadway, 11 th Floor New York, NY 10038 |
58.87 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
17.41 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
9.47 | % | ||||
SPDR S&P 1500 MOMENTUM TILT ETF |
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
45.34 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.56 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
9.45 | % |
73
Fund | Name and Address |
Percentage
Ownership |
||||
JPMorgan Clearing Corp. 3 Chase Metrotech Center 7 th Floor Brooklyn, NY 11245 |
7.51 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.64 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
6.59 | % | ||||
SPDR RUSSELL 1000 LOW VOLATILITY ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
59.86 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
7.01 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
6.49 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.16 | % | ||||
SPDR RUSSELL 2000 LOW VOLATILITY ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
34.94 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
12.01 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
10.98 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
5.80 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.17 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
5.05 | % | ||||
SPDR WELLS FARGO PREFERRED STOCK ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
16.39 | % |
74
Fund | Name and Address |
Percentage
Ownership |
||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
15.72 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
9.09 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
7.31 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.06 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
6.06 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.93 | % | ||||
SPDR MSCI USA QUALITY MIX ETF |
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
98.88 | % | |||
SPDR BARCLAYS 1-3 MONTH T-BILL ETF |
American Enterprise Investment Services Inc. 2723 Ameriprise Financial Center Minneapolis, MN 55474 |
22.27 | % | |||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
17.43 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
10.81 | % | ||||
The Bank of New York Mellon/ Mellon Trust of New England, National Association Three Mellon Bank Center Pittsburgh, PA 15259 |
7.92 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.58 | % | ||||
SPDR BARCLAYS TIPS ETF |
The Bank of New York Mellon/ Mellon Trust of New England, National Association Three Mellon Bank Center Pittsburgh, PA 15259 |
49.12 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.82 | % |
75
Fund | Name and Address |
Percentage
Ownership |
||||
SPDR BARCLAYS 0-5YEAR TIPS ETF |
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
39.10 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
14.11 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
11.30 | % | ||||
FOLIOfn Investments, Inc. 8180 Greensboro Drive, 8 th Floor McLean, VA 22102 |
8.99 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
8.81 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.37 | % | ||||
SPDR BARCLAYS 1-10 YEAR TIPS ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
33.44 | % | |||
Goldman, Sachs & Co. 180 Maiden Lane New York, NY 10038 |
25.73 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
11.11 | % | ||||
RBC Capital Markets Corporation 200 Vesey Street New York, NY 10281 |
9.02 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
8.33 | % | ||||
SPDR BARCLAYS SHORT TERM TREASURY ETF |
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
23.80 | % | |||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
12.60 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
10.63 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.87 | % |
76
Fund | Name and Address |
Percentage
Ownership |
||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
6.47 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
5.73 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
5.32 | % | ||||
SPDR BARCLAYS INTERMEDIATE TERM TREASURY ETF |
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
20.69 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
13.64 | % | ||||
Stephens Inc. 175 Federal Street #900 Boston, MA 02110 |
9.55 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
6.26 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
5.84 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.37 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.05 | % | ||||
SPDR BARCLAYS LONG TERM TREASURY ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
37.99 | % | |||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
14.05 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.18 | % | ||||
State Street Bank & Trust Company-State Street Total ETF 1776 Heritage Drive North Quincy, MA 02171 |
6.60 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.00 | % |
77
Fund | Name and Address |
Percentage
Ownership |
||||
JPMorgan Chase Bank, National Association 14201 Dallas Parkway Chase International Plaza Dallas, TX 75254 |
5.22 | % | ||||
SPDR BARCLAYS SHORT TERM CORPORATE BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
28.38 | % | |||
Bank of America N.A./ GWIM TRUST OPERATIONS 414 N. Akard Street, 5 th Floor Dallas, TX 75201 |
9.06 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.64 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
8.12 | % | ||||
The Bank of New York Mellon/ Mellon Trust of New England, National Association Three Mellon Bank Center Pittsburgh, PA 15259 |
5.74 | % | ||||
SPDR BARCLAYS INTERMEDIATE TERM CORPORATE BOND ETF |
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
15.28 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.92 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
8.32 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
7.87 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
7.32 | % | ||||
Stephens Inc. 175 Federal Street #900 Boston, MA 02110 |
6.16 | % | ||||
JPMorgan Chase Bank, National Association 14201 Dallas Parkway Chase International Plaza Dallas, TX 75254 |
5.34 | % | ||||
SPDR BARCLAYS LONG TERM CORPORATE BOND ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
17.98 | % |
78
Fund | Name and Address |
Percentage
Ownership |
||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
16.08 | % | ||||
State Street Bank & Trust Company-State Street Total ETF 1776 Heritage Drive North Quincy, MA 02171 |
10.51 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
5.90 | % | ||||
JPMorgan Chase Bank, National Association 14201 Dallas Parkway Chase International Plaza Dallas, TX 75254 |
5.80 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.53 | % | ||||
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
5.36 | % | ||||
Goldman Sachs Execution & Clearing, L.P. 30 Hudon Street, 4 th Floor Jersey City, NJ 07302 |
5.13 | % | ||||
SPDR BARCLAYS ISSUER SCORED CORPORATE BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
56.75 | % | |||
JPMorgan Clearing Corp. 3 Chase Metrotech Center 7 th Floor Brooklyn, NY 11245 |
12.02 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
7.27 | % | ||||
SPDR BARCLAYS CONVERTIBLE SECURITIES ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.32 | % | |||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
9.21 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.09 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
7.64 | % |
79
Fund | Name and Address |
Percentage
Ownership |
||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
7.26 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.62 | % | ||||
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
5.14 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
5.00 | % | ||||
SPDR BARCLAYS MORTGAGE BACKED BOND ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
65.14 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
7.34 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
6.33 | % | ||||
SPDR BARCLAYS AGGREGATE BOND ETF |
The Bank of New York Mellon/ Mellon Trust of New England, National Association Three Mellon Bank Center Pittsburgh, PA 15259 |
55.69 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
12.34 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.74 | % | ||||
SPDR NUVEEN BARCLAYS MUNICIPAL BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
14.05 | % | |||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
13.41 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
13.29 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
11.99 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
10.18 | % |
80
Fund | Name and Address |
Percentage
Ownership |
||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
7.11 | % | ||||
Apex Clearing Corporation 350 North St. Paul Street #1300 Dallas, TX 75201 |
5.40 | % | ||||
SPDR NUVEEN BARCLAYS CALIFORNIA MUNICIPAL BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
31.22 | % | |||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
16.57 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
9.51 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
7.76 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.08 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
5.53 | % | ||||
RBC Capital Markets Corporation 200 Vesey Street New York, NY 10281 |
5.36 | % | ||||
SPDR NUVEEN BARCLAYS NEW YORK MUNICIPAL BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.18 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
11.79 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
9.72 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
9.23 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
8.49 | % | ||||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
6.63 | % |
81
Fund | Name and Address |
Percentage
Ownership |
||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
6.53 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.77 | % | ||||
SPDR NUVEEN BARCLAYS SHORT TERM MUNICIPAL BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
16.42 | % | |||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
14.71 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
12.45 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
9.88 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
7.71 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
5.30 | % | ||||
SPDR NUVEEN S&P HIGH YIELD MUNICIPAL BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
18.72 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
16.36 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
15.11 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
12.14 | % | ||||
SPDR NUVEEN BARCLAYS BUILD AMERICA BOND ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
12.99 | % | |||
U.S. Bank N.A. 1555 North River Center, Suite 210 Milwaukee, WI 53212 |
11.96 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
9.04 | % |
82
Fund | Name and Address |
Percentage
Ownership |
||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
8.75 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
7.99 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
7.39 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
7.08 | % | ||||
RBC Capital Markets Corporation 200 Vesey Street New York, NY 10281 |
6.17 | % | ||||
SPDR DB INTERNATIONAL GOVERNMENT INFLATION- PROTECTED BOND ETF |
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
24.02 | % | |||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
17.37 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.93 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.11 | % | ||||
SPDR BARCLAYS SHORT TERM INTERNATIONAL TREASURY BOND ETF |
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
28.23 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
25.42 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.56 | % | ||||
SEI Private Trust Company 1 Freedom Valley Drive Oaks, PA 19456 |
7.19 | % | ||||
Vanguard Marketing Corporation 100 Vanguard Boulevard Malvern, PA 19355 |
5.03 | % | ||||
SPDR BARCLAYS INTERNATIONAL TREASURY BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.20 | % |
83
Fund | Name and Address |
Percentage
Ownership |
||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.90 | % | ||||
The Bank of New York Mellon/ Mellon Trust of New England, National Association Three Mellon Bank Center Pittsburgh, PA 15259 |
9.03 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
8.51 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
7.91 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.01 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
5.66 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
5.47 | % | ||||
SPDR BARCLAYS INTERNATIONAL CORPORATE BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
22.85 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
15.68 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
9.13 | % | ||||
JPMorgan Chase Bank, National Association 14201 Dallas Parkway Chase International Plaza Dallas, TX 75254 |
6.20 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
5.68 | % | ||||
SPDR BARCLAYS EMERGING MARKETS LOCAL BOND ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
24.06 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
23.10 | % |
84
Fund | Name and Address |
Percentage
Ownership |
||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
6.42 | % | ||||
SPDR BARCLAYS HIGH YIELD BOND ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
9.43 | % | |||
First Clearing LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
9.12 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
8.47 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
5.68 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
5.25 | % | ||||
State Street Bank & Trust Company-State Street Total ETF 1776 Heritage Drive North Quincy, MA 02171 |
5.24 | % | ||||
Brown Brothers Harriman & Co. 525 Washington Blvd. Jersey City, NJ 07310 |
5.03 | % | ||||
SPDR BARCLAYS INTERNATIONAL HIGH YIELD BOND ETF |
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
80.40 | % | |||
SPDR BARCLAYS SHORT TERM HIGH YIELD BOND ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
17.35 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.69 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.35 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
8.31 | % | ||||
American Enterprise Investment Services Inc. 2723 Ameriprise Financial Center Minneapolis, MN 55474 |
6.40 | % | ||||
SPDR BARCLAYS INVESTMENT GRADE FLOATING RATE ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
55.04 | % |
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Fund | Name and Address |
Percentage
Ownership |
||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
18.02 | % | ||||
SPDR BOFA MERRILL LYNCH EMERGING MARKETS CORPORATE BOND ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
23.26 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
22.80 | % | ||||
JPMorgan Clearing Corp. 3 Chase Metrotech Center 7 th Floor Brooklyn, NY 11245 |
17.31 | % | ||||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
13.97 | % | ||||
SEI Private Trust Company 1 Freedom Valley Drive Oaks, PA 19456 |
8.22 | % | ||||
SPDR BOFA MERRILL LYNCHCROSSOVER CORPORATE BOND ETF |
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
16.62 | % | |||
ML SFKPG 4 Corporate Place Piscataway, NJ 08854 |
14.82 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
12.17 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.39 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
9.29 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
6.48 | % | ||||
Scotia Capital Inc./Hollis Wealth/CDS 1 Adelaide Street East, Suite 2700 Toronto, ON M5C 2V9 CANADA |
5.78 | % |
* | Percentages referenced in this table for Merrill Lynch may also include Shares held at ML SFKPG. |
An Authorized Participant (as defined below) may hold of record more than 25% of the outstanding Shares of a Fund. From time to time, Authorized Participants may be a beneficial and/or legal owner of a Fund, may be affiliated with an index provider, may be deemed to have control of the applicable Fund and/or may be able to affect the outcome of matters presented for a vote of the
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shareholders of the Fund. Authorized Participants may execute an irrevocable proxy granting the Distributor or another affiliate of State Street (the Agent) power to vote or abstain from voting such Authorized Participants beneficially or legally owned Shares of a Fund. In such cases, the Agent shall mirror vote (or abstain from voting) such Shares in the same proportion as all other beneficial owners of the Fund.
The Trustees and Officers of the Trust, as a group, own less than 1% of the Trusts voting securities as of the date of this SAI.
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PURCHASE AND REDEMPTION OF CREATION UNITS
Each Fund issues and redeems its Shares on a continuous basis, at net asset value, only in a large specified number of Shares called a Creation Unit, either principally in-kind for securities included in the relevant Index or in cash for the value of such securities. The value of a Fund is determined once each business day, as described under Determination of Net Asset Value. The Creation Unit size for a Fund may change. Authorized Participants (as defined below) will be notified of such change. The principal consideration for creations and redemptions for each Equity ETF is in-kind. The principal consideration for creations and redemptions for each Fixed Income ETF is set forth in the table below:
FUND |
CREATION* | REDEMPTION* | ||
SPDR Barclays 1-3 Month T-Bill ETF |
In-Kind | In-Kind | ||
SPDR Barclays TIPS ETF |
In-Kind | In-Kind | ||
SPDR Barclays 0-5 Year TIPS ETF |
In-Kind | In-Kind | ||
SPDR Barclays 1-10 Year TIPS ETF |
In-Kind | In-Kind | ||
SPDR Barclays Short Term Treasury ETF |
In-Kind | In-Kind | ||
SPDR Barclays Intermediate Term Treasury ETF |
In-Kind | In-Kind | ||
SPDR Barclays Long Term Treasury ETF |
In-Kind | In-Kind | ||
SPDR Barclays Short Term Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Intermediate Term Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Long Term Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Issuer Scored Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Convertible Securities ETF |
In-Kind | In-Kind | ||
SPDR Barclays Mortgage Backed Bond ETF |
Cash | Cash | ||
SPDR Barclays Aggregate Bond ETF |
In-Kind** | In-Kind** | ||
SPDR Nuveen Barclays Municipal Bond ETF |
Cash | In-Kind | ||
SPDR Nuveen Barclays California Municipal Bond ETF |
Cash | In-Kind | ||
SPDR Nuveen Barclays New York Municipal Bond ETF |
Cash | In-Kind | ||
SPDR Nuveen Barclays Short Term Municipal Bond ETF |
Cash | In-Kind | ||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
Cash | In-Kind | ||
SPDR Nuveen Barclays Build America Bond ETF |
Cash | In-Kind | ||
SPDR DB International Government Inflation-Protected Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Short Term International Treasury Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays International Treasury Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays International Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Emerging Markets Local Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays High Yield Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays International High Yield Bond ETF |
Cash | Cash | ||
SPDR Barclays Short Term High Yield Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Investment Grade Floating Rate ETF |
In-Kind | In-Kind | ||
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
In-Kind | In-Kind |
* | May be revised at any time without notice. Funds that effect redemptions principally for cash, rather than primarily in-kind, may be less tax efficient than investments in conventional ETFs. |
** | Cash is to be provided in lieu of TBA positions. |
PURCHASE (CREATION). The Trust issues and sells Shares of each Fund only: in Creation Units on a continuous basis through the Principal Underwriter, without a sales load (but subject to transaction fees), at their NAV per share next determined after receipt of an order, on any Business Day (as defined below), in proper form pursuant to the terms of the Authorized Participant Agreement (Participant Agreement). A Business Day with respect to a Fund is, generally, any day on which the NYSE is open for business, although Fixed Income ETFs will also not be open for orders on Veterans Day and Columbus Day.
FUND DEPOSIT. The consideration for purchase of a Creation Unit of a Fund generally consists of either (i) the in-kind deposit of a designated portfolio of securities (the Deposit Securities) per each Creation Unit, constituting a substantial replication, or a portfolio sampling representation, of the securities included in the relevant Funds benchmark Index and the Cash Component (defined below), computed as described below or (ii) the cash value of the Deposit Securities (Deposit Cash) and the Cash Component, computed as described below. When accepting purchases of Creation Units for cash, a Fund may incur additional costs associated with the acquisition of Deposit Securities that would otherwise be provided by an in-kind purchaser.
Together, the Deposit Securities or Deposit Cash, as applicable, and the Cash Component constitute the Fund Deposit, which represents the minimum initial and subsequent investment amount for a Creation Unit of a Fund. The Cash Component, which may include a Dividend Equivalent Payment, is an amount equal to the difference between the net asset value of the Shares (per Creation Unit) and the market value of the Deposit Securities or Deposit Cash, as applicable. The Dividend Equivalent Payment enables a Fund to make a complete distribution
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of dividends on the day preceding the next dividend payment date, and is an amount equal, on a per Creation Unit basis, to the dividends on all the portfolio securities of the Fund (Dividend Securities) with ex-dividend dates within the accumulation period for such distribution (the Accumulation Period), net of expenses and liabilities for such period, as if all of the Dividend Securities had been held by the Fund for the entire Accumulation Period. The Accumulation Period begins on the ex-dividend date for each Fund and ends on the day preceding the next ex-dividend date. If the Cash Component is a positive number ( i.e. , the net asset value per Creation Unit exceeds the market value of the Deposit Securities or Deposit Cash, as applicable), the Cash Component shall be such positive amount. If the Cash Component is a negative number ( i.e. , the net asset value per Creation Unit is less than the market value of the Deposit Securities or Deposit Cash, as applicable), the Cash Component shall be such negative amount and the creator will be entitled to receive cash in an amount equal to the Cash Component. The Cash Component serves the function of compensating for any differences between the net asset value per Creation Unit and the market value of the Deposit Securities or Deposit Cash, as applicable. Computation of the Cash Component excludes any stamp duty or other similar fees and expenses payable upon transfer of beneficial ownership of the Deposit Securities, if applicable, which shall be the sole responsibility of the Authorized Participant (as defined below).
The Custodian, through NSCC, makes available on each Business Day, immediately prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern time), the list of the names and the required number of shares of each Deposit Security or the required amount of Deposit Cash, as applicable, to be included in the current Fund Deposit (based on information at the end of the previous Business Day) for a Fund. Such Fund Deposit is subject to any applicable adjustments as described below, in order to effect purchases of Creation Units of a Fund until such time as the next-announced composition of the Deposit Securities or the required amount of Deposit Cash, as applicable, is made available.
The identity and number of shares of the Deposit Securities or the amount of Deposit Cash, as applicable, required for a Fund Deposit for each Fund changes as rebalancing adjustments, interest payments and corporate action events are reflected from time to time by the Adviser with a view to the investment objective of the Fund. Information regarding the Fund Deposit necessary for the purchase of a Creation Unit is made available to Authorized Participants and other market participants seeking to transact in Creation Unit aggregations. The composition of the Deposit Securities may also change in response to adjustments to the weighting or composition of the component securities of a Funds Index.
The Trust intends to require the substitution of an amount of cash (i.e., a cash in lieu amount) to replace any Deposit Security that is a TBA transaction. The amount of cash contributed will be equivalent to the price of the TBA transaction listed as a Deposit Security. As noted above, the Trust reserves the right to permit or require the substitution of Deposit Cash to replace any Deposit Security, which shall be added to the Cash Component, including, without limitation, in situations where the Deposit Security: (i) may not be available in sufficient quantity for delivery, (ii) may not be eligible for transfer through the systems of DTC for corporate securities and municipal securities or the Federal Reserve System for U.S. Treasury securities; (iii) may not be eligible for trading by an Authorized Participant (as defined below) or the investor for which it is acting; (iv) would be restricted under the securities laws or where the delivery of the Deposit Security to the Authorized Participant would result in the disposition of the Deposit Security by the Authorized Participant becoming restricted under the securities laws, or (v) in certain other situations (collectively, non-standard orders). The Trust also reserves the right to: (i) permit or require the substitution of Deposit Securities in lieu of Deposit Cash; and (ii) include or remove Deposit Securities from the basket in anticipation of index rebalancing changes. The adjustments described above will reflect changes, known to the Adviser on the date of announcement to be in effect by the time of delivery of the Fund Deposit, in the composition of the subject Index being tracked by the relevant Fund or resulting from certain corporate actions.
PROCEDURES FOR PURCHASE OF CREATION UNITS. To be eligible to place orders with the Principal Underwriter, as facilitated via the Transfer Agent, to purchase a Creation Unit of a Fund, an entity must be (i) a Participating Party, i.e., a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the NSCC (the Clearing Process), a clearing agency that is registered with the SEC; or (ii) a DTC Participant (see BOOK ENTRY ONLY SYSTEM), and, with respect to the Fixed Income ETFs (except the International Treasury Bond ETFs), must have the ability to clear through the Federal Reserve System. In addition, each Participating Party or DTC Participant (each, an Authorized Participant) must execute a Participant Agreement that has been agreed to by the Principal Underwriter and the Transfer Agent, and that has been accepted by the Trust, with respect to purchases and redemptions of Creation Units. Each Authorized Participant will agree, pursuant to the terms of a Participant Agreement, on behalf of itself or any investor on whose behalf it will act, to certain conditions, including that it will pay to the Trust, an amount of cash sufficient to pay the Cash Component together with the creation transaction fee (described below) and any other applicable fees, taxes and additional variable charge.
All orders to purchase Shares directly from a Fund, including non-standard orders, must be placed for one or more Creation Units and in the manner and by the time set forth in the Participant Agreement and/or the applicable order form. The date on which an order to purchase Creation Units (or an order to redeem Creation Units, as set forth below) is received and accepted is referred to as the Order Placement Date.
An Authorized Participant may require an investor to make certain representations or enter into agreements with respect to the order (e.g., to provide for payments of cash, when required). Investors should be aware that their particular broker may not have executed a Participant Agreement and that, therefore, orders to purchase Shares directly from a Fund in Creation Units have to be placed by the
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investors broker through an Authorized Participant that has executed a Participant Agreement. In such cases there may be additional charges to such investor. At any given time, there may be only a limited number of broker-dealers that have executed a Participant Agreement and only a small number of such Authorized Participants may have international capabilities.
On days when the Exchange or the bond markets close earlier than normal, a Fund may require orders to create Creation Units to be placed earlier in the day. In addition, if a market or markets on which a Funds investments are primarily traded is closed, the Fund will also generally not accept orders on such day(s). Orders must be transmitted by an Authorized Participant by telephone or other transmission method acceptable to the Distributor pursuant to procedures set forth in the Participant Agreement and in accordance with the applicable order form. Those placing orders through an Authorized Participant should allow sufficient time to permit proper submission of the purchase order by the cut-off time on such Business Day. Economic or market disruptions or changes, or telephone or other communication failure may impede the ability to reach the Distributor or an Authorized Participant.
Fund Deposits must be delivered by an Authorized Participant through the Federal Reserve System (for cash and U.S. government securities), or through DTC (for corporate securities and municipal securities), through a subcustody agent for (for foreign securities) and/or through such other arrangements allowed by the Trust or its agents. With respect to foreign Deposit Securities, the Custodian shall cause the subcustodian of a Fund to maintain an account into which the Authorized Participant shall deliver, on behalf of itself or the party on whose behalf it is acting, such Deposit Securities. Foreign Deposit Securities must be delivered to an account maintained at the applicable local subcustodian. The Fund Deposit transfer must be ordered by the Authorized Participant in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities or Deposit Cash, as applicable, to the account of a Fund or its agents by no later than the Settlement Date. The Settlement Date for a Fund is generally the third Business Day, or in the case of the, SPDR Barclays 1-3 Month T-Bill ETF and SPDR Barclays TIPS ETF, the first Business Day, after the Order Placement Date. All questions as to the number of Deposit Securities or Deposit Cash to be delivered, as applicable, and the validity, form and eligibility (including time of receipt) for the deposit of any tendered securities or cash, as applicable, will be determined by the Trust, whose determination shall be final and binding. The amount of cash represented by the Cash Component must be transferred directly to the Custodian through the Federal Reserve Bank wire transfer system in a timely manner so as to be received by the Custodian no later than the Settlement Date. If the Cash Component and the Deposit Securities or Deposit Cash, as applicable, are not received in a timely manner by the Settlement Date, the creation order may be cancelled. Upon written notice to the Distributor, such canceled order may be resubmitted the following Business Day using a Fund Deposit as newly constituted to reflect the then current NAV of the Fund. The delivery of Creation Units so created generally will occur no later than the third Business Day following the day on which the purchase order is deemed received by the Distributor.
The order shall be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to the applicable cut-off time and the federal funds in the appropriate amount are deposited by 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions), with the Custodian on the Settlement Date. If the order is not placed in proper form as required, or federal funds in the appropriate amount are not received by 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions) on the Settlement Date, then the order may be deemed to be rejected and the Authorized Participant shall be liable to the Fund for losses, if any, resulting therefrom. A creation request is considered to be in proper form if all procedures set forth in the Participant Agreement, order form and this SAI are properly followed.
ISSUANCE OF A CREATION UNIT. Except as provided herein, Creation Units will not be issued until the transfer of good title to the Trust of the Deposit Securities or payment of Deposit Cash, as applicable, and the payment of the Cash Component have been completed. When the subcustodian has confirmed to the Custodian that the required Deposit Securities (or the cash value thereof) have been delivered to the account of the relevant subcustodian or subcustodians, the Principal Underwriter and the Adviser shall be notified of such delivery, and the Trust will issue and cause the delivery of the Creation Units.
In instances where the Trust accepts Deposit Securities for the purchase of a Creation Unit, the Creation Unit may be purchased in advance of receipt by the Trust of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the net asset value of the Shares on the date the order is placed in proper form since in addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component, plus (ii) an additional amount of cash equal to a percentage of the market value as set forth in the Participant Agreement, of the undelivered Deposit Securities (the Additional Cash Deposit), which shall be maintained in a general non-interest bearing collateral account. An additional amount of cash shall be required to be deposited with the Trust, pending delivery of the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with the Trust in an amount at least equal to the applicable percentage, as set forth in the Participant Agreement, of the daily marked to market value of the missing Deposit Securities. The Trust may use such Additional Cash Deposit to buy the missing Deposit Securities at any time. Authorized Participants will be liable to the Trust for all costs, expenses, dividends, income and taxes associated with missing Deposit Securities, including the costs incurred by the Trust in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities exceeds the market value of such Deposit Securities on the day the purchase order was deemed received by the Principal Underwriter plus the brokerage and related transaction costs associated with such purchases. The Trust will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Securities have been properly received by the
90
Custodian or purchased by the Trust and deposited into the Trust. In addition, a transaction fee as set forth below under Creation Transaction Fees will be charged in all cases and an additional variable charge may also be applied. The delivery of Creation Units so created generally will occur no later than the Settlement Date.
ACCEPTANCE OF ORDERS OF CREATION UNITS. The Trust reserves the absolute right to reject an order for Creation Units transmitted in respect of a Fund at its discretion, including, without limitation, if (a) the order is not in proper form; (b) the Deposit Securities or Deposit Cash, as applicable, delivered by the Participant are not as disseminated through the facilities of the NSCC for that date by the Custodian; (c) the investor(s), upon obtaining the Shares ordered, would own 80% or more of the currently outstanding Shares of the Fund; (d) acceptance of the Deposit Securities would have certain adverse tax consequences to the Fund; (e) the acceptance of the Fund Deposit would, in the opinion of counsel, be unlawful; (f) the acceptance of the Fund Deposit would otherwise, in the discretion of the Trust or the Adviser, have an adverse effect on the Trust or the rights of beneficial owners; (g) the acceptance or receipt of the order for a Creation Unit would, in the opinion of counsel to the Trust, be unlawful; or (h) in the event that circumstances outside the control of the Trust, the Custodian, the Transfer Agent and/or the Adviser make it for all practical purposes not feasible to process orders for Creation Units. Examples of such circumstances include acts of God or public service or utility problems such as fires, floods, extreme weather conditions and power outages resulting in telephone, telecopy and computer failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting the Trust, the Principal Underwriter, the Custodian, the Transfer Agent, DTC, NSCC, Federal Reserve System, or any other participant in the creation process, and other extraordinary events. The Trust or its agents shall communicate to the Authorized Participant its rejection of an order. The Trust, the Transfer Agent, the Custodian and the Principal Underwriter are under no duty, however, to give notification of any defects or irregularities in the delivery of Fund Deposits nor shall either of them incur any liability for the failure to give any such notification. The Trust, the Transfer Agent, the Custodian and the Principal Underwriter shall not be liable for the rejection of any purchase order for Creation Units.
All questions as to the number of shares of each security in the Deposit Securities and the validity, form, eligibility and acceptance for deposit of any securities to be delivered shall be determined by the Trust, and the Trusts determination shall be final and binding.
REDEMPTION. Shares may be redeemed only in Creation Units at their net asset value next determined after receipt of a redemption request in proper form by a Fund through the Transfer Agent and only on a Business Day. EXCEPT UPON LIQUIDATION OF A FUND, THE TRUST WILL NOT REDEEM SHARES IN AMOUNTS LESS THAN CREATION UNITS. Investors must accumulate enough Shares in the secondary market to constitute a Creation Unit in order to have such Shares redeemed by the Trust. There can be no assurance, however, that there will be sufficient liquidity in the public trading market at any time to permit assembly of a Creation Unit. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of Shares to constitute a redeemable Creation Unit.
With respect to each Fund, the Custodian, through the NSCC, makes available immediately prior to the opening of business on the Exchange (currently 9:30 a.m. Eastern time) on each Business Day, the list of the names and share quantities of each Funds portfolio securities that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form (as defined below) on that day (Fund Securities). Fund Securities received on redemption may not be identical to Deposit Securities.
Redemption proceeds for a Creation Unit are paid either in-kind or in cash or a combination thereof, as determined by the Trust. With respect to in-kind redemptions of a Fund, redemption proceeds for a Creation Unit will consist of Fund Securitiesas announced by the Custodian on the Business Day of the request for redemption received in proper form plus cash in an amount equal to the difference between the net asset value of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Fund Securities (the Cash Redemption Amount), less a fixed redemption transaction fee and any applicable additional variable charge as set forth below. In the event that the Fund Securities have a value greater than the net asset value of the Shares, a compensating cash payment equal to the differential is required to be made by or through an Authorized Participant by the redeeming shareholder. Notwithstanding the foregoing: (i) the Trust will substitute a cash in lieu amount to replace any Fund Security that is a TBA transaction and the amount of cash paid out in such cases will be equivalent to the value of the TBA transaction listed as a Fund Security and (ii) at the Trusts discretion, an Authorized Participant may receive the corresponding cash value of the securities in lieu of the in-kind securities value representing one or more Fund Securities.
PROCEDURES FOR REDEMPTION OF CREATION UNITS. After the Trust has deemed an order for redemption received, the Trust will initiate procedures to transfer the requisite Fund Securities and the Cash Redemption Amount to the Authorized Participant by the Settlement Date. With respect to in-kind redemptions of a Fund, the calculation of the value of the Fund Securities and the Cash Redemption Amount to be delivered upon redemption will be made by the Custodian according to the procedures set forth under Determination of Net Asset Value, computed on the Business Day on which a redemption order is deemed received by the Trust. Therefore, if a redemption order in proper form is submitted to the Principal Underwriter by a DTC Participant by the specified time on the Order Placement Date, and the requisite number of Shares of a Fund are delivered to the Custodian prior to 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions) on the Settlement Date, then the value of the Fund Securities and the Cash Redemption Amount to be delivered will be determined by the Custodian on such Order Placement Date. If the requisite number of Shares of the
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Fund are not delivered by 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions) on the Settlement Date, the Fund will not release the underlying securities for delivery unless collateral is posted in such percentage amount of missing Shares as set forth in the Participant Agreement (marked to market daily).
With respect to in kind redemptions of a Fund, in connection with taking delivery of shares of Fund Securities upon redemption of Creation Units, an Authorized Participant must maintain appropriate custody arrangements with a qualified broker-dealer, bank or other custody providers in each jurisdiction in which any of the Fund Securities are customarily traded (or such other arrangements as allowed by the Trust or its agents), to which account such Fund Securities will be delivered. Deliveries of redemption proceeds generally will be made within three Business Days of the trade date. Due to the schedule of holidays in certain countries, however, the delivery of in-kind redemption proceeds may take longer than three business days after the day on which the redemption request is received in proper form. The section below entitled Local Market Holiday Schedules identifies the instances where more than seven days would be needed to deliver redemption proceeds. Pursuant to an order of the SEC, in respect of each Fund, the Trust will make delivery of in-kind redemption proceeds within the number of days stated in the Local Market Holidays section to be the maximum number of days necessary to deliver redemption proceeds. If the Authorized Participant has not made appropriate arrangements to take delivery of the Fund Securities in the applicable foreign jurisdiction and it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Fund Securities in such jurisdiction, the Trust may, in its discretion, exercise its option to redeem such Shares in cash, and the Authorized Participant will be required to receive its redemption proceeds in cash.
If it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Fund Securities, the Trust may in its discretion exercise its option to redeem such Shares in cash, and the redeeming investor will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash that a Fund may, in its sole discretion, permit. In either case, the investor will receive a cash payment equal to the NAV of its Shares based on the NAV of Shares of the relevant Fund next determined after the redemption request is received in proper form (minus a redemption transaction fee and additional charge for requested cash redemptions specified above, to offset the Trusts brokerage and other transaction costs associated with the disposition of Fund Securities). A Fund may also, in its sole discretion, upon request of a shareholder, provide such redeemer a portfolio of securities that differs from the exact composition of the Fund Securities but does not differ in net asset value.
An Authorized Participant submitting a redemption request is deemed to represent to the Trust that it (or its client) (i) owns outright or has full legal authority and legal beneficial right to tender for redemption the requisite number of Shares to be redeemed and can receive the entire proceeds of the redemption, and (ii) the Shares to be redeemed have not been loaned or pledged to another party nor are they the subject of a repurchase agreement, securities lending agreement or such other arrangement which would preclude the delivery of such Shares to the Trust. The Trust reserves the right to verify these representations at its discretion, but will typically require verification with respect to a redemption request from a Fund in connection with higher levels of redemption activity and/or short interest in the Fund. If the Authorized Participant, upon receipt of a verification request, does not provide sufficient verification of its representations as determined by the Trust, the redemption request will not be considered to have been received in proper form and may be rejected by the Trust.
Redemptions of Shares for Fund Securities will be subject to compliance with applicable federal and state securities laws and each Fund (whether or not it otherwise permits cash redemptions) reserves the right to redeem Creation Units for cash to the extent that the Trust could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Fund Securities under such laws. An Authorized Participant or an investor for which it is acting subject to a legal restriction with respect to a particular security included in the Fund Securities applicable to the redemption of Creation Units may be paid an equivalent amount of cash. The Authorized Participant may request the redeeming investor of the Shares to complete an order form or to enter into agreements with respect to such matters as compensating cash payment. Further, an Authorized Participant that is not a qualified institutional buyer, (QIB) as such term is defined under Rule 144A of the Securities Act, will not be able to receive Fund Securities that are restricted securities eligible for resale under Rule 144A. An Authorized Participant may be required by the Trust to provide a written confirmation with respect to QIB status in order to receive Fund Securities.
The right of redemption may be suspended or the date of payment postponed with respect to a Fund (1) for any period during which the Exchange is closed (other than customary weekend and holiday closings); (2) for any period during which trading on the Exchange is suspended or restricted; (3) for any period during which an emergency exists as a result of which disposal of the Shares of the Fund or determination of the NAV of the Shares is not reasonably practicable; or (4) in such other circumstance as is permitted by the SEC.
REQUIRED EARLY ACCEPTANCE OF ORDERS FOR CERTAIN INTERNATIONAL FUNDS. Notwithstanding the foregoing, as described in the Participant Agreement and the applicable order form, certain Funds may require orders to be placed up to one or more Business Days prior to the trade date, as described in the Participant Agreement or the applicable order form, in order to receive the trade dates net asset value. Orders to purchase Shares of such Funds that are submitted on the Business Day immediately preceding a holiday or a day (other than a weekend) that the equity markets in the relevant foreign market are closed may not be accepted. Authorized Participants may be notified that the cut-off time for an order may be earlier on a particular Business Day, as described in the Participant Agreement and the applicable order form.
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CREATION AND REDEMPTION TRANSACTION FEES. A transaction fee, as set forth in the table below, is imposed for the transfer and other transaction costs associated with the purchase or redemption of Creation Units, as applicable. Authorized Participants will be required to pay a fixed creation transaction fee and/or a fixed redemption transaction fee, as applicable, on a given day regardless of the number of Creation Units created or redeemed on that day. A Fund may adjust the transaction fee from time to time. An additional charge or a variable charge (discussed below) will be applied to certain creation and redemption transactions, including non-standard orders and whole or partial cash purchases or redemptions. With respect to creation orders, Authorized Participants are responsible for the costs of transferring the securities constituting the Deposit Securities to the account of the Trust and with respect to redemption orders, Authorized Participants are responsible for the costs of transferring the Fund Securities from the Trust to their account or on their order. Investors who use the services of a broker or other such intermediary may also be charged a fee for such services.
Creation and Redemption Transaction Fees:
FUND |
TRANSACTION
FEE*, ** |
MAXIMUM
TRANSACTION FEE*, ** |
||||||
SPDR Russell 3000 ETF |
$ | 2,500 | $ | 10,000 | ||||
SPDR Russell 1000 ETF |
$ | 2,000 | $ | 8,000 | ||||
SPDR Russell 2000 ETF |
$ | 2,500 | $ | 10,000 | ||||
SPDR S&P 500 Buyback ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P 500 High Dividend ETF |
$ | 250 | $ | 750 | ||||
SPDR S&P 500 Large Cap Growth ETF |
$ | 1,000 | $ | 4,000 | ||||
SPDR S&P 500 Large Cap Value ETF |
$ | 1,000 | $ | 4,000 | ||||
SPDR Russell Small Cap Completeness ETF |
$ | 2,000 | $ | 8,000 | ||||
SPDR S&P 400 Mid Cap Growth ETF |
$ | 1,000 | $ | 4,000 | ||||
SPDR S&P 400 Mid Cap Value ETF |
$ | 1,000 | $ | 4,000 | ||||
SPDR S&P 600 Small Cap ETF |
$ | 3,000 | $ | 12,000 | ||||
SPDR S&P 600 Small Cap Growth ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR S&P 600 Small Cap Value ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Global Dow ETF |
$ | 1,000 | $ | 4,000 | ||||
SPDR Dow Jones REIT ETF |
$ | 1,000 | $ | 4,000 | ||||
SPDR S&P Bank ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Capital Markets ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Insurance ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Mortgage Finance ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Regional Banking ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Morgan Stanley Technology ETF |
$ | 500 | $ | 2,000 | ||||
SPDR S&P Dividend ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Aerospace & Defense ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Biotech ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Health Care Equipment ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Building & Construction ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Computer Hardware ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Food & Beverage ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Health Care Services ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Homebuilders ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P LeisureTime ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Metals & Mining ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Oil & Gas Equipment & Services ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Oil & Gas Exploration & Production ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Outsourcing and IT Consulting ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Pharmaceuticals ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Retail ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Semiconductor ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Software & Services ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Telecom ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Transportation ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P 1500 Value Tilt ETF |
$ | 3,000 | $ | 12,000 | ||||
SPDR S&P 1500 Momentum Tilt ETF |
$ | 3,000 | $ | 12,000 | ||||
SPDR S&P 1500 Volatility Tilt ETF |
$ | 3,000 | $ | 12,000 |
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FUND |
TRANSACTION
FEE*, ** |
MAXIMUM
TRANSACTION FEE*, ** |
||||||
SPDR Russell 1000 Low Volatility ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Russell 2000 Low Volatility ETF |
$ | 300 | $ | 1,200 | ||||
SPDR Wells Fargo Preferred Stock ETF |
$ | 750 | $ | 3,000 | ||||
SPDR MSCI USA Quality Mix ETF |
$ | 1,500 | $ | 4,500 | ||||
SPDR Barclays 1-3 Month T-Bill ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Barclays TIPS ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays 0-5 Year TIPS ETF |
$ | 50 | $ | 150 | ||||
SPDR Barclays 1-10 Year TIPS ETF |
$ | 50 | $ | 200 | ||||
SPDR Barclays Short Term Treasury ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays Intermediate Term Treasury ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays Long Term Treasury ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays Short Term Corporate Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays Intermediate Term Corporate Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays Long Term Corporate Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays Issuer Scored Corporate Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays Convertible Securities ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays Mortgage Backed Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Barclays Aggregate Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Nuveen Barclays Municipal Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Nuveen Barclays California Municipal Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Nuveen Barclays New York Municipal Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Nuveen Barclays Short Term Municipal Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Nuveen S&P VRDO Municipal Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Nuveen Barclays Build America Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR DB International Government Inflation-Protected Bond ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Barclays Short Term International Treasury Bond ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Barclays International Treasury Bond ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Barclays International Corporate Bond ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Barclays Emerging Markets Local Bond ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Barclays High Yield Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays International High Yield Bond ETF |
$ | 1,500 | $ | 4,500 | ||||
SPDR Barclays Short Term High Yield Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Barclays Investment Grade Floating Rate ETF |
$ | 200 | $ | 800 | ||||
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
$ | 200 | $ | 800 | ||||
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
$ | 250 | $ | 1,000 |
* | From time to time, a Fund may waive all or a portion of its applicable transaction fee(s). An additional charge of up to three (3) times the standard transaction fee may be charged to the extent a transaction is outside of the clearing process. |
** | In addition to the transaction fees listed above, the Funds may charge an additional variable fee for creations and redemptions in cash to offset brokerage and impact expenses associated with the cash transaction. The variable transaction fee will be calculated based on historical transaction cost data and the Advisers view of current market conditions; however, the actual variable fee charged for a given transaction may be lower or higher than the trading expenses incurred by a Fund with respect to that transaction. |
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DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction with the sections in the applicable Prospectus entitled PURCHASE AND SALE INFORMATION and ADDITIONAL PURCHASE AND SALE INFORMATION.
Net asset value per Share for each Fund is computed by dividing the value of the net assets of the Fund (i.e., the value of its total assets less total liabilities) by the total number of Shares outstanding. Expenses and fees, including the management fees, are accrued daily and taken into account for purposes of determining net asset value. The net asset value of a Fund is calculated by State Street and determined as of the close of the regular trading session on the NYSE (ordinarily 4:00 p.m. Eastern time) on each day that such exchange is open. Fixed-income assets are generally valued as of the announced closing time for trading in fixed-income instruments in a particular market or exchange. Creation/redemption order cut-off times may be earlier on any day that the Securities Industry and Financial Markets Association (or applicable exchange or market on which a Funds investments are traded) announces an early closing time. Any assets or liabilities denominated in currencies other than the U.S. dollar are converted into U.S. dollars at market rates on the date of valuation (generally as of 4:00 p.m. London time) as quoted by one or more sources.
In calculating a Funds net asset value per Share, the Funds investments are generally valued using market valuations. A market valuation generally means a valuation (i) obtained from an exchange, a pricing service, or a major market maker (or dealer), (ii) based on a price quotation or other equivalent indication of value supplied by an exchange, a pricing service, or a major market maker (or dealer) or (iii) based on amortized cost. A Fund relies on a third-party service provider for assistance with the daily calculation of the Funds NAV. The third-party service provider, in turn, relies on other parties for certain pricing data and other inputs used in the calculation of the Funds NAV. Therefore, a Fund is subject to certain operational risks associated with reliance on its service provider and that service providers sources of pricing and other data. NAV calculation may be adversely affected by operational risks arising from factors such as errors or failures in systems and technology. Such errors or failures may result in inaccurately calculated NAVs, delays in the calculation of NAVs and/or the inability to calculate NAV over extended time periods. A Fund may be unable to recover any losses associated with such failures. In the case of shares of other funds that are not traded on an exchange, a market valuation means such funds published net asset value per share. The Adviser may use various pricing services, or discontinue the use of any pricing service, as approved by the Board from time to time. A price obtained from a pricing service based on such pricing services valuation matrix may be considered a market valuation.
In the event that current market valuations are not readily available or are deemed unreliable, the Trusts procedures require the Oversight Committee to determine a securitys fair value if a market price is not readily available. In determining such value the Oversight Committee may consider, among other things, (i) price comparisons among multiple sources, (ii) a review of corporate actions and news events, and (iii) a review of relevant financial indicators ( e.g. , movement in interest rates, market indices, and prices from each Funds Index Provider). In these cases, the Funds net asset value may reflect certain portfolio securities fair values rather than their market prices. The fair value of a portfolio instrument is generally the price which a Fund might reasonably expect to receive upon its current sale in an orderly market between market participants. Ascertaining fair value requires a determination of the amount that an arms-length buyer, under the circumstances, would currently pay for the portfolio instrument. Fair value pricing involves subjective judgments and it is possible that the fair value determination for a security is materially different than the value that could be realized upon the sale of the security. In addition, fair value pricing could result in a difference between the prices used to calculate a Funds net asset value and the prices used by the Funds benchmark Index. This may result in a difference between the Funds performance and the performance of the applicable Funds benchmark Index. With respect to securities that are primarily listed on foreign exchanges, the value of a Funds portfolio securities may change on days when you will not be able to purchase or sell your Shares.
The following information supplements and should be read in conjunction with the section in each Prospectus entitled DISTRIBUTIONS.
GENERAL POLICIES
Dividends from net investment income, if any, are generally declared and paid monthly by each Fixed Income ETF and quarterly for each Equity ETF, but may vary significantly from period to period. Distributions of net realized securities gains, if any, generally are declared and paid once a year, but the Trust may make distributions on a more frequent basis for a Fund to improve index tracking or to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the 1940 Act.
Dividends and other distributions on Shares are distributed, as described below, on a pro rata basis to Beneficial Owners of such Shares. Dividend payments are made through DTC Participants and Indirect Participants to Beneficial Owners then of record with proceeds received from the Trust.
Management of the Trust reserves the right to declare special dividends if, in its reasonable discretion, such action is necessary or advisable to preserve a Funds eligibility for treatment as a regulated investment company (RIC) under the Internal Revenue Code or to avoid imposition of income or excise taxes at the Fund level.
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DIVIDEND REINVESTMENT
Broker dealers, at their own discretion, may offer a dividend reinvestment service under which Shares are purchased in the secondary market at current market prices. Investors should consult their broker dealer for further information regarding any dividend reinvestment service offered by such broker dealer.
The following is a summary of certain federal income tax considerations generally affecting the Funds and their shareholders that supplements the discussions in the Prospectuses. No attempt is made to present a comprehensive explanation of the federal, state, local or foreign tax treatment of the Funds or their shareholders, and the discussion here and in each Prospectus is not intended to be a substitute for careful tax planning.
The following general discussion of certain federal income tax consequences is based on the Internal Revenue Code and the regulations issued thereunder as in effect on the date of this SAI. New legislation, as well as administrative changes or court decisions, may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein.
The following information should be read in conjunction with the section in the Prospectuses entitled ADDITIONAL TAX INFORMATION.
TAXATION OF THE FUNDS. Each Fund is treated as a separate corporation for federal income tax purposes. A Fund therefore is considered to be a separate entity in determining its treatment under the rules for RICs described herein and in the Prospectuses. Losses in one series of the Trust do not offset gains in any other series of the Trust and the requirements (other than certain organizational requirements) for qualifying for treatment as a RIC are determined at the Fund level rather than at the Trust level. Each Fund has elected or will elect and intends to qualify each year to be treated as a separate RIC under Subchapter M of the Internal Revenue Code. As such, each Fund should not be subject to federal income tax on its net investment income and capital gains, if any, to the extent that it timely distributes such income and capital gains to its shareholders. In order to qualify for treatment as a RIC, a Fund must distribute annually to its shareholders at least the sum of 90% of its taxable net investment income (generally including the excess of net short-term capital gains over net long-term capital losses) and 90% of its net tax exempt interest income, if any (the Distribution Requirement) and also must meet several additional requirements. Among these requirements are the following: (i) at least 90% of the Funds gross income each taxable year must be derived from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities or currencies, and net income derived from interests in qualified publicly traded partnerships (the Qualifying Income Requirement); and (ii) at the end of each quarter of the Funds taxable year, its assets must be diversified so that (a) at least 50% of the market value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities, with such other securities limited, in respect to any one issuer, to an amount not greater in value than 5% of the value of the Funds total assets and to not more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of its total assets is invested in the securities (other than U.S. government securities or securities of other RICs) of any one issuer, the securities (other than securities of other RICs) of two or more issuers that it controls and that are engaged in the same, similar, or related trades or businesses, or the securities of one or more qualified publicly traded partnerships (the Diversification Requirement).
If a Fund fails to satisfy the Qualifying Income Requirement or the Diversification Requirement in any taxable year, the Fund may be eligible for relief provisions if the failures are due to reasonable cause and not willful neglect and if a penalty tax is paid with respect to each failure to satisfy the applicable requirements. Additionally, relief is provided for certain de minimis failures of the Diversification Requirement where the Fund corrects the failure within a specified period of time. In order to be eligible for the relief provisions with respect to a failure to meet the Diversification Requirement, a Fund may be required to dispose of certain assets. If these relief provisions were not available to a Fund and it were to fail to qualify for treatment as a RIC for a taxable year, all of its taxable income would be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and its distributions (including capital gains distributions) generally would be taxable as ordinary income dividends to its shareholders, subject to the dividends-received deduction for corporate shareholders and the lower tax rates on qualified dividend income received by noncorporate shareholders. To requalify for treatment as a RIC in a subsequent taxable year, the Fund would be required to satisfy the RIC qualification requirements for that year and to distribute any earnings and profits from any year in which the Fund failed to qualify for tax treatment as a RIC. If a Fund failed to qualify as a RIC for a period greater than two taxable years, it would generally be required to pay a Fund-level tax on certain net built-in gains recognized with respect to certain of its assets upon a disposition of such assets within ten years of qualifying as a RIC in a subsequent year. The Board reserves the right not to maintain the qualification of a Fund for treatment as a RIC if it determines such course of action to be beneficial to shareholders.
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If a Fund meets the Distribution Requirement but retains some or all of its income or gains, it will be subject to federal income tax to the extent any such income or gains are not distributed. A Fund may designate certain amounts retained as undistributed net capital gain in a notice to its shareholders, who (i) will be required to include in income for U.S. federal income tax purposes, as long-term capital gain, their proportionate shares of the undistributed amount so designated, (ii) will be entitled to credit their proportionate shares of the income tax paid by the Fund on that undistributed amount against their federal income tax liabilities and to claim refunds to the extent such credits exceed their liabilities and (iii) will be entitled to increase their tax basis, for federal income tax purposes, in their Shares by an amount equal to the excess of the amount of undistributed net capital gain included in their respective income over their respective income tax credits. If a Fund failed to satisfy the Distribution Requirement for any taxable year, it would be taxed as a regular corporation, with consequences generally similar to those described in the preceding paragraph.
Given the concentration of certain of the Indexes in a relatively small number of securities, it may not be possible for certain Funds to fully implement sampling methodologies while satisfying the Diversification Requirement. A Funds efforts to satisfy the Diversification Requirement may affect the Funds execution of its investment strategy and may cause the Funds return to deviate from that of the applicable Index, and the Funds efforts to track the applicable Index may cause it inadvertently to fail to satisfy the Diversification Requirement.
A Fund will be subject to a 4% excise tax on certain undistributed income if it does not distribute to its shareholders in each calendar year an amount at least equal to 98% of its ordinary income for the calendar year plus 98.2% of its capital gain net income for the twelve months ended October 31 of such year, subject to an increase for any shortfall in the prior years distribution. Each Fund intends to declare and distribute dividends and distributions in the amounts and at the times necessary to avoid the application of this 4% excise tax.
A Fund may elect to treat part or all of any qualified late year loss as if it had been incurred in the succeeding taxable year in determining the Funds taxable income, net capital gain, net short-term capital gain, and earnings and profits. The effect of this election is to treat any such qualified late year loss as if it had been incurred in the succeeding taxable year in characterizing Fund distributions for any calendar year. A qualified late year loss generally includes net capital loss, net long-term capital loss, or net short-term capital loss incurred after October 31 of the current taxable year (commonly referred to as post-October losses) and certain other late-year losses.
Capital losses in excess of capital gains (net capital losses) are not permitted to be deducted against a RICs net investment income. Instead, for U.S. federal income tax purposes, potentially subject to certain limitations, a Fund may carry a net capital loss from any taxable year forward to offset its capital gains in future years. A Fund is permitted to carry forward a net capital loss to offset its capital gains, if any, in years following the year of the loss. A Fund is permitted to carryforward indefinitely a net capital loss form any taxable year that began after December 22, 2010. A Fund is permitted to carry forward a net capital loss from any taxable year that began on or before December 22, 2010 to offset its capital gains, if any, for up to eight years following the year of the loss. A Funds carryforwards of losses from taxable years that began after December 22, 2010 must be fully utilized before the Fund may utilize carryforwards of losses from taxable years that began on or before December 22, 2010. To the extent subsequent capital gains are offset by such losses, they will not result in U.S. federal income tax liability to the Fund and may not be distributed as capital gains to its shareholders. Generally, the Funds may not carry forward any losses other than net capital losses.
TAXATION OF SHAREHOLDERSDISTRIBUTIONS. Each Fund intends to distribute annually to its shareholders substantially all of its investment company taxable income (computed without regard to the deduction for dividends paid), its net tax-exempt income, if any, and any net capital gain (net recognized long-term capital gains in excess of net recognized short-term capital losses, taking into account any capital loss carryforwards). Each Fund will report to shareholders annually the amounts of dividends paid from ordinary income, the amount of distributions of net capital gain, the portion of dividends which may qualify for the dividends-received deduction, the portion of dividends which may qualify for treatment as qualified dividend income, and the amount of exempt-interest dividends, if any.
Subject to certain limitations, dividends reported by a Fund as qualified dividend income will be taxable to noncorporate shareholders at rates of up to 20%. Dividends may be reported by a Fund as qualified dividend income if they are attributable to qualified dividend income received by the Fund. Qualified dividend income includes, in general, subject to certain holding period requirements and other requirements, dividend income from certain U.S. and foreign corporations. Subject to certain limitations, eligible foreign corporations include those incorporated in possessions of the United States, those incorporated in certain countries with comprehensive tax treaties with the United States and other foreign corporations if the stock with respect to which the dividends are paid is tradable on an established securities market in the United States. A dividend generally will not be treated as qualified dividend income to the extent that (i) the shareholder has not held the stock on which the dividend was paid for more than 60 days during the 121-day period that begins on the date that is 60 days before the date on which the stock becomes ex-dividend with respect to such dividend or, in the case of certain preferred stock, for more than 90 days during the 181-day period beginning 90 days before such date, (ii) the shareholder is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to substantially similar or related property, or (iii) the shareholder elects to treat such dividend as investment income under section 163(d)(4)(B) of the Internal Revenue Code. The holding period requirements described in this paragraph apply to shareholders investments in the Funds and to the Funds investments in underlying dividend-paying stocks. Dividends received by a Fund from a REIT or another RIC may be
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treated as qualified dividend income generally only to the extent the dividend distributions are attributable to qualified dividend income received by such REIT or RIC. It is expected that dividends received by a Fund from a REIT and distributed by that Fund to a shareholder generally will be taxable to the shareholder as ordinary income. If 95% or more of a Funds gross income (calculated without taking into account net capital gain derived from sales or other dispositions of stock or securities) consists of qualified dividend income, that Fund may report all distributions of such income as qualified dividend income.
Certain dividends received by a Fund from U.S. corporations (generally, dividends received in respect of any share of stock (1) with a tax holding period of at least 46 days during the 91-day period beginning on the date that is 45 days before the date on which the stock becomes ex-dividend as to that dividend and (2) that is held in an unleveraged position) when distributed and appropriately so reported by the Fund may be eligible for the 70% dividends-received deduction generally available to corporations under the Internal Revenue Code. In order to qualify for the deduction, corporate shareholders must meet the minimum holding period requirement stated above with respect to their Shares, taking into account any holding period reductions from certain hedging or other transactions or positions that diminish their risk of loss with respect to their Shares, and, if they borrow to acquire or otherwise incur debt attributable to Shares, they may be denied a portion of the dividends-received deduction with respect to those Shares. The entire dividend, including the otherwise deductible amount, will be included in determining the excess, if any, of a corporations adjusted current earnings over its alternative minimum taxable income, which may increase a corporations alternative minimum tax liability. Any corporate shareholder should consult its tax adviser regarding the possibility that its tax basis in its Shares may be reduced, for U.S. federal income tax purposes, by reason of extraordinary dividends received with respect to the Shares and, to the extent such basis would be reduced below zero, current recognition of income may be required.
Distributions from a Funds net short-term capital gains will generally be taxable to shareholders as ordinary income. Distributions from a Funds net capital gain will be taxable to shareholders at long-term capital gains rates, regardless of how long shareholders have held their Shares. Long-term capital gains are generally taxed to noncorporate shareholders at rates of up to 20%.
The Municipal Bond ETFs intend to satisfy certain conditions (including requirements as to the proportion of their assets invested in municipal securities) that will enable them to report distributions from the interest income generated by their investments in municipal securities as exempt-interest dividends. Shareholders receiving exempt-interest dividends will not be subject to regular federal income tax on the amount of such dividends, but (as discussed below) exempt-interest dividends may be taken into account in determining shareholders liability under the federal alternative minimum tax. Insurance proceeds received by the Fund under any insurance policies in respect of scheduled interest payments on defaulted municipal securities will generally be correspondingly excludable from federal gross income. In the case of non-appropriation by a political subdivision, however, there can be no assurance that payments made by the insurer representing interest on non-appropriation lease obligations will be excludable from gross income for federal income tax purposes.
Exempt-interest dividends paid by the Municipal Bond ETFs and attributable to interest earned on municipal securities issued by a state or its political subdivisions are generally exempt in the hands of a shareholder from income tax imposed by that state, but exempt-interest dividends attributable to interest on municipal securities issued by another state generally will not be exempt from such income tax. For a general discussion of the state and local tax treatment to shareholders of the SPDR Nuveen Barclays California Municipal Bond ETF and SPDR Nuveen Barclays New York Municipal Bond ETF, see the section titled State Tax Matters below.
Distributions by the Municipal Bond ETFs of net interest received from certain taxable temporary investments (such as certificates of deposit, commercial paper and obligations of the U.S. Government, its agencies and instrumentalities) and net short-term capital gains realized by a Municipal Bond ETF, if any, will be taxable to shareholders as ordinary income. If a Municipal Bond ETF purchases a municipal security at a market discount, any gain realized by the Municipal Bond ETF upon sale or redemption of the municipal security will be treated as taxable interest income to the extent of the market discount, and any gain realized in excess of the market discount will be treated as capital gains.
If you lend your Shares in a Municipal Bond ETF pursuant to a securities lending or similar arrangement, you may lose the ability to treat dividends paid by the Municipal Bond ETF while the Shares are held by the borrower as tax-exempt income. Interest on indebtedness incurred by a shareholder to purchase or carry Shares of the Municipal Bond ETFs will not be deductible for U.S. federal income tax purposes. If a shareholder receives exempt-interest dividends with respect to any share of a Municipal Bond ETF and if the share is held by the shareholder for six months or less, then any loss on the sale or exchange of the share may, to the extent of the exempt-interest dividends, be disallowed. In addition, the Internal Revenue Code may require a shareholder in a Municipal Bond ETF that receives exempt-interest dividends to treat as taxable income a portion of certain otherwise non-taxable social security and railroad retirement benefit payments. Furthermore, a portion of any exempt-interest dividend paid by a Municipal Bond ETF that represents income derived from certain revenue or private activity bonds held by a Municipal Bond ETF may not retain its tax-exempt status in the hands of a shareholder who is a substantial user of a facility financed by such bonds, or a related person thereof. Shareholders should consult their own tax advisers as to whether they are substantial users with respect to a facility or related to such users within the meaning of the Internal Revenue Code.
Federal tax law imposes an alternative minimum tax with respect to both corporations and individuals. Interest on certain municipal securities that meet the definition of private activity bonds under the Internal Revenue Code is included as an item of tax preference in determining the amount of a taxpayers alternative minimum taxable income. To the extent that a Municipal Bond ETF receives
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income from private activity bonds, a portion of the dividends paid by it, although otherwise exempt from federal income tax, will be taxable to those shareholders subject to the alternative minimum tax regime. The Municipal Bond ETFs will annually supply shareholders with a report indicating the percentage of their income attributable to municipal securities required to be included in calculating the federal alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is increased by 75% of the difference between an alternative measure of income (adjusted current earnings) and the amount otherwise determined to be the alternative minimum taxable income. All exempt-interest dividends distributed by the Municipal Bond ETFs are included in calculating a corporations adjusted current earnings.
A Fund may invest in certain bonds that generate federal income tax credits. If a Fund invests in tax credit bonds, including certain so-called Build America Bonds, it may make an election to pass the credits through to its shareholders. If a Fund makes such an election for a taxable year, it will not be allowed any credits on those bonds for that taxable year. Instead, the Fund will include in its gross income, as interest income, an amount equal to the amount that the Fund would have included in gross income relating to the credits if the election had not been made (generally, the amount of the credits) and will increase its dividends-paid deduction by the same amount. Each shareholder of a Fund making such an election will be required to include in gross income the shareholders proportionate share of the interest income attributable to the credits and will be allowed as a credit (subject to applicable limitations) the shareholders proportionate share of the credits, in each case not to exceed the amounts thereof reported by the Fund in a year-end statement. If a Fund makes such an election, it will inform its shareholders concerning their allocable shares of any tax credits passed through as part of its annual reporting. For state income tax purposes, interest income from Build America Bonds will generally be treated the same as if the interest was from any other tax exempt obligation issued by a state or local government. A state may, however, decide to provide for different tax treatment for Build America Bonds. A Fund may invest in Build America Bonds from a number of different states and, in such case, it will annually provide information regarding the percentage of its income earned in each state. Depending on each states tax laws, this information may be used in determining the dividend amount that may be exempt from your state and/or local income taxes. You should be aware that some states require a minimum percentage of home state bonds to permit the state tax exemption. Consult your tax advisor to determine whether such interest is exempt from applicable state and/or local taxes.
Although dividends generally will be treated as distributed when paid, any dividend declared by a Fund in October, November or December and payable to shareholders of record in such a month that is paid during the following January will be treated for U.S. federal income tax purposes as received by shareholders on December 31 of the calendar year in which it was declared.
If a Funds distributions exceed its earnings and profits, all or a portion of the distributions made in the taxable year may be treated as a return of capital to shareholders. A return of capital distribution generally will not be taxable but will reduce the shareholders cost basis and result in a higher capital gain or lower capital loss when the Shares on which the distribution was received are sold. After a shareholders basis in the Shares has been reduced to zero, distributions in excess of earnings and profits will be treated as gain from the sale of the shareholders Shares.
Distributions that are reinvested in additional Shares of a Fund through the means of a dividend reinvestment service, if offered by your broker-dealer, will nevertheless be taxable dividends to the same extent as if such dividends had been received in cash.
A 3.8% Medicare contribution tax generally applies to all or a portion of the net investment income of a shareholder who is an individual and not a nonresident alien for federal income tax purposes and who has adjusted gross income (subject to certain adjustments) that exceeds a threshold amount ($250,000 if married filing jointly or if considered a surviving spouse for federal income tax purposes, $125,000 if married filing separately, and $200,000 in other cases). This 3.8% tax also applies to all or a portion of the undistributed net investment income of certain shareholders that are estates and trusts. For these purposes, interest, dividends and certain capital gains (generally including capital gain distributions and capital gains realized on the sale of Shares) are generally taken into account in computing a shareholders net investment income, but exempt-interest dividends generally are not taken into account. Distributions of ordinary income and capital gains may also be subject to foreign, state and local taxes depending on a shareholders circumstances.
TAXATION OF SHAREHOLDERSSALE OF SHARES. In general, a sale of Shares results in capital gain or loss, and for individual shareholders, is taxable at a federal rate dependent upon the length of time the Shares were held. A sale of Shares held for a period of one year or less at the time of such sale will, for tax purposes, generally result in short-term capital gains or losses, and a sale of those held for more than one year will generally result in long-term capital gains or losses. Long-term capital gains are generally taxed to non-corporate shareholders at rates of up to 20%.
Gain or loss on the sale of Shares is measured by the difference between the amount received and the adjusted tax basis of the Shares. Shareholders should keep records of investments made (including Shares acquired through reinvestment of dividends and distributions) so they can compute the tax basis of their Shares. It may not be advantageous from a tax perspective for shareholders to sell or redeem Shares of a Municipal Bond ETF after tax-exempt income has accrued but before the record date for the exempt-interest dividend representing the distribution of such income. Because such accrued tax-exempt income is included in the net asset value per share, such a sale or redemption could result in treatment of the portion of the sales or redemption proceeds equal to the accrued tax-exempt interest as taxable gain (to the extent the sale or redemption price exceeds the shareholders tax basis in the Municipal Bond ETF Shares disposed of) rather than tax-exempt interest.
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A loss realized on a sale of Shares may be disallowed if substantially identical Shares are acquired (whether through the reinvestment of dividends or otherwise) within a sixty-one (61) day period beginning thirty (30) days before and ending thirty (30) days after the date that the Shares are disposed of. In such a case, the basis of the Shares acquired must be adjusted to reflect the disallowed loss. Any loss upon the sale of Shares held for six (6) months or less will be disallowed to the extent of exempt-interest dividends paid on such Shares, and any amount of the loss that exceeds the amount disallowed will be treated as long-term capital loss to the extent of any amounts treated as distributions to the shareholder of long-term capital gain (including any amounts credited to the shareholder as undistributed capital gains).
COST BASIS REPORTING. The cost basis of Shares acquired by purchase will generally be based on the amount paid for the Shares and then may be subsequently adjusted for other applicable transactions as required by the Internal Revenue Code. The difference between the selling price and the cost basis of Shares generally determines the amount of the capital gain or loss realized on the sale or exchange of Shares. Contact the broker through whom you purchased your Shares to obtain information with respect to the available cost basis reporting methods and elections for your account.
TAXATION OF FUND INVESTMENTS. Dividends and interest received by a Fund on foreign securities may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. If a Fund meets certain requirements, which include a requirement that more than 50% of the value of the Funds total assets at the close of its respective taxable year consist of certain foreign securities (generally including foreign government securities), then the Fund should be eligible to file an election with the IRS that may enable its shareholders, in effect, to receive either the benefit of a foreign tax credit, or a tax deduction, with respect to certain foreign and U.S. possessions income taxes paid by the Fund, subject to certain limitations. If at least 50% of a Funds total assets at the close of each quarter of a taxable year consists of interests in other RICs (including money market funds and ETFs that are taxable as RICs), the Fund may make the same election and pass through to its shareholders their pro rata shares of qualified foreign taxes paid by those other RICs and passed through to the Fund for that taxable year. Pursuant to this election, a Fund would treat the applicable foreign taxes as dividends paid to its shareholders. Each such shareholder would be required to include a proportionate share of those taxes in gross income as income received from a foreign source and must treat the amount so included as if the shareholder had paid the foreign tax directly. The shareholder may then either deduct the taxes deemed paid by him or her in computing his or her taxable income or, alternatively, use the foregoing information in calculating any foreign tax credit the shareholder may be entitled to use against such shareholders federal income tax. If a Fund makes this election, the Fund will report annually to its shareholders the respective amounts per share of the Funds income from sources within, and taxes paid to, foreign countries and U.S. possessions. No deduction for such taxes will be permitted to individuals in computing their alternative minimum tax liability. If a Fund does not make this election, the Fund will be entitled to claim a deduction for certain foreign taxes incurred by the Fund.
Certain of the Funds investments may be subject to complex provisions of the Internal Revenue Code (including provisions relating to hedging transactions, straddles, integrated transactions, foreign currency contracts, forward foreign currency contracts, and notional principal contracts) that, among other things, could affect the character of gains and losses realized by the Funds (e.g., may affect whether gains or losses are ordinary or capital), accelerate recognition of income to the Fund and defer losses. These rules could therefore affect the character, amount and timing of distributions to shareholders. These provisions also may require a Fund to mark-to-market certain types of positions in its portfolio (i.e., treat them as if they were closed out) which may cause the Fund to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the RIC distribution requirements for avoiding income and excise taxes. The Funds intend to monitor their transactions, intend to make appropriate tax elections, and intend to make appropriate entries in their books and records in order to mitigate the effect of these rules and preserve the Funds qualification for treatment as RICs.
If a Fund acquires any equity interest (under Treasury regulations that may be promulgated in the future, generally including not only stock but also an option to acquire stock such as is inherent in a convertible bond) in certain foreign corporations (i) that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, certain rents and royalties, or capital gains) or (ii) where at least 50% of the corporations assets (computed based on average fair market value) either produce or are held for the production of passive income (passive foreign investment companies or PFICs), the Fund could be subject to U.S. federal income tax and nondeductible interest charges on excess distributions received from such companies or on gain from the sale of stock in such companies, even if all income or gain actually received by the Fund is timely distributed to its shareholders. The Fund would not be able to pass through to its shareholders any credit or deduction for such a tax. A qualified electing fund election or a mark to market election may be available that would ameliorate these adverse tax consequences, but such elections could require the applicable Fund to recognize taxable income or gain (subject to the distribution requirements applicable to RICs, as described above) without the concurrent receipt of cash. In order to satisfy the distribution requirements and avoid a tax at the Fund level, a Fund may be required to liquidate portfolio securities that it might otherwise have continued to hold, potentially resulting in additional taxable gain or loss to the Fund. Gains from the sale of stock of PFICs may also be treated as ordinary income. In order for a Fund to make a qualified electing fund election with respect to a PFIC, the PFIC would have to agree to provide certain tax information to the Fund on an annual basis, which it might not agree to do. The Funds may limit and/or manage their holdings in PFICs to limit their tax liability or maximize their returns from these investments.
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Each Fund is required for federal income tax purposes to mark-to-market and recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. Gain or loss from futures and options contracts on broad-based indexes required to be marked to market will be 60% long-term and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders. A Fund may be required to defer the recognition of losses on futures contracts, options contracts and swaps to the extent of any unrecognized gains on offsetting positions held by the Fund. It is anticipated that certain net gain realized from the closing out of futures or options contracts will be considered gain from the sale of securities and therefore will be qualifying income for purposes of the Qualifying Income Requirement.
Investments by a Fund in zero coupon or other discount securities will result in income to the Fund equal to a portion of the excess face value of the securities over their issue price (the original issue discount or OID) each year that the securities are held, even though the Fund may receive no cash interest payments or may receive cash interest payments that are less than the income recognized for tax purposes. In other circumstances, whether pursuant to the terms of a security or as a result of other factors outside the control of the Fund, a Fund may recognize income without receiving a commensurate amount of cash. Such income is included in determining the amount of income that a Fund must distribute to maintain its eligibility for treatment as a RIC and to avoid the payment of federal income tax, including the nondeductible 4% excise tax described above.
Any market discount recognized on a market discount bond is taxable as ordinary income. A market discount bond is a bond acquired in the secondary market at a price below redemption value, or below adjusted issue price if issued with original issue discount. Absent an election by a Fund to include the market discount in income as it accrues, gain on the Funds disposition of such an obligation will be treated as ordinary income rather than capital gain to the extent of the accrued market discount. If a Municipal Bond ETF purchases a municipal security at a market discount, any gain realized by such Fund upon sale or redemption of the municipal security will be treated as taxable interest income to the extent of the market discount, and any gain realized in excess of the market discount will be treated as capital gains. Where the income required to be recognized as a result of the OID and/or market discount rules is not matched by a corresponding cash receipt by a Fund, the Fund may be required to borrow money or dispose of securities to enable the Fund to make distributions to its shareholders in order to qualify for treatment as a RIC and eliminate taxes at the Fund level.
Special rules apply if a Fund holds inflation-indexed bonds, such as Treasury Inflation-Protected Securities (TIPS). Generally, all stated interest on inflation-indexed bonds is taken into income by a Fund under its regular method of accounting for interest income. The amount of any positive inflation adjustment for a taxable year, which results from an increase in the inflation-adjusted principal amount of the bond, is treated as OID. The amount of a Funds OID in a taxable year with respect to a bond will increase a Funds taxable income for such year without a corresponding receipt of cash, until the bond matures. As a result, the Fund may need to use other sources of cash to satisfy its distribution requirements for the applicable year. The amount of any negative inflation adjustments, which result from a decrease in the inflation-adjusted principal amount of the bond, first reduces the amount of interest (including stated interest, OID, and market discount, if any) otherwise includable in the Funds taxable income with respect to the bond for the taxable year; any remaining negative adjustments will be either treated as ordinary loss or, in certain circumstances, carried forward to reduce the amount of interest income taken into account with respect to the bond in future taxable years.
TAX-EXEMPT SHAREHOLDERS. Certain tax-exempt shareholders, including qualified pension plans, individual retirement accounts, salary deferral arrangements, 401(k) plans, and other tax-exempt entities, generally are exempt from federal income taxation except with respect to their unrelated business taxable income (UBTI). Under current law, a Fund generally serves to block UBTI from being realized by its tax-exempt shareholders. However, notwithstanding the foregoing, tax-exempt shareholders could realize UBTI by virtue of their investment in a Fund where, for example, (i) the Fund invests in REITs that hold residual interests in real estate mortgage investment conduits (REMICs) or (ii) Shares constitute debt-financed property in the hands of the tax-exempt shareholders within the meaning of section 514(b) of the Internal Revenue Code. Charitable remainder trusts are subject to special rules and should consult their tax advisors. There are no restrictions preventing a Fund from holding investments in REITs that hold residual interests in REMICs, and a Fund may do so. The IRS has issued guidance with respect to these issues and prospective shareholders, especially charitable remainder trusts, are strongly encouraged to consult with their tax advisors regarding these issues.
FOREIGN SHAREHOLDERS. Dividends, other than capital gains dividends and exempt-interest dividends, paid by a Fund to shareholders who are nonresident aliens or foreign entities will be subject to a 30% United States withholding tax unless a reduced rate of withholding or a withholding exemption is provided under applicable treaty law to the extent derived from investment income and short-term capital gain or unless such income is effectively connected with a U.S. trade or business carried on through a permanent establishment in the United States. Nonresident shareholders are urged to consult their own tax advisors concerning the applicability of the United States withholding tax and the proper withholding form(s) to be submitted to a Fund. A non-U.S. shareholder who fails to provide an appropriate IRS Form W-8 may be subject to backup withholding at the appropriate rate.
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Unless certain non-U.S. entities that hold Shares comply with IRS requirements that will generally require them to report information regarding U.S. persons investing in, or holding accounts with, such entities, a 30% withholding tax may apply to Fund distributions (other than exempt-interest dividends) payable to such entities after June 30, 2014 (or, in certain cases, after later dates) and redemptions and certain capital gain dividends payable to such entities after December 31, 2018. A non-U.S. shareholder may be exempt from the withholding described in this paragraph under an applicable intergovernmental agreement between the U.S. and a foreign government, provided that the shareholder and the applicable foreign government comply with the terms of such agreement.
Non-U.S. persons are subject to U.S. tax on disposition of a United States real property interest (a USRPI). Gain on such a disposition is sometimes referred to as FIRPTA gain. The Internal Revenue Code provides a look-through rule for distributions of FIRPTA gain if certain requirements are met. If the look-through rule applies, certain distributions attributable to income received by a Fund from REITs may be treated as gain from the disposition of a USRPI, causing distributions to be subject to U.S. withholding tax at rates of up to 35%, and requiring non-U.S. investors to file nonresident U.S. income tax returns. Also, gain may be subject to a 30% branch profits tax in the hands of a non-U.S. shareholder that is treated as a corporation for federal income tax purposes. Under certain circumstances, a Fund may itself qualify as a USRPI, which would result in similar consequences to certain non-U.S. investors.
BACKUP WITHHOLDING. A Fund will be required in certain cases to withhold (as backup withholding) on amounts (including exempt-interest dividends) payable to any shareholder who (1) has provided the Fund either an incorrect tax identification number or no number at all, (2) is subject to backup withholding by the IRS for failure to properly report payments of interest or dividends, (3) has failed to certify to the Fund that such shareholder is not subject to backup withholding, or (4) has not certified that such shareholder is a U.S. person (including a U.S. resident alien). The backup withholding rate is 28%. Backup withholding will not be applied to payments that have been subject to the 30% withholding tax on shareholders who are neither citizens nor permanent residents of the U.S.
CREATION UNITS. An Authorized Participant who exchanges securities for Creation Units generally will recognize a gain or a loss. The gain or loss will be equal to the difference between the market value of the Creation Units at the time and the sum of the exchangers aggregate basis in the securities surrendered plus the amount of cash paid for such Creation Units. A person who redeems Creation Units will generally recognize a gain or loss equal to the difference between the exchangers basis in the Creation Units and the sum of the aggregate market value of any securities received plus the amount of any cash received for such Creation Units. The IRS, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing wash sales, or on the basis that there has been no significant change in economic position.
Any gain or loss realized upon a creation of Creation Units will be treated as capital gain or loss if the Authorized Participant holds the securities exchanged therefor as capital assets, and otherwise will be ordinary income or loss. Similarly, any gain or loss realized upon a redemption of Creation Units will be treated as capital gain or loss if the Authorized Participant holds the Shares comprising the Creation Units as capital assets, and otherwise will be ordinary income or loss. Any capital gain or loss realized upon the creation of Creation Units will generally be treated as long-term capital gain or loss if the securities exchanged for such Creation Units have been held for more than one year, and otherwise will be short-term capital gain or loss. Any capital gain or loss realized upon the redemption of Creation Units will generally be treated as long-term capital gain or loss if the Shares comprising the Creation Units have been held for more than one year, and otherwise,will generally be short-term capital gain or loss. Any capital loss realized upon a redemption of Creation Units held for six (6) months or less will be disallowed to the extent of exempt-interest dividends paid with respect to the Creation Units, and to the extent not disallowed will be treated as a long-term capital loss to the extent of any amounts treated as distributions to the applicable Authorized Participant of long-term capital gains with respect to the Creation Units (including any amounts credited to the Authorized Participant as undistributed capital gains).
A Fund has the right to reject an order for Creation Units if the purchaser (or a group of purchasers) would, upon obtaining the Shares so ordered, own 80% or more of the outstanding shares of the Fund and if, pursuant to section 351 of the Internal Revenue Code, the Fund would have a basis in any deposit securities different from the market value of such securities on the date of deposit. A Fund also has the right to require information necessary to determine beneficial Share ownership for purposes of the 80% determination. If a Fund does issue Creation Units to a purchaser (or a group of purchasers) that would, upon obtaining the Shares so ordered, own 80% or more of the outstanding shares of the Fund, the purchaser (or a group of purchasers) may not recognize gain or loss upon the exchange of securities for Creation Units.
Persons purchasing or redeeming Creation Units should consult their own tax advisors with respect to the tax treatment of any creation or redemption transaction.
CERTAIN POTENTIAL TAX REPORTING REQUIREMENTS. Under promulgated Treasury regulations, if a shareholder recognizes a loss on disposition of a Funds shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder (or certain greater amounts over a combination of years), the shareholder must file with the IRS a disclosure statement on IRS Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC are not excepted. A shareholder who fails to make the required disclosure to the IRS
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may be subject to adverse tax consequences, including significant penalties. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayers treatment of the loss is proper. Shareholders should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.
The foregoing discussion is a summary only and is not intended as a substitute for careful tax planning. Purchasers of Shares should consult their own tax advisors as to the tax consequences of investing in such Shares, including under state, local and other tax laws. Finally, the foregoing discussion is based on applicable provisions of the Internal Revenue Code, regulations, judicial authority and administrative interpretations in effect on the date hereof. Changes in applicable authority could materially affect the conclusions discussed above, and such changes often occur.
STATE TAX MATTERS. The discussion of state and local tax treatment is based on the assumptions that the Funds will qualify for treatment under Subchapter M of the Internal Revenue Code as RICs, that they will satisfy the conditions which will cause distributions to qualify as exempt-interest dividends to shareholders when distributed as intended, and that each Fund will distribute all interest and dividends it receives to its shareholders. The tax discussion summarizes general state and local tax laws which are currently in effect and which are subject to change by legislative, judicial or administrative action; any such changes may be retroactive with respect to the applicable Funds transactions. Investors should consult a tax advisor for more detailed information about state and local taxes to which they may be subject.
Many states grant tax-free status to dividends paid to you from interest earned on direct obligations of the U.S. government, subject in some states to minimum investment requirements that must be met by the Fund. Investment in Government National Mortgage Association (Ginnie Mae) or Federal National Mortgage Association (Fannie Mae) securities, bankers acceptances, commercial paper, and repurchase agreements collateralized by U.S. government securities do not generally qualify for such tax-free treatment. The rules on exclusion of this income are different for corporate shareholders.
CALIFORNIA. The following is a general, abbreviated summary of certain provisions of the applicable California tax law as presently in effect as it directly governs the taxation of resident individual and corporate shareholders of the SPDR Nuveen Barclays California Municipal Bond ETF. This summary does not address the taxation of other shareholders nor does it discuss any local taxes that may be applicable. These provisions are subject to change by legislative, administrative or judicial action, and any such change may be retroactive with respect to transactions of the SPDR Nuveen Barclays California Municipal Bond ETF.
The following is based on the assumptions that the SPDR Nuveen Barclays California Municipal Bond ETF will qualify under Subchapter M of the Internal Revenue Code for treatment as a RIC, that it will satisfy the conditions (including a condition, for California tax purposes, that as of the close of each quarter of the Fund, at least 50% of the value of the Funds assets consists of obligations that, when held by individuals, pay interest that is exempt from taxation in California) which will cause its distributions to qualify as exempt-interest dividends to shareholders, and that it will distribute all interest and dividends it receives to its shareholders.
The SPDR Nuveen Barclays California Municipal Bond ETF will be subject to the California corporate franchise and corporation income tax only if it has a sufficient nexus with California. If the SPDR Nuveen Barclays California Municipal Bond ETF is subject to the California franchise or corporation income tax, it does not expect to pay a material amount of such tax.
Distributions by the SPDR Nuveen Barclays California Municipal Bond ETF that are attributable to interest on any obligation of California and its political subdivisions or to interest on obligations of the United States, its territories, possessions or instrumentalities that are exempt from state taxation under federal law will not be subject to the California personal income tax. For purposes of determining interest earned on obligations of the United States, distributions attributable to interest on Fannie Mae securities, Government National Mortgage Association securities, and repurchase agreements are not treated as obligations of the United States and therefore will be subject to California personal income tax. All other distributions, including distributions attributable to capital gains, will also be subject to the California personal income tax.
All distributions of the SPDR Nuveen Barclays California Municipal Bond ETF to corporate shareholders, regardless of source, will be subject to the California corporate franchise tax.
Gain on the sale, exchange, or other disposition of Shares of the SPDR Nuveen Barclays California Municipal Bond ETF will be subject to the California personal income and corporate franchise taxes.
Shares of the SPDR Nuveen Barclays California Municipal Bond ETF may be subject to the California estate tax if held by a California decedent at the time of death.
Shareholders are advised to consult with their own tax advisors for more detailed information concerning California tax matters.
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NEW YORK. The following is a general, abbreviated summary of certain provisions of the applicable New York tax law as presently in effect as it directly governs the taxation of resident individual, corporate, and unincorporated business shareholders of the SPDR Nuveen Barclays New York Municipal Bond ETF. This summary does not address the taxation of other shareholders nor does it discuss any other state or any local taxes, other than New York City taxes, that may be applicable. These provisions are subject to change by legislative or administrative action, and any such change may be retroactive with respect to SPDR Nuveen Barclays New York Municipal Bond ETF transactions.
The SPDR Nuveen Barclays New York Municipal Bond ETF will be subject to the New York State corporate franchise tax and the New York City general corporation tax only if it has a sufficient nexus with New York State or New York City. If the SPDR Nuveen Barclays New York Municipal Bond ETF is subject to such taxes, it does not expect to pay a material amount of either tax.
Individual shareholders of the SPDR Nuveen Barclays New York Municipal Bond ETF, who are subject to New York State and/or New York City personal income taxation, will not be required to include in their New York adjusted gross income that portion of their exempt-interest dividends (as determined for federal income tax purposes), which the SPDR Nuveen Barclays New York Municipal Bond ETF clearly identifies as directly attributable to interest earned on municipal obligations issued by governmental authorities in New York and which are specifically exempted from personal income taxation in New York State or New York City, or interest earned on obligations of U.S. territories or possessions, that is exempt from taxation by the states pursuant to federal law. Distributions to individual shareholders of dividends derived from interest that does not qualify as exempt-interest dividends (as determined for federal income tax purposes), distributions of exempt-interest dividends (as determined for federal income tax purposes) which are derived from interest on municipal obligations issued by governmental authorities in states other than New York State, and distributions derived from interest earned on federal obligations subject to state tax under federal law will be included in their New York adjusted gross income as ordinary income. Distributions to individual shareholders of the SPDR Nuveen Barclays New York Municipal Bond ETF of capital gain dividends (as determined for federal income tax purposes) will be included in their New York adjusted gross income as long-term capital gains. Distributions to individual shareholders of the SPDR Nuveen Barclays New York Municipal Bond ETF of dividends derived from any net income received from taxable temporary investments and any net short-term capital gains realized by the SPDR Nuveen Barclays New York Municipal Bond ETF will be included in their New York adjusted gross income and taxed at the same rate as ordinary income.
All distributions from the SPDR Nuveen Barclays New York Municipal Bond ETF, regardless of source, will increase the taxable base of corporate shareholders subject to the New York State franchise tax and/or the New York City general corporation tax.
Gain from the sale, exchange, or other disposition of Shares of the SPDR Nuveen Barclays New York Municipal Bond ETF will be subject to the New York State personal income or franchise taxes, as applicable, and the New York City personal income, unincorporated business, or general corporation taxes, as applicable.
Shares of the SPDR Nuveen Barclays New York Municipal Bond ETF may be subject to the New York State estate tax if owned by a New York decedent at the time of death.
Shareholders are advised to consult with their own tax advisors for more detailed information concerning New York and local tax matters.
INVESTMENT BY AN UNDERTAKING FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES
The Adviser has reviewed the investment characteristics and limitations of each Fund and believes that, as of December 30, 2014 each Fund (other than the SPDR Barclays Short Term International Treasury Bond ETF, SPDR Barclays International Treasury Bond ETF, SPDR Barclays Aggregate Bond ETF, SPDR Barclays Mortgage Backed Bond ETF, SPDR Barclays 0-5 Year TIPS ETF and SPDR Barclays International High Yield Bond ETF) qualifies as an undertaking for collective investment (UCI) for purposes of the Luxembourg law of 17 December 2010. However, an Undertaking for Collective Investment in Transferable Securities should consult its own counsel regarding the qualification of a Fund as a UCI before investing in the Fund.
CAPITAL STOCK AND SHAREHOLDER REPORTS
Each Fund issues Shares of beneficial interest, par value $.01 per Share. The Board may designate additional funds.
Each Share issued by the Trust has a pro rata interest in the assets of the corresponding series of the Trust. Shares have no preemptive, exchange, subscription or conversion rights and are freely transferable. Each Share is entitled to participate equally in dividends and distributions declared by the Board with respect to each Fund, and in the net distributable assets of each Fund on liquidation.
Each Share has one vote with respect to matters upon which a shareholder vote is required consistent with the requirements of the 1940 Act and the rules promulgated thereunder. Shares of all series of the Trust (Funds) vote together as a single class except that if the matter being voted on affects only a particular fund it will be voted on only by that fund and if a matter affects a particular fund differently from other Funds, that fund will vote separately on such matter. Under Massachusetts law, the Trust is not required to hold an annual meeting of
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shareholders unless required to do so under the 1940 Act. The policy of the Trust is not to hold an annual meeting of shareholders unless required to do so under the 1940 Act. All Shares of the Trust (regardless of the fund) have noncumulative voting rights for the election of Trustees. Under Massachusetts law, Trustees of the Trust may be removed by vote of the shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain circumstances, be held personally liable as partners for obligations of the Trust. However, the Declaration of Trust contains an express disclaimer of shareholder liability for acts or obligations of the Trust, requires that Trust obligations include such disclaimer, and provides for indemnification and reimbursement of expenses out of the Trusts property for any shareholder held personally liable for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Trust itself would be unable to meet its obligations. Given the above limitations on shareholder personal liability, and the nature of each Funds assets and operations, the risk to shareholders of personal liability is believed to be remote.
Shareholder inquiries may be made by writing to the Trust, c/o the Distributor, State Street Global Markets, LLC at State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
COUNSEL AND INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Morgan, Lewis & Bockius LLP, 2020 K Street NW, Washington, DC 20006, serves as counsel to the Trust. Ernst & Young LLP, 200 Clarendon Street, Boston, MA 02116, serves as the independent registered public accounting firm for the Trust. Ernst & Young LLP performs annual audits of the Funds financial statements and provides other audit, tax and related services.
LOCAL MARKET HOLIDAY SCHEDULES
The Trust generally intends to effect deliveries of portfolio securities on a basis of T plus three business days ( i.e. , days on which the NYSE is open) in the relevant foreign market of a Fund. The ability of the Trust to effect in-kind redemptions within three business days of receipt of a redemption request is subject, among other things, to the condition that, within the time period from the date of the request to the date of delivery of the securities, there are no days that are local market holidays on the relevant business days. For every occurrence of one or more intervening holidays in the local market that are not holidays observed in the United States, the redemption settlement cycle may be extended by the number of such intervening local holidays. In addition to holidays, other unforeseeable closings in a foreign market due to emergencies may also prevent the Trust from delivering securities within three business days.
The securities delivery cycles currently practicable for transferring portfolio securities to redeeming investors, coupled with local market holiday schedules, may require a delivery process longer than the standard settlement period. In certain circumstances during the calendar year, the settlement period may be greater than seven calendar days. Such periods are listed in the table below, as are instances where more than seven days will be needed to deliver redemption proceeds. Since certain holidays may occur on different dates in subsequent years, the number of days required to deliver redemption proceeds in any given year may exceed the maximum number of days listed in the table below. The proclamation of new holidays, the treatment by market participants of certain days as informal holidays ( e.g. , days on which no or limited securities transactions occur, as a result of substantially shortened trading hours), the elimination of existing holidays, or changes in local securities delivery practices, could affect the information set forth herein at some time in the future and longer (worse) redemption periods are possible.
Listed below are the dates in calendar year 2015 in which the regular holidays in non-U.S. markets may impact Fund settlement. This list is based on information available to the Fund. The list may not be accurate or complete and is subject to change:
105
Canada |
Chile |
China | Columbia | Czech Republic | Denmark | |||||
January 1-2 February 9, 16 April 3 May 18 June 24 July 1 August 3 September 7 October 12 November 11 December 25, 28 |
January 1 April 3 May 1, 21 June 29 July 16 September 18 October 12 December 8, 25, 31 |
January 1-2
February 18-20, 23-24 April 6 May 1 June 20 September 27 October 1-2, 5-7 December 25 |
January 1, 12
March 23 April 2-3 May 1, 18 June 8, 15 August 7, 17 October 12 November 2, 16 December 8, 25 |
January 1
April 6 May 1, 8 July 6 September 28 October 28 November 17 December 24-25 |
January 1
April 2-3, 6 May 1, 14-15, 25 June 5 December 24-25, 31 |
|||||
Egypt |
Finland |
France | Germany | Greece | Hong Kong | |||||
January 1, 3, 7, 25 April 12-13 July 1, 17-18, 23 September 22-24 October 6, 14 December 23 |
January 1, 6 April 2-3, 6 May 1, 14 June 19 December 24-25, 31 |
January 1
April 3, 6 May 1, 8, 14, 25 July 14 November 11 December 25 |
January 1
April 3, 6 May 1, 14, 25 December 24-25, 31 |
January 1, 6
February 23 March 25 April 3, 6, 10, 13 May 1 June 1 October 28 December 25 |
January 1
February 19-20 April 3, 6-7 May 1, 25 July 1 September 28 October 1, 21 December 25 |
|||||
Hungary |
India |
Indonesia | Ireland | Israel | Italy | |||||
January 1-2 April 6 May 1, 25 August 20-21 October 23 December 24-25 |
January 26 February 17, 19 March 6 April 1-3, 14 May 1, 4 August 18 September 17, 25 October 2, 22 November 11-12, 25 December 24-25 |
January 1
February 19 April 3 May 1, 14 June 2 July 16-17, 20-21 August 17 September 24 October 14 December 24-25, 31 |
January 1
March 17 April 3, 6 May 1, 4 June 1 August 3 October 26 December 25, 28-29 |
March 5
April 3, 5-9, 22-23 May 24 July 26
September 13-15,
October 1, 4-5 |
January 1, 6
April 3, 6 May 1 June 2, 29 December 8, 25, 31 |
|||||
Japan | Jordan | Kuwait | Lebanon | Malaysia | Mauritius | |||||
January 1-2, 12 February 11 April 29 May 4-6 July 20 September 21-23 October 12 November 3, 23 December 23, 31 |
January 1, 3 April 30 May 25 July 17-20 September 22-26 October 14 December 25 |
January 1, 3
February 25-26 May 16 July 17-19 September 22-25 October 14 December 24 |
January 1, 6
February 9 March 25 April 3, 10 May 1 July 17 September 23-24 October 14, 23 December 25 |
January 1
February 2-3, 19-20 May 1, 4 July 17-18 August 31 September 16, 24 October 14 November 10 December 24-25 |
January 1-2
February 3, 17, 19 March 12 May 1 July 18 September 18 November 2, 11 December 25 |
|||||
Mexico | Morocco | Netherlands | New Zealand | Norway | Oman | |||||
January 1 February 2 March 16 April 2-3 May 1 September 16 November 20 December 25 |
January 1 May 1 July 30 August 14, 20-21 September 23 October 13 November 6, 18 |
January 1
April 3, 6, 27, 30 May 5, 14, 25 December 25 |
January 1-2
February 6 April 3, 6, 27 June 1
October 26
|
January 1
April 1-3, 6 May 1, 14, 25 December 24-25, 31 |
January 1
May 15 July 20-21, 23 September 25, 28 October 13 November 18 December 24 |
106
Peru | Philippines | Poland | Portugal | Qatar | Russia | |||||
January 1 April 2-3 May 1 July 28 October 8 December 8, 25 |
January 1, 2 February 19 April 2-3, 9 May 1 June 12 August 21, 31 November 30 December 24-25, 30-31 |
January 1, 6
April 3, 6 May 1 June 4 November 11 December 24-25, 31 |
January 1
April 3 May 1 June 10 December 25 |
January 1
February 10 March 1 July 20-22 September 21-23 December 18 |
January 1-5, 5-9
February 23 March 9 May 1, 4, 11 June 12 November 4 |
|||||
Singapore | South Africa | South Korea | Spain | Sweden | Switzerland | |||||
January 1 February 19-20 April 3 May 1 June 1 July 17 August 10 September 24 November 10 December 25 |
January 1 April 3, 6, 27 May 1 June 16 August 10 September 24 December 16, 25 |
January 1
February 18-20 May 1, 5, 25 July 17 September 28 October 1, 9 December 24-25, 31 |
January 1, 6
March 19 April 2-3, 6 May 1, 14, 25 June 4 October 12 December 8, 25 |
January 1, 5-6
April 2-3, 6, 30 May 1, 13-14 June 19 October 30 December 24-25, 31 |
January 1-2
April 3, 6 May 1, 14, 25 December 25 |
|||||
Taiwan | Thailand | Turkey | U.A.E. | United Kingdom | ||||||
January 1-2 February 18-20, 23, 27 April 3, 6 May 1 June 19 September 28 October 9 |
January 1 March 4 April 6, 13-15 May 1, 5 June 1 July 1, 30 August 12 October 23 December 7, 10, 31 |
January 1
April 23 May 1, 19 July 16-17 September 23-25 October 28-29 |
January 1, 3
May 15 July 18-20 September 24-27 October 15 December 2-3 |
January 1
April 3, 6 May 4, 25 August 31 December 25, 28 |
* | Early Close |
Redemptions. The longest redemption cycle for a Fund is a function of the longest redemption cycle among the countries whose securities comprise the Funds. In calendar years 2015 and 2016, the dates of regular holidays affecting the following securities markets present the worst-case redemption cycles* for a Fund as follows:
2015
Country |
Trade Date |
Settlement
Date |
Number of
Days to Settle |
|||||||
Brazil |
02/11/15 | 02/19/15 | 8 | |||||||
02/12/15 | 02/20/15 | 8 | ||||||||
02/13/15 | 02/23/15 | 10 | ||||||||
China |
02/13/15 | 02/25/15 | 12 | |||||||
02/16/15 | 02/26/15 | 10 | ||||||||
02/17/15 | 02/27/15 | 10 | ||||||||
09/28/15 | 10/08/15 | 10 | ||||||||
09/29/15 | 10/09/15 | 10 | ||||||||
09/30/15 | 10/12/15 | 12 | ||||||||
Indonesia |
07/13/15 | 07/22/15 | 9 | |||||||
07/14/15 | 07/23/15 | 9 | ||||||||
07/15/15 | 07/24/15 | 9 |
107
Country |
Trade Date |
Settlement
Date |
Number of
Days to Settle |
|||||||
Ireland |
12/22/15 | 12/30/15 | 8 | |||||||
12/23/15 | 12/31/15 | 8 | ||||||||
Israel |
04/01/15 | 04/12/15 | 11 | |||||||
04/02/15 | 04/13/15 | 11 | ||||||||
09/21/15 | 10/06/15 | 15 | ||||||||
09/24/15 | 10/07/15 | 13 | ||||||||
Kazakhstan |
09/18/15 | 09/28/15 | 10 | |||||||
Philippines |
01/12/15 | 01/20/15 | 8 | |||||||
01/13/15 | 01/21/15 | 8 | ||||||||
01/14/15 | 01/22/15 | 8 | ||||||||
12/23/15 | 01/04/16 | 12 | ||||||||
12/28/15 | 01/05/16 | 8 | ||||||||
12/29/15 | 01/06/16 | 8 | ||||||||
Qatar |
07/14/15 | 07/22/15 | 8 | |||||||
07/15/15 | 07/23/15 | 8 | ||||||||
07/16/15 | 07/26/15 | 10 | ||||||||
09/09/15 | 09/17/15 | 8 | ||||||||
09/10/15 | 09/20/15 | 10 | ||||||||
09/13/15 | 09/21/15 | 8 | ||||||||
Russia |
12/28/15 | 01/13/16 | 16 | |||||||
12/29/15 | 01/14/16 | 16 | ||||||||
12/30/15 | 01/05/16 | 16 | ||||||||
South Africa |
03/27/15 | 04/07/15 | 11 | |||||||
03/30/15 | 04/08/15 | 9 | ||||||||
03/31/15 | 04/09/15 | 9 | ||||||||
04/01/15 | 04/10/15 | 9 | ||||||||
04/02/15 | 04/13/15 | 11 | ||||||||
04/20/15 | 04/28/15 | 8 | ||||||||
04/21/15 | 04/29/15 | 8 | ||||||||
04/22/15 | 04/30/15 | 8 | ||||||||
04/23/15 | 05/01/15 | 8 | ||||||||
04/24/15 | 05/05/15 | 11 | ||||||||
04/28/15 | 05/06/15 | 8 | ||||||||
04/29/15 | 05/07/15 | 8 | ||||||||
04/30/15 | 05/08/15 | 8 | ||||||||
06/09/15 | 06/17/15 | 8 | ||||||||
06/10/15 | 06/18/15 | 8 | ||||||||
06/11/15 | 06/19/15 | 8 | ||||||||
06/12/15 | 06/22/15 | 10 | ||||||||
06/15/15 | 06/23/15 | 8 | ||||||||
08/03/15 | 08/11/15 | 8 | ||||||||
08/04/15 | 08/12/15 | 8 | ||||||||
08/05/15 | 08/13/15 | 8 | ||||||||
08/06/15 | 08/14/15 | 8 | ||||||||
08/07/15 | 08/17/15 | 10 | ||||||||
09/17/15 | 09/25/15 | 8 | ||||||||
09/18/15 | 09/28/15 | 10 | ||||||||
09/21/15 | 09/29/15 | 8 | ||||||||
09/22/15 | 09/30/15 | 8 | ||||||||
09/23/15 | 10/01/15 | 8 | ||||||||
12/09/15 | 12/17/15 | 8 | ||||||||
12/10/15 | 12/18/15 | 8 | ||||||||
12/11/15 | 12/21/15 | 10 | ||||||||
12/14/15 | 12/22/15 | 8 | ||||||||
12/15/15 | 12/23/15 | 8 | ||||||||
12/18/15 | 12/28/15 | 10 | ||||||||
12/21/15 | 12/29/15 | 8 |
108
Country |
Trade Date |
Settlement
Date |
Number of
Days to Settle |
|||||||
12/22/15 | 12/30/15 | 8 | ||||||||
12/23/15 | 12/31/15 | 8 | ||||||||
12/24/15 | 01/04/16 | 11 | ||||||||
Spain |
03/30/15 | 04/07/15 | 8 | |||||||
03/31/15 | 04/08/15 | 8 | ||||||||
04/01/15 | 04/09/15 | 8 | ||||||||
Thailand |
04/08/15 | 04/16/15 | 8 | |||||||
04/09/15 | 04/17/15 | 8 | ||||||||
04/10/15 | 04/20/15 | 10 |
2016
Country |
Trade Date |
Settlement
Date |
Number of
Days to Settle |
|||||||
China |
02/03/16 | 02/17/16 | 14 | |||||||
02/04/16 | 02/18/16 | 14 | ||||||||
02/05/16 | 02/19/16 | 14 | ||||||||
04/27/16 | 05/09/16 | 12 | ||||||||
04/28/16 | 05/10/16 | 12 | ||||||||
04/29/16 | 05/11/16 | 12 | ||||||||
09/28/16 | 10/11/16 | 13 | ||||||||
09/29/16 | 10/12/16 | 13 | ||||||||
09/30/16 | 10/13/16 | 13 |
109
Country |
Trade Date |
Settlement
Date |
Number of
Days to Settle |
|||||||
Colombia |
03/18/16 | 03/28/16 | 10 | |||||||
Indonesia |
06/29/16 | 07/11/16 | 12 | |||||||
06/30/16 | 07/12/16 | 12 | ||||||||
07/01/16 | 07/13/16 | 12 | ||||||||
Ireland |
12/21/16 | 12/29/16 | 8 | |||||||
12/22/16 | 01/02/17 | 11 | ||||||||
Israel |
04/20/16 | 05/01/16 | 11 | |||||||
04/21/16 | 05/02/16 | 11 | ||||||||
10/10/16 | 10/25/16 | 15 | ||||||||
10/13/16 | 10/26/16 | 13 | ||||||||
Malaysia |
07/01/16 | 07/11/16 | 10 | |||||||
07/04/16 | 07/12/16 | 8 | ||||||||
07/05/16 | 07/13/16 | 8 | ||||||||
Mexico |
03/18/16 | 03/28/16 | 10 | |||||||
Pakistan |
09/08/16 | 09/16/16 | 8 | |||||||
09/09/16 | 09/19/16 | 10 | ||||||||
Philippines |
12/23/15 | 01/04/16 | 12 | |||||||
12/28/15 | 01/05/16 | 8 | ||||||||
12/29/15 | 01/06/16 | 8 | ||||||||
Qatar |
09/06/16 | 09/18/16 | 12 | |||||||
09/07/16 | 09/19/16 | 12 | ||||||||
09/08/16 | 09/20/16 | 12 | ||||||||
Serbia |
04/26/16 | 05/04/16 | 8 | |||||||
04/27/16 | 05/05/16 | 8 | ||||||||
04/28/16 | 05/06/16 | 8 | ||||||||
South Africa |
12/24/15 | 01/04/16 | 11 | |||||||
12/28/15 | 01/05/16 | 8 | ||||||||
12/29/15 | 01/06/16 | 8 | ||||||||
12/30/15 | 01/07/16 | 8 | ||||||||
12/31/15 | 01/08/16 | 8 | ||||||||
03/14/16 | 03/22/16 | 8 | ||||||||
03/15/16 | 03/23/16 | 8 | ||||||||
03/16/16 | 03/24/16 | 8 | ||||||||
03/17/16 | 03/29/16 | 12 | ||||||||
03/18/16 | 03/30/16 | 12 | ||||||||
03/22/16 | 03/31/16 | 9 | ||||||||
03/23/16 | 04/01/16 | 9 | ||||||||
03/24/16 | 04/04/16 | 11 | ||||||||
04/20/16 | 04/28/16 | 8 | ||||||||
04/21/16 | 04/29/16 | 8 | ||||||||
04/22/16 | 05/03/16 | 11 | ||||||||
04/25/16 | 05/04/16 | 9 |
110
Country |
Trade Date |
Settlement
Date |
Number of
Days to Settle |
|||||||
04/26/16 | 05/05/16 | 9 | ||||||||
04/28/16 | 05/06/16 | 8 | ||||||||
04/29/16 | 05/09/16 | 10 | ||||||||
06/09/16 | 06/17/16 | 8 | ||||||||
06/10/16 | 06/20/16 | 10 | ||||||||
06/13/16 | 06/21/16 | 8 | ||||||||
06/14/16 | 06/22/16 | 8 | ||||||||
06/15/16 | 06/23/16 | 8 | ||||||||
08/02/16 | 08/10/16 | 8 | ||||||||
08/03/16 | 08/11/16 | 8 | ||||||||
08/04/16 | 08/12/16 | 8 | ||||||||
08/05/16 | 08/15/16 | 10 | ||||||||
08/08/16 | 08/16/16 | 8 | ||||||||
12/09/16 | 12/19/16 | 10 | ||||||||
12/12/16 | 12/20/16 | 8 | ||||||||
12/13/16 | 12/21/16 | 8 | ||||||||
12/14/16 | 12/22/16 | 8 | ||||||||
12/15/16 | 12/28/16 | 13 | ||||||||
12/16/16 | 12/28/16 | 12 | ||||||||
12/19/16 | 12/29/16 | 10 | ||||||||
12/20/16 | 01/02/17 | 13 | ||||||||
12/21/16 | 01/03/17 | 13 | ||||||||
12/22/16 | 01/04/17 | 13 | ||||||||
12/28/16 | 01/05/17 | 8 | ||||||||
12/29/16 | 01/06/17 | 8 | ||||||||
Sweden |
12/30/15 | 01/07/16 | 8 | |||||||
Thailand |
04/08/16 | 04/18/16 | 10 | |||||||
04/11/16 | 04/19/16 | 8 | ||||||||
04/12/16 | 04/20/16 | 8 | ||||||||
Turkey |
07/01/16 | 07/11/16 | 10 | |||||||
07/04/16 | 07/12/16 | 8 | ||||||||
09/08/16 | 09/19/16 | 11 | ||||||||
09/09/16 | 09/20/16 | 11 | ||||||||
Ukraine |
12/31/15 | 01/08/16 | 8 | |||||||
United Arab Emirates |
09/07/16 | 09/15/16 | 8 | |||||||
09/08/16 | 09/18/16 | 10 |
* | These worst-case redemption cycles are based on information regarding regular holidays, which may be out of date. Based on changes in holidays, longer (worse) redemption cycles are possible. |
111
The financial statements and financial highlights of the Funds that were operating during the year ended June 30, 2015, along with the Reports of Ernst & Young, LLP, the Trusts Independent Registered Public Accounting Firm, included in the Trusts Annual Reports to Shareholders on Form N-CSR under the 1940 Act, are incorporated by reference into this Statement of Additional Information.
112
March 2015
FM Global Proxy Voting and Engagement Principles
SSGA Funds Management, Inc. (SSGA FM), one of the industrys largest institutional asset managers, is the investment management arm of State Street Bank and Trust Company, a wholly owned subsidiary of State Street Corporation, a leading provider of financial services to institutional investors. As an investment manager, SSGA FM has discretionary proxy voting authority over most of its client accounts, and SSGA FM votes these proxies in the manner that we believe will most likely protect and promote the long-term economic value of client investments as described in the SSGA FM Global Proxy Voting and Engagement Principles.
A-1
SSGA FM maintains Proxy Voting and Engagement Guidelines for select markets, including: the US, the EU, the UK, Australia, emerging markets and Japan. International markets that do not have specific guidelines are reviewed and voted consistent with our Global Proxy Voting and Engagement Principles; however, SSGA FM also endeavors to show sensitivity to local market practices when voting in these various markets.
SSGA FMs Approach to Proxy Voting and Issuer Engagement
At SSGA FM, we take our fiduciary duties as an asset manager very seriously. We have a dedicated team of corporate governance professionals who help us carry out our duties as a responsible investor. These duties include engaging with companies, developing and enhancing in-house corporate governance policies, analyzing corporate governance issues on a case-by-case basis at the company level, and exercising our voting rightsall to maximize shareholder value.
SSGA FMs Global Proxy Voting and Engagement Principles (the Principles) may take different perspectives on common governance issues that vary from one market to another and, likewise, engagement activity may take different forms in order to best achieve long-term engagement goals. We believe that proxy voting and engagement with portfolio companies is often the most direct and productive way shareholders can exercise their ownership rights, and taken together, we view these tools to be an integral part of the overall investment process.
We believe engagement and voting activity have a direct relationship. As a result, the integration of our engagement activities, while leveraging the exercise of our voting rights, provides a meaningful shareholder tool that we believe protects and enhances the long-term economic value of the holdings in our client accounts. SSGA FM maximizes its voting power and engagement by maintaining a centralized proxy voting and active ownership process covering all holdings, regardless of strategy. Despite the different investment views and objectives across SSGA FM, depending on the product or strategy, the fiduciary responsibilities of share ownership and voting for which SSGA FM has voting discretion are carried out with a single voice and objective.
The Principles support governance structures that we believe add to, or maximize shareholder value at the companies held in our clients portfolios. SSGA FM conducts issuer specific engagements with companies to discuss our principles, including sustainability related risks. In addition, we encourage issuers to find ways of increasing the amount of direct communication board members have with shareholders. We believe direct communication with executive board members and independent non-executive directors is critical to helping companies understand shareholder concerns. Conversely, where appropriate, we conduct collaborative engagement activities with multiple shareholders and communicate with company representatives about common concerns.
In conducting our engagements, SSGA FM also evaluates the various factors that play into the corporate governance framework of a country, including the macroeconomic conditions and broader political system, the quality of regulatory oversight, the enforcement of property and shareholder rights and the independence of the judiciary to name a few. SSGA FM understands that regulatory requirements and investor expectations relating to governance practices and engagement activities differ from country-to-country. As a result, SSGA FM engages with issuers, regulators, or both, depending on the market. SSGA FM also is a member of various investor associations that seek to address broader corporate governance related policy at the country level as well as issuer specific concerns at a company level.
2
To help mitigate company specific risk, the team may collaborate with members of the active investment teams to engage with companies on corporate governance issues and address any specific concerns, or to get more information regarding shareholder items that are to be voted on at upcoming shareholder meetings. Outside of proxy voting season, SSGA FM conducts issuer specific engagements with companies covering various corporate governance and sustainability related topics.
The SSGA FM Governance Team uses a blend of quantitative and qualitative research and data to support screens to help identify issuers where active engagement may be necessary to protect and promote shareholder value. Issuer engagement may also be event driven, focusing on issuer specific corporate governance, sustainability concerns or wider industry related trends. SSGA FM also gives consideration to the size of our total position of the issuer in question and/or the potential negative governance, performance profile, and circumstance at hand. As a result, SSGA FM believes issuer engagement can take many forms and be triggered under numerous circumstances. The following methods represent how SSGA FM defines engagement methods:
Active
SSGA FM uses screening tools designed to capture a mix of company specific data including governance and sustainability profiles to help us focus our voting and engagement activity.
SSGA FM will actively seek direct dialogue with the board and management of companies we have identified through our screening processes. Such engagements may lead to further monitoring to ensure the company improves its governance or sustainability practices. In these cases, the engagement process represents the most meaningful opportunity for SSGA FM to protect long-term shareholder value from excessive risk due to poor governance and sustainability practices.
Recurring
SSGA FM has ongoing dialogue with its largest holdings on corporate governance and sustainability issues. SSGA FM maintains regular face-to-face meetings with these issuers, allowing SSGA FM to reinforce key tenets of good corporate governance and actively advise these issuers around concerns that SSGA FM feels may negatively impact long-term shareholder value.
Reactive
Reactive engagement is initiated by the issuers. SSGA FM routinely discusses specific voting issues and items with the issuer community. Reactive engagement is an opportunity to address not only voting items, but also a wide range of governance and sustainability issues.
SSGA FM has established an engagement protocol that further describes our approach to issuer engagement.
Measurement
Assessing the effectiveness of our issuer engagement process is often difficult. To limit the subjectivity of measuring our success we actively seek issuer feedback and monitor the actions issuers take post-engagement to identify tangible changes. By doing so, we are able to establish indicators to gauge how issuers respond to our concerns and to what degree these responses satisfy our requests. It is also important to note that successful engagement activity can be measured over differing time periods depending on the facts and circumstances involved. Engagements can last as short as a single meeting or span multiple years.
Depending on the issue and whether the engagement activity is reactive, recurring, or active, engagement with issuers can take the form of written communication, conference calls, or face-to-face meetings.SSGA FM believes active engagement is best conducted directly with company management or board members. Collaborative engagement, where multiple shareholders communicate with company representatives, can serve as a potential forum for issues that are not identified by SSGA FM as requiring active engagement, such as shareholder conference calls.
3
Proxy Voting Procedure
Oversight
The SSGA FM Corporate Governance Team is responsible for developing and implementing the Proxy Voting and Engagement Guidelines (the Guidelines), case-by-case voting items, issuer engagement activities, and research and analysis of governance-related issues. The implementation of the Guidelines is overseen by the SSGA Global Proxy Review Committee (SSGA PRC), a committee of investment, compliance and legal professionals, who provide guidance on proxy issues as described in greater detail below. Oversight of the proxy voting process is ultimately the responsibility of the SSGA Investment Committee. The SSGA Investment Committee reviews and approves amendments to the Guidelines. The SSGA PRC reports to the SSGA Investment Committee, and may refer certain significant proxy items to that committee.
Proxy Voting Process
In order to facilitate SSGA FMs proxy voting process, SSGA FM retains Institutional Shareholder Services Inc. (ISS), a firm with expertise in proxy voting and corporate governance. SSGA FM utilizes ISSs services in three ways: (1) as SSGA FMs proxy voting agent (providing SSGA FM with vote execution and administration services); (2) for applying the Guidelines; and (3) as providers of research and analysis relating to general corporate governance issues and specific proxy items.
The SSGA FM Corporate Governance Team reviews the Guidelines with ISS on an annual basis or on a case-by-case basis as needed. On most routine proxy voting items (e.g., ratification of auditors), ISS will affect the proxy votes in accordance with the Guidelines.
In other cases, the Corporate Governance Team will evaluate the proxy solicitation to determine how to vote based on facts and circumstances, consistent with the Principles, and the accompanying Guidelines, that seek to maximize the value of our client accounts.
In some instances, the Corporate Governance Team may refer significant issues to the SSGA PRC for a determination of the proxy vote. In addition, in determining whether to refer a proxy vote to the SSGA PRC, the Corporate Governance. Team will consider whether a material conflict of interest exists between the interests of our client and those of SSGA FM or its affiliates (as explained in greater detail in our Conflict of Interest Policy).
SSGA FM votes in all markets where it is feasible; however, SSGA FM may refrain from voting meetings when power of attorney documentation is required, where voting will have a material impact on our ability to trade the security, where issuer-specific special documentation is required or where various market or issuer certifications are required. SSGA FM is unable to vote proxies when certain custodians, used by our clients, do not offer proxy voting in a jurisdiction, or when they charge a meeting specific fee in excess of the typical custody service agreement.
Conflict of Interest
See SSGAs standalone Conflicts of Interest Policy.
Proxy Voting and Engagement Principles
Directors and Boards
The election of directors is one of the most important fiduciary duties SSGA FM performs as a shareholder. SSGA FM believes that well-governed companies can protect and pursue shareholder interests better and withstand the challenges of an uncertain economic environment. As such, SSGA FM seeks to vote director elections in a way which we, as a fiduciary, believe will maximize the long-term value of each portfolios holdings.
Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. This concept establishes the standard by which board and director performance is measured. To achieve this fundamental principle, the role of the board, in SSGA FMs view, is to carry out its responsibilities in the best long-term interest of the company and its shareholders. An independent and effective board oversees management, provides guidance on strategic matters, selects the CEO and other senior executives, creates a succession plan for the board and management, provides risk oversight and assesses the performance of the CEO and management. In contrast, management implements the business and capital allocation strategies and runs the companys day-to-day operations. As part of SSGA FMs engagement process, SSGA FM routinely discusses the importance of these responsibilities with the boards of issuers.
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SSGA FM believes the quality of a board is a measure of director independence, director succession planning, board evaluations and refreshment and company governance practices. In voting to elect nominees, SSGA FM considers many factors. SSGA FM believes independent directors are crucial to good corporate governance and help management establish sound corporate governance policies and practices. A sufficiently independent board will effectively monitor management, maintain appropriate governance practices, and perform oversight functions necessary to protect shareholder interests. SSGA FM also believes the right mix of skills, independence and qualifications among directors provides boards with the knowledge and direct experience to deal with risks and operating structures that are often unique and complex from one industry to another.
Accounting and Audit Related Issues
SSGA FM believes audit committees are critical and necessary as part of the boards risk oversight role. The audit committee is responsible for setting out an internal audit function to provide robust audit and internal control systems designed to effectively manage potential and emerging risks to the companys operations and strategy. SSGA FM believes audit committees should have independent directors as members, and SSGA FM will hold the members of the audit committee responsible for overseeing the management of the audit function.
The disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. As a result, board oversight of the internal controls and the independence of the audit process are essential if investors are to rely on financial statements. Also, it is important for the audit committee to appoint external auditors who are independent from management as we expect auditors to provide assurance as of a companys financial condition.
Capital Structure, Reorganization and Mergers
The ability to raise capital is critical for companies to carry out strategy, grow and achieve returns above their cost of capital. The approval of capital raising activities is fundamental to a shareholders ability to monitor the amounts of proceeds and to ensure capital is deployed efficiently. Altering the capital structure of a company is a critical decision for boards and in making such a critical decision, SSGA FM believes the company should have a well explained business rationale that is consistent with corporate strategy and not overly dilute its shareholders.
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation.
Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In evaluating mergers and acquisitions, SSGA FM considers the adequacy of the consideration and the impact of the corporate governance provisions to shareholders. In all cases, SSGA FM uses its discretion in order to maximize shareholder value.
Occasionally, companies add anti-takeover provisions that reduce the chances of a potential acquirer making an offer, or reducing the likelihood of a successful offer. SSGA FM does not support proposals that reduce shareholders rights, entrench management or reduce the likelihood of shareholders right to vote on reasonable offers.
Compensation
SSGA FM considers the boards responsibility to include setting the appropriate level of executive compensation. Despite the differences among the types of plans and the awards possible, there is a simple underlying philosophy that guides SSGA FMs analysis of executive compensation; SSGA FM believes that there should be a direct relationship between executive compensation and company performance over the long-term.
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, SSGA FM considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests, as well as with corporate strategy and performance. SSGA FM may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA FM may also consider executive compensation practices when re-electing members of the remuneration committee.
SSGA FM recognizes that compensation policies and practices are unique from market to market; often with significant differences between the level of disclosures, the amount and forms of compensation paid, and the ability of shareholders to approve executive compensation practices. As a result, our ability to assess the appropriateness of executive compensation is often dependent on market practices and laws.
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Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. Environmental and social factors may not only have an impact on the reputation of companies but may also represent significant operational risks and costs to business. Well-developed environmental and social management systems can generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. In our view, companies that manage all risks and consider opportunities related to environmental and social issues are able to adapt faster to changes and appear to be better placed to achieve sustainable competitive advantage in the long-term. Similarly, companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change, which could be the result of anything from regulation and litigation, physical threats (severe weather, climate change), economic trends to shifts in consumer behavior.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks and shareholder proposals relating to them on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on a company, its industry, operations, and geographic footprint. SSGA FM may also take action against the re-election of board members if we have serious concerns over ESG practices and the company has not been responsive to shareholder requests to amend them.
General/Routine
Although SSGA FM does not seek involvement in the day-to-day operations of an organization, SSGA FM recognizes the need for conscientious oversight and input into management decisions that may affect a companys value. SSGA FM supports proposals that encourage economically advantageous corporate practices and governance, while leaving decisions that are deemed to be routine or constitute ordinary business to management and the board of directors.
Securities on Loan
For funds where SSGA FM acts as trustee, SSGA FM may recall securities in instances where SSGA FM believes that a particular vote will have a material impact on the fund(s). Several factors shape this process. First, SSGA FM must receive notice of the vote in sufficient time to recall the shares on or before the record date. In many cases, SSGA FM does not receive timely notice, and is unable to recall the shares on or before the record date. Second, SSGA FM, exercising its discretion may recall shares if it believes the benefit of voting shares will outweigh the foregone lending income. This determination requires SSGA FM, with the information available at the time, to form judgments about events or outcomes that are difficult to quantify. Given past experience in this area, however, we believe that the recall of securities will rarely provide an economic benefit that outweighs the cost of the foregone lending income.
Reporting
Any client who wishes to receive information on how its proxies were voted should contact its SSGA FM relationship manager.
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State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canay Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 28, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3430-INST-5405 0315 Exp. Date: 02/29/2016
March 2015
FM Proxy Voting and Engagement Guidelines
United States
SSGA Funds Management, Inc.s (SSGA FM) US Proxy Voting and Engagement Guidelines outline our expectations of companies listed on stock exchanges in the US. This policy complements and should be read in conjunction with SSGA FMs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGA FMs approach to voting and engaging with companies and SSGAs Conflicts of Interest Policy.
SSGA FMs US Proxy Voting and Engagement Guidelines address areas including board structure, director tenure, audit related issues, capital structure, executive compensation, environmental, social and other governance related issues. Principally, we believe the primary responsibility of the board of directors is to preserve and enhance shareholder value and protect shareholder interests. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy, overseeing executive management to monitoring the risks that arise from a companys business, including risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board.
When voting and engaging with companies in global markets, SSGA FM considers market specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. SSGA FM expects companies to observe the relevant laws and regulations of their respective markets as well as country specific best practice guidelines and corporate governance codes. When we feel that a countrys regulatory requirements do not address some of the key philosophical principles that SSGA FM believes are fundamental to its global voting guidelines, we may hold companies in such markets to our global standards.
In its analysis and research into corporate governance issues in the US, SSGA FM expects all companies to act in a transparent manner and provide detailed disclosure on board profiles, related-party transactions, executive compensation and other governance issues that impact shareholders long-term interests.
SSGA FMs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Corporate Governance Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA FM has established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. SSGA FM engages with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagements to address significant shareholder concerns and environmental, social and governance (ESG) issues in a manner consistent with maximizing shareholder value. The team works alongside members of SSGA FMs active investment teams; collaborating on issuer engagements and providing input on company specific fundamentals. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in the US.
SSGA FM is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the UK Stewardship Code. We are committed to sustainable investing and are working to further integrate ESG principles into investment and corporate governance practices, where applicable and consistent with our fiduciary duty.
Directors and Boards
SSGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering various factors including general market practice and availability of information on director skills and expertise. In principle, SSGA FM believes independent directors are crucial to good corporate governance and help management establish sound corporate governance policies and practices. A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests.
Director related proposals at US companies include issues submitted to shareholders that deal with the composition of the board or with members of a corporations board of directors. In deciding which director nominee to support, SSGA FM considers numerous factors.
Director Elections
SSGA FMs director election policy focuses on companies governance profile to identify if a company demonstrates appropriate governance practices or if it exhibits negative governance practices. Factors SSGA FM considers when evaluating governance practices include, but are not limited to the following:
| Shareholder rights; |
| Board independence; and |
| Board structure. |
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If a company demonstrates appropriate governance practices, SSGA FM believes a director should be classified as independent based on the relevant listing standards or local market practice standards. In such cases, the composition of the key oversight committees of a board should meet the minimum standards of independence. Accordingly, SSGA FM will vote against a nominee at a company with appropriate governance practices if the director is classified as non-independent under relevant listing standards or local market practice AND serves on a key committee of the board (compensation, audit, nominating or committees required to be fully independent by local market standards).
Conversely, if a company demonstrates negative governance practices, SSGA FM believes the classification standards for director independence should be elevated. In such circumstances, we will evaluate all director nominees based on the following classification standards:
| Is the nominee an employee of or related to an employee of the issuer or its auditor; |
| Does the nominee provide professional services to the issuer; |
| Has the nominee attended an appropriate number of board meetings; or |
| Has the nominee received non-board related compensation from the issuer. |
Where companies demonstrate negative governance practices, these stricter standards will apply not only to directors who are a member of a key committee but to all directors on the board as market practice permits. Accordingly, SSGA FM will vote against a nominee (with the exception of the CEO) where the board has inappropriate governance practices and is considered not independent based on the above independence criteria.
Additionally, SSGA FM may withhold votes from directors based on the following:
| When overall average board tenure is excessive and/or individual director tenure is excessive. In assessing excessive tenure, SSGA FM gives consideration to factors such as the preponderance of long tenured directors, board refreshment practices, and classified board structures; |
| When directors attend less than 75% of board meetings without appropriate explanation or providing reason for their failure to meet the attendance threshold; |
| CEOs of a public company who sit on more than three public company boards; |
| Director nominees who sit on more than six public company boards; |
| Directors of companies that have ignored a shareholder proposal which received a majority of the shares outstanding at the last annual or special meeting, unless management submits the proposal(s) on the ballot as a binding management proposal, recommending shareholders vote for the particular proposal(s); |
| Directors of companies have unilaterally adopted/ amended company by-laws that negatively impact SSGA FMs shareholder rights (such as fee-shifting, forum selection and exclusion service by-laws) without putting such amendments to a shareholder vote; |
| Compensation committee members where there is a weak relationship between executive pay and performance over a five-year period; |
| Audit committee members if non-audit fees exceed 50% of total fees paid to the auditors; and |
| Directors who appear to have been remiss in their duties. |
Director Related Proposals
SSGA FM generally votes for the following director related proposals:
| Discharge of board members duties, in the absence of pending litigation, regulatory investigation, charges of fraud or other indications of significant concern; |
| Proposals to restore shareholders ability to remove directors with or without cause; |
| Proposals that permit shareholders to elect directors to fill board vacancies; and |
| Shareholder proposals seeking disclosure regarding the company, board, or compensation committees use of compensation consultants, such as company name, business relationship(s) and fees paid. |
SSGA FM generally votes against the following director related proposals:
| Requirements that candidates for directorships own large amounts of stock before being eligible to be elected; |
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| Proposals that relate to the transaction of other business as properly comes before the meeting, which extend blank check powers to those acting as proxy; and |
| Proposals requiring two candidates per board seat. |
Majority Voting
SSGA FM will generally support a majority vote standard based on votes cast for the election of directors.
SSGA FM will generally vote to support amendments to bylaws that would require simple majority of voting shares (i.e. shares cast) to pass or repeal certain provisions.
Annual Elections
SSGA FM generally supports the establishment of annual elections of the board of directors. Consideration is given to the overall level of board independence and the independence of the key committees as well as whether there is a shareholders rights plan.
Cumulative Voting
SSGA FM does not support cumulative voting structures for the election of directors.
Separation Chair/CEO
SSGA FM analyzes proposals for the separation of Chair/CEO on a case-by-case basis taking into consideration numerous factors, including but not limited to, the appointment of and role played by a lead director, a companys performance and the overall governance structure of the company.
Proxy Access
SSGA FM will consider proposals relating to Proxy Access on a case-by-case basis.
SSGA FM will evaluate the companys specific circumstances, the impact of the proposal on the target company and its potential effect on shareholder value.
Considerations include but are not limited to the following:
| The ownership thresholds and holding duration proposed in the resolution; |
| The binding nature of the proposal; |
| The number of directors that shareholders may be able to nominate each year; |
| Company performance; |
| Company governance structure; |
| Shareholder rights; and |
| Board performance. |
Age/Term Limits
Generally, SSGA FM will vote against age and term limits unless the company is found to have poor board refreshment and director succession practices and has a preponderance of non-executive directors with excessively long-tenures serving on the board.
Approve Remuneration of Directors
Generally, SSGA FM will support directors compensation, provided the amounts are not excessive relative to other issuers in the market or industry. In making our determination, we review whether the compensation is overly dilutive to existing shareholders.
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Indemnification
Generally, SSGA FM supports proposals to limit directors liability and/or expand indemnification and liability protection if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Classified Boards
SSGA FM generally supports annual elections for the board of directors.
Confidential Voting
SSGA FM will support confidential voting.
Board Size
SSGA FM will support proposals seeking to fix the board size or designate a range for the board size and will vote against proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval.
Audit Related Issues
Ratifying Auditors and Approving Auditor Compensation
SSGA FM supports the approval of auditors and auditor compensation provided that the issuer has properly disclosed audit and non-audit fees relative to market practice and the audit fees are not deemed excessive. SSGA FM deems audit fees to be excessive if the non-audit fees for the prior year constituted 50% or more of the total fees paid to the auditor. SSGA FM will support the disclosure of auditor and consulting relationships when the same or related entities are conducting both activities and will support the establishment of a selection committee responsible for the final approval of significant management consultant contract awards where existing firms are already acting in an auditing function. In circumstances where other fees include fees related to initial public offerings, bankruptcy emergence, and spin-offs, and the company makes public disclosure of the amount and nature of those fees which are determined to be an exception to the standard non-audit fee category, then such fees may be excluded from the non-audit fees considered in determining the ratio of non-audit to audit/audit-related fees/tax compliance and preparation for purposes of determining whether non-audit fees are excessive.
SSGA FM will support the discharge of auditors and requirements that auditors attend the annual meeting of shareholders. 1
Capital Related Issues
Capital structure proposals include requests by management for approval of amendments to the certificate of incorporation that will alter the capital structure of the company.
The most common request is for an increase in the number of authorized shares of common stock, usually in conjunction with a stock split or dividend. Typically, requests that are not unreasonably dilutive or enhance the rights of common shareholders are supported. In considering authorized share proposals, the typical threshold for approval is 100% over current authorized shares. However, the threshold may be increased if the company offers a specific need or purpose (merger, stock splits, growth purposes, etc.). All proposals are evaluated on a case-by-case basis taking into account the companys specific financial situation.
Increase in Authorized Common Shares
In general, SSGA FM supports share increases for general corporate purposes up to 100% of current authorized stock.
SSGA FM supports increases for specific corporate purposes up to 100% of the specific need plus 50% of current authorized common stock for US firms.
When applying the thresholds, SSGA FM will also consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Increase in Authorized Preferred Shares
SSGA FM votes on a case-by-case basis on proposals to increase the number of preferred shares.
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Generally, SSGA FM will vote for the authorization of preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable.
SSGA FM will support proposals to create declawed blank check preferred stock (stock that cannot be used as a takeover defense). However, SSGA FM will vote against proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose.
Unequal Voting Rights
SSGA FM will not support proposals authorizing the creation of new classes of common stock with superior voting rights and will vote against new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights. In addition, SSGA FM will not support capitalization changes that add blank check classes of stock (i.e. classes of stock with undefined voting rights) or classes that dilute the voting interests of existing shareholders.
However, SSGA FM will support capitalization changes that eliminate other classes of stock and/or unequal voting rights.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation.
Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported.
In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported.
SSGA FM will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock, especially in some non-US markets; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
| At the time of voting, the current market price of the security exceeds the bid price. |
AntiTakeover Issues
Typically, these are proposals relating to requests by management to amend the certificate of incorporation or bylaws to add or delete a provision that is deemed to have an antitakeover effect. The majority of these proposals deal with managements attempt to add some provision that makes a hostile takeover more difficult or will protect incumbent management in the event of a change in control of the company.
Proposals that reduce shareholders rights or have the effect of entrenching incumbent management will not be supported.
Proposals that enhance the right of shareholders to make their own choices as to the desirability of a merger or other proposal are supported.
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Shareholder Rights Plans
SSGA FM will support mandates requiring shareholder approval of a shareholder rights plans (poison pill) and repeals of various anti-takeover related provisions.
In general, SSGA FM will vote against the adoption or renewal of a US issuers shareholder rights plan (poison pill).
SSGA FM will vote for an amendment to a shareholder rights plan (poison pill) where the terms of the new plans are more favorable to shareholders ability to accept unsolicited offers (i.e. if one of the following conditions are met: (i) minimum trigger, flip-in or flip-over of 20%, (ii) maximum term of three years, (iii) no dead hand, slow hand, no hand or similar feature that limits the ability of a future board to redeem the pill, and (iv) inclusion of a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced).
Special Meetings
SSGA FM will vote for shareholder proposals related to special meetings at companies that do not provide shareholders the right to call for a special meeting in their bylaws if:
| The company also does not allow shareholders to act by written consent; or |
| The company allows shareholders to act by written consent but the ownership threshold for acting by written consent is set above 25% of outstanding shares. |
SSGA FM will vote for shareholder proposals related to special meetings at companies that give shareholders (with a minimum 10% ownership threshold) the right to call for a special meeting in their bylaws if:
| The current ownership threshold to call for a special meeting is above 25% of outstanding shares. |
SSGA FM will vote for management proposals related to special meetings.
Written Consent
SSGA FM will vote for shareholder proposals on written consent at companies if:
| The company does not have provisions in their bylaws giving shareholders the right to call for a special meeting; or |
| The company allows shareholders the right to call for a special meeting but the current ownership threshold to call for a special meeting is above 25% of outstanding shares; and |
| The company has a poor governance profile. |
SSGA FM will vote management proposals on written consent on a case-by-case basis.
Super-Majority
SSGA FM will generally vote against amendments to bylaws requiring super-majority shareholder votes to pass or repeal certain provisions. SSGA FM will vote for the reduction or elimination of super-majority vote requirements, unless management of the issuer was concurrently seeking to or had previously made such a reduction or elimination.
Remuneration Issues
Despite the differences among the types of plans and the awards possible there is a simple underlying philosophy that guides the analysis of all compensation plans; namely, are the terms of the plan designed to provide an incentive for executives and/or employees to align their interests with those of the shareholders and thus work toward enhancing shareholder value. Plans which benefit participants only when the shareholders also benefit are those most likely to be supported.
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Advisory Vote on Executive Compensation and Frequency
SSGA FM believes executive compensation plays a critical role in aligning executives interest with shareholders, attracting, retaining and incentivizing key talent, and ensuring positive correlation between the performance achieved by management and the benefits derived by shareholders. SSGA FM supports management proposals on executive compensation where there is a strong relationship between executive pay and performance over a five-year period. SSGA FM seeks adequate disclosure of different compensation elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long term and short term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and performance. Further, shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance on an annual basis.
Employee Equity Award Plans
SSGA FM considers numerous criteria when examining equity award proposals. Generally, SSGA FM does not vote against plans for lack of performance or vesting criteria. Rather, the main criteria that will result in a vote against an equity award plan are:
Excessive voting power dilution To assess the dilutive effect, we divide the number of shares required to fully fund the proposed plan, the number of authorized but unissued shares and the issued but unexercised shares by the fully diluted share count. SSGA FM reviews that number in light of certain factors, including the industry of the issuer.
Historical option grants Excessive historical option grants over the past three years. Plans that provide for historical grant patterns of greater than eight to twelve percent are generally not supported.
Repricing SSGA FM will vote against any plan where repricing is expressly permitted. If a company has a history of repricing underwater options, the plan will not be supported.
Other criteria include the following:
| Number of participants or eligible employees; |
| The variety of awards possible; and |
| The period of time covered by the plan. |
There are numerous factors that we view as negative, and together, may result in a vote against a proposal:
| Grants to individuals or very small groups of participants; |
| Gun-jumping grants which anticipate shareholder approval of a plan or amendment; |
| The power of the board to exchange underwater options without shareholder approval; this pertains to the ability of a company to reprice options, not the actual act of repricing described above; |
| Below market rate loans to officers to exercise their options; |
| The ability to grant options at less than fair market value; |
| Acceleration of vesting automatically upon a change in control; and |
| Excessive compensation (i.e. compensation plans which are deemed by SSGA FM to be overly dilutive). |
Share Repurchases If a company makes a clear connection between a share repurchase program and its intent to offset dilution created from option plans and the company fully discloses the amount of shares being repurchased, the voting dilution calculation may be adjusted to account for the impact of the buy back.
Companies who do not (i) clearly state the intentions of any proposed share buy-back plan or (ii) disclose a definitive number of the shares to be bought back, (iii) specify the range of premium/discount to market price at which a company can repurchase shares and, (iv) disclose the time frame during which the shares will be bought back, will not have any such repurchase plan factored into the dilution calculation.
162(m) Plan Amendments If a plan would not normally meet the SSGA FM criteria described above, but is primarily being amended to add specific performance criteria to be used with awards designed to qualify for performance-based exception from the tax deductibility limitations of Section 162(m) of the Internal Revenue Code, then SSGA FM will support the proposal to amend the plan.
8
Employee Stock Option Plans
SSGA FM generally votes for stock purchase plans with an exercise price of not less than 85% of fair market value. However, SSGA FM takes market practice into consideration.
Compensation Related Items
SSGA FM will generally support the following proposals:
| Expansions to reporting of financial or compensation-related information, within reason; and |
| Proposals requiring the disclosure of executive retirement benefits if the issuer does not have an independent compensation committee. |
SSGA FM will generally vote against the following proposals:
| Retirement bonuses for non-executive directors and auditors. |
Miscellaneous/Routine Items
SSGA FM generally supports the following miscellaneous/routine governance items:
| Reimbursement of all appropriate proxy solicitation expenses associated with the election when voting in conjunction with support of a dissident slate; |
| Opting out of business combination provision; |
| Proposals that remove restrictions on the right of shareholders to act independently of management; |
| Liquidation of the company if the company will file for bankruptcy if the proposal is not approved; |
| Shareholder proposals to put option repricings to a shareholder vote; |
| General updating of or corrective amendments to charter and bylaws not otherwise specifically addressed herein, unless such amendments would reasonably be expected to diminish shareholder rights (e.g. extension of directors term limits, amending shareholder vote requirement to amend the charter documents, insufficient information provided as to the reason behind the amendment); |
| Change in corporation name; |
| Mandates that amendments to bylaws or charters have shareholder approval; |
| Management proposals to change the date, time, and/or location of the annual meeting unless the proposed change is unreasonable; |
| Repeals, prohibitions or adoption of anti-greenmail provisions; |
| Management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced and proposals to implement a reverse stock split to avoid delisting; and |
| Exclusive forum provisions. |
SSGA FM generally does not support the following miscellaneous/ routine governance items:
| Proposals asking companies to adopt full tenure holding periods for their executives; |
| Reincorporation to a location that we believe has more negative attributes than its current location of incorporation; |
| Shareholder proposals to change the date, time, and/or location of the annual meeting unless the current scheduling or location is unreasonable; |
| Proposals to approve other business when it appears as voting item; |
| Proposals giving the board exclusive authority to amend the bylaws; and |
| Proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding unless there are compelling reasons to support the proposal. |
9
Environmental and Social Issues
As a fiduciary, we consider the financial and economic implications of environmental and social issues first and foremost. Environmental and social factors not only can have an impact on the reputation of companies; they may also represent significant operational risks and costs to business.
Well-developed environmental and social management systems can also generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. In our view, companies that manage all risks and consider opportunities related to environmental and social issues are able to adapt faster to changes and appear to be better placed to achieve sustainable competitive advantage in the long-term. Similarly, companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change, which could result in anything from regulation and litigation, physical threats (severe weather, climate change), economic trends as well as shifts in consumer behavior.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks on an issuer-by-issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint.
1 | Common for non-US issuers; request from the issuer to discharge from liability the directors or auditors with respect to actions taken by them during the previous year. |
10
ssga.com
State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended March 31, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Past performance is no guarantee of future results.
SSGA generally delegates commodities management for separately managed accounts to SSGA FM, a wholly owned subsidiary of State Street and an affiliate of SSGA. SSGA FM is registered as a commodity trading advisor (CTA) with the Commodity Futures Trading Commission and National Futures Association.
This communication is not specifically directed to investors of separately managed accounts (SMA) utilizing futures, options on futures or swaps. SSGA FM CTA clients should contact SSGA Relationship Management for important CTA materials.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3439-INST-5436 0315 Exp. Date: 03/31/2016
March 2015
FM Proxy Voting and Engagement Guidelines
Europe
SSGA Funds Management, Inc.s, (SSGA FM) European Proxy Voting and Engagement Guidelines cover different corporate governance frameworks and practices in European markets excluding the United Kingdom and Ireland. This policy complements and should be read in conjunction with SSGA FMs overarching Global Proxy Voting and Engagement Principles and SSGAs Conflicts of Interest Policy which provide a detailed explanation of SSGA FMs approach to voting and engaging with companies.
SSGA FMs Proxy Voting and Engagement Guidelines in European markets address areas including board structure, audit related issues, capital structure, remuneration, environmental, social and other governance related issues. Principally, we believe the primary responsibility of the board of directors is to preserve and enhance shareholder value and protect shareholder interests. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy, overseeing executive management and monitoring the risks that arise from a companys business, including risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board.
When voting and engaging with companies in European markets, SSGA FM considers market specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. SSGA FM expects companies to observe the relevant laws and regulations of their respective markets as well as country specific best practice guidelines and corporate governance codes. When we feel that a countrys regulatory requirements do not address some of the key philosophical principles that SSGA FM believes are fundamental to its global voting guidelines, we may hold companies in such markets to our global standards.
In its analysis and research in to corporate governance issues in European companies, SSGA FM also considers guidance issued by the European Commission. Companies should provide detailed explanations under diverse comply or explain approaches, especially where they fail to meet requirements and why any such non-compliance would serve shareholders long-term interests.
SSGA FMs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Corporate Governance Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA FM has established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. SSGA FM engages with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and environmental, social and governance (ESG) issues in a manner consistent with maximizing shareholder value.
The team works alongside members of SSGA FMs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in European markets.
SSGA FM is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the UK Stewardship Code. We are committed to sustainable investing and are working to further integrate ESG principles into investment and corporate governance practice, where applicable and consistent with our fiduciary duty.
Directors and Boards
SSGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. SSGA FM votes for the election/reelection of directors on a case-by-case basis after considering various factors including general market practice and availability of information on director skills and expertise. In principle, SSGA FM believes independent directors are crucial to good corporate governance and help management establish sound corporate governance policies and practices.
A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests.
SSGA FMs broad criteria for director independence in European companies include factors such as:
| Participation in relatedparty transactions and other business relations with the company; |
| Employment history with company; |
| Relations with controlling shareholders; |
| Family ties with any of the companys advisers, directors or senior employees; |
| Employee and government representatives; and |
| Overall average board tenure and individual director tenure at issuers with classified and de-classified boards, respectively. |
2
While, overall board independence requirements and board structures differ from market to market, SSGA FM considers voting against directors it deems non-independent if overall board independence is below one third. SSGA FM also assesses the division of responsibilities between chairman and CEO on a case-by-case basis, giving consideration to factors such as overall level of independence on the board and general corporate governance standards in the company. SSGA FM may also not support a proposal to discharge the board, if a company fails to meet adequate governance standards or board level independence.
When considering the election or re-election of a non-executive director, SSGA FM also considers the number of outside board directorships a non-executive can undertake and attendance at board meetings. In addition, SSGA FM may vote against the election of a director whose biographical disclosures are insufficient to assess his or her role on the board and/or independence.
Although we generally are in favour of the annual election of directors, we recognise that director terms vary considerably in different European markets. SSGA FM may vote against article/ bylaw changes that seek to extend director terms. In addition, in certain markets, SSGA FM may vote against directors if their director terms extend beyond four years.
SSGA FM believes companies should have relevant board level committees for audit, remuneration and nomination oversight. The audit committee is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence as well their effectiveness and resource levels. Similarly, executive pay is an important aspect of corporate governance, and it should be determined by the board of directors and SSGA FM expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA FM may vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA FM considers whether board members have adequate skills to provide effective oversight of corporate strategy, operations and risks, including environmental and social issues. Boards should also have a regular evaluation process in place to assess the effectiveness of the board and the skills of board members to address issues such as emerging risks, changes to corporate strategy and diversification of operations and geographic footprint.
In certain European markets it is not uncommon for the election of directors to be presented in a single slate. In these cases, where executives serve on the audit or the remuneration committees, SSGA FM may vote against the entire slate.
SSGA FM may also consider factors such as board performance and directors who appear to be remiss in the performance of their oversight responsibilities. (e.g. fraud, criminal wrongdoing, breach of fiduciary responsibilities)
Indemnification and Limitations on Liability
Generally, SSGA FM supports proposals to limit directors liability and/or expand indemnification and liability protection up to the limit provided by law, if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Audit Related Issues
Companies should have robust internal audit and internal control systems designed for effective management of any potential and emerging risks to company operations and strategy. The responsibility of setting out an internal audit function lies with the audit committee, which should have as members independent non-executive directors.
Appointment of External Auditors
SSGA FM believes that a companys auditor is an essential feature of an effective and transparent system of external supervision and shareholders should be given the opportunity to vote on their appointment or re-appoint at the annual meeting. When appointing external auditors and approving audit fees, SSGA FM will take into consideration the level of detail in company disclosures and will generally not support such resolutions if adequate breakdown is not provided and if non-audit fees are more than 50% of audit fees. In addition, SSGA FM may vote against members of the audit committee if we have concerns with audit related issues or if the level of non-audit fees to audit fees is significant. In certain circumstances, SSGA FM may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA FM generally opposes limiting the legal liability of audit firms as we believe this could create a negative impact on the quality of the audit function.
3
Shareholder Rights and Capital Related Issues
In some European markets, differential voting rights continue to exist. SSGA FM supports the one share one vote policy and favours a share structure where all shares have equal voting rights. SSGA FM believes pre-emption rights should be introduced for shareholders in order to provide adequate protection from being overly diluted from the issuance of new shares or convertible securities to third parties or a small number of select shareholders.
Unequal Voting Rights
SSGA FM generally opposes proposals authorizing the creation of new classes of common stock with superior voting rights and will generally oppose new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights. In addition, SSGA FM will not support capitalization changes that add classes of stock with undefined voting rights or classes that may dilute the voting interests of existing shareholders. SSGA FM supports proposals to abolish voting caps and capitalization changes that eliminate other classes of stock and/or unequal voting rights.
Increase in Authorized Capital
The ability raise capital is critical for companies to carry out strategy, grow, and achieve returns above their cost of capital. The approval of capital raising activities is fundamental to shareholders ability to monitor the amounts of proceeds and to ensure capital is deployed efficiently. SSGA FM supports capital increases that have sound business reasons and are not excessive relative to a companys existing capital base.
Pre-emption rights are a fundamental right for shareholders to protect their investment in a company. Where companies seek to issue new shares whilst dis-applying pre-emption rights, SSGA FM may vote against if such authorities are greater than 20% of the issued share capital. SSGA FM may also vote against resolutions seeking authority to issue capital with pre-emption rights if the aggregate amount allowed seems excessive and is not justified by the board. Generally, we are against capital issuance proposals greater than 100% of the issued share capital when the proceeds are not intended for a specific purpose.
Share Repurchase Programs
SSGA FM generally supports a proposal to repurchase shares, other than if the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, specify the range of premium/discount to market price at which a company can repurchase shares, and the time frame for the repurchase. SSGA FM may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA FM generally supports dividend payouts that constitute 30% or more of net income. SSGA FM may vote against the dividend payouts if the dividend payout ratio has been consistently below 30% without adequate explanation; or, the payout is excessive given the companys financial position. Particular attention will be paid where the payment may damage the companys long-term financial health.
Related Party Transactions
Certain companies in European markets have a controlled ownership structure and have complex cross-shareholdings between subsidiaries and parent companies (related companies). Such structures may result in the prevalence of related-party transactions between the company and its various stakeholders such as directors and management, subsidiaries and shareholders. In markets where shareholders are required to approve such transactions, SSGA FM expects companies to provide details of the transaction, such as the nature, value and purpose of such a transaction. It also encourages independent directors to ratify such transactions. Further, SSGA FM encourages companies to describe the level of independent board oversight and the approval process, including details of any independent valuations provided by financial advisors on related-party transactions.
4
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported.
SSGA FM will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
| At the time of voting, the current market price of the security exceeds the bid price |
Anti-Takeover Measures
European markets have diverse regulations concerning the use of share issuances as takeover defenses with legal restrictions lacking in some markets. SSGA FM supports a one-share, one-vote policy, for example, given that dual-class capital structures entrench certain shareholders and management, insulating them from possible takeovers. SSGA FM opposes unlimited share issuance authorizations as they may be used as antitakeover devices, and they have the potential for substantial voting and earnings dilution. SSGA FM also monitors the duration of authorities to issue shares and whether there are restrictions and caps on multiple issuance authorities during the specified time periods. SSGA FM opposes antitakeover defenses such as authorities for the board, when subject to a hostile takeover, to issue warrants convertible into shares to existing shareholders.
Remuneration
Executive Pay
Despite the differences among the types of plans and awards possible, there is a simple underlying philosophy that guides SSGA FMs analysis of executive paythere should be a direct relationship between remuneration and company performance over the long-term.
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, SSGA FM considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and performance. SSGA FM may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA FM may also vote against the re-election of members of the remuneration committee if we have serious concerns over remuneration practices and the company has not been responsive to shareholder pressure to review its approach.
Equity Incentives Plans
SSGA FM may not support proposals on equity-based incentive plans where insufficient information is provided on matters such as grant limits, performance metrics, performance and vesting periods and overall dilution. SSGA FM does not generally support options under such plans being issued at a discount to market price or plans that allow for re-testing of performance metrics.
5
Non-Executive Director Pay
In European markets, authorities seeking shareholder approval for non-executive directors fees are generally not controversial. SSGA FM generally supports resolutions regarding directors fees unless disclosure is poor and we are unable to determine whether they are excessive relative to fees paid by other companies in the same country or industry. SSGA FM will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA FM believes that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. SSGA FM allows boards discretion over how they provide oversight in this area. However, SSGA FM expects companies to disclose how the board provides oversight on its risk management system and to identify key risks facing the company. Boards should also review existing and emerging risks as they can change with a changing political and economic landscape, or as companies diversify or expand their operations into new areas.
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA FM supports environmental and social related items that we believe would protect or enhance shareholder value. Environmental and social factors not only can have an impact on the reputation of companies; they may also represent significant operational risks and costs to business. Well-developed environmental and social management systems can also generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. In our view, companies that manage all risks and consider opportunities related to environmental and social issues are able to adapt faster to changes and appear to be better placed to achieve sustainable competitive advantage in the long-term. Similarly, Companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change, which could result in anything from regulation and litigation, physical threats (severe weather, climate change), economic trends as well as shifts in consumer behavior.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks and shareholder proposals relating to them on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint. SSGA FM may also take action against the re-election of members of the board if we have serious concerns over ESG practices and the company has not been responsive to shareholder pressure.
6
ssga.com
State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 28, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3449-INST-5416 0315 Exp. Date: 03/31/2016
March 2015
FM Proxy Voting and Engagement Guidelines United Kingdom
SSGA Funds Management, Inc.s, (SSGA FM), UK Proxy Voting and Engagement Guidelines outline our expectations of companies listed on stock exchanges in the United Kingdom and Ireland. This policy complements and should be read in conjunction with SSGA FMs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGA FMs approach to voting and engaging with companies and SSGAs Conflicts of Interest Policy.
SSGA FMs UK Proxy Voting and Engagement Guidelines address areas including board structure, audit related issues, capital structure, remuneration, environmental, social and other governance related issues. Principally, we believe the primary responsibility of the board of directors is to preserve and enhance shareholder value and protect shareholder interests. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy, overseeing executive management to monitoring the risks that arise from a companys business, including risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board.
When voting and engaging with companies in global markets, SSGA FM considers market specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. SSGA FM expects companies to observe the relevant laws and regulations of their respective markets as well as country specific best practice guidelines and corporate governance codes. When we feel that a countrys regulatory requirements do not address some of the key philosophical principles that SSGA FM believes are fundamental to its global voting guidelines, we may hold companies in such markets to our global standards.
In its analysis and research into corporate governance issues in the UK and Ireland, SSGA FM expects all companies, regardless of domicile, that obtain a primary listing on the London Stock Exchange or the Irish Stock Exchange to comply with the UK Corporate Governance Code. Companies should provide detailed explanations under the Codes comply or explain approach, especially where they fail to meet requirements and why any such non-compliance would serve shareholders long-term interests.
SSGA FMs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Corporate Governance Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA FM has established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. SSGA FM engages with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and environmental, social and governance (ESG) issues in a manner consistent with maximizing shareholder value.
The team works alongside members of SSGA FMs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in the UK and European markets.
SSGA FM is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the UK Stewardship Code. We are committed to sustainable investing and are working to further integrate ESG principles into investment and corporate governance practice, where applicable and consistent with our fiduciary duty.
Directors and Boards
SSGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering various factors including general market practice and availability of information on director skills and expertise. In principle, SSGA FM believes independent directors are crucial to good corporate governance and help management establish sound corporate governance policies and practices.
A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests.
SSGA FMs broad criteria for director independence in UK companies include factors such as:
| Participation in related-party transactions and other business relations with the company; |
| Employment history with company; |
| Excessive tenure and a preponderance of long-tenured directors: |
| Relations with controlling shareholders; and |
| Family ties with any of the companys advisers, directors or senior employees. |
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When considering the election or re-election of a director, SSGA FM also considers the number of outside board directorships a non-executive and an executive may undertake as well as attendance at board meetings. In addition, SSGA FM monitors other factors that may influence the independence of a non-executive director, such as performance related pay, cross-directorships, significant shareholdings and tenure. SSGA FM supports the annual election of directors.
While SSGA FM is generally supportive of having the roles of chairman and CEO separated in the UK market, SSGA FM assesses the division of responsibilities between chairman and CEO on a case-by-case basis, giving consideration to factors such as the companys specific circumstances, overall level of independence on the board and general corporate governance standards in the company. Similarly, SSGA FM will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA FM may also consider factors such as board performance and directors who appear to be remiss in the performance of their oversight responsibilities when considering their suitability for reappointment. (e.g. fraud, criminal wrongdoing, breach of fiduciary responsibilities).
SSGA FM believes companies should have committees for audit, remuneration and nomination oversight. The audit committee is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence as well their effectiveness and resource levels. Similarly, executive pay is an important aspect of corporate governance, and it should be determined by the board of directors and SSGA FM expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA FM will vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA FM considers whether board members have adequate skills to provide effective oversight of corporate strategy, operations and risks, including environmental and social issues. Boards should also have a regular evaluation process in place to assess the effectiveness of the board and the skills of board members to address issues such as emerging risks, changes to corporate strategy and diversification of operations and geographic footprint. The nomination committee is responsible for evaluating and keeping under review the balance of skills, knowledge and experience of the board and ensuring that adequate succession plans are in place for directors and the CEO. SSGA FM may vote against the re-election of members of the nomination committee if, over time, the board has failed to address concerns over board structure or succession.
Indemnification and Limitations on Liability
Generally, SSGA FM supports proposals to limit directors liability and/or expand indemnification and liability protection up to the limit provided by law, if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in.
Audit Related Issues
Companies should have robust internal audit and internal control systems designed for effective management of any potential and emerging risks to company operations and strategy. The responsibility of setting out an internal audit function lies with the audit committee, which should have as members independent non-executive directors.
Appointment of External Auditors
SSGA FM believes that a companys auditor is an essential feature of an effective and transparent system of external supervision and shareholders should be given the opportunity to vote on their appointment or re-appoint at the annual meeting. When appointing external auditors and approving audit fees, SSGA FM will take into consideration the level of detail in company disclosures and will generally not support such resolutions if an adequate breakdown is not provided and if non-audit fees are more than 50% of audit fees. In addition, SSGA FM may vote against members of the audit committee if we have concerns with audit related issues or if the level of non-audit fees to audit fees is significant. In certain circumstances, SSGA FM may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA FM generally opposes limiting the legal liability of audit firms as we believe this could create a negative impact on the quality of the audit function.
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Shareholder Rights and Capital Related Issues
Share Issuances
The ability to raise capital is critical for companies to carry out strategy, grow, and achieve returns above their cost of capital. The approval of capital raising activities is fundamental to shareholders ability to monitor the amounts of proceeds and to ensure capital is deployed efficiently. SSGA FM supports capital increases that have sound business reasons and are not excessive relative to a companys existing capital base.
Pre-emption rights are a fundamental right for shareholders to protect their investment in a company. Where companies seeks to issue new shares whilst dis-applying pre-emption rights, SSGA FM may vote against if such authorities are greater than 20% of the issued share capital. SSGA FM may also vote against resolutions seeking authority to issue capital with pre-emption rights if the aggregate amount allowed seems excessive and is not justified by the board. Generally, we are against capital issuance proposals greater than 100% of the issued share capital when the proceeds are not intended for a specific purpose.
Share Repurchase Programs
SSGA FM generally supports a proposal to repurchase shares, other than if the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, specify the range of premium/discount to market price at which a company can repurchase shares, and the time frame for the repurchase. SSGA FM may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA FM generally supports dividend payouts that constitute 30% or more of net income. SSGA FM may vote against the dividend payouts if the dividend payout ratio has been consistently below 30% without adequate explanation; or, the payout is excessive given the companys financial position. Particular attention will be paid where the payment may damage the companys long term financial health.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported.
SSGA FM will generally support transactions that maximize share-holder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
| At the time of voting, the current market price of the security exceeds the bid price. |
Anti-Takeover Measures
SSGA FM opposes antitakeover defenses such as authorities for the board when subject to a hostile takeover to issue warrants convertible into shares to existing shareholders.
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Remuneration
Executive Pay
Despite the differences among the types of plans and awards possible, there is a simple underlying philosophy that guides SSGA FMs analysis of executive paythere should be a direct relationship between remuneration and company performance over the long-term.
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration policies and reports, SSGA FM considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and performance. SSGA FM may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA FM may also vote against the re-election of members of the remuneration committee if we have serious concerns over remuneration practices and the company has not been responsive to shareholder pressure.
Equity Incentives Plans
SSGA FM may not support proposals on equity-based incentive plans where insufficient information is provided on matters such as grant limits, performance metrics, performance and vesting periods and overall dilution. SSGA FM does not generally support options under such plans being issued at a discount to market price or plans that allow for re-testing of performance metrics.
Non-Executive Director Pay
Authorities seeking shareholder approval for non-executive directors fees are generally not controversial. SSGA FM generally supports resolutions regarding directors fees unless disclosure is poor and we are unable to determine whether they are excessive relative to fees paid by other companies in the same country or industry. SSGA FM will evaluate on a company- by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA FM believes that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. SSGA FM allows boards discretion over how they provide oversight in this area. However, SSGA FM expects companies to disclose how the board provides oversight on its risk management system and to identify key risks facing the company. Boards should also review existing and emerging risks as they can change with a changing political and economic landscape, or as companies diversify or expand their operations into new areas.
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA FM supports environmental and social related items that we believe would protect or enhance shareholder value. Environmental and social factors not only can have an impact on the reputation of companies; they may also represent significant operational risks and costs to business. Well-developed environmental and social management systems can also generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. In our view, companies that manage all risks and consider opportunities related to environmental and social issues are able to adapt faster to changes and appear to be better placed to achieve sustainable competitive advantage in the long-term. Similarly, companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change, which could result in anything from regulation and litigation, physical threats (severe weather, climate change), economic trends as well as shifts in consumer behavior.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks and shareholder proposals relating to them on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint. SSGA FM may also take action against the re-election of members of the board if we have serious concerns over ESG practices and the company has not been responsive to shareholder pressure.
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State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 19, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3445-INST-5412 0315 Exp. Date: 03/31/2016
March 2015
FM Proxy Voting and Engagement Guidelines
Emerging Markets
SSGA Funds Management, Inc.s (SSGA FM) Emerging Market Proxy Voting and Engagement Guidelines cover different corporate governance frameworks and practices in emerging markets. This policy complements and should be read in conjunction with SSGA FMs overarching Global Proxy Voting and Engagement Principles which provides a detailed explanation of SSGA FMs approach to voting and engaging with companies, and SSGAs Conflicts of Interest Policy.
At SSGA FM, we recognize that countries in emerging markets are disparate in their corporate governance frameworks and practices. Concurrent with developing a company specific voting and engagement program, SSGA FM also evaluates the various factors that play into the corporate governance framework of a country. These factors include: (i) the macroeconomic conditions and broader political system in a country; (ii) quality of regulatory oversight, enforcement of property and shareholder rights; and (iii) the independence of judiciaryto name a few. While emerging market countries tend to pose broad common governance issues across all markets, such as concentrated ownership, poor disclosure of financial and related-party transactions, and weak enforcement of rules and regulation, SSGA FMs emerging market proxy voting policy is designed to identify and address specific governance concerns in each market.
SSGA FMs Proxy Voting and Engagement Philosophy in Emerging Markets
SSGA FMs approach to proxy voting and issuer engagement in emerging markets is designed to increase the value of our investments through the mitigation of governance risks. Since the overall quality of the corporate governance framework in an emerging market country drives the level of governance risks investors assign to a country, improving the macro governance framework in a country may help reduce governance risks, in turn, increasing the overall value of SSGA FMs holdings over time. Therefore, in order to improve the overall governance framework and practices in a country, members of our proxy voting and engagement team endeavor to visit emerging market countries and meet with representatives from regulatory agencies and stock markets to highlight potential concerns with the macro governance framework of a country. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in emerging markets. To help mitigate company specific risk, the team works alongside members of the active fundamental and emerging market teams to engage with emerging market companies on governance issues and address any specific concerns or to get more information regarding shareholder items that are to be voted on at upcoming shareholder meetings. This integrated approach to engagement drives SSGA FMs proxy voting and engagement philosophy in emerging markets.
SSGA FMs proxy voting guidelines in emerging markets addresses six broad areas:
| Directors and Boards; |
| Accounting and Audit Related Issues; |
| Shareholder Rights and Capital Related Issues; |
| Remuneration; |
| Environmental and Social Issues; and |
| General/Routine Issues. |
Directors and Boards
SGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. However, several factors such as low overall independence level requirements by market regulators, poor biographical disclosure of director profiles, prevalence of related-party transactions and the general resistance from controlling shareholders to increase board independence renders the election of directors as one of the most important fiduciary duties SSGA FM performs in emerging market companies.
SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering various factors including general market practice and availability of information on director skills and expertise.
SSGA FMs broad criteria for director independence in emerging market companies include factors such as:
| Participation in related-party transactions; |
| Employment history with company; |
| Relations with controlling shareholders and other |
| employees; and |
| Attendance levels. |
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Audit Related Issues
The disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. As a result, board oversight of internal controls and the independence of the audit process are essential if investors are to rely on financial statements. SSGA FM believes that audit committees provide the necessary oversight on the selection and appointment of auditors, a companys internal controls and accounting policies, and the overall audit process. In emerging markets, SSGA FM encourages boards to appoint an audit committee composed of a majority of independent auditors.
Appointment of External Auditors
SSGA FM believes that a companys auditor is an essential feature of an effective and transparent system of external supervision and shareholders should be given the opportunity to vote on their appointment or re-appoint at the annual meeting. SSGA FM believes that it is imperative for audit committees to select outside auditors who are independent from management.
Shareholder Rights and Capital Related Issues
SSGA FM believes that changes to a companys capital structure such as changes in authorized share capital, share repurchase and debt issuances are critical decisions made by the board. SSGA FM believes the company should have a well explained business rationale that is consistent with corporate strategy and should not overly dilute its shareholders.
Related Party Transactions
Most companies in emerging markets have a controlled ownership structure that often include complex cross-shareholding between subsidiaries and parent companies (related companies). As a result, there is a high prevalence of related-party transactions between the company and its various stakeholders such as directors and management. In addition, inter-group loan and loan guarantees provided to related companies are some of the other related-party transactions that increase the risk profile of companies. In markets where shareholders are required to approve such transactions, SSGA FM expects companies to provide details of the transaction, such as the nature, value and purpose of such a transaction. It also encourages independent directors to ratify such transactions. Further, SSGA FM encourages companies to describe the level of independent board oversight and the approval process, including details of any independent valuations provided by financial advisors on related-party transactions.
Share Repurchase Programs
With regard to share repurchase programs, SSGA FM expects companies to clearly state the business purpose for the program, a definitive number of shares to be repurchase.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported.
SSGA FM evaluates mergers and structural reorganizations on a case-by-case basis. SSGA FM will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
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| At the time of voting, the current market price of the security exceeds the bid price. |
SSGA will actively seek direct dialogue with the board and management of companies we have identified through our screening processes. Such engagements may lead to further monitoring to ensure the company improves its governance or sustainability practices. In these cases, the engagement process represents the most meaningful opportunity for SSGA to protect long-term shareholder value from excessive risk due to poor governance and sustainability practices.
Remuneration
SSGA FM considers it to be the boards responsibility to set appropriate level of executive compensation. Despite the differences among the types of plans and the awards possible, there is a simple underlying philosophy that guides SSGA FMs analysis of executive compensation; there should be a direct relationship between executive compensation and company performance over the long term. In emerging markets we encourage companies to disclose information on senior executive remuneration.
With regard to director remuneration, SSGA FM supports director pay provided the amounts are not excessive relative to other issuers in the market or industry and are not overly dilutive to existing shareholders.
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA FM supports environmental and social related items that we believe would protect or enhance shareholder value. Environmental and social factors can not only have an impact on the reputation of companies; they may also represent significant operational risks and costs to business. Well-developed environmental and social management systems generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. Companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change. In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint. In emerging markets, shareholders seldom vote on environmental and social issues. Therefore, SSGA FM addresses a companys approach to identifying and managing environmental and social risks stemming for various aspects of its operations in its one-on-one engagement with companies.
General/Routine Issues
Some of the other issues that are routinely voted on in emerging markets include approving the allocation of income and accepting financial statements and statutory reports. For these voting items, SSGA FMs policies consider several factors including historical dividend payouts, pending litigation, governmental investigation, charges of fraud or other indication of significant concerns.
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State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 28, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3510-INST-5434 0315 Exp. Date: 03/31/2016
March 2015
FM Proxy Voting and Engagement Guidelines
Japan
SSGA Funds Management, Inc.s, (SSGA FM) Japan Proxy Voting and Engagement Guidelines complement and should be read in conjunction with SSGA FMs overarching Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGA FMs approach to voting and engaging with companies, and SSGAs Conflicts of Interest Policy.
SSGA FMs Proxy Voting and Engagement Guidelines in Japan address areas including; board structure, audit related issues, capital structure, remuneration, environmental, social and other governance related issues. Principally, we believe the primary responsibility of the board of directors is to preserve and enhance shareholder value and protect shareholder interests. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy, overseeing executive management to monitoring the risks that arise from a companys business, including risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board.
When voting and engaging with companies in Japan, SSGA FM takes into consideration the unique aspects of Japanese corporate governance structures. We recognize that under Japanese corporate law, companies may choose between two structures of corporate governance: the statutory auditor system or the committee structure. Most Japanese boards predominantly consist of executives and non-independent outsiders affiliated through commercial relationships or cross-shareholdings. Nonetheless, when evaluating companies, SSGA FM expects Japanese companies to address conflicts of interest, risk management and demonstrate an effective process for monitoring management. In its analysis and research into corporate governance issues in Japanese companies, SSGA FM also considers guidance issued by the Corporate Law Subcommittee of the Legislative Council within the Ministry of Justice as well as private study groups.
SSGA FMs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Corporate Governance Team consists of investment professionals with expertise in corporate governance and company law, remuneration, and environmental and social issues. SSGA FM has established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. SSGA FM engages with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and environmental, social and governance (ESG) issues in a manner consistent with maximizing shareholder value.
The team works alongside members of SSGA FMs active investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in Japan.
SSGA FM is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with UK Stewardship Code. We are committed to sustainable investing and are working to further integrate ESG principles into investment and corporate governance practice, where applicable and consistent with our fiduciary duty.
Directors and Boards
SSGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering various factors including general market practice.
Japanese companies have the option of having a traditional board of directors with statutory auditors, or a board with a committee structure. Most Japanese issuers prefer the traditional statutory auditor structure. Statutory auditors act in a quasi-compliance role as they are not involved in strategic decision-making nor are they part of the formal management decision process. Statutory auditors attend board meetings but do not have voting rights at the board; however, they have the right to seek an injunction and conduct broad investigations of unlawful behavior in the companys operations.
SSGA FM will support the election of statutory auditors, unless the outside statutory auditor nominee is regarded as non-independent based on SSGA FM criteria, the outside statutory auditor has attended less than 75 percent of meetings of the board of directors or board of statutory auditors during the year under review, or the statutory auditor has been remiss in the performance of their oversight responsibilities (fraud, criminal wrong doing, breach of fiduciary responsibilities).
For companies with a statutory auditor structure there is no legal requirement that boards have outside directors, however, SSGA FM believes there should be a transparent process of independent and external monitoring of management on behalf of shareholders.
| SSGA FM believes that non-controlled Japanese companies should appoint at least one outside director, otherwise, SSGA FM will oppose the top executive who is responsible for the director nomination process; and |
| For controlled companies with a statutory auditor structure, SSGA FM will oppose the top executive, if the board does not have at least two outside directors. |
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For companies with a committee structure, SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering general market practice, as well as the independence of the nominee. SSGA FM also takes into consideration the overall independence level of the committees. In determining director independence, SSGA FM considers the following factors:
| Participation in related-party transactions and other business relations with the company; |
| Past employment with the company; |
| Provides professional services to the company; and |
| Family ties with the company. |
Regardless of board structure, SSGA FM may oppose the election of a director for the following reasons:
| Failure to attend board meetings; or |
| In instances of egregious actions related to a directors service on the board. |
Indemnification and Limitations on Liability
Generally, SSGA FM supports proposals to limit directors and statutory auditors liability and/or expand indemnification and liability protection up to the limit provided by law, if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. SSGA FM believes limitations and indemnification are necessary to attract and retain qualified directors.
Audit Related Items
SSGA FM believes that a companys auditor is an essential feature of an effective and transparent system of external supervision and shareholders should have the opportunity to vote on their appointment at the annual meeting.
Ratifying External Auditors
SSGA FM will generally support the appointment of external auditors unless the external auditor is perceived as being non-independent and there are concerns about the accounts presented and the audit procedures followed.
Limit Legal Liability of External Auditors
SSGA FM generally opposes limiting the legal liability of audit firms as we believe this could create a negative impact on the quality of the audit function.
Capital Structure, Reorganization and Mergers
SSGA FM supports the one share one vote policy and favors a share structure where all shares have equal voting rights. SSGA FM supports proposals to abolish voting caps or multiple voting rights and will oppose measures to introduce these types of restrictions on shareholder rights. SSGA FM believes pre-emption rights should be introduced for shareholders in order to provide adequate protection from being overly diluted from the issuance of new shares or convertible securities to third parties or a small number of select shareholders.
Unequal Voting Rights
SSGA FM generally opposes proposals authorizing the creation of new classes of common stock with superior voting rights and will generally oppose new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights. In addition, SSGA FM will not support capitalization changes that add classes of stock with undefined voting rights or classes that may dilute the voting interests of existing shareholders.
However, SSGA FM will support capitalization changes that eliminate other classes of stock and/or unequal voting rights.
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Increase in Authorized Capital
SSGA FM generally supports increases in authorized capital where the company provides an adequate explanation for the use of shares. In the absence of an adequate explanation, SSGA FM may oppose the request if the increase in authorized capital exceeds 100 percent of the currently authorized capital. Where share issuance requests exceed our standard threshold, SSGA FM will consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Dividends
SSGA FM generally supports dividend payouts that constitute 30% or more of net income. SSGA FM may vote against the dividend payouts if the dividend payout ratio has been consistently below 30% without adequate explanation; or, the payout is excessive given the companys financial position. Particular attention will be paid where the payment may damage the companys long term financial health.
Share Repurchase Programs
Companies are allowed under Japan Corporate Law to amend their articles to authorize the repurchase of shares at the boards discretion. SSGA FM will oppose an amendment to articles allowing the repurchase of shares at the boards discretion. SSGA FM believes the company should seek shareholder approval for a share repurchase program at each years AGM, providing shareholders the right to evaluate the purpose of the repurchase.
SSGA FM generally supports a proposal to repurchase shares, other than if the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, and the time frame for the repurchase. SSGA FM may vote against share repurchase requests that allow share repurchases during a takeover period.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported.
SSGA FM evaluates mergers and structural reorganizations on a case-by-case basis. SSGA FM will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
| At the time of voting, the current market price of the security exceeds the bid price. |
Anti-Takeover Measures
In general, SSGA FM believes that adoption of poison pills that have been structured to protect management and to prevent takeover bids from succeeding is not in shareholders interest. A shareholder rights plan may lead to management entrenchment and discourage legitimate tender offers and acquisitions. Even if the premium paid to companies with a shareholder rights plan is higher than that offered to unprotected firms, a companys chances of receiving a takeover offer in the first place may be reduced by the presence of a shareholder rights plan.
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Proposals that reduce shareholders rights or have the effect of entrenching incumbent management will not be supported.
Proposals that enhance the right of shareholders to make their own choices as to the desirability of a merger or other proposal are supported.
Shareholder Rights Plans
In evaluating poison pills, the following conditions must be met before SSGA FM will recommend a vote in favor.
SSGA FM will support the adoption or renewal of a Japanese issuers shareholder rights plans (poison pill) if the following conditions are met: (i) minimum trigger, flip-in or flip-over of 20%, (ii) maximum term of three years, (iii) no dead hand, slow hand, no hand or similar feature that limits the ability of a future board to redeem the pill, and (iv) inclusion of a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced.
SSGA FM will vote for an amendment to a shareholder rights plan (poison pill) where the terms of the new plans are more favorable to shareholders ability to accept unsolicited offers (i.e. if one of the following conditions are met: (i) minimum trigger, flip-in or flip-over of 20%, (ii) maximum term of three years, (iii) no dead hand, slow hand, no hand or similar feature that limits the ability of a future board to redeem the pill, or (iv) inclusion of a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced).
Compensation
In Japan, excessive compensation is rarely an issue. Rather, the problem is the lack of connection between pay and performance. Fixed salaries and cash retirement bonuses tend to comprise a significant portion of the compensation structure while performance-based pay is generally a small portion of the total pay. SSGA FM, where possible, seeks to encourage the use of performance based compensation in Japan as an incentive for executives and as a way to align interests with shareholders.
Approve Adjustment to Aggregate Compensation Ceiling for Directors
Remuneration for directors is generally reasonable. Typically, each company sets the director compensation parameters as an aggregate thereby limiting the total pay to all directors. When requesting a change, a company must disclose the last time the ceiling was adjusted and management provides the rationale for the ceiling increase. SSGA FM will generally support proposed increases to the ceiling if the company discloses the rationale for the increase. SSGA FM may oppose proposals to increase the ceiling if there has been corporate malfeasance or sustained poor performance.
Approve Annual Bonuses for Directors/Statutory Auditors
In Japan, since there are no legal requirements that mandate companies to seek shareholder approval before awarding a bonus, SSGA FM believes that existing shareholder approval of the bonus should be considered best practice. As a result, SSGA FM supports management proposals on executive compensation where there is a strong relationship between executive pay and performance over a five-year period.
Approve Retirement Bonuses for Directors/ Statutory Auditors
Retirement bonuses make up a sizeable portion of directors and auditors lifetime compensation and are based on board tenure. While many companies in Japan have abolished this practice, there remain many proposals seeking shareholder approval for the total amounts paid to directors and statutory auditors as a whole. In general, SSGA FM supports these payments unless the recipient is an outsider or in instances where the amount is not disclosed.
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Approve Stock Plan
Most option plans in Japan are conservative, particularly at large companies. Japan corporate law requires companies to disclose the monetary value of the stock options for directors and/or statutory auditors. Some companies do not disclose the maximum number of options that can be issued per year and shareholders are unable to evaluate the dilution impact. In this case, SSGA FM cannot calculate the dilution level and, therefore, SSGA FM may oppose such plans for poor disclosure. SSGA FM also opposes plans that allow for the repricing of the exercise price.
Deep Discount Options
As Japanese companies move away from the retirement bonus system, deep discount options plans have become more popular. Typically, the exercise price is set at JPY 1 per share. SSGA FM evaluates deep discount options using the same criteria used to evaluate stock options as well as considering the vesting period.
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA FM supports environmental and social related items that we believe would protect or enhance shareholder value. Environmental and social factors can not only have an impact on the reputation of companies; they may also represent significant operational risks and costs to business. Well-developed environmental and social management systems generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. Companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint.
Miscellaneous/Routine Items
Expansion of Business Activities
Japanese companies articles of incorporation strictly define the types of businesses in which a company is permitted to engage. In general, SSGA FM views proposals to expand and diversify the companys business activities as routine and non-contentious. SSGA FM will monitor instances where there has been an inappropriate acquisition and diversification away from the companys main area of competence, which resulted in a decrease of shareholder value.
More Information
Any client who wishes to receive information on how its proxies were voted should contact its SSGA FM relationship manager.
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Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 28, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3454-INST-5418 0315 Exp. Date: 03/31/2016
March 2015
FM Proxy Voting and Engagement Guidelines
Australia
SSGA Funds Management, Inc.s (SSGA FM) Australia Proxy Voting and Engagement Guidelines outline our expectations of companies listed on stock exchanges in Australia. This policy complements and should be read in conjunction with SSGA FMs Global Proxy Voting and Engagement Principles which provide a detailed explanation of SSGA FMs approach to voting and engaging with companies, and SSGAs Conflict of Interest Policy.
SSGA FMs Australia Proxy Voting and Engagement Guidelines address areas including board structure, audit related issues, capital structure, remuneration, environmental, social and other governance related issues. Principally, we believe the primary responsibility of the board of directors is to preserve and enhance shareholder value and protect shareholder interests. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy, overseeing executive management to monitoring the risks that arise from a companys business, including risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board.
When voting and engaging with companies in global markets, SSGA FM considers market specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. SSGA FM expects companies to observe the relevant laws and regulations of their respective markets as well as country specific best practice guidelines and corporate governance codes. When we feel that a countrys regulatory requirements do not address some of the key philosophical principles that SSGA FM believes are fundamental to its global voting guidelines, we may hold companies in such markets to our global standards.
In its analysis and research in to corporate governance issues in Australia, SSGA FM expects all companies at a minimum to comply with the ASX Corporate Governance Principles. Companies should provide detailed explanations under the Principles comply or explain approach, especially where they fail to meet requirements and why any such non-compliance would serve shareholders long-term interests. On some governance matters, such as composition of audit committees, we hold Australian companies to our global standards requiring all directors on the committee to be independent of management.
SSGA FMs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Corporate Governance Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA FM has established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. SSGA FM engages with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and environmental, social and governance (ESG) issues in a manner consistent with maximizing shareholder value.
The team works alongside members of SSGA FMs active fundamental and the Asia-Pacific (APAC) investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in the region.
SSGA FM is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the UK Stewardship Code. We are committed to sustainable investing and are working to further integrate ESG principles into investment and corporate governance practice, where applicable and consistent with our fiduciary duty.
Directors and Boards
SSGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering various factors including general market practice and availability of information on director skills and expertise. In principle, SSGA FM believes independent directors are crucial to good corporate governance and help management establish sound ESG policies and practices. A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests.
SSGA FMs broad criteria for director independence in Australian companies include factors such as:
| Participation in related-party transactions and other business relations with the company; |
| Employment history with company; |
| Relations with controlling shareholders; and |
| Family ties with any of the companys advisers, directors or senior employees. |
When considering the election or re-election of a director, SSGA FM also considers the number of outside board director-ships a non-executive and an executive may undertake as well as attendance at board meetings. In addition, SSGA FM monitors other factors that may influence the independence of a non-executive director, such as performance related pay, cross-directorships, significant shareholdings and tenure. SSGA FM supports the annual election of directors and encourages Australian companies to adopt this practice.
While SSGA FM is generally supportive of having the roles of chairman and CEO separated in the Australia market, SSGA FM assesses the division of responsibilities between chairman and CEO on a case-by-case basis, giving consideration to factors such as the
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companys specific circumstances, overall level of independence on the board and general corporate governance standards in the company. Similarly, SSGA FM will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA FM may also consider factors such as board performance and directors who appear to be remiss in the performance of their oversight responsibilities when considering their suitability for reappointment. (e.g. fraud, criminal wrongdoing, breach of fiduciary responsibilities)
SSGA FM believes companies should have committees for audit, remuneration and nomination oversight. The audit committee is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence as well their effectiveness and resource levels. Australian Corporate Governance Principles requires ASX listed companies to have an audit committee of at least three members all of whom are non-executive directors and a majority of whom are independent directors. It also requires that the committee be chaired by an independent director who is not the chair of the board. SSGA FM holds Australian companies to its global standards for developed financial markets, by requiring that all members of the audit committee be independent directors.
In its analysis of boards, SSGA FM considers whether board members have adequate skills to provide effective oversight of corporate strategy, operations and risks, including environmental and social issues. Boards should also have a regular evaluation process in place to assess the effectiveness of the board and the skills of board members to address issues such as emerging risks, changes to corporate strategy and diversification of operations and geographic footprint. The nomination committee is responsible for evaluating and keeping under review the balance of skills, knowledge and experience of the board and ensuring that adequate succession plans are in place for directors and the CEO. SSGA FM may vote against the re-election of members of the nomination committee if, over time, the board has failed to address concerns over board structure or succession.
Executive pay is another important aspect of corporate governance. SSGA FM believes that executive pay should be determined by the board of directors and SSGA FM expects companies to have in place remuneration committees to provide independent oversight over executive pay. Australian Corporate Governance Principles requires ASX listed companies to have a remuneration committee of at least three members all of whom are non-executive directors and a majority of whom are independent directors. Since Australia has a non-binding vote on pay with a two-strike rule requiring a board spill in the event of a second strike, SSGA FM believes that the vote provides investors a mechanism to address concerns it may have on the quality of oversight provided by the board on remuneration issues. Accordingly SSGA FM voting guidelines accommodate local market practice.
Indemnification and limitations on liability
Generally, SSGA FM supports proposals to limit directors liability and/or expand indemnification and liability protection up to the limit provided by law, if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Audit Related Issues
Companies should have robust internal audit and internal control systems designed for effective management of any potential and emerging risks to company operations and strategy. The responsibility of setting out an internal audit function lies with the audit committee, which should have as members independent non-executive directors.
Appointment of External Auditors
SSGA FM believes that a companys auditor is an essential feature of an effective and transparent system of external supervision and shareholders should be given the opportunity to vote on their appointment or re-appoint at the annual meeting. When appointing external auditors and approving audit fees, SSGA FM will take into consideration the level of detail in company disclosures and will generally not support such resolutions if adequate breakdown is not provided and if non-audit fees are more than 50% of audit fees. In addition, SSGA FM may vote against members of the audit committee if we have concerns with audit related issues or if the level of non-audit fees to audit fees is significant. In certain circumstances, SSGA FM may consider auditor tenure when evaluating the audit process.
Shareholder Rights and Capital Related Issues
Share Issuances
The ability to raise capital is critical for companies to carry out strategy, grow, and achieve returns above their cost of capital. The approval of capital raising activities is fundamental to shareholders ability to monitor the amounts of proceeds and to ensure capital is deployed efficiently. SSGA FM supports capital increases that have sound business reasons and are not excessive relative to a companys existing capital base.
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Pre-emption rights are a fundamental right for shareholders to protect their investment in a company. Where companies seeks to issue new shares whilst dis-applying pre-emption rights, SSGA FM may vote against if such authorities are greater than 20% of the issued share capital. SSGA FM may also vote against resolutions seeking authority to issue capital with pre-emption rights if the aggregate amount allowed seems excessive and is not justified by the board. Generally, we are against capital issuance proposals greater than 100% of the issued share capital when the proceeds are not intended for specific purpose.
Share Repurchase Programs
SSGA FM generally supports a proposal to repurchase shares, other than if the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, and the time frame for the repurchase. SSGA FM may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA FM generally supports dividend payouts that constitute 30% or more of net income. SSGA FM may vote against the dividend payouts if the dividend payout ratio has been consistently below 30% without adequate explanation; or, the payout is excessive given the companys financial position. Particular attention will be paid where the payment may damage the companys long-term financial health.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported. SSGA FM will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
| At the time of voting, the current market price of the security exceeds the bid price. |
Anti-Takeover Measures
SSGA FM opposes antitakeover defenses, such as authorities for the board, when subject to a hostile takeover, to issue warrants convertible into shares to existing shareholders.
Remuneration
Executive Pay
There is a simple underlying philosophy that guides SSGA FMs analysis of executive paythere should be a direct relationship between remuneration and company performance over the long-term. Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, SSGA FM considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long term and short term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and performance. SSGA FM may oppose remuneration reports where there seems to be a misalignment between pay and shareholders
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interests and where incentive policies and schemes have a re-test option or feature. SSGA FM may also vote against the re-election of members of the remuneration committee if we have serious concerns over remuneration practices and the company has not been responsive to shareholder pressure to review its approach.
Equity Incentives Plans
SSGA FM may not support proposals on equity-based incentive plans where insufficient information is provided on matters such as grant limits, performance metrics, performance and vesting periods and overall dilution. SSGA FM does not generally support options under such plans being issued at a discount to market price or plans that allow for re-testing of performance metrics.
Non-Executive Director Pay
Authorities seeking shareholder approval for non-executive directors fees are generally not controversial. SSGA FM generally supports resolutions regarding directors fees unless disclosure is poor and we are unable to determine whether they are excessive relative to fees paid by other companies in the same country or industry. SSGA FM will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA FM believes that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. SSGA FM allows boards discretion over how they provide oversight in this area. However, SSGA FM expects companies to disclose how the board provides oversight on its risk management system and to identify key risks facing the company. Boards should also review existing and emerging risks as they can change with a changing political and economic landscape, or as companies diversify or expand their operations into new areas.
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA FM supports environmental and social related items that we believe would protect or enhance shareholder value. Environmental and social factors not only can have an impact on the reputation of companies; they may also represent significant operational risks and costs to business. Well-developed environmental and social management systems can also generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. In our view, companies that manage all risks and consider opportunities related to environmental and social issues are able to adapt faster to changes and appear to be better placed to achieve sustainable competitive advantage in the long-term. Similarly, companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change, which could result in anything from regulation and litigation, physical threats (severe weather, climate change), economic trends as well as shifts in consumer behavior.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks and shareholder proposals relating to them on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint. SSGA FM may also take action against the re-election of members of the board if we have serious concerns over ESG practices and the company has not been responsive to shareholder pressure.
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State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 28, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3503-INST-5431 0315 Exp. Date: 03/31/2016
February 2015
Managing Conflicts of Interest arising from SSGAs Proxy Voting and Engagement Activities
State Street Corporation has a comprehensive standalone Conflicts of Interest Policy and other policies that address a range of conflicts of interests identified by our parent company. In addition, SSGA maintains a conflicts register that identifies key conflicts and describes systems in place to mitigate the conflicts. This policy is designed to act in conjunction with related policies and practices employed by other groups within the organization. Further, they complement those policies and practices by providing specific guidance on managing the conflicts of interests that may arise through SSGAs proxy voting activities.
Managing Conflicts of Interest Related to Proxy Voting
SSGA has policies and procedures designed to prevent undue influence on SSGAs voting activities that may arise from relationships between proxy issuers or companies and State Street Corporation (STT) SSGA, SSGA affiliates, SSGA Funds or SSGA Fund affiliates.
Protocols designed to help mitigate potential conflicts of interest include:
| Providing sole voting discretion to members of SSGAs Corporate Governance Team. Members of the corporate governance team may from time to time discuss views on proxy voting matters, company performance, strategy etc. with other STT or SSGA employees including portfolio managers, senior executives and relationship managers. However, final voting decisions are made solely by the corporate governance team, in a manner that is consistent with the best interests of all clients, taking into account various perspectives on risks and opportunities with a view of maximizing the value of client assets; |
| Exercising a singular vote decision for each ballot item regardless of SSGAs investment strategy; |
| Prohibiting members of SSGAs corporate governance team from disclosing SSGAs voting decision to any individual not affiliated with the proxy voting process prior to the meeting or date of written consent, as the case may be; |
| Mandatory disclosure by members of the SSGAs Corporate Governance Team, Global Proxy Review Committee (PRC) and Investment Committee (IC) of any personal conflict of interest (e.g., familial relationship with company management) to the Head of the Corporate Governance Team. Members are required to recuse themselves from any engagement or proxy voting activities related to the conflict; |
| In certain instances, client accounts and/or SSGA pooled funds, where SSGA acts as trustee, may hold shares in STT or other SSGA affiliated entities, such as mutual funds affiliated with SSGA Funds Management, Inc. In general, SSGA will outsource any voting decision relating to a shareholder meeting of STT or other SSGA affiliated entities to independent outside third parties. Delegated third parties exercise vote decisions based upon SSGAs in-house policies; and |
| Reporting of voting policy overrides, if any, to the PRC on a quarterly basis. |
In general, we do not believe matters that fall within the Guidelines and are voted consistently with the Guidelines present any potential conflicts, since the vote on the matter has effectively been determined without reference to the soliciting entity. However, where matters do not fall within the Guidelines or where we believe that voting in accordance with the Guidelines is unwarranted, we conduct an additional review to determine whether there is a conflict of interest. In circumstances where a conflict has been identified and either: (i) the matter does not fall clearly within the Guidelines; or (ii) SSGA determines that voting in accordance with such policies or guidance is not in the best interests of its clients, the Head of SSGAs Corporate Governance Team will determine whether a Material Relationship exists. If so, the matter is referred to the SSGA PRC. The SSGA PRC then reviews the matter and determines whether a conflict of interest exists, and if so, how to best resolve such conflict. For example, the SSGA PRC may (i) determine that the proxy vote does not give rise to a conflict due to the issues presented, (ii) refer the matter to the SSGA Investment Committee for further evaluation or (iii) retain an independent fiduciary to determine the appropriate vote.
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ssga.com
State Street Global Advisors Worldwide Entities
Australia
: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an
Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611.
Belgium
: State Street Global Advisors Belgium,
Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by
the Financial Conduct Authority in the United Kingdom.
Canada
: State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C
3G6. T: +647 775 5900.
Dubai
: State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates.
T: +971 (0)4 4372800. F: +971 (0)4 4372818.
France
: State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of
Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92.
Germany
: State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440.
Hong Kong
: State Street Global Advisors Asia Limited, 68/F, Two International Finance
Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200.
Ireland
: State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park
Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300.
Italy
: State Street Global Advisors Italy, Sede Secondaria di
Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is
authorised and regulated by the Financial Conduct Authority in the United Kingdom.
Japan
: State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator,
Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association.
Netherland
s: State Street Global Advisors Netherlands, Adam Smith Building, Thomas
Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the
Financial Conduct Authority in the United Kingdom.
Singapore
: State Street Global Advisors Singapore Limited, 168, Robinson Road,
#33-01
Capital Tower, Singapore 068912 (Company Registered Number:
200002719D). T: +65 6826 7500. F: +65 6826 7501.
Switzerland
: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich.
T: +41 (0)44 245 70 00.
F: +41 (0)44 245 70 16.
United Kingdom
: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81.
Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350.
United States
: State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of Feely, John S through the period ended February 28, 2015 and are subject to change based on market and other conditions. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Past performance is not a guarantee of future results.
Investing involves risk including the risk of loss of principal.
Risk associated with equity investing include stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions.
Standard & Poors (S&P) S&P Indices are a registered trademark of Standard & Poors Financial Services LLC.
© 2015 State Street Corporation. All Rights Reserved.
ID3455-INST-5419 0315 Exp. Date: 03/31/2016
Nuveen Asset Management, LLC
Proxy Voting Policies and Procedures
Effective Date: January 1, 2011, as last amended October 27, 2014
I. | General Principles |
A. Nuveen Asset Management, LLC (N AM ) is an investment sub-adviser for certain of the Nuveen Funds (the Funds ) and investment adviser for institutional and other separately managed accounts (collectively, with the Funds, Accounts ). As such, Accounts may confer upon NAM complete discretion to vote proxies. 1
B. It is NAMs duty to vote proxies in the best interests of its clients (which may involve affirmatively deciding that voting the proxies may not be in the best interests of certain clients on certain matters). In voting proxies, NAM also seeks to enhance total investment return for its clients.
C. If NAM contracts with another investment adviser to act as a sub-adviser for an Account, NAM may delegate proxy voting responsibility to the sub-adviser. Where NAM has delegated proxy voting responsibility, the sub-adviser will be responsible for developing and adhering to its own proxy voting policies, subject to oversight by NAM.
D. NAMs Proxy Voting Committee (PVC) provides oversight of NAMs proxy voting policies and procedures, including (1) providing an administrative framework to facilitate and monitor the exercise of such proxy voting and to fulfill the obligations of reporting and recordkeeping under the federal securities laws; and (2) approving the proxy voting policies and procedures.
II. | Policies |
The PVC after reviewing and concluding that such policies are reasonably designed to vote proxies in the best interests of clients, has approved and adopted the proxy voting policies of Institutional Shareholder Services, Inc. ( ISS ), a leading national provider of proxy voting administrative and research services. As a result, such policies set forth NAMs positions on recurring proxy issues and criteria for addressing non-recurring issues. These policies are reviewed periodically by ISS, and therefore are subject to change. Even though it has adopted ISS policies, NAM maintains the fiduciary responsibility for all proxy voting decisions.
1 | NAM does not vote proxies where a client withholds proxy voting authority, and in certain non-discretionary and model programs NAM votes proxies in accordance with its policies and procedures in effect from time to time. Clients may opt to vote proxies themselves, or to have proxies voted by an independent third party or other named fiduciary or agent, at the clients cost. |
B-1
III. | Procedures |
A. Supervision of Proxy Voting. Day-to-day administration of proxy voting may be provided internally or by a third-party service provider, depending on client type, subject to the ultimate oversight of the PVC. The PVC shall supervise the relationships with NAMs proxy voting services, ISS. ISS apprises Nuveen Global Operations (NGO) of shareholder meeting dates, and casts the actual proxy votes. ISS also provides research on proxy proposals and voting recommendations. ISS serves as NAMs proxy voting record keepers and generate reports on how proxies were voted.
B. Conflicts of Interest.
1. | The following relationships or circumstances may give rise to conflicts of interest 2 : |
a. | The issuer or proxy proponent (e.g., a special interest group) is TIAA-CREF, the ultimate principal owner of NAM, or any of its affiliates. |
b. | The issuer is an entity in which an executive officer of NAM or a spouse or domestic partner of any such executive officer is or was (within the past three years of the proxy vote) an executive officer or director. |
c. | The issuer is a registered or unregistered fund for which NAM or another Nuveen adviser serves as investment adviser or sub-adviser. |
d. | Any other circumstances that NAM is aware of where NAMs duty to serve its clients interests, typically referred to as its duty of loyalty, could be materially compromised. |
2. | NAM will vote proxies in the best interest of its clients regardless of such real or perceived conflicts of interest. By adopting ISS policies, NAM believes the risk related to conflicts will be minimized. |
3. | To further minimize this risk, Compliance will review ISS conflict avoidance policy at least annually to ensure that it adequately addresses both the actual and perceived conflicts of interest the proxy voting service may face. |
2 | A conflict of interest shall not be considered material for the purposes of these Policies and Procedures with respect to a specific vote or circumstance if the matter to be voted on relates to a restructuring of the terms of existing securities or the issuance of new securities or a similar matter arising out of the holding of securities, other than common equity, in the context of a bankruptcy or threatened bankruptcy of the issuer, even if a conflict described in III.B.1.a.-d is present. |
4. | In the event that ISS faces a material conflict of interest with respect to a specific vote, the PVC shall direct ISS how to vote. The PVC shall receive voting direction from appropriate investment personnel. Before doing so, the PVC will consult with Legal to confirm that NAM faces no material conflicts of its own with respect to the specific proxy vote. |
5. | If Legal concludes that a material conflict does exist for NAM, the PVC will recommend to NAMs Compliance Committee or designee a course of action designed to address the conflict. Such actions could include, but are not limited to: |
a. | Obtaining instructions from the affected client(s) on how to vote the proxy; |
b. | Disclosing the conflict to the affected client(s) and seeking their consent to permit NAM to vote the proxy; |
c. | Voting in proportion to the other shareholders; |
e. | Recusing the individual with the actual or potential conflict of interest from all discussion or consideration of the matter, if the material conflict is due to such persons actual or potential conflict of interest; or |
f. | Following the recommendation of a different independent third party. |
6. | In addition to all of the above-mentioned and other conflicts, the Head of Equity Research, NGO and any member of the PVC must notify NAMs Chief Compliance Officer (CCO) of any direct, indirect or perceived improper influence exerted by any employee, officer or director within the MDP affiliate or Fund complex with regard to how NAM should vote proxies. NAM Compliance will investigate any such allegations and will report the findings to NAMs Compliance Committee. If it is determined that improper influence was attempted, appropriate action shall be taken. Such appropriate action may include disciplinary action, notification of the appropriate senior managers within the MDP affiliate, or notification of the appropriate regulatory authorities. In all cases, NAM will not consider any improper influence in determining how to vote proxies, and will vote in the best interests of clients. |
C. Proxy Vote Override. From time to time, a portfolio manager of an Account (a Portfolio Manager ) may initiate action to override ISSs recommendation for a particular vote. Any such override by a NAM Portfolio Manager (but not a sub-adviser Portfolio Manager) shall
be reviewed by NAMs Legal Department for material conflicts. If the Legal Department determines that no material conflicts exist, the approval of one member of the PVC shall authorize the override. If a material conflict exists, the conflict and, ultimately, the override recommendation will be addressed pursuant to the procedures described above under Conflicts of Interest.
D. Securities Lending.
1. | In order to generate incremental revenue, some clients may participate in a securities lending program. If a client has elected to participate in the lending program then it will not have the right to vote the proxies of any securities that are on loan as of the shareholder meeting record date. A client, or a Portfolio Manager, may place restrictions on loaning securities and/or recall a security on loan at any time. Such actions must be affected prior to the record date for a meeting if the purpose for the restriction or recall is to secure the vote. |
2. | Portfolio Managers and/or analysts who become aware of upcoming proxy issues relating to any securities in portfolios they manage, or issuers they follow, will consider the desirability of recalling the affected securities that are on loan or restricting the affected securities prior to the record date for the matter. If the proxy issue is determined to be material, and the determination is made prior to the shareholder meeting record date the Portfolio Manager(s) will contact the Securities Lending Agent to recall securities on loan or restrict the loaning of any security held in any portfolio they manage, if they determine that it is in the best interest of shareholders to do so. |
E. Proxy Voting for ERISA Clients. If a proxy voting issue arises for an ERISA client, NAM is prohibited from voting shares with respect to any issue advanced by a party in interest of the ERISA client, and will rely on its ERISA clients to inform NAM of any actual or perceived client conflicts.
F. Proxy Voting Records. As required by Rule 204-2 of the Investment Advisers Act of 1940, NAM shall make and retain five types of records relating to proxy voting; (1) proxy voting policies and procedures; (2) proxy statements received for client and fund securities; (3) records of votes cast on behalf of clients and funds; (4) records of written requests for proxy voting information and written responses from NAM to either a written or oral request; and (5) any documents prepared by the adviser that were material to making a proxy voting decision or that memorialized the basis for the decision. NAM may rely on ISS to make and retain on NAMs behalf records pertaining to the rule.
G. Fund of Funds Provision . In instances where NAM provides investment advice to a fund of funds that acquires shares of affiliated funds or three percent or more of the outstanding voting securities of an unaffiliated fund, the acquiring fund shall vote the shares in
the same proportion as the vote of all other shareholders of the acquired fund. If compliance with this policy results in a vote of any shares in a manner different than the ISS recommendation, such vote will not require compliance with the Proxy Vote Override procedures set forth above.
H. Legacy Securities. To the extent that NAM receives proxies for securities that are transferred into an Accounts portfolio that were not recommended or selected by it and are sold or expected to be sold promptly in an orderly manner (legacy securities), NAM will generally instruct ISS to refrain from voting such proxies. In such circumstances, since legacy securities are expected to be sold promptly, voting proxies on such securities would not further NAMs interest in maximizing the value of client investments. NAM may agree to an institutional accounts special request to vote a legacy security proxy, and would instruct ISS to vote such proxy in accordance with its guidelines.
I. Terminated Accounts. Proxies received after the termination date of an Account generally will not be voted. An exception will be made if the record date is for a period in which an Account was under management or if a separately managed account (SMA) custodian failed to remove the accounts holdings from its aggregated voting list.
J. Non-votes. NGO shall be responsible for obtaining reasonable assurance that proxies are voted and submitted in a timely manner. It should not be considered a breach of this responsibility if NAM does not receive a proxy from ISS or a custodian with adequate time to analyze and direct to vote or vote a proxy by the required voting deadline.
NAM may determine not to vote proxies associated with the securities of any issuer if as a result of voting, subsequent purchases or sales of such securities would be blocked. However, NAM may decide, on an individual security basis that it is in the best interests of its clients to vote the proxy associated with such a security, taking into account the loss of liquidity. In addition, NAM may not to vote proxies where the voting would in NAMs judgment result in some other financial, legal, regulatory disability or burden to the client (such as imputing control with respect to the issuer) or subject to resolution of any conflict of interest as provided herein, to NAM.
In the case of SMAs, NAM may determine not to vote securities where voting would require the transfer of the security to another custodian designated by the issuer. Such transfer is generally outside the scope of NAMs authority and may result in significant operational limitations on NAMs ability to conduct transactions relating to the securities during the period of transfer. From time to time, situations may arise (operational or otherwise) that prevent NAM from voting proxies after reasonable attempts have been made.
K. Review and Reports.
1. | The PVC shall maintain a review schedule. The schedule shall include reviews of the proxy voting policy (including the policies of any sub-adviser engaged by NAM), the proxy voting record, account maintenance, and other reviews as deemed appropriate by the PVC. The PVC shall review the schedule at least annually. |
2. | The PVC will report to NAMs Compliance Committee with respect to all identified conflicts and how they were addressed. These reports will include all Accounts, including those that are sub-advised. NAM also shall provide the Funds that it sub-advises with information necessary for preparing Form N-PX. |
L. Vote Disclosure to Clients. NAMs institutional and SMA clients can contact their relationship manager for more information on NAMs policies and the proxy voting record for their account. The information available includes name of issuer, ticker/CUSIP, shareholder meeting date, description of item and NAMs vote.
IV. | Policy Owner |
PVC
V. | Responsible Parties |
PVC
NGO
Compliance
Legal Department
As amended: | 3/1/13 | |||
6/5/14 | ||||
10/27/14 |
Investment Objective |
The SPDR S&P Commercial Paper ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the 1-3 month sector of the United States commercial paper market. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR S&P Agency Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the U.S. Agency bond market. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR Barclays Corporate Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the corporate sector of the U.S. investment bond market. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR Barclays Corporate Industrial Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the corporate industrial sector of the U.S. investment bond market. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR Barclays Corporate Financial Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the corporate financial sector of the U.S. investment bond market. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR Barclays Corporate Utilities Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the corporate utilities sector of the U.S. investment bond market. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR Barclays Zero Coupon Bond ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks Separate Trading of Registered Interest and Principal Securities (“STRIPS”) registered with the U.S. Treasury's Bureau of Public Debt. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR Barclays CMBS ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the ERISA-eligible sector of the U.S. dollar denominated investment grade commercial mortgage backed securities (CMBS) market. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR Barclays Global Convertible Securities ETF (the “Fund”) seeks to provide investment results that, before fees expenses, correspond generally to the price and yield performance of an index that tracks global convertible securities markets with outstanding issue sizes greater than $500 million. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR Barclays Breakeven Inflation ETF (the “Fund”) seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of an index designed to track the “breakeven” rate of inflation in the United States. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR S&P Commercial Paper Ex-Financials ETF (the “Fund”) seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of an index that tracks the 1-3 month sector of the U.S. non-financial commercial paper market. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Investment Objective |
The SPDR Barclays Floating Rate Treasury ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the market for floating rate notes of the United States Treasury. |
Management fees | [X.XX]% |
Distribution and service (12b-1) fees 1 | [0.00]% |
Other expenses 2 | [0.00]% |
Total annual Fund operating expenses | [X.XX]% |
1 | The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to which payments of up to 0.25% of average daily net assets may be made; however, the SPDR ® Series Trust's Board of Trustees has determined that no such payments will be made through at least October 31, 2016. |
2 | “Other expenses” are based on estimated amounts for the current fiscal year. |
Year 1 | Year 3 |
$[XX] | $[XX] |
Fund Name | SPDR S&P Commercial Paper ETF | SPDR S&P Agency Bond ETF | SPDR Barclays Corporate Bond ETF | SPDR Barclays Corporate Industrial Bond ETF | SPDR Barclays Corporate Financial Bond ETF | SPDR Barclays Corporate Utilities Bond ETF |
Call/Prepayment Risk | x | x | x | x | x | x |
Convertible Securities Risk | ||||||
Counterparty Risk | ||||||
Credit Risk | x | x | x | x | x | x |
Currency Risk | ||||||
Debt Securities Risk | x | x | x | x | x | x |
Derivatives Risk | ||||||
Emerging Markets Risk | ||||||
Extension Risk | x | x | x | x | x | x |
Financial Sector Risk | x | |||||
Income Risk | x | x | x | x | x | x |
Index Tracking Risk | x | x | x | x | x | x |
Industrial Sector Risk | x | |||||
Inflation Outlook Risk | ||||||
Interest Rate Risk | x | x | x | x | x | x |
Interest Rate Risk – Preferred Securities | ||||||
Issuer Risk | x | x | x | x | x | x |
Issuer Risk – Preferred Securities | ||||||
Liquidity Risk | x | x | x | x | x | x |
Market Risk | x | x | x | x | x | x |
Mortgage-Related and Other Asset-Backed Securities Risk | ||||||
Non-Diversification Risk | x | x | x | x | x | x |
Non-U.S. Securities Risk | ||||||
Passive Strategy/Index Risk | x | x | x | x | x | x |
Preferred Securities Risk | ||||||
Reinvestment Risk | x | x | x | x | x | x |
Settlement Risk | ||||||
Short Sale Risk | ||||||
U.S. Government Securities Risk | x | |||||
Utilities Sector Risk | x | |||||
Valuation Risk | x | x | x | x | x | x |
Fund Name | SPDR S&P Commercial Paper ETF | SPDR S&P Agency Bond ETF | SPDR Barclays Corporate Bond ETF | SPDR Barclays Corporate Industrial Bond ETF | SPDR Barclays Corporate Financial Bond ETF | SPDR Barclays Corporate Utilities Bond ETF |
Variable and Floating Rate Securities Risk | ||||||
Zero Coupon Bond Risk |
Fund Name | SPDR Barclays Zero Coupon Bond ETF | SPDR Barclays CMBS ETF | SPDR Barclays Global Convertible Securities ETF | SPDR Barclays Breakeven Inflation ETF | SPDR S&P Commercial Paper ex-Financials ETF | SPDR Barclays Floating Rate Treasury ETF |
Call/Prepayment Risk | x | x | x | x | x | x |
Convertible Securities Risk | x | |||||
Counterparty Risk | x | |||||
Credit Risk | x | x | x | x | x | x |
Currency Risk | x | |||||
Debt Securities Risk | x | x | x | x | x | x |
Derivatives Risk | x | |||||
Emerging Markets Risk | x | |||||
Extension Risk | x | x | x | x | x | x |
Financial Sector Risk | ||||||
Income Risk | x | x | x | x | x | x |
Index Tracking Risk | x | x | x | x | x | x |
Industrial Sector Risk | ||||||
Inflation Outlook Risk | x | |||||
Interest Rate Risk | x | x | x | x | x | |
Interest Rate Risk – Preferred Securities | x | |||||
Issuer Risk | x | x | x | x | x | |
Issuer Risk – Preferred Securities | x | |||||
Liquidity Risk | x | x | x | x | x | x |
Market Risk | x | x | x | x | x | x |
Mortgage-Related and Other Asset-Backed Securities Risk | x | |||||
Non-Diversification Risk | x | x | x | x | x | x |
Non-U.S. Securities Risk | x | |||||
Passive Strategy/Index Risk | x | x | x | x | x | x |
Preferred Securities Risk | x | |||||
Reinvestment Risk | x | x | x | x | x | x |
Settlement Risk | x | |||||
Short Sale Risk | x | |||||
U.S. Government Securities Risk | x | |||||
Utilities Sector Risk | ||||||
Valuation Risk | x | x | x | x | x | x |
Variable and Floating Rate Securities Risk | x |
SPDR S&P Commercial Paper ETF | 0.[XX]% |
SPDR S&P Agency Bond
ETF
|
0.[XX]% |
SPDR Barclays Corporate Bond
ETF
|
0.[XX]% |
SPDR Barclays Corporate Industrial Bond
ETF
|
0.[XX]% |
SPDR Barclays Corporate Financial Bond
ETF
|
0.[XX]% |
SPDR Barclays Corporate Utilities Bond
ETF
|
0.[XX]% |
SPDR Barclays Zero Coupon Bond
ETF
|
0.[XX]% |
SPDR Barclays CMBS
ETF
|
0.[XX]% |
SPDR Barclays Global Convertible Securities
ETF
|
0.[XX]% |
SPDR Barclays Breakeven Inflation
ETF
|
0.[XX]% |
SPDR S&P Commercial Paper ex-Financials
ETF
|
0.[XX]% |
SPDR Barclays Floating Rate Treasury
ETF
|
0.[XX]% |
Portfolio Managers | Fund |
Todd Bean, Steve Meier and Jeff St.
Peters
|
SPDR S&P Commercial Paper ETFSPDR S&P Commercial Paper ex-Financials ETF |
Todd Bean and Jeff St.
Peters
|
SPDR Barclays Floating Rate Treasury ETF |
Michael Brunell and Karen
Tsang
|
SPDR S&P Agency Bond ETFSPDR Barclays Zero Coupon Bond ETFSPDR Barclays CMBS ETF |
Patrick Bresnehan and Kyle
Kelly
|
SPDR Barclays Corporate Bond ETFSPDR Barclays Corporate Industrial Bond ETFSPDR Barclays Corporate Financial Bond ETFSPDR Barclays Corporate Utilities Bond ETF |
[ ] and Stephen
Yeats
|
SPDR Barclays Global Convertible Securities ETF |
Patrick Bresnehan and [
]
|
SPDR Barclays Breakeven Inflation ETF |
SPDR ® SERIES TRUST (THE TRUST)
STATEMENT OF ADDITIONAL INFORMATION
Dated October 31, 2015
This Statement of Additional Information (SAI) is not a prospectus. With respect to each of the Trusts series portfolios listed below, this SAI should be read in conjunction with the prospectus dated October 31, 2015, as may be revised from time to time (Prospectus).
TICKER | ||
SPDR S&P Commercial Paper ETF |
CPZ | |
SPDR S&P Agency Bond ETF |
[ ] | |
SPDR S&P Commercial Paper ex-Financials ETF |
[ ] | |
SPDR Barclays Corporate Bond ETF |
[ ] | |
SPDR Barclays Corporate Industrial Bond ETF |
[ ] | |
SPDR Barclays Corporate Financial Bond ETF |
[ ] | |
SPDR Barclays Corporate Utilities Bond ETF |
[ ] | |
SPDR Barclays Zero Coupon Bond ETF |
[ ] | |
SPDR Barclays CMBS ETF |
[ ] | |
SPDR Barclays Global Convertible Securities ETF |
GCWB | |
SPDR Barclays Breakeven Inflation ETF |
[ ] | |
SPDR Barclays Floating Rate Treasury ETF |
FLTY |
Principal U.S. Listing Exchange for each ETF: NYSE Arca, Inc.
Capitalized terms used herein that are not defined have the same meaning as in the Prospectus, unless otherwise noted. Copies of the Prospectus may be obtained without charge by writing to State Street Global Markets, LLC, the Trusts principal underwriter (referred to herein as Distributor or Principal Underwriter), State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111, by visiting the Trusts website at www.spdrs.com or by calling 1-866-787-2257.
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4 | ||||
13 | ||||
15 | ||||
17 | ||||
18 | ||||
30 | ||||
31 | ||||
32 | ||||
38 | ||||
39 | ||||
39 | ||||
45 | ||||
46 | ||||
46 | ||||
A-1 |
2
GENERAL DESCRIPTION OF THE TRUST
The Trust is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (the 1940 Act), consisting of multiple investment series (each a Fund and collectively the Funds). The Trust was organized as a Massachusetts business trust on June 12, 1998. The offering of each Funds shares (Shares) is registered under the Securities Act of 1933, as amended (the Securities Act). The investment objective of each Fund is to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of a specified market index (each an Index and together the Indexes). SSGA Funds Management, Inc. serves as the investment adviser for each Fund (the Adviser) and the SPDR Barclays Global Convertible Securities ETF is sub-advised by a sub-adviser as further described herein (the Sub-Adviser). To the extent that a reference in this SAI refers to the Adviser, such reference should be read to refer to the Sub-Adviser where the context requires.
Each Fund offers and issues Shares at their net asset value (sometimes referred to herein as NAV) only in aggregations of a specified number of Shares (each, a Creation Unit). Each Fund generally offers and issues Shares either in exchange for (i) a basket of securities included in its Index (Deposit Securities) together with the deposit of a specified cash payment (Cash Component) or (ii) a cash payment equal in value to the Deposit Securities (Deposit Cash) together with the Cash Component. The primary consideration accepted by a Fund (i.e., Deposit Securities or Deposit Cash) is set forth under Purchase and Redemption of Creation Units later in this SAI. The Trust reserves the right to permit or require the substitution of a cash in lieu amount to be added to the Cash Component to replace any Deposit Security and reserves the right to permit or require the substitution of Deposit Securities in lieu of Deposit Cash (subject to applicable legal requirements). The Shares have been approved for listing and secondary trading on a national securities exchange (the Exchange). The Shares will trade on the Exchange at market prices. These prices may differ from the Shares net asset values. The Shares are also redeemable only in Creation Unit aggregations, and generally in exchange either for (i) portfolio securities and a specified cash payment or (ii) cash (subject to applicable legal requirements). A Creation Unit of each Fund consists of 100,000 Shares.
Shares may be issued in advance of receipt of Deposit Securities subject to various conditions including a requirement to maintain on deposit with the Trust cash at least equal to a specified percentage of the market value of the missing Deposit Securities as set forth in the Participant Agreement (as defined below). See Purchase and Redemption of Creation Units. The Trust may impose a transaction fee for each creation or redemption. In all cases, such fees will be limited in accordance with the requirements of the U.S. Securities and Exchange Commission (the SEC) applicable to management investment companies offering redeemable securities. In addition to the fixed creation or redemption transaction fee, an additional transaction fee of up to three times the fixed creation or redemption transaction fee and/or an additional variable charge may apply.
The SPDR S&P Commercial Paper ETF and the SPDR S&P Commercial Paper ex-Financials ETF may sometimes be referred to herein as the Commercial Paper ETFs. The SPDR S&P Agency Bond ETF may sometimes be referred to herein as the Agency Bond ETF. The SPDR Barclays Corporate Bond ETF may sometimes be referred to as the Corporate Bond ETF. The SPDR Barclays Corporate Industrial Bond ETF may sometimes be referred to herein as the Corporate Industrial Bond ETF. The SPDR Barclays Corporate Financial Bond ETF may sometimes be referred to herein as the Corporate Financial Bond ETF. The SPDR Barclays Corporate Utilities Bond ETF may sometimes be referred to herein as the Corporate Utilities Bond ETF (and, together with the Corporate Bond ETF, Corporate Industrial Bond ETF and Corporate Financial Bond ETF, the Corporate Bond ETFs). The SPDR Barclays Zero Coupon Bond ETF may sometimes be referred to herein as the Zero Coupon Bond ETF. The SPDR Barclays CMBS ETF may sometimes be referred to herein as the CMBS ETF. The SPDR Barclays Global Convertible Securities ETF may sometimes be referred to herein as the Global Convertible Securities ETF. The SPDR Barclays Breakeven Inflation ETF may sometimes be referred to herein as the Breakeven Inflation ETF. The SPDR Barclays Floating Rate Treasury ETF may sometimes be referred to herein as the Floating Rate Treasury ETF.
3
Each Fund may invest in the following types of investments, consistent with its investment strategies and objective. Please see a Funds Prospectus for additional information regarding its principal investment strategies.
DIVERSIFICATION STATUS
Each Fund is classified as a non-diversified investment company under the 1940 Act. A non-diversified classification means that a Fund is not limited by the 1940 Act with regard to the percentage of its assets that may be invested in the securities of a single issuer. This means that a Fund may invest a greater portion of its assets in the securities of a single issuer than a diversified fund. The securities of a particular issuer may constitute a greater portion of an Index of each Fund and, therefore, the securities may constitute a greater portion of a Funds portfolio. This may have an adverse effect on a Funds performance or subject a Funds Shares to greater price volatility than more diversified investment companies.
Although each Fund is non-diversified for purposes of the 1940 Act, each Fund intends to maintain the required level of diversification and otherwise conduct its operations so as to qualify as a regulated investment company for purposes of the Internal Revenue Code of 1986, as amended (Internal Revenue Code), and to relieve each Fund of any liability for federal income tax to the extent that its earnings are distributed to shareholders. Compliance with the diversification requirements of the Internal Revenue Code may severely limit the investment flexibility of a Fund and may make it less likely that a Fund will meet its investment objectives.
CONCENTRATION
Each Funds investments will generally be concentrated in a particular industry or group of industries to the extent that the Funds underlying Index is concentrated in a particular industry or group of industries. The securities of issuers in particular industries may dominate the benchmark Index of a Fund and consequently a Funds investment portfolio. This may adversely affect a Funds performance or subject its Shares to greater price volatility than that experienced by less concentrated investment companies. The Trusts general policy is to exclude securities of the U.S. government and its agencies or instrumentalities when measuring industry concentration.
In pursuing its objective, each Fund may hold the securities of a single issuer in an amount exceeding 10% of the market value of the outstanding securities of the issuer, subject to restrictions imposed by the Internal Revenue Code. In particular, as a Funds size grows and its assets increase, it will be more likely to hold more than 10% of the securities of a single issuer if the issuer has a relatively small public float as compared to other components in its benchmark Index.
PREFERRED SECURITIES
Preferred securities pay fixed or adjustable rate dividends to investors, and have preference over common stock in the payment of dividends and the liquidation of a companys assets. This means that a company must pay dividends on preferred stock before paying any dividends on its common stock. In order to be payable, distributions on preferred securities must be declared by the issuers board of directors. Income payments on typical preferred securities currently outstanding are cumulative, causing dividends and distributions to accrue even if not declared by the board of directors or otherwise made payable. There is no assurance that dividends or distributions on the preferred securities in which the Fund invests will be declared or otherwise made payable.
The market value of preferred securities may be affected by favorable and unfavorable changes impacting companies in the utilities and financial services sectors, which are prominent issuers of preferred securities, and by actual and anticipated changes in tax laws. Because the claim on an issuers earnings represented by preferred securities may become onerous when interest rates fall below the rate payable on such securities, the issuer may redeem the securities. Thus, in declining interest rate environments in particular, the Funds holdings of higher rate-paying fixed rate preferred securities may be reduced and the Fund would be unable to acquire securities paying comparable rates with the redemption proceeds.
CONVERTIBLE SECURITIES
Convertible securities are bonds, debentures, notes, preferred stocks or other securities that may be converted or exchanged (by the holder or by the issuer) into shares of the underlying common stock (or cash or securities of equivalent value) at a stated exchange ratio. A convertible security may also be called for redemption or conversion by the issuer after a particular date and under certain circumstances (including a specified price) established upon issue. If a convertible security held by a Fund is called for redemption or conversion, the Fund could be required to tender it for redemption, convert it into the underlying common stock, or sell it to a third party.
Convertible securities generally have less potential for gain or loss than common stocks. Convertible securities generally provide yields higher than the underlying common stocks, but generally lower than comparable non-convertible securities. Because of this higher yield, convertible securities generally sell at a price above their conversion value, which is the current market value of the
4
stock to be received upon conversion. The difference between this conversion value and the price of convertible securities will vary over time depending on changes in the value of the underlying common stocks and interest rates. When the underlying common stocks decline in value, convertible securities will tend not to decline to the same extent because of the interest or dividend payments and the repayment of principal at maturity for certain types of convertible securities. However, securities that are convertible other than at the option of the holder generally do not limit the potential for loss to the same extent as securities convertible at the option of the holder. When the underlying common stocks rise in value, the value of convertible securities may also be expected to increase. At the same time, however, the difference between the market value of convertible securities and their conversion value will narrow, which means that the value of convertible securities will generally not increase to the same extent as the value of the underlying common stocks. Because convertible securities may also be interest-rate sensitive, their value may increase as interest rates fall and decrease as interest rates rise. Convertible securities are also subject to credit risk, and are often lower-quality securities.
BONDS
A bond is an interest-bearing security issued by a company, governmental unit or, in some cases, a non-U.S. entity. The issuer of a bond has a contractual obligation to pay interest at a stated rate on specific dates and to repay principal (the bonds face value) periodically or on a specified maturity date; provided, however, a zero coupon bond pays no interest to its holder during its life. The value of a zero coupon bond to a Fund consists of the difference between such bonds face value at the time of maturity and the price for which it was acquired, which may be an amount significantly less than its face value (sometimes referred to as a deep discount price).
An issuer may have the right to redeem or call a bond before maturity, in which case the investor may have to reinvest the proceeds at lower market rates. Most bonds bear interest income at a coupon rate that is fixed for the life of the bond. The value of a fixed rate bond usually rises when market interest rates fall, and falls when market interest rates rise. Accordingly, a fixed rate bonds yield (income as a percent of the bonds current value) may differ from its coupon rate as its value rises or falls. Fixed rate bonds generally are also subject to inflation risk, which is the risk that the value of the bond or income from the bond will be worth less in the future as inflation decreases the value of money. This could mean that, as inflation increases, the real value of the assets of a Fund holding fixed rate bonds can decline, as can the value of the Funds distributions. Other types of bonds bear income at an interest rate that is adjusted periodically. Because of their adjustable interest rates, the value of floating-rate or variable-rate bonds fluctuates much less in response to market interest rate movements than the value of fixed rate bonds. A Fund may treat some of these bonds as having a shorter maturity for purposes of calculating the weighted average maturity of its investment portfolio. Bonds may be senior or subordinated obligations. Senior obligations generally have the first claim on a corporations earnings and assets and, in the event of liquidation, are paid before subordinated obligations. Bonds may be unsecured (backed only by the issuers general creditworthiness) or secured (also backed by specified collateral).
In addition, the Corporate Bond ETFs invest almost exclusively in corporate bonds. The investment return of corporate bonds reflects interest on the bond and changes in the market value of the bond. The market value of a corporate bond may be affected by the credit rating of the corporation, the corporations performance and perceptions of the corporation in the market place. There is a risk that the issuers of the securities may not be able to meet their obligations on interest or principal payments at the time called for by such a security.
VARIABLE AND FLOATING RATE SECURITIES
Variable rate securities are instruments issued or guaranteed by entities such as (1) US Government, or an agency or instrumentality thereof, (2) corporations, (3) financial institutions, (4) insurance companies or (5) trusts that have a rate of interest subject to adjustment at regular intervals but less frequently than annually. A variable rate security provides for the automatic establishment of a new interest rate on set dates. Variable rate obligations whose interest is readjusted no less frequently than annually will be deemed to have a maturity equal to the period remaining until the next readjustment of the interest rate. The Funds may also purchase floating rate securities. A floating rate security provides for the automatic adjustment of its interest rate at regular predetermined intervals. Interest rates on these securities are ordinarily tied to, and are a percentage of, a widely recognized interest rate, such as the yield on 90-day US Treasury bills or the prime rate of a specified bank. Generally, changes in interest rates will have a smaller effect on the market value of variable and fixed rate floating rate securities than on the market value of comparable fixed rate fixed income obligations.
U.S. GOVERNMENT OBLIGATIONS
U.S. Government obligations are a type of bond. U.S. Government obligations include securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities.
One type of U.S. Government obligation, U.S. Treasury obligations, are backed by the full faith and credit of the U.S. Treasury and differ only in their interest rates, maturities and times of issuance. U.S. Treasury bills have initial maturities of one year or less; U.S. Treasury notes have initial maturities of one to ten years; and U.S. Treasury bonds generally have initial maturities of greater than ten years.
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Other U.S. Government obligations are issued or guaranteed by agencies or instrumentalities of the U.S. Government including, but not limited to, Federal National Mortgage Association (Fannie Mae), the Government National Mortgage Association (Ginnie Mae), the Small Business Administration, the Federal Farm Credit Administration, the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal Home Loan Banks (FHLB), Banks for Cooperatives (including the Central Bank for Cooperatives), the Federal Land Banks, the Federal Intermediate Credit Banks, the Tennessee Valley Authority, the Export-Import Bank of the United States, the Commodity Credit Corporation, the Federal Financing Bank, the Student Loan Marketing Association, the National Credit Union Administration and the Federal Agricultural Mortgage Corporation (Farmer Mac). Some obligations issued or guaranteed by U.S. Government agencies and instrumentalities, including, for example, Ginnie Mae pass-through certificates, are supported by the full faith and credit of the U.S. Treasury. Other obligations issued by or guaranteed by federal agencies, such as those securities issued by Fannie Mae, are supported by the discretionary authority of the U.S. Government to purchase certain obligations of the federal agency, while other obligations issued by or guaranteed by federal agencies, such as those of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Treasury, while the U.S. Government provides financial support to such U.S. Government-sponsored federal agencies, no assurance can be given that the U.S. Government will always do so, since the U.S. Government is not so obligated by law.
On September 7, 2008, the U.S. Treasury announced a federal takeover of Fannie Mae and Freddie Mac, placing the two federal instrumentalities in conservatorship. Under the takeover, the U.S. Treasury agreed to acquire $1 billion of senior preferred stock of each instrumentality and obtained warrants for the purchase of common stock of each instrumentality (the Senior Preferred Stock Purchase Agreement or Agreement). Under the Agreement, the U.S. Treasury pledged to provide up to $200 billion per instrumentality as needed, including the contribution of cash capital to the instrumentalities in the event their liabilities exceed their assets. This was intended to ensure that the instrumentalities maintain a positive net worth and meet their financial obligations, preventing mandatory triggering of receivership. On December 24, 2009, the U.S. Treasury announced that it was amending the Agreement to allow the $200 billion cap on the U.S. Treasurys funding commitment to increase as necessary to accommodate any cumulative reduction in net worth over the next three years. As a result of this Agreement, the investments of holders, including applicable funds, of mortgage-backed securities and other obligations issued by Fannie Mae and Freddie Mac are protected to the extent of such commitment.
MORTGAGE PASS-THROUGH SECURITIES
The term non-government related pass-through security refers to a category of pass-through securities backed by pools of mortgages and issued by a commercial firm (ex. JP Morgan). In the basic mortgage pass-through structure, mortgages with similar issuer, term and coupon characteristics are collected and aggregated into a pool consisting of multiple mortgage loans. The pool is assigned a CUSIP number and undivided interests in the pool are traded and sold as pass-through securities. The holder of the security is entitled to a pro rata share of principal and interest payments (including unscheduled prepayments) from the pool of mortgage loans.
An investment in a specific pool of pass-through securities requires an analysis of the specific prepayment risk of mortgages within the covered pool (since mortgagors typically have the option to prepay their loans). The level of prepayments on a pool of mortgage securities is difficult to predict and can impact the subsequent cash flows and value of the mortgage pool. In addition, when trading specific mortgage pools, precise execution, delivery and settlement arrangements must be negotiated for each transaction. These factors combine to make trading in mortgage pools somewhat cumbersome.
COMMERCIAL MORTGAGE-BACKED SECURITIES
Commercial mortgage-backed securities are securities backed by commercial real estate properties. Commercial mortgage-backed securities represent interests in pools of assets in which payments of both interest and principal on the securities are made on a regular basis. The payments are, in effect, passed through to the holder of the securities (net of any fees paid to the issuer or guarantor of the securities). The average life of commercial mortgage-backed securities varies with the maturities of the underlying instruments and, as a result of prepayments, can often be less than the original maturity of the assets underlying the securities. For this and other reasons, commercial mortgage-backed securitys stated maturity may be shortened, and the securitys total return may be difficult to predict precisely.
ZERO COUPON BONDS
Separate Trading of Registered Interest and Principal of Securities (STRIPS) make no periodic payments of interest, but instead are sold at a discount from their face value. When held to maturity, their entire income, which consists of accretion of discount, comes from the difference between the issue price and their value at maturity. The amount of the discount rate varies depending on factors including the time remaining until maturity, prevailing interest rates, the securitys liquidity and the issuers credit quality. These securities may include treasury securities that have had their interest payments (coupons) separated from the underlying principal
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(corpus) by their holder, typically a custodian bank or investment brokerage firm. Once the holder of the security has stripped or separated corpus and coupons, it may sell each component separately. The principal or corpus is then sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and does not receive any rights to periodic interest (cash) payments. Typically, the coupons are sold separately or grouped with other coupons with like maturity dates and sold bundled in such form. The underlying treasury security is held in book-entry form at the Federal Reserve Bank or, in the case of bearer securities ( i.e. , unregistered securities which are owned ostensibly by the bearer or holder thereof), in trust on behalf of the owners thereof. Purchasers of stripped obligations acquire, in effect, discount obligations that are economically identical to the zero coupon securities that the Treasury sells itself. The U.S. Treasury has facilitated transfers of ownership of zero coupon securities by accounting separately for the beneficial ownership of particular interest coupon and corpus payments on Treasury securities through the Federal Reserve book-entry record keeping system. Under a Federal Reserve program known as STRIPS or Separate Trading of Registered Interest and Principal of Securities, a Fund can record its beneficial ownership of the coupon or corpus directly in the book-entry record-keeping system.
SOVEREIGN DEBT OBLIGATIONS
Sovereign debt obligations are issued or guaranteed by foreign governments or their agencies. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. Governmental entities responsible for repayment of the debt may be unable or unwilling to repay principal and pay interest when due, and may require renegotiation or reschedule of debt payments. In addition, prospects for repayment of principal and payment of interest may depend on political as well as economic factors. Although some sovereign debt, such as Brady Bonds, is collateralized by U.S. Government securities, repayment of principal and payment of interest is not guaranteed by the U.S. Government.
FOREIGN CURRENCY TRANSACTIONS
Each Fund may conduct foreign currency transactions on a spot (i.e., cash) or forward basis (i.e., by entering into forward contracts to purchase or sell foreign currencies). Although foreign exchange dealers generally do not charge a fee for such conversions, they do realize a profit based on the difference between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency at one rate, while offering a lesser rate of exchange should the counterparty desire to resell that currency to the dealer. Forward contracts are customized transactions that generally require a specific amount of a currency to be delivered at a specific exchange rate on a specific date or range of dates in the future, although the Fund may also enter into non-deliverable currency forward contracts (NDFs) that contractually require the netting of the parties liabilities. Forwards, including NDFs, can have substantial price volatility. Forward contracts are generally traded in an interbank market directly between currency traders (usually large commercial banks) and their customers. The parties to a forward contract may agree to offset or terminate the contract before its maturity, or may hold the contract to maturity and complete the contemplated currency exchange. At the discretion of the Adviser, the Fund may enter into forward currency exchange contracts for hedging purposes to help reduce the risks and volatility caused by changes in foreign currency exchange rates, or to gain exposure to certain currencies in an effort to track the composition of the Index. When used for hedging purposes, they tend to limit any potential gain that may be realized if the value of the Funds foreign holdings increases because of currency fluctuations.
HIGH YIELD SECURITIES
Investment in high yield securities generally provides greater income and increased opportunity for capital appreciation than investments in higher quality securities, but they also typically entail greater price volatility and credit risk. These high yield securities are regarded as predominantly speculative with respect to the issuers continuing ability to meet principal and interest payments. Analysis of the creditworthiness of issuers of debt securities that are high yield may be more complex than for issuers of higher quality debt securities. In addition, high yield securities are often issued by smaller, less creditworthy companies or by highly leveraged (indebted) firms, which are generally less able than more financially stable firms to make scheduled payments of interest and principal. The risks posed by securities issued under such circumstances are substantial.
Investing in high yield debt securities involves risks that are greater than the risks of investing in higher quality debt securities. These risks include: (i) changes in credit status, including weaker overall credit conditions of issuers and risks of default; (ii) industry, market and economic risk; and (iii) greater price variability and credit risks of certain high yield securities such as zero coupon and payment-in-kind securities. While these risks provide the opportunity for maximizing return over time, they may result in greater volatility of the value of the Fund than a fund that invests in higher-rated securities.
Furthermore, the value of high yield securities may be more susceptible to real or perceived adverse economic, company or industry conditions than is the case for higher quality securities. The market values of certain of these lower-rated and unrated debt securities tend to reflect individual corporate developments to a greater extent than do higher-rated securities which react primarily to fluctuations in the general level of interest rates, and tend to be more sensitive to economic conditions than are higher-rated securities. Adverse market, credit or economic conditions could make it difficult at certain times to sell certain high yield securities held by the Fund.
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The secondary market on which high yield securities are traded may be less liquid than the market for higher grade securities. Less liquidity in the secondary trading market could adversely affect the price at which the Fund could sell a high yield security, and could adversely affect the daily net asset value per share of the Fund. When secondary markets for high yield securities are less liquid than the market for higher grade securities, it may be more difficult to value the securities because there is less reliable, objective data available.
The use of credit ratings as a principal method of selecting high yield securities can involve certain risks. For example, credit ratings evaluate the safety of principal and interest payments, not the market value risk of high yield securities. Also, credit rating agencies may fail to change credit ratings in a timely fashion to reflect events since the security was last rated.
LENDING PORTFOLIO SECURITIES
Each Fund may lend portfolio securities to certain creditworthy borrowers in an amount not to exceed one third (25%) of the value of its total assets. The borrowers provide collateral that is marked to market daily in an amount at least equal to the current market value of the securities loaned. A Fund may terminate a loan at any time and obtain the securities loaned. A Fund receives the value of any interest or cash or non-cash distributions paid on the loaned securities. A Fund cannot vote proxies for securities on loan, but may recall loans to vote proxies if a material issue affecting the Funds economic interest in the investment is to be voted upon. Distributions received on loaned securities in lieu of dividend payments (i.e., substitute payments) would not be considered qualified dividend income.
With respect to loans that are collateralized by cash, the borrower will be entitled to receive a fee based on the amount of cash collateral. A Fund is compensated by the difference between the amount earned on the reinvestment of cash collateral and the fee paid to the borrower. In the case of collateral other than cash, a Fund is compensated by a fee paid by the borrower equal to a percentage of the market value of the loaned securities. Any cash collateral may be reinvested in certain short-term instruments either directly on behalf of the lending Fund or through one or more joint accounts or money market funds, which may include those managed by the Adviser.
A Fund may pay a portion of the interest or fees earned from securities lending to a borrower as described above, and to one or more securities lending agents approved by the Board of Trustees of the Trust (the Board) who administer the lending program for the Funds in accordance with guidelines approved by the Board. In such capacity, the lending agent causes the delivery of loaned securities from a Fund to borrowers, arranges for the return of loaned securities to the Fund at the termination of a loan, requests deposit of collateral, monitors the daily value of the loaned securities and collateral, requests that borrowers add to the collateral when required by the loan agreements, and provides recordkeeping and accounting services necessary for the operation of the program. State Street Bank and Trust Company (State Street), an affiliate of the Trust, has been approved by the Board to serve as securities lending agent for a Fund and the Trust has entered into an agreement with State Street for such services. Among other matters, the Trust has agreed to indemnify State Street for certain liabilities. State Street has received an order of exemption from the SEC under Sections 17(a) and 12(d)(1) under the 1940 Act to serve as the lending agent for affiliated investment companies such as the Trust and to invest the cash collateral received from loan transactions to be invested in an affiliated cash collateral fund.
Securities lending involves exposure to certain risks, including operational risk (i.e., the risk of losses resulting from problems in the settlement and accounting processespecially so in certain international markets such as Taiwan), gap risk (i.e., the risk of a mismatch between the return on cash collateral reinvestments and the fees a Fund has agreed to pay a borrower), risk of loss of collateral, credit, legal, counterparty and market risk. Although State Street has agreed to provide a Fund with indemnification in the event of a borrower default, a Fund is still exposed to the risk of losses in the event a borrower does not return a Funds securities as agreed. For example, delays in recovery of lent securities may cause a Fund to lose the opportunity to sell the securities at a desirable price.
LEVERAGING
While the Funds do not anticipate doing so, a Fund may borrow money in an amount greater than 5% of the value of the Funds total assets. However, a Fund may not borrow money from a bank in an amount greater than 33 1/3% of the value of the Funds total assets. Borrowing for investment purposes is one form of leverage. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk, but also increases investment opportunity. Because substantially all of a Funds assets will fluctuate in value, whereas the interest obligations on borrowings may be fixed, the NAV of a Fund will increase more when such Funds portfolio assets increase in value and decrease more when the Funds portfolio assets decrease in value than would otherwise be the case. Moreover, interest costs on borrowings may fluctuate with changing market rates of interest and may partially offset or exceed the returns on the borrowed funds.
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INFLATION-PROTECTED OBLIGATIONS
Inflation-protected public obligations of the U.S. Treasury, commonly known as TIPS are a type of security issued by a government that are designed to provide inflation protection to investors. TIPS are income-generating instruments whose interest and principal payments are adjusted for inflationa sustained increase in prices that erodes the purchasing power of money. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the Consumer Price Index. A fixed coupon rate is applied to the inflation-adjusted principal so that as inflation rises or falls, both the principal value and the interest payments will increase or decrease. This can provide investors with a hedge against inflation, as it helps preserve the purchasing power of an investment. Because of this inflation adjustment feature, inflation-protected bonds typically have lower yields than conventional fixed-rate bonds.
REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements with commercial banks, brokers or dealers to generate income from its excess cash balances and to invest securities lending cash collateral. A repurchase agreement is an agreement under which a Fund acquires a financial instrument (e.g., a security issued by the U.S. government or an agency thereof, a bankers acceptance or a certificate of deposit) from a seller, subject to resale to the seller at an agreed upon price and date (normally, the next Business Dayas defined below). A repurchase agreement may be considered a loan collateralized by securities. The resale price reflects an agreed upon interest rate effective for the period the instrument is held by a Fund and is unrelated to the interest rate on the underlying instrument.
In these repurchase agreement transactions, the securities acquired by a Fund (including accrued interest earned thereon) must have a total value in excess of the value of the repurchase agreement and are held by the Custodian until repurchased. No more than an aggregate of 15% of a Funds net assets will be invested in illiquid securities, including repurchase agreements having maturities longer than seven days and securities subject to legal or contractual restrictions on resale, or for which there are no readily available market quotations.
The use of repurchase agreements involves certain risks. For example, if the other party to the agreement defaults on its obligation to repurchase the underlying security at a time when the value of the security has declined, a Fund may incur a loss upon disposition of the security. If the other party to the agreement becomes insolvent and subject to liquidation or reorganization under the U.S. Bankruptcy Code or other laws, a court may determine that the underlying security is collateral for a loan by a Fund not within the control of the Fund and, therefore, the Fund may not be able to substantiate its interest in the underlying security and may be deemed an unsecured creditor of the other party to the agreement.
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REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into reverse repurchase agreements, which involve the sale of securities with an agreement to repurchase the securities at an agreed-upon price, date and interest payment and have the characteristics of borrowing. The securities purchased with the funds obtained from the agreement and securities collateralizing the agreement will have maturity dates no later than the repayment date. Generally the effect of such transactions is that a Fund can recover all or most of the cash invested in the portfolio securities involved during the term of the reverse repurchase agreement, while in many cases a Fund is able to keep some of the interest income associated with those securities. Such transactions are only advantageous if a Fund has an opportunity to earn a greater rate of interest on the cash derived from these transactions than the interest cost of obtaining the same amount of cash. Opportunities to realize earnings from the use of the proceeds equal to or greater than the interest required to be paid may not always be available and a Fund intends to use the reverse repurchase technique only when the Adviser believes it will be advantageous to the Fund. The use of reverse repurchase agreements may exaggerate any interim increase or decrease in the value of a Funds assets. A Funds exposure to reverse repurchase agreements will be covered by securities having a value equal to or greater than such commitments. Under the 1940 Act, reverse repurchase agreements are considered borrowings. Although there is no limit on the percentage of Fund assets that can be used in connection with reverse repurchase agreements, the Funds do not expect to engage, under normal circumstances, in reverse repurchase agreements with respect to more than 33 1/3% of their respective total assets.
RESTRICTED SECURITIES
Each Fund may invest in restricted securities. Restricted Securities are securities that are not registered under the Securities Act, but which can be offered and sold to qualified institutional buyers under Rule 144A under the Securities Act. Institutional markets for restricted securities have developed as a result of the promulgation of Rule 144A under the Securities Act, which provides a safe harbor from Securities Act registration requirements for qualifying sales to institutional investors. When Rule 144A restricted securities present an attractive investment opportunity and meet other selection criteria, a Fund may make such investments whether or not such securities are illiquid depending on the market that exists for the particular security. The Board has delegated the responsibility for determining the liquidity of Rule 144A restricted securities that a Fund may invest in to the Adviser. In reaching liquidity decisions, the Adviser may consider the following factors: the frequency of trades and quotes for the security; the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; dealer undertakings to make a market in the security; and the nature of the security and the nature of the marketplace in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer).
COMMERCIAL PAPER
Each Fund may invest in commercial paper. Commercial paper consists of short-term, promissory notes issued by banks, corporations and other entities to finance short-term credit needs. These securities generally are discounted but sometimes may be interest bearing.
OTHER SHORT-TERM INSTRUMENTS
In addition to repurchase agreements, each Fund may invest in short-term instruments, including money market instruments (including money market funds advised by the Adviser), cash and cash equivalents, on an ongoing basis to provide liquidity or for other reasons. Money market instruments are generally short-term investments that may include but are not limited to: (i) shares of money market funds (including those advised by the Adviser); (ii) obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities (including government-sponsored enterprises); (iii) negotiable certificates of deposit (CDs), bankers acceptances, fixed time deposits and other obligations of U.S. and foreign banks (including foreign branches) and similar institutions; (iv) commercial paper rated at the date of purchase Prime-1 by Moodys Investors Service (Moodys) or A-1 by Standard & Poors (S&P), or if unrated, of comparable quality as determined by the Adviser; (v) non-convertible corporate debt securities (e.g., bonds and debentures) with remaining maturities at the date of purchase of not more than 397 days and that satisfy the rating requirements set forth in Rule 2a-7 under the 1940 Act; and (vi) short-term U.S. dollar-denominated obligations of foreign banks (including U.S. branches) that, in the opinion of the Adviser, are of comparable quality to obligations of U.S. banks which may be purchased by a Fund. Any of these instruments may be purchased on a current or a forward-settled basis. Money market instruments also include shares of money market funds. Time deposits are non-negotiable deposits maintained in banking institutions for specified periods of time at stated interest rates. Bankers acceptances are time drafts drawn on commercial banks by borrowers, usually in connection with international transactions.
INVESTMENT COMPANIES
Each Fund may invest in the securities of other investment companies, including affiliated funds and money market funds, subject to applicable limitations under Section 12(d)(1) of the 1940 Act. Pursuant to Section 12(d)(1), a Fund may invest in the securities of another investment company (the acquired company) provided that the Fund, immediately after such purchase or acquisition, does not own in the aggregate: (i) more than 3% of the total outstanding voting stock of the acquired company; (ii) securities issued by the acquired company having an aggregate value in excess of 5% of the value of the total assets of the Fund; or (iii) securities issued by the acquired company and all other investment companies (other than Treasury stock of the Fund) having an aggregate value in excess of 10% of the value of the total assets of the Fund. To the extent allowed by law, regulation, a Funds investment restrictions and the Trusts exemptive relief, a Fund may invest its assets in securities of investment companies that are affiliated funds and/or money market funds in excess of the limits discussed above.
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If a Fund invests in and, thus, is a shareholder of, another investment company, the Funds shareholders will indirectly bear the Funds proportionate share of the fees and expenses paid by such other investment company, including advisory fees, in addition to both the management fees payable directly by the Fund to the Funds own investment adviser and the other expenses that the Fund bears directly in connection with the Funds own operations.
U.S. REGISTERED SECURITIES OF FOREIGN ISSUERS
Each Fund may invest in U.S. registered, dollar-denominated bonds of foreign corporations, governments, agencies and supra-national entities. Investing in U.S. registered, dollar-denominated securities issued by non-U.S. issuers involves some risks and considerations not typically associated with investing in U.S. companies. These include differences in accounting, auditing and financial reporting standards, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations, political instability which could affect U.S. investments in foreign countries, and potential restrictions of the flow of international capital. Foreign companies may be subject to less governmental regulation than U.S. issuers. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payment positions.
A Funds investment in common stock of foreign corporations may also be in the form of American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs) (collectively Depositary Receipts). Depositary Receipts are receipts, typically issued by a bank or trust company, which evidence ownership of underlying securities issued by a foreign corporation. For ADRs, the depository is typically a U.S. financial institution and the underlying securities are issued by a foreign issuer. For other Depositary Receipts, the depository may be a foreign or a U.S. entity, and the underlying securities may have a foreign or a U.S. issuer. Depositary Receipts will not necessarily be denominated in the same currency as their underlying securities. Generally, ADRs, in registered form, are designed for use in the U.S. securities market, and EDRs, in bearer form, are designated for use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world. The Fund may invest in unsponsored Depositary Receipts. The issuers of unsponsored Depositary Receipts are not obligated to disclose material information in the United States, and, therefore, there may be less information available regarding such issuers and there may not be a correlation between such information and the market value of the Depositary Receipts
FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS
Each Fund may invest up to 20% of its assets in derivatives, including exchange-traded futures on Treasuries or Eurodollars, U.S. exchange-traded or OTC put and call options contracts exchange-traded or OTC and swap (including interest rate swaps, total return swaps, excess return swaps, and credit default swaps). A Fund will segregate cash and/or appropriate liquid assets if required to do so by SEC or Commodity Futures Trading Commission (CFTC) regulation or interpretation.
Futures contracts generally provide for the future sale by one party and purchase by another party of a specified commodity or security at a specified future time and at a specified price. Index futures contracts are settled daily with a payment by one party to the other of a cash amount based on the difference between the level of the index specified in the contract from one day to the next. Futures contracts are standardized as to maturity date and underlying instrument and are traded on futures exchanges.
A Fund is required to make a good faith margin deposit in cash or U.S. government securities with a broker or custodian to initiate and maintain open positions in futures contracts. A margin deposit is intended to assure completion of the contract (delivery or acceptance of the underlying commodity or payment of the cash settlement amount) if it is not terminated prior to the specified delivery date. Brokers may establish deposit requirements which are higher than the exchange minimums. Futures contracts are customarily purchased and sold on margin deposits which may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked to market daily. If the futures contract price changes to the extent that the margin on deposit does not satisfy margin requirements, payment of additional variation margin will be required. Conversely, change in the contract value may reduce the required margin, resulting in a repayment of excess margin to the contract holder. Variation margin payments are made to and from the futures broker for as long as the contract remains open. In such case, a Fund would expect to earn interest income on its margin deposits. Closing out an open futures position is done by taking an opposite position (buying a contract which has previously been sold, or selling a contract previously purchased) in an identical contract to terminate the position. Brokerage commissions are incurred when a futures contract position is opened or closed.
A Fund may purchase and sell put and call options. Such options may relate to particular securities and may or may not be listed on a national securities exchange and issued by the Options Clearing Corporation. Options trading is a highly specialized activity that
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entails greater than ordinary investment risk. Options on particular securities may be more volatile than the underlying securities, and therefore, on a percentage basis, an investment in options may be subject to greater fluctuation than an investment in the underlying securities themselves.
Each Fund intends to use futures and options in accordance with Rule 4.5 of the Commodity Exchange Act (CEA). A Fund may use exchange-traded futures and options, together with positions in cash and money market instruments, to simulate full investment in its underlying Index. Exchange-traded futures and options contracts may not be currently available for an Index. Under such circumstances, the Adviser may seek to utilize other instruments that it believes to be correlated to the applicable Index components or a subset of the components. The Trust, on behalf of a Fund, has filed a notice of eligibility for exclusion from the definition of the term commodity pool operator in accordance with Rule 4.5 so that the Fund is not subject to registration or regulation as a commodity pool operator under the CEA.
Restrictions on the Use of Futures and Options. In connection with its management of the Funds, the Adviser has claimed an exclusion from registration as a commodity trading advisor under the CEA and, therefore, is not subject to the registration and regulatory requirements of the CEA. Each Fund reserves the right to engage in transactions involving futures and options thereon to the extent allowed by the CFTC regulations in effect from time to time and in accordance with a Funds policies. Each Fund would take steps to prevent its futures positions from leveraging its securities holdings. When it has a long futures position, it will maintain with its custodian bank, cash or equivalents. When it has a short futures position, it will maintain with its custodian bank assets substantially identical to those underlying the contract or cash and equivalents (or a combination of the foregoing) having a value equal to the net obligation of the Fund under the contract (less the value of any margin deposits in connection with the position).
Swap Agreements. Each Fund may enter into swap agreements, including interest rate, index and total return swap agreements. Swap agreements are contracts between parties in which one party agrees to make periodic payments to the other party based on the change in market value or level of a specified rate, index or asset. In return, the other party agrees to make payments to the first party based on the return of a different specified rate, index or asset. Swap agreements will usually be done on a net basis, i.e., where the two parties make net payments with a Fund receiving or paying, as the case may be, only the net amount of the two payments. The net amount of the excess, if any, of a Funds obligations over its entitlements with respect to each swap is accrued on a daily basis and an amount of cash or equivalents having an aggregate value at least equal to the accrued excess is maintained by the Fund.
In the case of a credit default swap (CDS), the contract gives one party (the buyer) the right to recoup the economic value of a decline in the value of debt securities of the reference issuer if the credit event (a downgrade or default) occurs. This value is obtained by delivering a debt security of the reference issuer to the party in return for a previously agreed payment from the other party (frequently, the par value of the debt security). As the seller of a CDS contract, a Fund would be required to pay the par (or other agreed upon) value of a referenced debt obligation to the counterparty in the event of a default or other credit event by the reference issuer, such as a U.S. or foreign corporate issuer, with respect to debt obligations. In return, the Fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, a Fund would keep the stream of payments and would have no payment obligations. As the seller, the Fund would be subject to investment exposure on the notional amount of the swap.
CDSs may require initial premium (discount) payments as well as periodic payments (receipts) related to the interest leg of the swap or to the default of a reference obligation. A Fund will segregate assets necessary to meet any accrued payment obligations when it is the buyer of CDSs. In cases where a Fund is a seller of a CDS, if the CDS is physically settled, the Fund will be required to segregate the full notional amount of the CDS. Such segregation will not limit a Funds exposure to loss.
CDS agreements involve greater risks than if a Fund had invested in the reference obligation directly since, in addition to general market risks, illiquidity risk associated with a particular issuer, and credit risk, each of which will be similar in either case, CDSs are subject to the risk of illiquidity within the CDS market on the whole, as well as counterparty risk. A Fund will enter into CDS agreements only with counterparties that meet certain standards of creditworthiness. A Fund will only enter into CDSs for purposes of better tracking the performance of its Index.
FUTURE DEVELOPMENTS
A Fund may take advantage of opportunities in the area of options and futures contracts, options on futures contracts, warrants, swaps and any other investments which are not presently contemplated for use by the Fund or which are not currently available but which may be developed, to the extent such opportunities are both consistent with the Funds investment objective and legally permissible for the Fund. Before entering into such transactions or making any such investment, a Fund will provide appropriate disclosure.
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RATINGS
An investment grade rating means the security or issuer is rated investment grade by Moodys, S&P, Fitch, Inc., Dominion Bond Rating Service Limited, or another credit rating agency designated as a nationally recognized statistical rating organization by the SEC, or is unrated but considered to be of equivalent quality by the Adviser or Sub-Adviser.
Subsequent to purchase by a Fund, a rated security may cease to be rated or its investment grade rating may be reduced below an investment grade rating. Bonds rated lower than Baa3 by Moodys or BBB- by S&P are below investment grade quality and are obligations of issuers that are considered predominantly speculative with respect to the issuers capacity to pay interest and repay principal according to the terms of the obligation and, therefore, carry greater investment risk, including the possibility of issuer default and bankruptcy and increased market price volatility. Such securities (lower rated securities) are commonly referred to as junk bonds and are subject to a substantial degree of credit risk. Lower rated securities are often issued by smaller, less creditworthy companies or by highly leveraged (indebted) firms, which are generally less able than more financially stable firms to make scheduled payments of interest and principal. The risks posed by securities issued under such circumstances are substantial. Bonds rated below investment grade tend to be less marketable than higher-quality bonds because the market for them is less broad. The market for unrated bonds is even narrower. See HIGH YIELD SECURITIES above for more information relating to the risks associated with investing in lower rated securities.
SPECIAL CONSIDERATIONS AND RISKS
A discussion of the risks associated with an investment in each Fund is contained in the Prospectus. The discussion below supplements, and should be read in conjunction with, the Prospectus.
GENERAL
Investment in a Fund should be made with an understanding that the value of a Funds portfolio securities may fluctuate in accordance with changes in the financial condition of the issuers of the portfolio securities, the value of securities generally and other factors.
An investment in a Fund should also be made with an understanding of the risks inherent in an investment in securities, including the risk that the financial condition of issuers may become impaired or that the general condition of the securities markets may deteriorate (either of which may cause a decrease in the value of the portfolio securities and thus in the value of Shares). Securities are susceptible to general market fluctuations and to volatile increases and decreases in value as market confidence in and perceptions of their issuers change. These investor perceptions are based on various and unpredictable factors including expectations regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political, economic and banking crises. Securities of issuers traded on exchanges may be suspended on certain exchanges by the issuers themselves, by an exchange or by government authorities. The likelihood of such suspensions may be higher for securities of issuers in emerging or less-developed market countries than in countries with more developed markets. Trading suspensions may be applied from time to time to the securities of individual issuers for reasons specific to that issuer, or may be applied broadly by exchanges or governmental authorities in response to market events. Suspensions may last for significant periods of time, during which trading in the securities and instruments that reference the securities, such as participatory notes (or P-notes) or other derivative instruments, may be halted.
Holders of common stocks incur more risk than holders of preferred stocks and debt obligations because common stockholders, as owners of the issuer, have generally inferior rights to receive payments from the issuer in comparison with the rights of creditors of, or holders of debt obligations or preferred stocks issued by, the issuer. Further, unlike debt securities which typically have a stated principal amount payable at maturity (whose value, however, will be subject to market fluctuations prior thereto), or preferred stocks which typically have a liquidation preference and which may have stated optional or mandatory redemption provisions, common stocks have neither a fixed principal amount nor a maturity. Common stock values are subject to market fluctuations as long as the common stock remains outstanding.
The principal trading market for some of the securities in an Index may be in the over-the-counter market. The existence of a liquid trading market for certain securities may depend on whether dealers will make a market in such securities. There can be no assurance that a market will be made or maintained or that any such market will be or remain liquid. The price at which securities may be sold and the value of a Funds Shares will be adversely affected if trading markets for a Funds portfolio securities are limited or absent or if bid/ask spreads are wide.
FUTURES AND OPTIONS TRANSACTIONS
Positions in futures contracts and options may be closed out only on an exchange which provides a secondary market for such financial instruments. However, there can be no assurance that a liquid secondary market will exist for any particular futures contract or option at any specific time. Thus, it may not be possible to close a futures or options position. In the event of adverse price movements, a Fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if a Fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when it may be disadvantageous to do so. In addition, a Fund may be required to make delivery of the instruments underlying futures contracts it has sold.
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Each Fund will minimize the risk that it will be unable to close out a futures or options contract by only entering into futures and options for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts or uncovered call options in some strategies (e.g., selling uncovered index futures contracts) is potentially unlimited. The Funds do not plan to use futures and options contracts, when available, in this manner. The risk of a futures position may still be large as traditionally measured due to the low margin deposits required. In many cases, a relatively small price movement in a futures contract may result in immediate and substantial loss or gain to the investor relative to the size of a required margin deposit. A Fund, however, may utilize futures and options contracts in a manner designed to limit its risk exposure to that which is comparable to what it would have incurred through direct investment in securities.
Utilization of futures transactions by a Fund involves the risk of imperfect or even negative correlation to its benchmark Index if the index underlying the futures contracts differs from the benchmark Index or if the futures contracts do not track the benchmark Index as expected. There is also the risk of loss by a Fund of margin deposits in the event of bankruptcy of a broker with whom a Fund has an open position in the futures contract or option.
Certain financial futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous days settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting some futures traders to substantial losses.
RISKS OF SWAP AGREEMENTS
Swap agreements are subject to the risk that the swap counterparty will default on its obligations. If such a default occurs, a Fund will have contractual remedies pursuant to the agreements related to the transaction, but such remedies may be subject to bankruptcy and insolvency laws which could affect the Funds rights as a creditor.
The use of interest-rate and index swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. The use of a swap requires an understanding not only of the referenced asset, reference rate or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions. These transactions generally do not involve the delivery of securities or other underlying assets or principal.
The swaps market is largely unregulated. It is possible that developments in the swaps market, including potential government regulation, could adversely affect a Funds ability to terminate existing swap agreements or to realize amounts to be received under such agreements.
Because they are two party contracts that may be subject to contractual restrictions on transferability and termination and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid and subject to a Funds limitation on investments in illiquid securities. To the extent that a swap is not liquid, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. Like most other investments, swap agreements are subject to the risk that the market value of the instrument will change in a way detrimental to a Funds interest.
If a Fund uses a swap as a hedge against, or as a substitute for, a portfolio investment, the Fund will be exposed to the risk that the swap will have or will develop imperfect or no correlation with the portfolio investment. This could cause substantial losses for the Fund. While hedging strategies involving swap instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other Fund investments. Many swaps are complex and often valued subjectively.
TAX RISKS
As with any investment, you should consider how your investment in Shares of a Fund will be taxed. The tax information in the Prospectus and this SAI is provided as general information. You should consult your own tax professional about the tax consequences of an investment in Shares of a Fund.
Unless your investment in Shares is made through a tax-exempt entity or tax-advantaged retirement account, such as an individual retirement account, you need to be aware of the possible tax consequences when a Fund makes distributions or you sell Fund Shares.
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CONFLICTS OF INTEREST RISK
An investment in a Fund may be subject to a number of actual or potential conflicts of interest. For example, the Adviser or its affiliates may provide services to a Fund, such as securities lending agency services, custodial, administrative, bookkeeping, and accounting services, transfer agency and shareholder servicing, securities brokerage services, and other services for which the Fund would compensate the Adviser and/or such affiliates. A Fund may invest in other pooled investment vehicles sponsored, managed, or otherwise affiliated with the Adviser. There is no assurance that the rates at which a Fund pays fees or expenses to the Adviser or its affiliates, or the terms on which it enters into transactions with the Adviser or its affiliates, will be the most favorable available in the market generally or as favorable as the rates the Adviser makes available to other clients. Because of its financial interest, the Adviser may have an incentive to enter into transactions or arrangements on behalf of a Fund with itself or its affiliates in circumstances where it might not have done so in the absence of that interest.
CONTINUOUS OFFERING
The method by which Creation Units of Shares are created and traded may raise certain issues under applicable securities laws. Because new Creation Units of Shares are issued and sold by the Trust on an ongoing basis, at any point a distribution, as such term is used in the Securities Act, may occur. Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus delivery and liability provisions of the Securities Act.
For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with the Distributor, breaks them down into constituent Shares, and sells such Shares directly to customers, or if it chooses to couple the creation of a supply of new Shares with an active selling effort involving solicitation of secondary market demand for Shares. A determination of whether one is an underwriter for purposes of the Securities Act must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that could lead to a categorization as an underwriter.
Broker-dealer firms should also note that dealers who are not underwriters but are effecting transactions in Shares, whether or not participating in the distribution of Shares, are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(3) of the Securities Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. Firms that incur a prospectus-delivery obligation with respect to Shares of a Fund are reminded that under Securities Act Rule 153, a prospectus-delivery obligation under Section 5(b)(2) of the Securities Act owed to an exchange member in connection with a sale on the Exchange is satisfied by the fact that a Funds Prospectus is available at the Exchange upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to transactions on an exchange.
The Trust has adopted the following investment restrictions as fundamental policies with respect to each Fund. These restrictions cannot be changed without the approval of the holders of a majority of a Funds outstanding voting securities. For purposes of the 1940 Act, a majority of the outstanding voting securities of a Fund means the vote, at an annual or a special meeting of the security holders of the Trust, of the lesser of (1) 67% or more of the voting securities of the Fund present at such meeting, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy, or (2) more than 50% of the outstanding voting securities of the Fund. Except with the approval of a majority of the outstanding voting securities, each Fund may not:
1. Concentrate its investments in securities of issuers in the same industry, except as may be necessary to approximate the composition of the Funds underlying Index 1 ;
2. Make loans to another person except as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund;
3. Issue senior securities or borrow money except as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund;
4. Invest directly in real estate unless the real estate is acquired as a result of ownership of securities or other instruments. This restriction shall not preclude the Fund from investing in companies that deal in real estate or in instruments that are backed or secured by real estate;
5. Act as an underwriter of another issuers securities, except to the extent the Fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in connection with the Funds purchase and sale of portfolio securities; or
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6. Invest in commodities except as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund.
In addition to the investment restrictions adopted as fundamental policies as set forth above, each Fund observes the following restrictions, which may be changed by the Board without a shareholder vote. Each Fund will not:
1. Invest in the securities of a company for the purpose of exercising management or control, provided that the Trust may vote the investment securities owned by the Fund in accordance with its views;
2. Hold illiquid assets in excess of 15% of its net assets. An illiquid asset is any asset which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Fund has valued the investment; or
3. With respect to each Fund, under normal circumstances, invest less than 80% of its total assets in securities that comprise its relevant Index. Securities that have economic characteristics substantially identical to the economic characteristics of the securities that comprise the Index are included within this 80% investment policy. Prior to any change in a Funds 80% investment policy, such Fund will provide shareholders with 60 days written notice.
4. With respect to each Commercial Paper ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in commercial paper. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
5. With respect to the Corporate Bond ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in corporate bonds. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
6. With respect to the Agency Bond ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in agency bonds. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
7. With respect to the Corporate Industrial Bond ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in corporate bonds issued by companies in the industrial sector. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
8. With respect to the Corporate Financial Bond ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in corporate bonds issued by companies in the financial sector. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
9. With respect to the Corporate Utilities Bond ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in corporate bonds issued by companies in the utilities sector. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
10. With respect to the Zero Coupon Bond ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in zero coupon bonds. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
1 | The SEC Staff considers concentration to involve more than 25% of a funds assets to be invested in an industry or group of industries. |
11. With respect to the CMBS ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in commercial mortgage backed securities. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
12. With respect to the Global Convertible Securities ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in convertible securities. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
13. With respect to the Floating Rate Treasury ETF, under normal circumstances, invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in floating rate U.S. Treasury securities. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
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If a percentage limitation is adhered to at the time of investment or contract, a later increase or decrease in percentage resulting from any change in value or total or net assets will not result in a violation of such restriction, except that the percentage limitations with respect to the borrowing of money and illiquid securities will be observed continuously. With respect to the limitation on illiquid securities, in the event that a subsequent change in net assets or other circumstances cause a Fund to exceed its limitation, the Fund will take steps to bring the aggregate amount of illiquid instruments back within the limitations as soon as reasonably practicable.
A discussion of exchange listing and trading matters associated with an investment in a Fund is contained in the Prospectus under PURCHASE AND SALE INFORMATION and ADDITIONAL PURCHASE AND SALE INFORMATION. The discussion below supplements, and should be read in conjunction with, such sections of the Prospectus.
The Shares of each Fund are approved for listing and trading on the Exchange, subject to notice of issuance. The Shares trade on the Exchange at prices that may differ to some degree from their net asset value. There can be no assurance that the requirements of the Exchange necessary to maintain the listing of Shares of a Fund will continue to be met.
The Exchange may, but is not required to, remove the Shares of a Fund from listing if: (1) following the initial twelve-month period beginning upon the commencement of trading of the Fund, there are fewer than 50 beneficial holders of the Shares for 30 or more consecutive trading days; (2) the value of its underlying Index or portfolio of securities on which the Fund is based is no longer calculated or available; (3) the indicative optimized portfolio value (IOPV) of the Fund is no longer calculated or available; or (4) such other event shall occur or condition exists that, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. In addition, the Exchange will remove the Shares from listing and trading upon termination of the Trust or a Fund.
The Trust reserves the right to adjust the Share price of a Fund in the future to maintain convenient trading ranges for investors. Any adjustments would be accomplished through stock splits or reverse stock splits, which would have no effect on the net assets of the Fund.
As in the case of other publicly traded securities, brokers commissions on transactions will be based on negotiated commission rates at customary levels.
The base and trading currencies of each Fund is the U.S. dollar. The base currency is the currency in which a Funds net asset value per Share is calculated and the trading currency is the currency in which Shares of a Fund are listed and traded on the Exchange.
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The following information supplements and should be read in conjunction with the section in the Prospectus entitled MANAGEMENT.
Board Responsibilities. The management and affairs of the Trust and its series, including the Funds described in this SAI, are overseen by the Trustees. The Board has approved contracts, as described in this SAI, under which certain companies provide essential management services to the Trust.
Like most mutual funds, the day-to-day business of the Trust, including the management of risk, is performed by third party service providers, such as the Adviser, Sub-Adviser, Distributor and Administrator. The Trustees are responsible for overseeing the Trusts service providers and, thus, have oversight responsibility with respect to risk management performed by those service providers. Risk management seeks to identify and address risks, i.e., events or circumstances that could have material adverse effects on the business, operations, shareholder services, investment performance or reputation of the Funds. The Funds and their service providers employ a variety of processes, procedures and controls to identify various of those possible events or circumstances, to lessen the probability of their occurrence and/or to mitigate the effects of such events or circumstances if they do occur. Each service provider is responsible for one or more discrete aspects of the Trusts business (e.g., a Sub-Adviser is responsible for the day-to-day management of a Funds portfolio investments) and, consequently, for managing the risks associated with that business. The Board has emphasized to the Funds service providers the importance of maintaining vigorous risk management.
The Trustees role in risk oversight begins before the inception of a Fund, at which time the Funds Adviser and, if applicable, Sub-Adviser presents the Board with information concerning the investment objectives, strategies and risks of the Fund, as well as proposed investment limitations for the Fund. Additionally, the Funds Adviser and Sub-Adviser provide the Board with an overview of, among other things, their investment philosophies, brokerage practices and compliance infrastructures. Thereafter, the Board continues its oversight function as various personnel, including the Trusts Chief Compliance Officer, as well as personnel of the Adviser and other service providers, such as the Funds independent accountants, make periodic reports to the Audit Committee or to the Board with respect to various aspects of risk management. The Board and the Audit Committee oversee efforts by management and service providers to manage risks to which a Fund may be exposed.
The Board is responsible for overseeing the nature, extent and quality of the services provided to the Funds by the Adviser and Sub-Adviser and receives information about those services at its regular meetings. In addition, on an annual basis, in connection with its consideration of whether to renew the Advisory Agreement and Sub-Advisory Agreement with the Adviser and Sub-Adviser, respectively, the Board meets with the Adviser and Sub-Adviser to review such services. Among other things, the Board regularly considers the Advisers and Sub-Advisers adherence to the Funds investment restrictions and compliance with various Fund policies and procedures and with applicable securities regulations. The Board also reviews information about each Funds investments.
The Trusts Chief Compliance Officer reports regularly to the Board to review and discuss compliance issues. At least annually, the Trusts Chief Compliance Officer provides the Board with a report reviewing the adequacy and effectiveness of the Trusts policies and procedures and those of its service providers, including the Adviser and Sub-Adviser. The report addresses the operation of the policies and procedures of the Trust and each service provider since the date of the last report; any material changes to the policies and procedures since the date of the last report; any recommendations for material changes to the policies and procedures; and any material compliance matters since the date of the last report.
The Board receives reports from the Funds service providers regarding operational risks and risks related to the valuation and liquidity of portfolio securities. Regular reports are made to the Board concerning investments for which market quotations are not readily available. Annually, the independent registered public accounting firm reviews with the Audit Committee its audit of each Funds financial statements, focusing on major areas of risk encountered by the Funds and noting any significant deficiencies or material weaknesses in the Funds internal controls. Additionally, in connection with its oversight function, the Board oversees Fund managements implementation of disclosure controls and procedures, which are designed to ensure that information required to be disclosed by the Trust in its periodic reports with the SEC are recorded, processed, summarized, and reported within the required time periods. The Board also oversees the Trusts internal controls over financial reporting, which comprise policies and procedures designed to provide reasonable assurance regarding the reliability of the Trusts financial reporting and the preparation of the Trusts financial statements.
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From their review of these reports and discussions with the Adviser and Sub-Adviser, the Chief Compliance Officer, the independent registered public accounting firm and other service providers, the Board and the Audit Committee learn in detail about the material risks of the Fund, thereby facilitating a dialogue about how management and service providers identify and mitigate those risks.
The Board recognizes that not all risks that may affect a Fund can be identified and/or quantified, that it may not be practical or cost-effective to eliminate or mitigate certain risks, that it may be necessary to bear certain risks (such as investment-related risks) to achieve a Funds goals, and that the processes, procedures and controls employed to address certain risks may be limited in their effectiveness. Moreover, reports received by the Trustees as to risk management matters are typically summaries of the relevant information. Most of the Funds investment management and business affairs are carried out by or through the Funds Adviser, Sub-Adviser and other service providers, each of which has an independent interest in risk management but whose policies and the methods by which one or more risk management functions are carried out may differ from the Funds and each others in the setting of priorities, the resources available or the effectiveness of relevant controls. As a result of the foregoing and other factors, the Boards ability to monitor and manage risk, as a practical matter, is subject to limitations.
Trustees and Officers. There are six members of the Board of Trustees, five of whom are not interested persons of the Trust, as that term is defined in the 1940 Act (Independent Trustees). Frank Nesvet, an Independent Trustee, serves as Chairman of the Board. The Board has determined its leadership structure is appropriate given the specific characteristics and circumstances of the Trust. The Board made this determination in consideration of, among other things, the fact that the Independent Trustees constitute a super-majority (greater than 75%) of the Board, the fact that the chairperson of each Committee of the Board is an Independent Trustee, the amount of assets under management in the Trust, and the number of funds (and classes of shares) overseen by the Board. The Board also believes that its leadership structure facilitates the orderly and efficient flow of information to the Independent Trustees from fund management.
The Board of Trustees has two standing committees: the Audit Committee and Trustee Committee. The Audit Committee and Trustee Committee are each chaired by an Independent Trustee and composed of all of the Independent Trustees.
Set forth below are the names, year of birth, position with the Trust, length of term of office, and the principal occupations during the last five years and other directorships held of each of the persons currently serving as a Trustee or Officer of the Trust.
TRUSTEES
NAME, ADDRESS AND YEAR OF BIRTH |
POSITION(S)
WITH
|
TERM OF OFFICE AND LENGTH OF TIME SERVED |
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS |
NUMBER OF
|
OTHER DIRECTORSHIPS
HELD
BY
|
|||||
INDEPENDENT TRUSTEES | ||||||||||
FRANK NESVET c/o SPDR Series Trust State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1943 |
Independent Trustee, Chairman, Trustee Committee Chair |
Term: Unlimited Served: since September 2000 |
Chief Executive Officer, Libra Group, Inc. (a financial services consulting company) (1998-present). | 197 | SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee). | |||||
DAVID M. KELLY c/o SPDR Series Trust State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1938 |
Independent Trustee, Audit Committee Chair |
Term: Unlimited Served: since September 2000 |
Retired. | 197 | Chicago Stock Exchange (Former Director, retired); Penson Worldwide Inc. (Former Director, retired); SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee). |
19
NAME, ADDRESS AND YEAR OF BIRTH |
POSITION(S)
WITH
|
TERM OF OFFICE AND LENGTH OF TIME SERVED |
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS |
NUMBER OF
|
OTHER DIRECTORSHIPS
HELD
BY
|
|||||
BONNY EUGENIA BOATMAN c/o SPDR Series Trust State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1950 |
Independent Trustee |
Term: Unlimited Served: since April 2010 |
Retired. | 197 |
SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee). |
|||||
DWIGHT D. CHURCHILL c/o SPDR Series Trust State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1953 |
Independent Trustee |
Term: Unlimited Served: since April 2010 |
Self-employed consultant since 2010; CEO and President, CFA Institute (June 2014-January 2015). | 197 | SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee); Affiliated Managers Group, Inc. (Director). | |||||
CARL G. VERBONCOEUR c/o SPDR Series Trust State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1952 |
Independent Trustee |
Term: Unlimited Served: since April 2010 |
Self-employed consultant since 2009. | 197 | The Motley Fool Funds Trust (Trustee); SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee). | |||||
INTERESTED TRUSTEE | | | | | ||||||
JAMES E. ROSS* SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1965 |
Interested Trustee |
Term: Unlimited Served as Trustee: since April 2010 |
Chairman and Director, SSGA Funds Management, Inc. (2005-present); Senior Managing Director and Principal, State Street Global Advisors (2006-present); President, SSGA Funds Management, Inc. (2005-2012). |
261 |
SPDR Index Shares Funds (Trustee); SSGA Master Trust (Trustee); SSGA Active Trust (Trustee); Select Sector SPDR Trust (Trustee); State Street Master Funds (Trustee); and State Street Institutional Investment Trust (Trustee). |
* | Mr. Ross is an Interested Trustee because of his employment with the Adviser and ownership interest in an affiliate of the Adviser. Mr. Ross previously served as an Interested Trustee from November 2005 to December 2009. |
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OFFICERS
NAME, ADDRESS AND YEAR OF BIRTH |
POSITION(S)
WITH FUNDS |
TERM OF
OFFICE AND LENGTH OF TIME SERVED |
PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS |
|||
ELLEN M. NEEDHAM SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1967 |
President |
Term: Unlimited
Served: since October 2012 |
President and Director, SSGA Funds Management, Inc. (June 2012-present); Chief Operating Officer, SSGA Funds Management, Inc. (May 2010-June 2012); Senior Managing Director, SSGA Funds Management, Inc. (1992-2012)*; Senior Managing Director, State Street Global Advisors (1992-present).* | |||
ANN M. CARPENTER SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1966 |
Vice
President;
Assistant Treasurer |
Term: Unlimited
Served: since August 2012; Term: Unlimited Served: since April 2015 |
Chief Operating Officer, SSGA Funds Management, Inc. (April 2014-present); Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (2005-present).* | |||
MICHAEL P. RILEY SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1969 |
Vice
President |
Term: Unlimited
Served: since February 2005 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (2008-present); Principal, State Street Global Advisors and SSGA Funds Management, Inc. (2005-2008). | |||
JOSHUA A. WEINBERG SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1978 |
Chief Legal
Officer |
Term: Unlimited
Served: since
|
Vice President and Managing Counsel, State Street Global Advisors (2011 present); Clerk, SSGA Funds Management, Inc. (2013 present); Associate, Financial Services Group, Dechert LLP (2006 2011). | |||
CHRISTOPHER A. MADDEN State Street Bank and Trust Company One Hundred Huntington Avenue, CPH0326 Boston, MA 02116 1967 |
Secretary |
Term: Unlimited
Served: since August 2013 |
Vice President and Senior Counsel, State Street Bank and Trust Company (2013-present); Counsel, Atlantic Fund Services (2009-2013); Vice President, Citigroup Fund Services, LLC (2005-2009).* | |||
PATRICIA A. MORISETTE State Street Bank and Trust Company One Hundred Huntington Avenue, CPH0326 Boston, MA 02116 1973 |
Assistant
Secretary |
Term: Unlimited
Served: since February 2015 |
Vice President and Counsel, State Street Bank and Trust Company (2014-present); Assistant Vice President and Counsel, John Hancock Financial Services (2011-2013); Independent legal consultant (2009-2011); Associate, Bingham McCutchen LLP (2003-2009).* , ** | |||
CHAD C. HALLETT SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1969 |
Treasurer |
Term: Unlimited
Served: since November 2010 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (November 2014 present); Vice President, State Street Bank and Trust Company (2001-November 2014).* |
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NAME, ADDRESS AND YEAR OF BIRTH |
POSITION(S)
WITH FUNDS |
TERM OF
OFFICE AND LENGTH OF TIME SERVED |
PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS |
|||
BRIAN HARRIS SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1973 |
Chief Compliance
Officer |
Term: Unlimited
Served: since November 2013 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (2013-Present); Senior Vice President and Global Head of Investment Compliance, BofA Global Capital Management (2010-2013); Director of Compliance, AARP Financial Inc. (2008-2010). |
|||
TREVOR SWANBERG SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111 1979 |
Code of Ethics
Compliance Officer |
Term: Unlimited
Served: since
|
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (January 2015-Present); Senior Manager Mutual Fund Compliance, ICMA-Retirement Corporation (December 2011- January 2015); Assistant Vice President, J.P. Morgan (September 2007-December 2011). |
* | Served in various capacities and/or with various affiliated entities during noted time period. |
** | Served in various capacities and/or with unaffiliated mutual funds or closed-end funds for which State Street Bank and Trust Company or its affiliates act as a provider of services during the noted time period. |
Individual Trustee Qualifications
The Board has concluded that each of the Trustees should serve on the Board because of his or her ability to review and understand information about the Funds provided to him or her by management, to identify and request other information he or she may deem relevant to the performance of his or her duties, to question management and other service providers regarding material factors bearing on the management and administration of the Funds, and to exercise his or her business judgment in a manner that serves the best interests of each Funds shareholders. The Board has concluded that each of the Trustees should serve as a Trustee based on his or her own experience, qualifications, attributes and skills as described below.
The Board has concluded that Mr. Nesvet should serve as Trustee because of the experience he has gained serving as the Chief Executive Officer of a financial services consulting company, serving on the boards of other investment companies, and serving as chief financial officer of a major financial services company; his knowledge of the financial services industry, and the experience he has gained serving as Trustee of the Trust since 2000.
The Board has concluded that Mr. Kelly should serve as Trustee because of the experience he gained serving as the President and Chief Executive Officer of the National Securities Clearing Corporation, his previous directorship experience, and the experience he has gained serving as Trustee of the Trust since 2000.
The Board has concluded that Ms. Boatman should serve as Trustee because of the experience she gained serving as Managing Director of the primary investment division of one of the nations leading financial institutions and her knowledge of the financial services industry. Ms. Boatman was elected to serve as Trustee of the Trust in April 2010.
The Board has concluded that Mr. Churchill should serve as Trustee because of the experience he gained serving as the Chief Executive Officer and President of the CFA Institute, serving as the Head of the Fixed Income Division of one of the nations leading mutual fund companies and provider of financial services and his knowledge of the financial services industry. Mr. Churchill was elected to serve as Trustee of the Trust in April 2010.
The Board has concluded that Mr. Verboncoeur should serve as Trustee because of the experience he gained serving as the Chief Executive Officer of a large financial services and investment management company, his knowledge of the financial services industry and his experience serving on the boards of other investment companies. Mr. Verboncoeur was elected to serve as Trustee of the Trust in April 2010.
The Board has concluded that Mr. Ross should serve as Trustee because of the experience he has gained in his various roles with the Adviser, his knowledge of the financial services industry, and the experience he has gained serving as Trustee of the Trust since 2005 (Mr. Ross did not serve as Trustee from December 2009 until April 2010).
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In its periodic assessment of the effectiveness of the Board, the Board considers the complementary individual skills and experience of the individual Trustees primarily in the broader context of the Boards overall composition so that the Board, as a body, possesses the appropriate (and appropriately diverse) skills and experience to oversee the business of the Funds.
REMUNERATION OF THE TRUSTEES AND OFFICERS
No officer, director or employee of the Adviser, its parent or subsidiaries receives any compensation from the Trust for serving as an officer or Trustee of the Trust. The Trust, SSGA Master Trust, SSGA Active Trust and SPDR Index Shares Funds (together with the Trust, the Trusts) pay, in the aggregate, each Independent Trustee an annual fee of $200,000 plus $10,000 per in-person meeting attended and $1,250 for each telephonic or video conference meeting attended. The Chairman of the Board receives an additional annual fee of $50,000 and the Chairman of the Audit Committee receives an additional annual fee of $20,000. Prior to July 1, 2015, each Independent Trustee received an annual fee of $185,000 plus $10,000 per in-person meeting attended and $1,250 for each telephonic or video conference meeting attended. The Chairman of the Board received an additional annual fee of $50,000 and the Chairman of the Audit Committee received an additional annual fee of $20,000. The Trust also reimburses each Independent Trustee for travel and other out-of-pocket expenses incurred by him/her in connection with attending such meetings and in connection with attending industry seminars and meetings. Trustee fees are allocated between the Trusts and each of their respective series in such a manner as deemed equitable, taking into consideration the relative net assets of the series.SSGA
The table below shows the compensation that the Independent Trustees received during the Trusts fiscal year ended June 30, 2015.
NAME OF INDEPENDENT TRUSTEE |
AGGREGATE
COMPENSATION FROM THE TRUST |
PENSION OR
RETIREMENT BENEFITS ACCRUED AS PART OF TRUST EXPENSES |
ESTIMATED
ANNUAL BENEFITS UPON RETIREMENT |
TOTAL
COMPENSATION FROM THE TRUST AND FUND COMPLEX PAID TO TRUSTEES(1) |
||||||||||||
Frank Nesvet |
$ | 224,871 | N/A | N/A | $ | 298,750 | ||||||||||
Bonny Boatman |
$ | 186,169 | N/A | N/A | $ | 247,500 | ||||||||||
Dwight Churchill |
$ | 187,105 | N/A | N/A | $ | 248,750 | ||||||||||
David M. Kelly |
$ | 202,150 | N/A | N/A | $ | 268,750 | ||||||||||
Carl Verboncoeur |
$ | 187,105 | N/A | N/A | $ | 248,750 |
(1) | The Fund Complex includes the Trust. |
STANDING COMMITTEES
Audit Committee. The Board has an Audit Committee consisting of all Independent Trustees. Mr. Kelly serves as Chairman. The Audit Committee meets with the Trusts independent auditors to review and approve the scope and results of their professional services; to review the procedures for evaluating the adequacy of the Trusts accounting controls; to consider the range of audit fees; and to make recommendations to the Board regarding the engagement of the Trusts independent auditors. The Audit Committee met four (4) times during the fiscal year ended June 30, 2015.
Trustee Committee. The Board has established a Trustee Committee consisting of all Independent Trustees. Mr. Nesvet serves as Chairman. The responsibilities of the Trustee Committee are to: 1) nominate Independent Trustees; 2) review on a periodic basis the governance structures and procedures of the Funds; 3) review proposed resolutions and conflicts of interest that may arise in the business of the Funds and may have an impact on the investors of the Funds; 4) review matters that are referred to the Committee by the Chief Legal Officer or other counsel to the Trust; and 5) provide general oversight of the Funds on behalf of the investors of the Funds. The Trustee Committee does not have specific procedures in place with respect to the consideration of nominees recommended by security holders, but may consider such nominees in the event that one is recommended. The Trustee Committee met four (4) times during the fiscal year ended June 30, 2015.
OWNERSHIP OF FUND SHARES
As of October 1, 2015, neither the Independent Trustees nor their immediate family members owned beneficially or of record any securities in the Adviser, Sub-Advisers, Principal Underwriter or any person controlling, controlled by, or under common control with the Adviser, Sub-Adviser or Principal Underwriter.
23
The following table shows, as of December 31, 2014, the amount of equity securities beneficially owned by the Trustees in the Trust.
Name of Trustee |
Fund |
Dollar Range of
Equity Securities in the Trust |
Aggregate Dollar Range of
Equity Securities in All Funds Overseen by Trustee in Family of Investment Companies |
|||
Independent Trustees: | ||||||
Frank Nesvet | None | None | None | |||
David M. Kelly | None | None | None | |||
Bonny Eugenia Boatman | None | None | None | |||
Dwight D. Churchill | None | None | None | |||
Carl G. Verboncoeur | SPDR S&P Dividend ETF | $1 to $10,000 | $1 to $10,000 | |||
Interested Trustee: | ||||||
James Ross | SPDR S&P Metals & Mining ETF | $1 to $10,000 | Over $100,000 | |||
SPDR Russell Small Cap Completeness ETF | $10,001$50,000 | |||||
SPDR Russell 1000 ETF | $50,001$100,000 | |||||
SPDR S&P Biotech ETF | $10,001$50,000 | |||||
SPDR S&P Dividend ETF | $10,001$50,000 | |||||
SPDR S&P 600 Small Cap Growth ETF | $10,001$50,000 | |||||
SPDR S&P 400 Mid Cap Growth ETF | $10,001$50,000 | |||||
SPDR Dow Jones REIT ETF | $10,001$50,000 | |||||
SPDR Barclays Short Term High Yield Bond ETF | $10,001$50,000 | |||||
SPDR Barclays High Yield Bond ETF | $10,001$50,000 | |||||
SPDR Barclays International Corporate Bond ETF | $10,001$50,000 | |||||
SPDR Barclays Short Term High Yield Bond ETF | $10,001$50,000 | |||||
SPDR Nuveen Barclays Short Term Municipal Bond ETF | Over $100,000 | |||||
SPDR Nuveen S&P High Yield Municipal Bond ETF | Over $100,000 | |||||
SPDR Barclays 1-3 Month T-Bill ETF | $10,001$50,000 | |||||
SPDR Barclays Short Term Corporate Bond ETF | Over $100,000 | |||||
SPDR Barclays Investment Grade Floating Rate ETF | Over $100,000 |
CODES OF ETHICS
The Trust, the Adviser (which includes applicable reporting personnel of the Distributor) and the Sub-Adviser each have adopted a code of ethics as required by applicable law, which is designed to prevent affiliated persons of the Trust, the Adviser, the Sub-Adviser and the Distributor from engaging in deceptive, manipulative or fraudulent activities in connection with securities held or to be acquired by the Funds (which may also be held by persons subject to the codes of ethics). Each Code of Ethics permits personnel, subject to that Code of Ethics, to invest in securities for their personal investment accounts, subject to certain limitations, including securities that may be purchased or held by the Funds.
There can be no assurance that the codes of ethics will be effective in preventing such activities. Each code of ethics, filed as exhibits to this registration statement, may be examined at the office of the SEC in Washington, D.C. or on the Internet at the SECs website at http://www.sec.gov.
PROXY VOTING POLICIES
The Board believes that the voting of proxies on securities held by each Fund is an important element of the overall investment process. As such, the Board has delegated the responsibility to vote such proxies to the Adviser and Sub-Adviser. The Sub-Advisers proxy voting policy is substantially and materially the same as the Advisers proxy voting policy, which is attached at the end of this SAI. Information regarding how a Fund voted proxies relating to its portfolio securities during the most recent twelve-month period ended June 30 is available: (1) without charge by calling 1-866-787-2257; (2) on the Funds website at www.spdrs.com; and (3) on the SECs website at http://www.sec.gov.
24
DISCLOSURE OF PORTFOLIO HOLDINGS POLICY
The Trust has adopted a policy regarding the disclosure of information about the Trusts portfolio holdings. The Board must approve all material amendments to this policy. The Funds portfolio holdings are publicly disseminated each day a Fund is open for business through financial reporting and news services including publicly accessible Internet web sites. In addition, a basket composition file, which includes the security names and share quantities to deliver in exchange for Fund Shares, together with estimates and actual cash components, is publicly disseminated daily prior to the opening of the Exchange via the National Securities Clearing Corporation (NSCC). The basket represents one Creation Unit of a Fund. The Trust, the Adviser, the Sub-Adviser or State Street will not disseminate non-public information concerning the Trust, except: (i) to a party for a legitimate business purpose related to the day-to-day operations of the Funds or (ii) to any other party for a legitimate business or regulatory purpose, upon waiver or exception.
THE INVESTMENT ADVISER
SSGAFM acts as investment adviser to the Trust and, subject to the supervision of the Board, is responsible for the investment management of each Fund. As of June 30, 2015, the Adviser managed approximately $376.28 billion in assets. The Advisers principal address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111. The Adviser, a Massachusetts corporation, is a wholly owned subsidiary of State Street Corporation, a publicly held bank holding company. State Street Global Advisors (SSGA), consisting of the Adviser and other investment advisory affiliates of State Street Corporation, is the investment management arm of State Street Corporation.
The Adviser serves as investment adviser to each Fund pursuant to an investment advisory agreement (Investment Advisory Agreement) between the Trust and the Adviser. The Investment Advisory Agreement, with respect to each Fund, continues in effect for two years from its effective date, and thereafter is subject to annual approval by (1) the Board or (2) vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, provided that in either event such continuance also is approved by a majority of the Board who are not interested persons (as defined in the 1940 Act) of the Trust by a vote cast in person at a meeting called for the purpose of voting on such approval. The Investment Advisory Agreement with respect to each Fund is terminable without penalty, on 60 days notice, by the Board or by a vote of the holders of a majority (as defined in the 1940 Act) of a Funds outstanding voting securities. The Investment Advisory Agreement is also terminable upon 60 days notice by the Adviser and will terminate automatically in the event of its assignment (as defined in the 1940 Act).
Under the Investment Advisory Agreement, the Adviser, subject to the supervision of the Board and in conformity with the stated investment policies of each Fund, manages the investment of each Funds assets. The Adviser is responsible for placing purchase and sale orders and providing continuous supervision of the investment portfolio of each Fund. Pursuant to the Investment Advisory Agreement, the Adviser is not liable for certain liabilities, including certain liabilities arising under the federal securities laws, unless such loss or liability results from willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard of its obligations and duties.
A discussion regarding the basis for the Boards approval or continuation of the Investment Advisory Agreements regarding certain Funds is available in the Trusts Semi-Annual Reports to Shareholders dated December 31, 2014 and in the Trusts Annual Reports to Shareholders dated June 30, 2015.
For the services provided to the Funds under the Investment Advisory Agreement, each Fund pays the Adviser monthly fees based on a percentage of each Funds average daily net assets as set forth in each Funds Prospectus. From time to time, the Adviser may waive all or a portion of its fee. The Adviser pays all expenses of each Fund other than the management fee, distribution fees pursuant to the Distribution and Service Plan, if any, brokerage, taxes, interest, fees and expenses of the Independent Trustees (including any Trustees counsel fees), acquired fund fees and expenses, litigation expenses and other extraordinary expenses.
INVESTMENT SUB-ADVISERGLOBAL CONVERTIBLE SECURITIES ETF
Pursuant to the Advisory Agreement between the Global Convertible Securities ETF and the Adviser, the Adviser is authorized to engage one or more sub-advisers for the performance of any of the services contemplated to be rendered by the Adviser. The Adviser has retained SSGA LTD, as sub-adviser, to be responsible for the day to day management of the Funds ex-U.S. investments and the overall allocation between U.S. and ex-U.S. investments within the Fund, subject to supervision of the Adviser and the Board. The Adviser provides administrative, compliance and general management services to the Fund in addition to day to day management of the Funds U.S. investments. Since 1990, SSGA LTD has been providing investment management services including managing indexed fixed income portfolios. As of June 30, 2015, SSGA LTD managed approximately $[ ] billion in assets. SSGA LTDs principal business address is 20 Churchill Place, Canary Wharf, London, United Kingdom E14 5HJ.
In accordance with the Sub-Advisory Agreement between the Adviser and SSGA LTD, the Adviser will pay SSGA LTD an annual investment sub-advisory fee equal to 40% of the advisory fees paid by the Fund to the Adviser after deducting the payments to fund service providers and fund expenses.
25
The Fund had not commenced operations as of June 30, 2015 and therefore did not pay fees to the Sub-Adviser for the past three fiscal years.
A discussion regarding the basis for the Boards approval of the Sub-Advisory Agreement is available in the Trusts Semi-Annual Report to Shareholders dated December 31, 2014.
PORTFOLIO MANAGERS
The Adviser and Sub-Adviser manage the Funds using a team of investment professionals. The professionals primarily responsible for the day-to-day portfolio management of each Fund are:
Fund |
Portfolio Managers |
|
SPDR S&P Commercial Paper ETF | Todd Bean, Steve Meier and Jeff St. Peters | |
SPDR S&P Commercial Paper Ex-Financials ETF | Todd Bean, Steve Meier and Jeff St. Peters | |
SPDR S&P Agency Bond ETF | Todd Bean, Steve Meier and Jeff St. Peters | |
SPDR Barclays Zero Coupon Bond ETF | Michael Brunell and Karen Tsang | |
SPDR Barclays CMBS ETF | Michael Brunell and Karen Tsang | |
SPDR Barclays Corporate Utilities Bond ETF | Patrick Bresnehan, [ ] and Kyle Kelly | |
SPDR Barclays Corporate Bond ETF | Patrick Bresnehan, [ ] and Kyle Kelly | |
SPDR Barclays Corporate Industrial Bond ETF | Patrick Bresnehan, [ ] and Kyle Kelly | |
SPDR Barclays Corporate Financial Bond ETF | Patrick Bresnehan, [ ] and Kyle Kelly | |
SPDR Barclays Global Convertible Securities ETF | [ ] and Stephen Yeats | |
SPDR Barclays Breakeven Inflation ETF | Patrick Bresnehan and [ ] | |
SPDR Barclays Floating Rate Treasury ETF | Todd Bean and Jeff St. Peters |
The following table lists the number and types of accounts managed by each of the key professionals involved in the day-to-day portfolio management for each Fund and assets under management in those accounts. The total number of accounts and assets have been allocated to each respective manager. Therefore, some accounts and assets have been counted twice.
Other Accounts Managed as of June 30, 2015:
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions)* |
Pooled
Investment Vehicle Accounts |
Assets
Managed (billions)* |
Other
Accounts |
Assets
Managed (billions)* |
Total
Assets Managed (billions)* |
|||||||
Todd Bean |
[ ] | $[ ] | [ ] | $[ ] | [ ] | $[ ] | $[ ] | |||||||
Steven Meier |
[ ] | $[ ] | [ ] | $[ ] | [ ] | $[ ] | $[ ] | |||||||
Jeff St. Peters |
[ ] | $[ ] | [ ] | $[ ] | [ ] | $[ ] | $[ ] | |||||||
Michael Brunell |
[ ] | $[ ] | [ ] | $[ ] | [ ] | $[ ] | $[ ] | |||||||
Kyle Kelly |
[ ] | $[ ] | [ ] | $[ ] | [ ] | $[ ] | $[ ] | |||||||
Karen Tsang |
[ ] | $[ ] | [ ] | $[ ] | [ ] | $[ ] | $[ ] | |||||||
Patrick Bresnehan |
[ ] | $[ ] | [ ] | $[ ] | [ ] | $[ ] | $[ ] |
* | There are no performance fees associated with these portfolios. |
The following table lists the dollar range of Fund Shares beneficially owned by portfolio managers listed above as of June 30, 2015:
Portfolio Manager |
Fund |
Dollar Range of Trust
|
||
Todd Bean |
None | None | ||
Steven Meier |
None | None | ||
Jeff St. Peters |
None | None |
26
Portfolio Manager |
Fund |
Dollar Range of Trust
|
||
Michael Brunell |
None | None | ||
Kyle Kelly |
None | None | ||
Karen Tsang |
None | None | ||
Patrick Bresnehan |
None | None |
A portfolio manager that has responsibility for managing more than one account may be subject to potential conflicts of interest because he or she is responsible for other accounts in addition to the Funds. Those conflicts could include preferential treatment of one account over others in terms of: (a) the portfolio managers execution of different investment strategies for various accounts; or (b) the allocation of resources or of investment opportunities. The Adviser and Sub-Adviser have adopted policies and procedures designed to address these potential material conflicts. For instance, portfolio managers are normally responsible for all accounts within a certain investment discipline, and do not, absent special circumstances, differentiate among the various accounts when allocating resources. Additionally, the Adviser, Sub-Adviser and its advisory affiliates have processes and procedures for allocating investment opportunities among portfolios that are designed to provide a fair and equitable allocation among the portfolio managers accounts with the same strategy.
Portfolio managers may manage numerous accounts for multiple clients. These accounts may include registered investment companies, other types of pooled accounts (e.g., collective investment funds), and separate accounts (i.e., accounts managed on behalf of individuals or public or private institutions). Portfolio managers make investment decisions for each account based on the investment objectives and policies and other relevant investment considerations applicable to that portfolio. A potential conflict of interest may arise as a result of the portfolio managers responsibility for multiple accounts with similar investment guidelines. Under these circumstances, a potential investment may be suitable for more than one of the portfolio managers accounts, but the quantity of the investment available for purchase is less than the aggregate amount the accounts would ideally devote to the opportunity. Similar conflicts may arise when multiple accounts seek to dispose of the same investment. The portfolio managers may also manage accounts whose objectives and policies differ from that of the Funds. These differences may be such that under certain circumstances, trading activity appropriate for one account managed by the portfolio manager may have adverse consequences for another account managed by the portfolio manager. For example, an account may sell a significant position in a security, which could cause the market price of that security to decrease, while a Fund maintained its position in that security.
A potential conflict may arise when the portfolio managers are responsible for accounts that have different advisory feesthe difference in fees could create an incentive for the portfolio manager to favor one account over another, for example, in terms of access to investment opportunities. Another potential conflict may arise when the portfolio manager has an investment in one or more accounts that participate in transactions with other accounts. His or her investment(s) may create an incentive for the portfolio manager to favor one account over another. The Adviser and Sub-Adviser have adopted policies and procedures reasonably designed to address these potential material conflicts. For instance, portfolio managers are normally responsible for all accounts within a certain investment discipline, and do not, absent special circumstances, differentiate among the various accounts when allocating resources. Additionally, the Adviser, Sub-Adviser and its advisory affiliates have processes and procedures for allocating investment opportunities among portfolios that are designed to provide a fair and equitable allocation.
The compensation of the Advisers and Sub-Advisers investment professionals is based on a number of factors. The first factor considered is external market. Through a compensation survey process, the Adviser seeks to understand what its competitors are paying people to perform similar roles. This data is then used to determine a competitive baseline in the areas of base pay, bonus, and long term incentive (i.e. equity). The second factor taken into consideration is the size of the pool available for this compensation. The Adviser and Sub-Adviser are a part of State Street Corporation, and therefore works within its corporate environment on determining the overall level of its incentive compensation pool. Once determined, this pool is then allocated to the various locations and departments of the Adviser and its affiliates. The discretionary determination of the allocation amounts to these locations and departments is influenced by the competitive market data, as well as the overall performance of the group, and in the case of investment teams, the investment performance of their strategies. The pool is then allocated on a discretionary basis to individual employees based on their individual performance.
SPDR Barclays Capital Global Convertible Securities ETF. The following table lists the number and types of other accounts managed by the key professional primarily involved in the day-to-day portfolio management of the ex-U.S. assets in the SPDR Barclays Capital Global Convertible Securities ETF and assets under management in that account.
27
Other Accounts Managed as of June 30, 2015:
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions)* |
Pooled
Investment Vehicle Accounts |
Assets
Managed (billions)* |
Other
Accounts |
Assets
Managed (billions)* |
Total
Assets Managed (billions)* |
|||||||
Stephen Yeats |
[ ] | $[ ] | [ ] | $[ ] | [ ] | $[ ] | $[ ] |
* | There are no performance fees associated with these portfolios. |
The following table lists the dollar range of Fund Shares beneficially owned by the portfolio manager of the ex-U.S. assets in the SPDR Barclays Capital Global Convertible Securities ETF as of June 30, 2015:
Dollar Range of Fund
Shares Beneficially Owned |
||
Stephen Yeats |
None |
The compensation of SSGA LTDs investment professionals is based on a number of factors. The first factor considered is external market. Through a compensation survey process, the Adviser seeks to understand what its competitors are paying people to perform similar roles. This data is then used to determine a competitive baseline in the areas of base pay, bonus, and long term incentive ( i.e. equity). The second factor taken into consideration is the size of the pool available for this compensation. SSGA LTD is a part of State Street Corporation, and therefore works within its corporate environment on determining the overall level of its incentive compensation pool. Once determined, this pool is then allocated to the various locations and departments of the Adviser and its affiliates. The discretionary determination of the allocation amounts to these locations and departments is influenced by the competitive market data, as well as the overall performance of the group. The pool is then allocated on a discretionary basis to individual employees based on their individual performance. There is no fixed formula for determining these amounts, nor is anyones compensation directly tied to the investment performance or asset value of a product or strategy. The same process is followed in determining incentive equity allocations.
A portfolio manager that has responsibility for managing more than one account may be subject to potential conflicts of interest because he or she is responsible for other accounts in addition to the fund. Those conflicts could include preferential treatment of one account over others in terms of: (a) the portfolio managers execution of different investment strategies for various accounts; or (b) the allocation of resources or of investment opportunities. SSGA LTD has adopted policies and procedures designed to address these potential material conflicts. For instance, portfolio managers are normally responsible for all accounts within a certain investment discipline, and do not, absent special circumstances, differentiate among the various accounts when allocating resources. Additionally, SSGA LTD and its advisory affiliates have processes and procedures for allocating investment opportunities among portfolios that are designed to provide a fair and equitable allocation among the portfolio managers accounts with the same strategy.
Portfolio managers may manage numerous accounts for multiple clients. These accounts may include registered investment companies, other types of pooled accounts ( e.g. , collective investment funds), and separate accounts ( i.e. , accounts managed on behalf of individuals or public or private institutions). Portfolio managers make investment decisions for each account based on the investment objectives and policies and other relevant investment considerations applicable to that portfolio. A potential conflict of interest may arise as a result of the portfolio managers responsibility for multiple accounts with similar investment guidelines. Under these circumstances, a potential investment may be suitable for more than one of the portfolio managers accounts, but the quantity of the investment available for purchase is less than the aggregate amount the accounts would ideally devote to the opportunity. Similar conflicts may arise when multiple accounts seek to dispose of the same investment. The portfolio managers may also manage accounts whose objectives and policies differ from that of the Fund. These differences may be such that under certain circumstances, trading activity appropriate for one account managed by the portfolio manager may have adverse consequences for another account managed by the portfolio manager. For example, an account may sell a significant position in a security, which could cause the market price of that security to decrease, while the Fund maintained its position in that security.
A potential conflict may arise when portfolio managers are responsible for accounts that have different advisory feesthe difference in fees could create an incentive for the portfolio manager to favor one account over another, for example, in terms of access to investment opportunities. This conflict may be heightened if an account is subject to a performance-based fee. Another potential conflict may arise when the portfolio manager has an investment in one or more accounts that participate in transactions with other accounts. His or her investment(s) may create an incentive for the portfolio manager to favor one account over another. SSGA LTD has adopted policies and procedures reasonably designed to address these potential material conflicts. For instance, portfolio managers are normally responsible for all accounts within a certain investment discipline, and do not, absent special circumstances, differentiate among the various accounts when allocating resources. Additionally, SSGA LTD and its advisory affiliates have processes and procedures for allocating investment opportunities among portfolios that are designed to provide a fair and equitable allocation.
28
THE ADMINISTRATOR, SUB-ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
Administrator. SSGA FM serves as the administrator to each series of the Trust, pursuant to an Administration Agreement dated June 1, 2015 (the SSGA Administration Agreement). Pursuant to the SSGA Administration Agreement, SSGA FM is obligated to continuously provide business management services to the Trust and its series and will generally, subject to the general oversight of the Trustees and except as otherwise provided in the SSGA Administration Agreement, manage all of the business and affairs of the Trust.
Sub-Administrator, Custodian and Transfer Agent. Prior to June 1, 2015, State Street Bank and Trust Company (State Street) served as the Trusts administrator, pursuant to an Administration Agreement dated September 22, 2000 (the SSB Administration Agreement). As compensation for its services under the SSB Administration Agreement, State Street received a fee for its services, calculated based on the average aggregate net assets of the Trust and SPDR Index Shares Funds (SIS), of 0.0225% on the first $12.5 billion and 0.0075% thereafter.
Sub-Administrator, Custodian and Transfer Agent. State Street serves as the sub-administrator to each series of the Trust, pursuant to a Sub-Administration Agreement dated June 1, 2015 (the Sub-Administration Agreement). Under the Sub-Administration Agreement, State Street is obligated to provide certain sub-administrative services to the Trust and its series. State Street is a wholly owned subsidiary of State Street Corporation, a publicly held bank holding company, and is affiliated with the Adviser. State Streets mailing address is 100 Huntington Avenue, Tower 2, 3rd Floor, Boston, MA 02116.
State Street also serves as Custodian for the Trusts series pursuant to a custodian agreement (Custodian Agreement). As Custodian, State Street holds Fund assets, calculates the net asset value of the Fund Shares and calculates net income and realized capital gains or losses. State Street and the Trust will comply with the self-custodian provisions of Rule 17f-2 under the 1940 Act.
State Street also serves as Transfer Agent for each series of the Trust pursuant to a transfer agency agreement (Transfer Agency Agreement).
Compensation. As compensation for their services provided under the SSGA Administration and Sub-Administration agreements, SSGA FM and State Street, respectively, shall receive fees for the services, calculated based on the average aggregate net assets of the Trust and SPDR Index Shares Funds, of 0.0225% on the first $12.5 billion and 0.0075% thereafter.
As compensation for its services under the Custodian Agreement and Transfer Agency Agreement, State Street shall receive a fee for its services, calculated based on the average aggregate net assets of the Trust and SPDR Index Shares Funds. Pursuant to the Custody Agreement, State Street shall receive 0.0025% on the first $50 billion, 0.0020% on the next $50 billion and 0.0010% thereafter. In addition, under the Custody Agreement State Street shall be entitled to fees for fund accounting services and shall receive 0.0150% for the first $12.5 billion and 0.0025% thereafter. State Street shall also be entitled to specialized custody, ETF accounting services and transfer agency fees and shall receive 0.0050% on the first $12.5 billion and 0.0030% thereafter. For each series of the Trust, a $110,000 annual minimum fee applies. The greater of the minimum fee or the asset based fee will be charged. In addition, State Street shall receive global safekeeping and transaction fees, which are calculated on a per-country basis, in-kind creation (purchase) and redemption transaction fees (as described below) and revenue on certain cash balances. State Street may be reimbursed by the series of the Trust for its out-of-pocket expenses. The Investment Advisory Agreement provides that the Adviser will pay certain operating expenses of the Trust, including the fees due to State Street under the Custodian Agreement and the Transfer Agency Agreement.
THE DISTRIBUTOR
State Street Global Markets, LLC is the principal underwriter and Distributor of Shares. Its principal address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111. Investor information can be obtained by calling 1-866-787-2257. The Distributor has entered into a distribution agreement (Distribution Agreement) with the Trust pursuant to which it distributes Shares of each Fund. The Distribution Agreement will continue for two years from its effective date and is renewable annually thereafter. Shares will be continuously offered for sale by the Trust through the Distributor only in Creation Units, as described in the Prospectus and below under PURCHASE AND REDEMPTION OF CREATION UNITS. Shares in less than Creation Units are not distributed by the Distributor. The Distributor will deliver the Prospectus to persons purchasing Creation Units and will maintain records of both orders placed with it and confirmations of acceptance furnished by it. The Distributor is a broker-dealer registered under the Securities Exchange Act of 1934 (the Exchange Act) and a member of the Financial Industry Regulatory Authority (FINRA). The Distributor has no role in determining the investment policies of the Trust or which securities are to be purchased or sold by the Trust. The Distributor may assist Authorized Participants (as defined below) in assembling shares to purchase Creation Units or upon redemption, for which it may receive commissions or other fees from such Authorized Participants. The Distributor also receives compensation from State Street for providing on-line creation and redemption functionality to Authorized Participants through its Fund Connect application.
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The Adviser or Distributor, or an affiliate of the Adviser or Distributor, may directly or indirectly make cash payments to certain broker-dealers for participating in activities that are designed to make registered representatives and other professionals more knowledgeable about exchange traded products, including the Funds, or for other activities, such as participation in marketing activities and presentations, educational training programs, conferences, the development of technology platforms and reporting systems. As of February 7, 2013, the Adviser and/or Distributor had arrangements to make payments, other than for the educational programs and marketing activities described above, only to Charles Schwab & Co., Inc. (Schwab). Pursuant to the arrangement with Schwab, Schwab has agreed to promote certain SPDR Funds to Schwabs customers and not to charge certain of its customers any commissions when those customers purchase or sell shares of certain SPDR Funds. Payments to a broker-dealer or intermediary may create potential conflicts of interest between the broker-dealer or intermediary and its clients. These amounts, which may be significant, are paid by the Adviser and/or Distributor from their own resources and not from the assets of the Funds.
Each Fund has adopted a Distribution and Service (Rule 12b-1) Plan (a Plan) pursuant to which payments of up to 0.25% may be made. No payments pursuant to the Plan will be made during the next twelve (12) months of operation. Under its terms, the Plan remains in effect from year to year, provided such continuance is approved annually by vote of the Board, including a majority of the Independent Trustees (Trustees who are not interested persons of the Funds (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of the Plan or any agreement related to the Plan). The Plan may not be amended to increase materially the amount to be spent for the services provided by the Distributor without approval by the shareholders of the relevant Fund to which the Plan applies, and all material amendments of the Plan also require Board approval (as described above). The Plan may be terminated at any time, without penalty, by vote of a majority of the Independent Trustees, or, by a vote of a majority of the outstanding voting securities of a Fund (as such vote is defined in the 1940 Act). Pursuant to the Distribution Agreement, the Distributor will provide the Board with periodic reports of any amounts expended under the Plan and the purpose for which such expenditures were made.
The Distribution Agreement provides that it may be terminated at any time, without the payment of any penalty, as to a Fund: (i) by vote of a majority of the Independent Trustees or (ii) by vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund, on at least 60 days written notice to the Distributor. The Distribution Agreement is also terminable upon 60 days notice by the Distributor and will terminate automatically in the event of its assignment (as defined in the 1940 Act).
The allocation among the Trusts series of fees and expenses payable under the Distribution Agreement will be made pro rata in accordance with the daily net assets of the respective series.
The Distributor may also enter into agreements with securities dealers (Soliciting Dealers) who will solicit purchases of Creation Unit aggregations of Fund Shares. Such Soliciting Dealers may also be Participating Parties (as defined in the Book Entry Only System section below), DTC Participants (as defined below) and/or Investor Services Organizations.
Pursuant to the Distribution Agreement, the Trust has agreed to indemnify the Distributor, and may indemnify Soliciting Dealers and Authorized Participants (as described below) entering into agreements with the Distributor, for certain liabilities, including certain liabilities arising under the federal securities laws, unless such loss or liability results from willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard of its obligations and duties under the Distribution Agreement or other agreement, as applicable.
The policy of the Trust regarding purchases and sales of securities for each Fund is that primary consideration will be given to obtaining the most favorable prices and efficient executions of transactions. Consistent with this policy, when securities transactions are effected on a stock exchange, the Trusts policy is to pay commissions which are considered fair and reasonable without necessarily determining that the lowest possible commissions are paid in all circumstances. The Trust believes that a requirement always to seek the lowest possible commission cost could impede effective portfolio management and preclude a Fund and the Adviser from obtaining a high quality of brokerage and research services. In seeking to determine the reasonableness of brokerage commissions paid in any transaction, the Adviser relies upon its experience and knowledge regarding commissions generally charged by various brokers and on its judgment in evaluating the brokerage and research services received from the broker effecting the transaction. Such determinations are necessarily subjective and imprecise, as in most cases an exact dollar value for those services is not ascertainable. The Trust has adopted policies and procedures that prohibit the consideration of sales of a Funds Shares as a factor in the selection of a broker or dealer to execute its portfolio transactions.
In selecting a broker/dealer for each specific transaction, the Adviser chooses the broker/dealer deemed most capable of providing the services necessary to obtain the most favorable execution and does not take the sale of Fund Shares into account. The Adviser considers the full range of brokerage services applicable to a particular transaction that may be considered when making this
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judgment, which may include, but is not limited to: liquidity, price, commission, timing, aggregated trades, capable floor brokers or traders, competent block trading coverage, ability to position, capital strength and stability, reliable and accurate communications and settlement processing, use of automation, knowledge of other buyers or sellers, arbitrage skills, administrative ability, underwriting and provision of information on a particular security or market in which the transaction is to occur. The specific criteria will vary depending upon the nature of the transaction, the market in which it is executed, and the extent to which it is possible to select from among multiple broker/dealers. The Adviser will also use electronic crossing networks when appropriate.
The Adviser does not currently use the Funds assets for, or participate in, third party soft dollar arrangements, although the Adviser may receive proprietary research from various full service brokers, the cost of which is bundled with the cost of the brokers execution services. The Adviser does not pay up for the value of any such proprietary research. The Adviser may aggregate trades with clients of SSGA, whose commission dollars may be used to generate soft dollar credits for SSGA. Although the Advisers clients commissions are not used for third party soft dollars, the Advisers and SSGAs clients may benefit from the soft dollar products/services received by SSGA.
The Adviser assumes general supervision over placing orders on behalf of the Trust for the purchase or sale of portfolio securities. If purchases or sales of portfolio securities of the Trust and one or more other investment companies or clients supervised by the Adviser are considered at or about the same time, transactions in such securities are allocated among the several investment companies and clients in a manner deemed equitable and consistent with its fiduciary obligations to all by the Adviser. In some cases, this procedure could have a detrimental effect on the price or volume of the security so far as the Trust is concerned. However, in other cases, it is possible that the ability to participate in volume transactions and to negotiate lower brokerage commissions will be beneficial to the Trust. The primary consideration is prompt execution of orders at the most favorable net price.
The Funds will not deal with affiliates in principal transactions unless permitted by exemptive order or applicable rule or regulation.
Securities of Regular Broker-Dealer. Each Fund is required to identify any securities of its regular brokers and dealers (as such term is defined in the 1940 Act) which it may hold at the close of its most recent fiscal year. Regular brokers or dealers of the Trust are the ten brokers or dealers that, during the most recent fiscal year: (i) received the greatest dollar amounts of brokerage commissions from the Trusts portfolio transactions; (ii) engaged as principal in the largest dollar amounts of portfolio transactions of the Trust; or (iii) sold the largest dollar amounts of the Trusts shares. The Funds were not operational and have not engaged in transactions prior to the date of this SAI.
Portfolio turnover may vary from year to year, as well as within a year. High turnover rates are likely to result in comparatively greater brokerage expenses or transaction costs. The portfolio turnover rate for each Fund is expected to be under 100%, except with respect to the SPDR S&P Commercial Paper ETF, which may experience significantly higher turnover. Funds may also experience higher portfolio turnover when migrating to a different benchmark index. The overall reasonableness of brokerage commissions and transaction costs is evaluated by the Adviser based upon its knowledge of available information as to the general level of commissions and transaction costs paid by other institutional investors for comparable services.
The following information supplements and should be read in conjunction with the section in the Prospectus entitled ADDITIONAL PURCHASE AND SALE INFORMATION.
The Depository Trust Company (DTC) acts as securities depositary for the Shares. Shares of each Fund are represented by securities registered in the name of DTC or its nominee, Cede & Co., and deposited with, or on behalf of, DTC. Except in the limited circumstance provided below, certificates will not be issued for Shares.
DTC, a limited-purpose trust company, was created to hold securities of its participants (the DTC Participants) and to facilitate the clearance and settlement of securities transactions among the DTC Participants in such securities through electronic book-entry changes in accounts of the DTC Participants, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives) own DTC. More specifically, DTC is owned by a number of its DTC Participants and by the New York Stock Exchange (NYSE) and the FINRA. Access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the Indirect Participants).
Beneficial ownership of Shares is limited to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership of beneficial interests in Shares (owners of such beneficial interests are referred to herein as Beneficial Owners) is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with
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respect to DTC Participants) and on the records of DTC Participants (with respect to Indirect Participants and Beneficial Owners that are not DTC Participants). Beneficial Owners will receive from or through the DTC Participant a written confirmation relating to their purchase of Shares.
Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the Trust and DTC, DTC is required to make available to the Trust upon request and for a fee to be charged to the Trust a listing of the Shares of each Fund held by each DTC Participant. The Trust, either directly or through a third party service, shall inquire of each such DTC Participant as to the number of Beneficial Owners holding Shares, directly or indirectly, through such DTC Participant. The Trust, either directly or through a third party service, shall provide each such DTC Participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC Participant may reasonably request, in order that such notice, statement or communication may be transmitted by such DTC Participant, directly or indirectly, to such Beneficial Owners. In addition, the Trust shall pay to each such DTC Participant and/or third party service a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements.
Share distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all Shares. DTC or its nominee, upon receipt of any such distributions, shall credit immediately DTC Participants accounts with payments in amounts proportionate to their respective beneficial interests in Shares of a Fund as shown on the records of DTC or its nominee. Payments by DTC Participants to Indirect Participants and Beneficial Owners of Shares held through such DTC Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in a street name, and will be the responsibility of such DTC Participants.
The Trust has no responsibility or liability for any aspects of the records relating to or notices to Beneficial Owners, or payments made on account of beneficial ownership interests in such Shares, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between DTC and the DTC Participants or the relationship between such DTC Participants and the Indirect Participants and Beneficial Owners owning through such DTC Participants.
DTC may determine to discontinue providing its service with respect to Shares at any time by giving reasonable notice to the Trust and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Trust shall take action either to find a replacement for DTC to perform its functions at a comparable cost or, if such a replacement is unavailable, to issue and deliver printed certificates representing ownership of Shares, unless the Trust makes other arrangements with respect thereto satisfactory to the Exchange.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The Funds were not operational prior to the date of this SAI and did not have any beneficial owners that owned greater than 5% of the outstanding voting securities as of the date of this SAI.
An Authorized Participant (as defined below) may hold of record more than 25% of the outstanding Shares of a Fund. From time to time, Authorized Participants may be a beneficial and/or legal owner of a Fund, may be affiliated with an index provider, may be deemed to have control of the applicable Fund and/or may be able to affect the outcome of matters presented for a vote of the shareholders of the Fund. Authorized Participants may execute an irrevocable proxy granting the Distributor or another affiliate of State Street (the Agent) power to vote or abstain from voting such Authorized Participants beneficially or legally owned Shares of a Fund. In such cases, the Agent shall mirror vote (or abstain from voting) such Shares in the same proportion as all other beneficial owners of the Fund.
The Trustees and Officers of the Trust, as a group, own less than 1% of the Trusts voting securities as of the date of this SAI.
PURCHASE AND REDEMPTION OF CREATION UNITS
Each Fund issues and redeems its Shares on a continuous basis, at net asset value, only in a large specified number of Shares called a Creation Unit, either principally in-kind for securities included in the relevant Index or in cash for the value of such securities. The principal consideration for creations and redemptions for each Fund set forth in the table below:
FUND |
CREATION* | REDEMPTION* | ||
SPDR S&P Commercial Paper ETF |
Cash | In-Kind | ||
SPDR S&P Agency Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Corporate Industrial Bond ETF |
In-Kind | In-Kind |
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FUND |
CREATION* | REDEMPTION* | ||
SPDR Barclays Corporate Financial Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Corporate Utilities Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays Zero Coupon Bond ETF |
In-Kind | In-Kind | ||
SPDR Barclays CMBS ETF |
In-Kind | In-Kind | ||
SPDR Barclays Global Convertible Securities ETF |
Cash | Cash | ||
SPDR Barclays Breakeven Inflation ETF |
In-Kind | In-Kind | ||
SPDR S&P Commercial Paper ex-Financials ETF |
Cash | Cash | ||
SPDR Barclays Floating Rate Treasury ETF |
[ ] | [ ] |
* | May be revised at any time without notice. Funds that effect redemptions principally for cash, rather than primarily in-kind, may be less tax efficient than investments in conventional ETFs. |
GENERAL. To be eligible to place orders with respect purchases (i.e., creations) and redemptions of Creation Units, an entity must be (i) a Participating Party, i.e., a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the NSCC (the Clearing Process), a clearing agency that is registered with the SEC; or (ii) a DTC Participant (see BOOK ENTRY ONLY SYSTEM), and, with respect to the Fixed Income ETFs (except with respect to the International Treasury Bond ETFs), has the ability to clear through the Federal Reserve System. In addition, each Participating Party or DTC Participant (each, an Authorized Participant) must execute a Participant Agreement that has been agreed to by the Principal Underwriter and the Transfer Agent, and that has been accepted by the Trust, with respect to purchases and redemptions of Creation Units. Each Authorized Participant will agree, pursuant to the terms of a Participant Agreement, on behalf of itself or any investor on whose behalf it will act, to certain conditions, including that it will pay to the Trust, an amount of cash sufficient to pay the Cash Component together with the creation transaction fee (described below) and any other applicable fees, taxes and additional variable charge.
All orders, including non-standard orders, must be placed for one or more Creation Units and in the manner and by the time set forth in the Participant Agreement and/or applicable order form. The date on which an order to purchase Creation Units or an order to redeem Creation Units is received and accepted is referred to as the Order Placement Date. The order shall be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to the applicable cut-off time. If the order is not placed in proper form as required, the Fund Deposit or Shares, as applicable, are not received in a timely manner by the Settlement Date (typically required by 2:00 p.m. ET) or the other terms and conditions set forth in the Participant Agreement are not followed by the Authorized Participant, then the order may be deemed to be rejected and the Authorized Participant shall be liable to the Fund for losses, if any, resulting therefrom. On days when the Exchange or the bond markets close earlier than normal, a Fund may require orders to be placed earlier in the day An order is considered to be in proper form if all procedures set forth in the Participant Agreement, order form and this SAI are properly followed.
Orders must be transmitted by an Authorized Participant by telephone or other transmission method acceptable to the Distributor and/or Transfer Agent pursuant to procedures set forth in the Participant Agreement and in accordance with the applicable order form. Those placing orders through an Authorized Participant should allow sufficient time to permit proper submission of the order by the cut-off time on such Business Day. Economic or market disruptions or changes, or telephone or other communication failure may impede the ability to reach the Distributor or an Authorized Participant.
An Authorized Participant may require an investor to make certain representations or enter into agreements with respect to the order (e.g., to provide for payments of cash, when required). Investors should be aware that their particular broker may not have executed a Participant Agreement and that, therefore, orders to purchase Creation Units or to redeem Creation Units have to be placed by the investors broker through an Authorized Participant that has executed a Participant Agreement. In such cases there may be additional charges to such investor. At any given time, there may be only a limited number of broker-dealers that have executed a Participant Agreement and only a small number of such Authorized Participants may have international capabilities.
PURCHASE (CREATION). The Trust issues and sells Shares of each Fund only in Creation Units on a continuous basis through the Principal Underwriter, without a sales load (but subject to transaction fees), at their NAV per share next determined after receipt of an order, on any Business Day (as defined below), in proper form pursuant to the terms of the Authorized Participant Agreement (Participant Agreement). A Business Day with respect to a Fund is, generally, any day on which the NYSE is open for business.
FUND DEPOSIT. The consideration for purchase of a Creation Unit of a Fund generally consists of either (i) the in-kind deposit of a designated portfolio of securities (the Deposit Securities) per each Creation Unit, constituting a substantial replication, or a portfolio sampling representation, of the securities included in the relevant Funds benchmark Index and the Cash Component (defined below), computed as described below or (ii) the cash value of the Deposit Securities (Deposit Cash) and the Cash Component, computed as described below. When accepting purchases of Creation Units for cash, a Fund may incur additional costs associated with the acquisition of Deposit Securities that would otherwise be provided by an in-kind purchaser.
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Together, the Deposit Securities or Deposit Cash, as applicable, and the Cash Component constitute the Fund Deposit, which represents the minimum initial and subsequent investment amount for a Creation Unit of any Fund. The Cash Component is an amount equal to the difference between the net asset value of the Shares (per Creation Unit) and the market value of the Deposit Securities or Deposit Cash, as applicable. The Dividend Equivalent Payment enables a Fund (and, in particular, the SPDR S&P Dividend ETF) to make a complete distribution of dividends on the day preceding the next dividend payment date, and is an amount equal, on a per Creation Unit basis, to the dividends on all the portfolio securities of the Fund (Dividend Securities) with ex-dividend dates within the accumulation period for such distribution (the Accumulation Period), net of expenses and liabilities for such period, as if all of the Dividend Securities had been held by the Fund for the entire Accumulation Period. The Accumulation Period begins on the ex-dividend date for each Fund and ends on the day preceding the next ex-dividend date. If the Cash Component is a positive number (i.e., the net asset value per Creation Unit exceeds the market value of the Deposit Securities or Deposit Cash, as applicable), the Cash Component shall be such positive amount. If the Cash Component is a negative number (i.e., the net asset value per Creation Unit is less than the market value of the Deposit Securities or Deposit Cash, as applicable), the Cash Component shall be such negative amount and the creator will be entitled to receive cash in an amount equal to the Cash Component. The Cash Component serves the function of compensating for any differences between the net asset value per Creation Unit and the market value of the Deposit Securities or Deposit Cash, as applicable. Computation of the Cash Component excludes any stamp duty or other similar fees and expenses payable upon transfer of beneficial ownership of the Deposit Securities, if applicable, which shall be the sole responsibility of the Authorized Participant (as defined below).
The Custodian, through NSCC, makes available on each Business Day, immediately prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern time), the list of the names and the required number of shares of each Deposit Security or the required amount of Deposit Cash, as applicable, to be included in the current Fund Deposit (based on information at the end of the previous Business Day) for a Fund. Such Fund Deposit is subject to any applicable adjustments as described below, in order to effect purchases of Creation Units of a Fund until such time as the next-announced composition of the Deposit Securities or the required amount of Deposit Cash, as applicable, is made available.
The identity and number of shares of the Deposit Securities or the amount of Deposit Cash, as applicable, required for a Fund Deposit for each Fund changes as rebalancing adjustments, interest payments and corporate action events are reflected from time to time by the Adviser with a view to the investment objective of the Fund. Information regarding the Fund Deposit necessary for the purchase of a Creation Unit is made available to Authorized Participants and other market participants seeking to transact in Creation Unit aggregations. The composition of the Deposit Securities may also change in response to adjustments to the weighting or composition of the component securities of a Funds Index.
The Trust intends to require the substitution of an amount of cash (i.e., a cash in lieu amount) to replace any Deposit Security that is a TBA transaction. The amount of cash contributed will be equivalent to the price of the TBA transaction listed as a Deposit Security. As noted above, the Trust reserves the right to permit or require the substitution of Deposit Cash to replace any Deposit Security, which shall be added to the Cash Component, including, without limitation, in situations where the Deposit Security: (i) may not be available in sufficient quantity for delivery, (ii) may not be eligible for transfer through the systems of DTC for corporate securities and municipal securities or the Federal Reserve System for U.S. Treasury securities; (iii) may not be eligible for trading by an Authorized Participant (as defined below) or the investor for which it is acting; (iv) would be restricted under the securities laws or where the delivery of the Deposit Security to the Authorized Participant would result in the disposition of the Deposit Security by the Authorized Participant becoming restricted under the securities laws, or (v) in certain other situations (collectively, non-standard orders). The Trust also reserves the right to include or remove Deposit Securities from the basket in anticipation of index rebalancing changes. The adjustments described above will reflect changes, known to the Adviser on the date of announcement to be in effect by the time of delivery of the Fund Deposit, in the composition of the subject Index being tracked by the relevant Fund or resulting from certain corporate actions.
PROCEDURES FOR PURCHASE OF CREATION UNITS. To be eligible to place orders with the Principal Underwriter, as facilitated via the Transfer Agent, to purchase a Creation Unit of a Fund, an entity must be (i) a Participating Party, i.e., a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the NSCC (the Clearing Process), a clearing agency that is registered with the SEC; or (ii) a DTC Participant (see BOOK ENTRY ONLY SYSTEM). In addition, each Participating Party or DTC Participant (each, an Authorized Participant) must execute a Participant Agreement that has been agreed to by the Principal Underwriter and the Transfer Agent, and that has been accepted by the Trust, with respect to purchases and redemptions of Creation Units. Each Authorized Participant will agree, pursuant to the terms of a Participant Agreement, on behalf of itself or any investor on whose behalf it will act, to certain conditions, including that it will pay to the Trust, an amount of cash sufficient to pay the Cash Component together with the creation transaction fee (described below) and any other applicable fees, taxes and additional variable charge.
All orders to purchase Shares directly from a Fund, including non-standard orders, must be placed for one or more Creation Units and in the manner and by the time set forth in the Participant Agreement and/or the applicable order form. The date on which an order to purchase Creation Units (or an order to redeem Creation Units, as set forth below) is received and accepted is referred to as the Order Placement Date.
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An Authorized Participant may require an investor to make certain representations or enter into agreements with respect to the order (e.g., to provide for payments of cash, when required). Investors should be aware that their particular broker may not have executed a Participant Agreement and that, therefore, orders to purchase Shares directly from a Fund in Creation Units have to be placed by the investors broker through an Authorized Participant that has executed a Participant Agreement. In such cases there may be additional charges to such investor. At any given time, there may be only a limited number of broker-dealers that have executed a Participant Agreement and only a small number of such Authorized Participants may have international capabilities.
On days when the Exchange or the bond markets close earlier than normal, a Fund may require orders to create Creation Units to be placed earlier in the day. In addition, if a market or markets on which a Funds investments are primarily traded is closed, the Fund will also generally not accept orders on such day(s). Orders must be transmitted by an Authorized Participant by telephone or other transmission method acceptable to the Distributor pursuant to procedures set forth in the Participant Agreement and in accordance with the applicable order form. Those placing orders through an Authorized Participant should allow sufficient time to permit proper submission of the purchase order by the cut-off time on such Business Day. Economic or market disruptions or changes, or telephone or other communication failure may impede the ability to reach the Distributor or an Authorized Participant.
Fund Deposits must be delivered by an Authorized Participant through the Federal Reserve System (for cash and U.S. government securities), or through DTC (for corporate securities and municipal securities), through a subcustody agent for (for foreign securities) and/or through such other arrangements allowed by the Trust or its agents. With respect to foreign Deposit Securities, the Custodian shall cause the subcustodian of a Fund to maintain an account into which the Authorized Participant shall deliver, on behalf of itself or the party on whose behalf it is acting, such Deposit Securities. Foreign Deposit Securities must be delivered to an account maintained at the applicable local subcustodian. The Fund Deposit transfer must be ordered by the Authorized Participant in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities or Deposit Cash, as applicable, to the account of a Fund or its agents by no later than the Settlement Date. The Settlement Date for a Fund is generally the third Business Day, or in the case of the, SPDR Barclays 1-3 Month T-Bill ETF, SPDR Barclays TIPS ETF and SPDR Nuveen S&P VRDO Municipal Bond ETF, the first Business Day, after the Order Placement Date. All questions as to the number of Deposit Securities or Deposit Cash to be delivered, as applicable, and the validity, form and eligibility (including time of receipt) for the deposit of any tendered securities or cash, as applicable, will be determined by the Trust, whose determination shall be final and binding. The amount of cash represented by the Cash Component must be transferred directly to the Custodian through the Federal Reserve Bank wire transfer system in a timely manner so as to be received by the Custodian no later than the Settlement Date. If the Cash Component and the Deposit Securities or Deposit Cash, as applicable, are not received in a timely manner by the Settlement Date, the creation order may be cancelled. Upon written notice to the Distributor, such canceled order may be resubmitted the following Business Day using a Fund Deposit as newly constituted to reflect the then current NAV of the Fund. The delivery of Creation Units so created generally will occur no later than the third Business Day following the day on which the purchase order is deemed received by the Distributor.
The order shall be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to the applicable cut-off time and the federal funds in the appropriate amount are deposited by 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions), with the Custodian on the Settlement Date. If the order is not placed in proper form as required, or federal funds in the appropriate amount are not received by 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions) on the Settlement Date, then the order may be deemed to be rejected and the Authorized Participant shall be liable to the Fund for losses, if any, resulting therefrom. A creation request is considered to be in proper form if all procedures set forth in the Participant Agreement, order form and this SAI are properly followed.
ISSUANCE OF A CREATION UNIT. Except as provided herein, Creation Units will not be issued until the transfer of good title to the Trust of the Deposit Securities or payment of Deposit Cash, as applicable, and the payment of the Cash Component have been completed. When the subcustodian has confirmed to the Custodian that the required Deposit Securities (or the cash value thereof) have been delivered to the account of the relevant subcustodian or subcustodians, the Principal Underwriter and the Adviser shall be notified of such delivery, and the Trust will issue and cause the delivery of the Creation Units.
In instances where the Trust accepts Deposit Securities for the purchase of a Creation Unit, the Creation Unit may be purchased in advance of receipt by the Trust of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the net asset value of the Shares on the date the order is placed in proper form since in addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component, plus (ii) an additional amount of cash equal to a percentage of the market value as set forth in the Participant Agreement, of the undelivered Deposit Securities (the Additional Cash Deposit), which shall be maintained in a general non-interest bearing collateral account. An additional amount of cash shall be required to be deposited with the Trust, pending delivery of the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with the Trust in an amount at least equal to the applicable percentage, as set forth in the Participant Agreement, of the daily marked to market value of the missing Deposit Securities. The Trust may use such
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Additional Cash Deposit to buy the missing Deposit Securities at any time. Authorized Participants will be liable to the Trust for all costs, expenses, dividends, income and taxes associated with missing Deposit Securities, including the costs incurred by the Trust in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities exceeds the market value of such Deposit Securities on the day the purchase order was deemed received by the Principal Underwriter plus the brokerage and related transaction costs associated with such purchases. The Trust will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Securities have been properly received by the Custodian or purchased by the Trust and deposited into the Trust. In addition, a transaction fee as set forth below under Creation Transaction Fees will be charged in all cases and an additional variable charge may also be applied. The delivery of Creation Units so created generally will occur no later than the Settlement Date.
ACCEPTANCE OF ORDERS OF CREATION UNITS. The Trust reserves the absolute right to reject an order for Creation Units transmitted in respect of a Fund at its discretion, including, without limitation, if (a) the order is not in proper form; (b) the Deposit Securities or Deposit Cash, as applicable, delivered by the Participant are not as disseminated through the facilities of the NSCC for that date by the Custodian; (c) the investor(s), upon obtaining the Shares ordered, would own 80% or more of the currently outstanding Shares of the Fund; (d) acceptance of the Deposit Securities would have certain adverse tax consequences to the Fund; (e) the acceptance of the Fund Deposit would, in the opinion of counsel, be unlawful; (f) the acceptance of the Fund Deposit would otherwise, in the discretion of the Trust or the Adviser, have an adverse effect on the Trust or the rights of beneficial owners; (g) the acceptance or receipt of the order for a Creation Unit would, in the opinion of counsel to the Trust, be unlawful; or (h) in the event that circumstances outside the control of the Trust, the Custodian, the Transfer Agent and/or the Adviser make it for all practical purposes not feasible to process orders for Creation Units. Examples of such circumstances include acts of God or public service or utility problems such as fires, floods, extreme weather conditions and power outages resulting in telephone, telecopy and computer failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting the Trust, the Principal Underwriter, the Custodian, the Transfer Agent, DTC, NSCC, Federal Reserve System, or any other participant in the creation process, and other extraordinary events. The Trust or its agents shall communicate to the Authorized Participant its rejection of an order. The Trust, the Transfer Agent, the Custodian and the Principal Underwriter are under no duty, however, to give notification of any defects or irregularities in the delivery of Fund Deposits nor shall either of them incur any liability for the failure to give any such notification. The Trust, the Transfer Agent, the Custodian and the Principal Underwriter shall not be liable for the rejection of any purchase order for Creation Units.
All questions as to the number of shares of each security in the Deposit Securities and the validity, form, eligibility and acceptance for deposit of any securities to be delivered shall be determined by the Trust, and the Trusts determination shall be final and binding.
REDEMPTION. Shares may be redeemed only in Creation Units at their net asset value next determined after receipt of a redemption request in proper form by a Fund through the Transfer Agent and only on a Business Day. EXCEPT UPON LIQUIDATION OF A FUND, THE TRUST WILL NOT REDEEM SHARES IN AMOUNTS LESS THAN CREATION UNITS. Investors must accumulate enough Shares in the secondary market to constitute a Creation Unit in order to have such Shares redeemed by the Trust. There can be no assurance, however, that there will be sufficient liquidity in the public trading market at any time to permit assembly of a Creation Unit. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of Shares to constitute a redeemable Creation Unit.
With respect to each Fund, the Custodian, through the NSCC, makes available immediately prior to the opening of business on the Exchange (currently 9:30 a.m. Eastern time) on each Business Day, the list of the names and share quantities of each Funds portfolio securities that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form (as defined below) on that day (Fund Securities). Fund Securities received on redemption may not be identical to Deposit Securities.
Redemption proceeds for a Creation Unit are paid either in-kind or in cash or a combination thereof, as determined by the Trust. With respect to in-kind redemptions of a Fund, redemption proceeds for a Creation Unit will consist of Fund Securities as announced by the Custodian on the Business Day of the request for redemption received in proper form plus cash in an amount equal to the difference between the net asset value of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Fund Securities (the Cash Redemption Amount), less a fixed redemption transaction fee and any applicable additional variable charge as set forth below. In the event that the Fund Securities have a value greater than the net asset value of the Shares, a compensating cash payment equal to the differential is required to be made by or through an Authorized Participant by the redeeming shareholder. Notwithstanding the foregoing: (i) the Trust will substitute a cash in lieu amount to replace any Fund Security that is a TBA transaction and the amount of cash paid out in such cases will be equivalent to the value of the TBA transaction listed as a Fund Security and (ii) at the Trusts discretion, an Authorized Participant may receive the corresponding cash value of the securities in lieu of the in-kind securities value representing one or more Fund Securities.
PROCEDURES FOR REDEMPTION OF CREATION UNITS. After the Trust has deemed an order for redemption received, the Trust will initiate procedures to transfer the requisite Fund Securities and the Cash Redemption Amount to the Authorized Participant by the Settlement Date.
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With respect to in-kind redemptions of a Fund, the calculation of the value of the Fund Securities and the Cash Redemption Amount to be delivered upon redemption will be made by the Custodian according to the procedures set forth under Determination of Net Asset Value, computed on the Business Day on which a redemption order is deemed received by the Trust. Therefore, if a redemption order in proper form is submitted to the Principal Underwriter by a DTC Participant by the specified time on the Order Placement Date, and the requisite number of Shares of the Fund are delivered to the Custodian prior to 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions) on the Settlement Date, then the value of the Fund Securities and the Cash Redemption Amount to be delivered will be determined by the Custodian on such Order Placement Date. If the requisite number of Shares of the Fund are not delivered by 2:00 p.m. or 3:00 p.m. Eastern time (per applicable instructions) on the Settlement Date, the Fund will not release the underlying securities for delivery unless collateral is posted in such percentage amount of missing Shares as set forth in the Participant Agreement (marked to market daily).
With respect to in kind redemptions of a Fund, in connection with taking delivery of shares of Fund Securities upon redemption of Creation Units, an Authorized Participant must maintain appropriate custody arrangements with a qualified broker-dealer, bank or other custody providers in each jurisdiction in which any of the Fund Securities are customarily traded (or such other arrangements as allowed by the Trust or its agents), to which account such Fund Securities will be delivered. Deliveries of redemption proceeds generally will be made within three Business Days of the trade date. Due to the schedule of holidays in certain countries, however, the delivery of in-kind redemption proceeds may take longer than three business days after the day on which the redemption request is received in proper form. The section below entitled Local Market Holiday Schedules identifies the instances where more than seven days would be needed to deliver redemption proceeds. Pursuant to an order of the SEC, in respect of the Fund, the Trust will make delivery of in-kind redemption proceeds within the number of days stated in the Local Market Holidays section to be the maximum number of days necessary to deliver redemption proceeds. If the Authorized Participant has not made appropriate arrangements to take delivery of the Fund Securities in the applicable foreign jurisdiction and it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Fund Securities in such jurisdiction, the Trust may, in its discretion, exercise its option to redeem such Shares in cash, and the Authorized Participant will be required to receive its redemption proceeds in cash.
If it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Fund Securities, the Trust may in its discretion exercise its option to redeem such Shares in cash, and the redeeming investor will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash that the Fund may, in its sole discretion, permit. In either case, the investor will receive a cash payment equal to the NAV of its Shares based on the NAV of Shares of the relevant Fund next determined after the redemption request is received in proper form (minus a redemption transaction fee and additional charge for requested cash redemptions specified above, to offset the Trusts brokerage and other transaction costs associated with the disposition of Fund Securities). A Fund may also, in its sole discretion, upon request of a shareholder, provide such redeemer a portfolio of securities that differs from the exact composition of the Fund Securities but does not differ in net asset value.
An Authorized Participant submitting a redemption request is deemed to represent to the Trust that it (or its client) (i) owns outright or has full legal authority and legal beneficial right to tender for redemption the requisite number of Shares to be redeemed and can receive the entire proceeds of the redemption, and (ii) the Shares to be redeemed have not been loaned or pledged to another party nor are they the subject of a repurchase agreement, securities lending agreement or such other arrangement which would preclude the delivery of such Shares to the Trust. The Trust reserves the right to verify these representations at its discretion, but will typically require verification with respect to a redemption request from a Fund in connection with higher levels of redemption activity and/or short interest in the Fund. If the Authorized Participant, upon receipt of a verification request, does not provide sufficient verification of its representations as determined by the Trust, the redemption request will not be considered to have been received in proper form and may be rejected by the Trust.
Redemptions of Shares for Fund Securities will be subject to compliance with applicable federal and state securities laws and each Fund (whether or not it otherwise permits cash redemptions) reserves the right to redeem Creation Units for cash to the extent that the Trust could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Fund Securities under such laws. An Authorized Participant or an investor for which it is acting subject to a legal restriction with respect to a particular security included in the Fund Securities applicable to the redemption of Creation Units may be paid an equivalent amount of cash. The Authorized Participant may request the redeeming investor of the Shares to complete an order form or to enter into agreements with respect to such matters as compensating cash payment. Further, an Authorized Participant that is not a qualified institutional buyer, (QIB) as such term is defined under Rule 144A of the Securities Act, will not be able to receive Fund Securities that are restricted securities eligible for resale under Rule 144A. An Authorized Participant may be required by the Trust to provide a written confirmation with respect to QIB status in order to receive Fund Securities.
The right of redemption may be suspended or the date of payment postponed with respect to a Fund (1) for any period during which the Exchange is closed (other than customary weekend and holiday closings); (2) for any period during which trading on the Exchange is suspended or restricted; (3) for any period during which an emergency exists as a result of which disposal of the Shares of the Fund or determination of the NAV of the Shares is not reasonably practicable; or (4) in such other circumstance as is permitted by the SEC.
REQUIRED EARLY ACCEPTANCE OF ORDERS. Notwithstanding the foregoing, as described in the Participant Agreement and the applicable order form, certain Funds may require orders to be placed up to one or more Business Days prior to the trade date, as
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described in the Participant Agreement or the applicable order form, in order to receive the trade dates net asset value. Orders to purchase Shares of such Funds that are submitted on the Business Day immediately preceding a holiday or a day (other than a weekend) that the equity markets in the relevant foreign market are closed will not be accepted. Authorized Participants may be notified that the cut-off time for an order may be earlier on a particular Business Day, as described in the Participant Agreement and the applicable order form.
CREATION AND REDEMPTION TRANSACTION FEES. A transaction fee, as set forth in the table below, is imposed for the transfer and other transaction costs associated with the purchase or redemption of Creation Units, as applicable. Authorized Participants will be required to pay a fixed creation transaction fee and/or a fixed redemption transaction fee, as applicable, on a given day regardless of the number of Creation Units created or redeemed on that day. A Fund may adjust the transaction fee from time to time. An additional charge or a variable charge (discussed below) will be applied to certain creation and redemption transactions, including non-standard orders and whole or partial cash purchases or redemptions. With respect to creation orders, Authorized Participants are responsible for the costs of transferring the securities constituting the Deposit Securities to the account of the Trust and with respect to redemption orders, Authorized Participants are responsible for the costs of transferring the Fund Securities from the Trust to their account or on their order. Investors who use the services of a broker or other such intermediary may also be charged a fee for such services.
FUND |
TRANSACTION
FEE*, ** |
MAXIMUM
TRANSACTION FEE*, ** |
||
SPDR S&P Commercial Paper ETF |
$ [ ] | $ [ ] | ||
SPDR S&P Agency Bond ETF |
$ [ ] | $ [ ] | ||
SPDR Barclays 0-5 Year TIPS ETF |
$ [ ] | $ [ ] | ||
SPDR Barclays Corporate Bond ETF |
$ [ ] | $ [ ] | ||
SPDR Barclays Corporate Industrial Bond ETF |
$ [ ] | $ [ ] | ||
SPDR Barclays Corporate Financial Bond ETF |
$ [ ] | $ [ ] | ||
SPDR Barclays Corporate Utilities Bond ETF |
$ [ ] | $ [ ] | ||
SPDR Barclays Zero Coupon Bond ETF |
$ [ ] | $ [ ] | ||
SPDR Barclays CMBS ETF |
$ [ ] | $ [ ] | ||
SPDR Barclays Global Convertible Securities ETF |
$ [ ] | $ [ ] | ||
SPDR Barclays Breakeven Inflation ETF |
$ [ ] | $ [ ] | ||
SPDR S&P Commercial Paper ex-Financials ETF |
$ [ ] | $ [ ] | ||
SPDR Barclays Floating Rate Treasury ETF |
$ [ ] | $ [ ] |
* | From time to time, any Fund may waive all or a portion of its applicable transaction fee(s). An additional charge of up to three (3) times the standard transaction fee may be charged to the extent a transaction is outside of the clearing process. |
** | In addition to the transaction fees listed above, the Funds may charge an additional variable fee for creations and redemptions in cash to offset brokerage and impact expenses associated with the cash transaction. The variable transaction fee will be calculated based on historical transaction cost data and the Advisers view of current market conditions; however, the actual variable fee charged for a given transaction may be lower or higher than the trading expenses incurred by a Fund with respect to that transaction. |
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction with the sections in the applicable Prospectus entitled PURCHASE AND SALE INFORMATION and ADDITIONAL PURCHASE AND SALE INFORMATION.
Net asset value per Share for each Fund is computed by dividing the value of the net assets of the Fund (i.e., the value of its total assets less total liabilities) by the total number of Shares outstanding. Expenses and fees, including the management fees, are accrued daily and taken into account for purposes of determining net asset value. The net asset value of a Fund is calculated by the Custodian and determined at the close of the regular trading session on the NYSE (ordinarily 4:00 p.m. Eastern time) on each day that such exchange is open. Fixed-income assets are generally valued as of the announced closing time for trading in fixed-income instruments on any day that the Securities Industry and Financial Markets Association (SIFMA) (or applicable exchange or market on which a Funds investments are traded) announces an early closing time. Creation/redemption order cut-off times may also be earlier on such days.
In calculating a Funds net asset value per Share, the Funds investments are generally valued using market valuations. A market valuation generally means a valuation (i) obtained from an exchange, a pricing service, or a major market maker (or dealer), (ii) based
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on a price quotation or other equivalent indication of value supplied by an exchange, a pricing service, or a major market maker (or dealer) or (iii) based on amortized cost. A Fund relies on a third-party service provider for assistance with the daily calculation of the Funds NAV. The third-party service provider, in turn, relies on other parties for certain pricing data and other inputs used in the calculation of the Funds NAV. Therefore, a Fund is subject to certain operational risks associated with reliance on its service provider and that service providers sources of pricing and other data. NAV calculation may be adversely affected by operational risks arising from factors such as errors or failures in systems and technology. Such errors or failures may result in inaccurately calculated NAVs, delays in the calculation of NAVs and/or the inability to calculate NAV over extended time periods. A Fund may be unable to recover any losses associated with such failures. In the case of shares of other funds that are not traded on an exchange, a market valuation means such funds published net asset value per share. The Adviser may use various pricing services, or discontinue the use of any pricing service, as approved by the Board from time to time. A price obtained from a pricing service based on such pricing services valuation matrix may be considered a market valuation. Any assets or liabilities denominated in currencies other than the U.S. dollar are converted into U.S. dollars at the current market rates on the date of valuation as quoted by one or more sources.
In the event that current market valuations are not readily available or such valuations do not reflect current market value, the Trusts procedures require the Pricing and Investment Committee to determine a securitys fair value if a market price is not readily available. In determining such value the Pricing and Investment Committee may consider, among other things, (i) price comparisons among multiple sources, (ii) a review of corporate actions and news events, and (iii) a review of relevant financial indicators (e.g., movement in interest rates, market indices, and prices from each Funds Index Provider). In these cases, the Funds net asset value may reflect certain portfolio securities fair values rather than their market prices. Fair value pricing involves subjective judgments and it is possible that the fair value determination for a security is materially different than the value that could be realized upon the sale of the security. In addition, fair value pricing could result in a difference between the prices used to calculate a Funds net asset value and the prices used by the Funds benchmark Index. This may result in a difference between the Funds performance and the performance of the applicable Funds benchmark Index. With respect to securities that are primarily listed on foreign exchanges, the value of a Funds portfolio securities may change on days when you will not be able to purchase or sell your Shares.
The following information supplements and should be read in conjunction with the section in the Prospectus entitled DISTRIBUTIONS.
GENERAL POLICIES
Dividends from net investment income, if any, are generally declared and paid monthly by each ETF but may vary significantly from period to period. Distributions of net realized securities gains, if any, generally are declared and paid once a year, but the Trust may make distributions on a more frequent basis for a Fund to improve index tracking or to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the 1940 Act.
Dividends and other distributions on Shares are distributed, as described below, on a pro rata basis to Beneficial Owners of such Shares. Dividend payments are made through DTC Participants and Indirect Participants to Beneficial Owners then of record with proceeds received from the Trust.
Management of the Trust reserves the right to declare special dividends if, in its reasonable discretion, such action is necessary or advisable to preserve a Funds eligibility for treatment as a regulated investment company (RIC) under the Internal Revenue Code or to avoid imposition of income or excise taxes at the Fund level.
DIVIDEND REINVESTMENT
Broker dealers, at their own discretion, may offer a dividend reinvestment service under which Shares are purchased in the secondary market at current market prices. Investors should consult their broker dealer for further information regarding any dividend reinvestment service offered by such broker dealer.
The following is a summary of certain federal income tax considerations generally affecting the Funds and their shareholders that supplements the discussions in the Prospectus. No attempt is made to present a comprehensive explanation of the federal, state, local or foreign tax treatment of the Funds or their shareholders, and the discussion here and in the Prospectus is not intended to be a substitute for careful tax planning.
The following general discussion of certain federal income tax consequences is based on the Internal Revenue Code and the regulations issued thereunder as in effect on the date of this SAI. New legislation, as well as administrative changes or court decisions, may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein.
The following information should be read in conjunction with the section in the Prospectuses entitled ADDITIONAL TAX INFORMATION.
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TAXATION OF THE FUNDS. Each Fund is treated as a separate corporation for federal income tax purposes. Each Fund therefore is considered to be a separate entity in determining its treatment under the rules for RICs described herein and in the Prospectuses. Losses in one series of the Trust do not offset gains in any other series of the Trust, and the requirements (other than certain organizational requirements) for qualifying RIC status are determined at the Fund level rather than at the Trust level. Each Fund has elected or will elect and intends to qualify for treatment each year as a separate RIC under Subchapter M of the Internal Revenue Code. As such, each Fund should not be subject to federal income tax on its net investment income and capital gains, if any, to the extent that it timely distributes such income and capital gains to its shareholders. In order to qualify for treatment as a RIC, a Fund must distribute annually to its shareholders at least the sum of 90% of its taxable net investment income (generally including the excess of net short-term capital gains over net long-term capital losses) and 90% of its net tax exempt interest income, if any (the Distribution Requirement) and also must meet several additional requirements. Among these requirements are the following: (i) at least 90% of the Funds gross income each taxable year must be derived from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities or currencies, and net income derived from interests in qualified publicly traded partnerships (the Qualifying Income Requirement); and (ii) at the end of each quarter of a Funds taxable year, its assets must be diversified so that (a) at least 50% of the market value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities, with such other securities limited, in respect to any one issuer, to an amount not greater in value than 5% of the value of the Funds total assets and to not more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of its total assets is invested in the securities (other than U.S. government securities or securities of other RICs) of any one issuer, the securities (other than securities of other RICs) of two or more issuers that it controls and that are engaged in the same, similar, or related trades or businesses, or the securities of one or more qualified publicly traded partnerships (the Diversification Requirement).
If a Fund fails to satisfy the Qualifying Income Requirement or the Diversification Requirement in any taxable year, the Fund may be eligible for relief provisions if the failures are due to reasonable cause and not willful neglect and if a penalty tax is paid with respect to each failure to satisfy the applicable requirements. Additionally, relief is provided for certain de minimis failures of the Diversification Requirement where the Fund corrects the failure within a specified period of time. In order to be eligible for the relief provisions with respect to a failure to meet the Diversification Requirement, a Fund may be required to dispose of certain assets. If these relief provisions were not available to a Fund and it were to fail to qualify for treatment as a RIC for a taxable year, all of its taxable income would be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and its distributions (including capital gains distributions) generally would be taxable as ordinary income dividends to its shareholders, subject to the dividends-received deduction for corporate shareholders and the lower tax rates on qualified dividend income received by noncorporate shareholders. To requalify for treatment as a RIC in a subsequent taxable year, the Fund would be required to satisfy the RIC qualification requirements for that year and to distribute any earnings and profits from any year in which the Fund failed to qualify for tax treatment as a RIC. If a Fund failed to qualify as a RIC for a period greater than two taxable years, it would generally be required to pay a Fund-level tax on certain net built-in gains recognized with respect to certain of its assets upon a disposition of such assets within ten years of qualifying as a RIC in a subsequent year. The Board reserves the right not to maintain the qualification of a Fund for treatment as a RIC if it determines such course of action to be beneficial to shareholders.
If a Fund meets the Distribution Requirement but retains some or all of its income or gains, it will be subject to federal income tax to the extent any such income or gains are not distributed. A Fund may designate certain amounts retained as undistributed net capital gain in a notice to its shareholders, who (i) will be required to include in income for U.S. federal income tax purposes, as long-term capital gain, their proportionate shares of the undistributed amount so designated, (ii) will be entitled to credit their proportionate shares of the income tax paid by the Fund on that undistributed amount against their federal income tax liabilities and to claim refunds to the extent such credits exceed their liabilities and (iii) will be entitled to increase their tax basis, for federal income tax purposes, in their Shares by an amount equal to the excess of the amount of undistributed net capital gain included in their respective income over their respective income tax credits. If a Fund failed to satisfy the Distribution Requirement for any taxable year, it would be taxed as a regular corporation, with consequences generally similar to those described in the preceding paragraph.
Given the concentration of certain of the Indexes in a relatively small number of securities, it may not be possible for certain Funds to fully implement sampling methodologies while satisfying the Diversification Requirement. A Funds efforts to satisfy the Diversification Requirement may affect the Funds execution of its investment strategy and may cause the Funds return to deviate from that of the applicable Index, and the Funds efforts to track the applicable Index may cause it inadvertently to fail to satisfy the Diversification Requirement.
A Fund will be subject to a 4% excise tax on certain undistributed income if it does not distribute to its shareholders in each calendar year an amount at least equal to 98% of its ordinary income for the calendar year plus 98.2% of its capital gain net income for the twelve months ended October 31 of such year, subject to an increase for any shortfall in the prior years distribution. Each Fund intends to declare and distribute dividends and distributions in the amounts and at the times necessary to avoid the application of this 4% excise tax.
A Fund may elect to treat part or all of any qualified late year loss as if it had been incurred in the succeeding taxable year in determining the Funds taxable income, net capital gain, net short-term capital gain, and earnings and profits. The effect of this
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election is to treat any such qualified late year loss as if it had been incurred in the succeeding taxable year in characterizing Fund distributions for any calendar year. A qualified late year loss generally includes net capital loss, net long-term capital loss, or net short-term capital loss incurred after October 31 of the current taxable year (commonly referred to as post-October losses) and certain other late-year losses.
Capital losses in excess of capital gains (net capital losses) are not permitted to be deducted against a RICs net investment income. Instead, for U.S. federal income tax purposes, potentially subject to certain limitations, a Fund may carry net capital losses from any taxable year forward to offset its capital gains in future years. A Fund is permitted to carry forward indefinitely a net capital loss to offset its capital gains, if any, in years following the year of the loss. To the extent subsequent capital gains are offset by such losses, they would not result in U.S. federal income tax liability to the Fund and may not be distributed as capital gains to its shareholders. Generally, the Funds may not carry forward any losses other than net capital losses.
TAXATION OF SHAREHOLDERSDISTRIBUTIONS. Each Fund intends to distribute annually to its shareholders substantially all of its investment company taxable income (computed without regard to the deduction for dividends paid), its net tax-exempt income and any net capital gain (net recognized long-term capital gains in excess of net recognized short-term capital losses, taking into account any capital loss carryovers). Each Fund will report to shareholders annually the amounts of dividends paid from ordinary income, the amount of distributions of net capital gain, the portion of dividends which may qualify for the dividends-received deduction, the portion of dividends which may qualify for treatment as qualified dividend income, and the amount of exempt-interest dividends, if any.
Subject to certain limitations, dividends reported by a Fund as qualified dividend income will be taxable to noncorporate shareholders at rates of up to 20%. Dividends may be reported by a Fund as qualified dividend income if they are attributable to qualified dividend income received by the Fund. Qualified dividend income includes, in general, subject to certain holding period requirements and other requirements, dividend income from certain U.S. and foreign corporations. Subject to certain limitations, eligible foreign corporations include those incorporated in possessions of the United States, those incorporated in certain countries with comprehensive tax treaties with the United States and other foreign corporations if the stock with respect to which the dividends are paid is tradable on an established securities market in the United States. A dividend generally will not be treated as qualified dividend income to the extent that (i) the shareholder has not held the stock on which the dividend was paid for more than 60 days during the 121-day period that begins on the date that is 60 days before the date on which the stock become ex-dividend with respect to such dividend or, in the case of certain preferred stock, for more than 90 days during the 181-day period beginning 90 days before such date, (ii) the shareholder is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to substantially similar or related property, or (iii) the shareholder elects to treat such dividend as investment income under section 163(d)(4)(B) of the Internal Revenue Code. The holding period requirements described in this paragraph apply to shareholders investments in the Funds and to the Funds investments in underlying dividend-paying stocks. Dividends received by a Fund from a REIT or another RIC may be treated as qualified dividend income generally only to the extent the dividend distributions are attributable to qualified dividend income received by such REIT or RIC. It is expected that dividends received by a Fund from a REIT and distributed to a shareholder generally will be taxable to the shareholder as ordinary income. If 95% or more of a Funds gross income (calculated without taking into account net capital gain derived from sales or other dispositions of stock or securities) consists of qualified dividend income, that Fund may report all distributions of such income as qualified dividend income.
Certain dividends received by a Fund from U.S. corporations (generally, dividends received in respect of any share of stock (1) with a tax holding period of at least 46 days during the 91-day period beginning on the date that is 45 days before the date on which the stock becomes ex-dividend as to that dividend and (2) that is held in an unleveraged position) when distributed and appropriately so reported by the Fund may be eligible for the 70% dividends-received deduction generally available to corporations under the Internal Revenue Code. In order to qualify for the deduction, corporate shareholders must meet the minimum holding period requirement stated above with respect to their Shares, taking into account any holding period reductions from certain hedging or other transactions or positions that diminish their risk of loss with respect to their Shares, and, if they borrow to acquire or otherwise incur debt attributable to Shares, they may be denied a portion of the dividends-received deduction with respect to those Shares. The entire dividend, including the otherwise deductible amount, will be included in determining the excess, if any, of a corporations adjusted current earnings over its alternative minimum taxable income, which may increase a corporations alternative minimum tax liability. Any corporate shareholder should consult its tax adviser regarding the possibility that its tax basis in its Shares may be reduced, for U.S. federal income tax purposes, by reason of extraordinary dividends received with respect to the Shares and, to the extent such basis would be reduced below zero, current recognition of income may be required.
Distributions from a Funds net short-term capital gains will be taxable to shareholders as ordinary income. Distributions from a Funds net capital gain will be taxable to you at long-term capital gains rates, regardless of how long you have held their Shares. Long-term capital gains are taxed to noncorporate shareholders at rates of up to 20%.
Although dividends generally will be treated as distributed when paid, any dividend declared by a Fund in October, November or December and payable to shareholders of record in such a month that is paid during the following January will be treated for U.S. federal income tax purposes as received by shareholders on December 31 of the calendar year in which it was declared.
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If a Funds distributions exceed its earnings and profits, all or a portion of the distributions made in the taxable year may be treated as a return of capital to shareholders. A return of capital distribution generally will not be taxable but will reduce the shareholders cost basis and result in a higher capital gain or lower capital loss when the Shares on which the distribution was received are sold. After a shareholders basis in the Shares has been reduced to zero, distributions in excess of earnings and profits will be treated as gain from the sale of the shareholders Shares.
Distributions that are reinvested in additional Shares of a Fund through the means of a dividend reinvestment service, if offered by your broker-dealer, will nevertheless be taxable dividends to the same extent as if such dividends had been received in cash.
A 3.8% Medicare contribution tax generally applies to all or a portion of the net investment income of a shareholder who is an individual and not a nonresident alien for federal income tax purposes and who has adjusted gross income (subject to certain adjustments) that exceeds a threshold amount ($250,000 if married filing jointly or if considered a surviving spouse for federal income tax purposes, $125,000 if married filing separately, and $200,000 in other cases). This 3.8% tax also applies to all or a portion of the undistributed net investment income of certain shareholders that are estates and trusts. For these purposes, interest, dividends and certain capital gains (generally including capital gain distributions and capital gains realized on the sale of Shares) are generally taken into account in computing a shareholders net investment income, but exempt-interest dividends generally are not taken into account. Distributions of ordinary income and capital gains may also be subject to foreign, state and local taxes depending on a shareholders circumstances.
TAXATION OF SHAREHOLDERSSALE OF SHARES. In general, a sale of Shares results in capital gain or loss, and for individual shareholders, is taxable at a federal rate dependent upon the length of time the Shares were held. A sale of Fund Shares held for a period of one year or less at the time of such sale will, for tax purposes, generally result in short-term capital gains or losses, and a sale of those held for more than one year will generally result in long-term capital gains or losses. Long-term capital gains are taxed to non-corporate shareholders at rates of up to 20%.
Gain or loss on the sale of Shares is measured by the difference between the amount received and the adjusted tax basis of the Shares. Shareholders should keep records of investments made (including Shares acquired through reinvestment of dividends and distributions) so they can compute the tax basis of their Shares.
A loss realized on a sale of Shares may be disallowed if other substantially identical Shares are acquired (whether through the reinvestment of dividends or otherwise) within a sixty-one (61) day period beginning thirty (30) days before and ending thirty (30) days after the date that the Shares are disposed of. In such a case, the basis of the Shares acquired must be adjusted to reflect the disallowed loss. Any loss upon the sale of Shares held for six (6) months or less is treated as long-term capital loss to the extent of any amounts treated as distributions to the shareholder of long-term capital gain (including any amounts credited to the shareholder as undistributed capital gains).
COST BASIS REPORTING. The cost basis of Shares acquired by purchase will generally be based on the amount paid for the Shares and then may be subsequently adjusted for other applicable transactions as required by the Internal Revenue Code. The difference between the selling price and the cost basis of Shares generally determines the amount of the capital gain or loss realized on the sale or exchange of Shares. Contact the broker through whom you purchased your Shares to obtain information with respect to the available cost basis reporting methods and elections for your account.
TAXATION OF FUND INVESTMENTS. Dividends and interest received by a Fund on foreign securities may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. If a Fund meets certain requirements, which include a requirement that more than 50% of the value of the Funds total assets at the close of its respective taxable year consist of certain foreign securities (generally including foreign government securities), then the Fund should be eligible to file an election with the IRS that may enable its shareholders, in effect, to receive either the benefit of a foreign tax credit, or a tax deduction, with respect to certain foreign and U.S. possessions income taxes paid by the Fund, subject to certain limitations. If at least 50% of a Funds total assets at the close of each quarter of a taxable year consists of interests in other RICs (including money market funds and ETFs that are taxable as RICs), the Fund may make the same election and pass through to its shareholders their pro rata shares of qualified foreign taxes paid by those other RICs and passed through to the Fund for that taxable year. Pursuant to this election, a Fund would treat the applicable foreign taxes as dividends paid to its shareholders. Each such shareholder would be required to include a proportionate share of those taxes in gross income as income received from a foreign source and must treat the amount so included as if the shareholder had paid the foreign tax directly. The shareholder may then either deduct the taxes deemed paid by him or her in computing his or her taxable income or, alternatively, use the foregoing information in calculating any foreign tax credit the shareholder may be entitled to use against such shareholders federal income tax. If a Fund makes this election, the Fund will report annually to its shareholders the respective amounts per share of the Funds income from sources within, and taxes paid to, foreign countries and U.S. possessions. No deduction for such taxes will be permitted to individuals in computing their alternative minimum tax liability. If a Fund does not make this election, the Fund will be entitled to claim a deduction for certain foreign taxes incurred by the Fund.
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Certain of the Funds investments may be subject to complex provisions of the Internal Revenue Code (including provisions relating to hedging transactions, straddles, integrated transactions, foreign currency contracts, forward foreign currency contracts, and notional principal contracts) that, among other things, may affect the character of gains and losses realized by the Funds (e.g., may affect whether gains or losses are ordinary or capital), accelerate recognition of income to the Fund and defer losses. These rules could therefore affect the character, amount and timing of distributions to shareholders. These provisions also may require a Fund to mark-to-market certain types of positions in its portfolio (i.e., treat them as if they were closed out) which may cause the Fund to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the RIC distribution requirements for avoiding income and excise taxes. The Funds intend to monitor their transactions, intend to make appropriate tax elections, and intend to make appropriate entries in their books and records in order to mitigate the effect of these rules and preserve the Funds qualification for treatment as RICs.
If a Fund acquires any equity interest (under Treasury regulations that may be promulgated in the future, generally including not only stock but also an option to acquire stock such as is inherent in a convertible bond) in certain foreign corporations (i) that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, certain rents and royalties, or capital gains) or (ii) where at least 50% of the corporations assets (computed based on average fair market value) either produce or are held for the production of passive income (passive foreign investment companies or PFICs), the Fund could be subject to U.S. federal income tax and nondeductible interest charges on excess distributions received from such companies or on gain from the sale of stock in such companies, even if all income or gain actually received by the Fund is timely distributed to its shareholders. The Fund would not be able to pass through to its shareholders any credit or deduction for such a tax. A qualified electing fund election or a mark to market election may generally be available that would ameliorate these adverse tax consequences, but such elections could require the applicable Fund to recognize taxable income or gain (subject to the distribution requirements applicable to RICs, as described above) without the concurrent receipt of cash. In order to satisfy the distribution requirements and avoid a tax at the Fund level, a Fund may be required to liquidate portfolio securities that it might otherwise have continued to hold, potentially resulting in additional taxable gain or loss to the Fund. Gains from the sale of stock of PFICs may also be treated as ordinary income. In order for a Fund to make a qualified electing fund election with respect to a PFIC, the PFIC would have to agree to provide certain tax information to the Fund on an annual basis, which it might not agree to do. The Funds may limit and/or manage their holdings in PFICs to limit their tax liability or maximize their returns from these investments.
Each Fund is required for federal income tax purposes to mark-to-market and recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. Gain or loss from futures and options contracts on broad-based indexes required to be marked to market will be 60% long-term and 40% short-term capital gain or loss. Application of this rule may alter the timing and character of distributions to shareholders. A Fund may be required to defer the recognition of losses on futures contracts, options contracts and swaps to the extent of any unrecognized gains on offsetting positions held by the Fund. It is anticipated that certain net gain realized from the closing out of futures or options contracts will be considered gain from the sale of securities and therefore will be qualifying income for purposes of the Qualifying Income Requirement.
Investments by a Fund in zero coupon or other discount securities will result in income to the Fund equal to a portion of the excess face value of the securities over their issue price (the original issue discount or OID) each year that the securities are held, even though the Fund may receive no cash interest payments or may receive cash interest payments that are less than the income recognized for tax purposes. In other circumstances, whether pursuant to the terms of a security or as a result of other factors outside the control of the Fund, a Fund may recognize income without receiving a commensurate amount of cash. Such income is included in determining the amount of income that a Fund must distribute to maintain its eligibility for treatment as a RIC and to avoid the payment of federal income tax, including the nondeductible 4% excise tax described above.
Any market discount recognized on a market discount bond is taxable as ordinary income. A market discount bond is a bond acquired in the secondary market at a price below redemption value, or below adjusted issue price if issued with original issue discount. Absent an election by a Fund to include the market discount in income as it accrues, gain on the Funds disposition of such an obligation will be treated as ordinary income rather than capital gain to the extent of the accrued market discount.
Special rules apply if a Fund holds inflation-indexed bonds, such as Treasury Inflation-Protected Securities (TIPS). Generally, all stated interest on inflation-indexed bonds is taken into income by a Fund under its regular method of accounting for interest income. The amount of any positive inflation adjustment for a taxable year, which results from an increase in the inflation-adjusted principal amount of the bond, is treated as OID. The amount of a Funds OID in a taxable year with respect to a bond will increase a Funds taxable income for such year without a corresponding receipt of cash, until the bond matures. As a result, the Fund may need to use other sources of cash to satisfy its distributions for the applicable year. The amount of any negative inflation adjustments, which result from a decrease in the inflation-adjusted principal amount of the bond, reduces the amount of interest (including stated interest, OID, and market discount, if any) otherwise includable in the Funds income with respect to the bond for the taxable year.
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TAX-EXEMPT SHAREHOLDERS. Certain tax-exempt shareholders, including qualified pension plans, individual retirement accounts, salary deferral arrangements, 401(k)s, and other tax-exempt entities, generally are exempt from federal income taxation except with respect to their unrelated business taxable income (UBTI). Under current law, a Fund generally serves to block UBTI from being realized by its tax-exempt shareholders. However, notwithstanding the foregoing, tax-exempt shareholders could realize UBTI by virtue of their investment in a Fund where, for example, (i) the Fund invests in REITs that hold residual interests in real estate mortgage investment conduits (REMICs) or (ii) Shares constitute debt-financed property in the hands of the tax-exempt shareholders within the meaning of section 514(b) of the Internal Revenue Code. Charitable remainder trusts are subject to special rules and should consult their tax advisors. There are no restrictions preventing a Fund from holding investments in REITs that hold residual interests in REMICs, and a Fund may do so. The IRS has issued guidance with respect to these issues and prospective shareholders, especially charitable remainder trusts, are strongly encouraged to consult with their tax advisors regarding these issues.
FOREIGN SHAREHOLDERS. Dividends, other than capital gains dividends and exempt-interest dividends, paid by a Fund to shareholders who are nonresident aliens or foreign entities will be subject to a 30% United States withholding tax unless a reduced rate of withholding or a withholding exemption is provided under applicable treaty law to the extent derived from investment income and short-term capital gain or unless such income is effectively connected with a U.S. trade or business carried on through a permanent establishment in the United States. Nonresident shareholders are urged to consult their own tax advisors concerning the applicability of the United States withholding tax and the proper withholding form(s) to be submitted to a Fund. A non-U.S. shareholder who fails to provide an appropriate IRS Form W-8 may be subject to backup withholding at the appropriate rate.
Dividends reported by a Fund as (i) interest-related dividends, to the extent such dividends are derived from the Funds qualified net interest income, or (ii) short-term capital gain dividends, to the extent such dividends are derived from the Funds qualified short-term gain, are generally exempt from this 30% withholding tax. Qualified net interest income is a Funds net income derived from U.S.-source interest and original issue discount, subject to certain exceptions and limitations. Qualified short-term gain generally means the excess of a Funds net short-term capital gain for the taxable year over its net long-term capital loss, if any. In the case of Shares held through an intermediary, the intermediary may withhold even if a Fund reports the payment as an interest-related dividend or as a short-term capital gain dividend. Non-U.S. shareholders should contact their intermediaries with respect to the application of these rules to their accounts. Absent future legislation, the withholding exemptions for interest-related dividends and short-term capital gain dividends only apply to dividends with respect to taxable years of a Fund beginning before January 1, 2014.
Unless certain non-U.S. entities that hold Shares comply with IRS requirements that will generally require them to report information regarding U.S. persons investing in, or holding accounts with, such entities, a 30% withholding tax may apply to Fund distributions (other than exempt-interest dividends) payable to such entities after June 30, 2014 (or, in certain cases, after later dates) and redemptions and certain capital gain dividends payable to such entities after December 31, 2018. A non-U.S. shareholder may be exempt from the withholding described in this paragraph under an applicable intergovernmental agreement between the U.S. and a foreign government, provided that the shareholder and the applicable foreign government comply with the terms of such agreement.
BACKUP WITHHOLDING. A Fund will be required in certain cases to withhold (as backup withholding) on amounts (including exempt-interest dividends) payable to any shareholder who (1) has provided the Fund either an incorrect tax identification number or no number at all, (2) is subject to backup withholding by the IRS for failure to properly report payments of interest or dividends, (3) has failed to certify to the Fund that such shareholder is not subject to backup withholding, or (4) has not certified that such shareholder is a U.S. person (including a U.S. resident alien). The backup withholding rate is 28%. Backup withholding will not be applied to payments that have been subject to the 30% withholding tax on shareholders who are neither citizens nor permanent residents of the U.S.
CREATION UNITS. An Authorized Participant who exchanges securities for Creation Units generally will recognize a gain or a loss. The gain or loss will be equal to the difference between the market value of the Creation Units at the time and the sum of the exchangers aggregate basis in the securities surrendered plus the amount of cash paid for such Creation Units. A person who redeems Creation Units will generally recognize a gain or loss equal to the difference between the exchangers basis in the Creation Units and the sum of the aggregate market value of any securities received plus the amount of any cash received for such Creation Units. The IRS, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing wash sales, or on the basis that there has been no significant change in economic position.
Any gain or loss realized upon a creation of Creation Units will be treated as capital gain or loss if the Authorized Participant holds the securities exchanged therefor as capital assets, and otherwise will be ordinary income or loss. Similarly, any gain or loss realized upon a redemption of Creation Units will be treated as capital gain or loss if the Authorized Participant holds the Shares comprising the Creation Units as capital assets, and otherwise will be ordinary income or loss. Any capital gain or loss realized upon the creation of Creation Units will generally be treated as long-term capital gain or loss if the securities exchanged for such Creation Units have been held for more than one year, and otherwise will be short-term capital gain or loss. Any capital gain or loss realized upon the redemption of Creation Units will generally be treated as long-term capital gain or loss if the Shares comprising the Creation Units have been held for more than one year, and otherwise, will generally be short-term capital gain or loss. Any capital loss realized upon a redemption of Creation Units held for six (6) months or less will be disallowed to the extent of exempt-interest dividends paid with respect to the Creation Units, and to the extent not
44
disallowed will be treated as a long-term capital loss to the extent of any amounts treated as distributions to the applicable Authorized Participant of long-term capital gains with respect to the Creation Units (including any amounts credited to the Authorized Participant as undistributed capital gains).
A Fund has the right to reject an order for Creation Units if the purchaser (or a group of purchasers) would, upon obtaining the Shares so ordered, own 80% or more of the outstanding shares of the Fund and if, pursuant to section 351 of the Internal Revenue Code, the Fund would have a basis in any deposit securities different from the market value of such securities on the date of deposit. A Fund also has the right to require information necessary to determine beneficial Share ownership for purposes of the 80% determination. If a Fund does issue Creation Units to a purchaser (or a group of purchasers) that would, upon obtaining the Shares so ordered, own 80% or more of the outstanding shares of the Fund, the purchaser (or a group of purchasers) may not recognize gain or loss upon the exchange of securities for Creation Units.
Persons purchasing or redeeming Creation Units should consult their own tax advisors with respect to the tax treatment of any creation or redemption transaction.
CERTAIN POTENTIAL TAX REPORTING REQUIREMENTS. Under promulgated Treasury regulations, if a shareholder recognizes a loss on disposition of a Funds shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder (or certain greater amounts over a combination of years), the shareholder must file with the IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC are not excepted. A shareholder who fails to make the required disclosure to the IRS may be subject to adverse tax consequences, including significant penalties. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayers treatment of the loss is proper. Shareholders should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.
The foregoing discussion is a summary only and is not intended as a substitute for careful tax planning. Purchasers of Shares should consult their own tax advisors as to the tax consequences of investing in such Shares, including under state, local and other tax laws. Finally, the foregoing discussion is based on applicable provisions of the Internal Revenue Code, regulations, judicial authority and administrative interpretations in effect on the date hereof. Changes in applicable authority could materially affect the conclusions discussed above, and such changes often occur.
CAPITAL STOCK AND SHAREHOLDER REPORTS
Each Fund issues Shares of beneficial interest, par value $.01 per Share. The Board may designate additional funds.
Each Share issued by the Trust has a pro rata interest in the assets of the corresponding series of the Trust. Shares have no preemptive, exchange, subscription or conversion rights and are freely transferable. Each Share is entitled to participate equally in dividends and distributions declared by the Board with respect to each Fund, and in the net distributable assets of each Fund on liquidation.
Each Share has one vote with respect to matters upon which a shareholder vote is required consistent with the requirements of the 1940 Act and the rules promulgated thereunder. Shares of all series of the Trust (Funds) vote together as a single class except that if the matter being voted on affects only a particular fund it will be voted on only by that fund and if a matter affects a particular fund differently from other Funds, that fund will vote separately on such matter. Under Massachusetts law, the Trust is not required to hold an annual meeting of shareholders unless required to do so under the 1940 Act. The policy of the Trust is not to hold an annual meeting of shareholders unless required to do so under the 1940 Act. All Shares of the Trust (regardless of the fund) have noncumulative voting rights for the election of Trustees. Under Massachusetts law, Trustees of the Trust may be removed by vote of the shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain circumstances, be held personally liable as partners for obligations of the Trust. However, the Declaration of Trust contains an express disclaimer of shareholder liability for acts or obligations of the Trust, requires that Trust obligations include such disclaimer, and provides for indemnification and reimbursement of expenses out of the Trusts property for any shareholder held personally liable for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Trust itself would be unable to meet its obligations. Given the above limitations on shareholder personal liability, and the nature of each Funds assets and operations, the risk to shareholders of personal liability is believed to be remote.
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Shareholder inquiries may be made by writing to the Trust, c/o the Distributor, State Street Global Markets, LLC at State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
COUNSEL AND INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Morgan, Lewis & Bockius LLP, 2020 K Street NW, Washington, DC 20006, serves as counsel to the Trust. [ ], [ ], serves as the independent registered public accounting firm for the Trust. [ ] performs annual audits of the Funds financial statements and provides other audit, tax and related services.
LOCAL MARKET HOLIDAY SCHEDULES
The Trust generally intends to effect deliveries of portfolio securities on a basis of T plus three business days (i.e., days on which the NYSE is open) in the relevant foreign market of a Fund. The ability of the Trust to effect in-kind redemptions within three business days of receipt of a redemption request is subject, among other things, to the condition that, within the time period from the date of the request to the date of delivery of the securities, there are no days that are local market holidays on the relevant business days. For every occurrence of one or more intervening holidays in the local market that are not holidays observed in the United States, the redemption settlement cycle may be extended by the number of such intervening local holidays. In addition to holidays, other unforeseeable closings in a foreign market due to emergencies may also prevent the Trust from delivering securities within three business days.
The securities delivery cycles currently practicable for transferring portfolio securities to redeeming investors, coupled with local market holiday schedules, may require a delivery process longer than the standard settlement period. In certain circumstances during the calendar year, the settlement period may be greater than seven calendar days. Such periods are listed in the table below, as are instances where more than seven days will be needed to deliver redemption proceeds. Since certain holidays may occur on different dates in subsequent years, the number of days required to deliver redemption proceeds in any given year may exceed the maximum number of days listed in the table below. The proclamation of new holidays, the treatment by market participants of certain days as informal holidays (e.g., days on which no or limited securities transactions occur, as a result of substantially shortened trading hours), the elimination of existing holidays, or changes in local securities delivery practices, could affect the information set forth herein at some time in the future and longer (worse) redemption periods are possible.
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Mexico | Morocco | Netherlands | New Zealand | Norway | Oman | |||||
January 1 February 2 March 16 April 2-3 May 1 September 16 November 20 December 25 |
January 1 May 1 July 30 August 14, 20-21 September 23 October 13 November 6, 18 |
January 1 April 3, 6, 27, 30 May 5, 14, 25 December 25 |
January 1-2 February 6 April 3, 6, 27 June 1 October 26 December 25, 28 |
January 1 April 1-3, 6 May 1, 14, 25 December 24-25, 31 |
January 1 May 15 July 20-21, 23 September 25, 28 October 13 November 18 December 24 |
|||||
Peru | Philippines | Poland | Portugal | Qatar | Russia | |||||
January 1 April 2-3 May 1 July 28 October 8 December 8, 25 |
January 1, 2 February 19 April 2-3, 9 May 1 June 12 August 21, 31 November 30 December 24-25, 30-31 |
January 1, 6 April 3, 6 May 1 June 4 November 11 December 24-25, 31 |
January 1 April 3 May 1 June 10 December 25 |
January 1 February 10 March 1 July 20-22 September 21-23 December 18 |
January 1-5, 5-9 February 23 March 9 May 1, 4, 11 June 12 November 4 |
|||||
Singapore | South Africa | South Korea | Spain | Sweden | Switzerland | |||||
January 1 February 19-20 April 3 May 1 June 1 July 17 August 10 September 24 November 10 December 25 |
January 1 April 3, 6, 27 May 1 June 16 August 10 September 24 December 16, 25 |
January 1 February 18-20 May 1, 5, 25 July 17 September 28 October 1, 9 December 24-25, 31 |
January 1, 6 March 19 April 2-3, 6 May 1, 14, 25 June 4 October 12 December 8, 25 |
January 1, 5-6 April 2-3, 6, 30 May 1, 13-14 June 19 October 30 December 24-25, 31 |
January 1-2 April 3, 6 May 1, 14, 25 December 25 |
|||||
Taiwan | Thailand | Turkey | U.A.E. | United Kingdom | ||||||
January 1-2 February 18-20, 23, 27 April 3, 6 May 1 June 19 September 28 October 9 |
January 1 March 4 April 6, 13-15 May 1, 5 June 1 July 1, 30 August 12 October 23 December 7, 10, 31 |
January 1 April 23 May 1, 19 July 16-17 September 23-25 October 28-29 |
January 1, 3 May 15 July 18-20 September 24-27 October 15 December 2-3 |
January 1 April 3, 6 May 4, 25 August 31 December 25, 28 |
* | Early Close |
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Redemptions. The longest redemption cycle for a Fund is a function of the longest redemption cycle among the countries whose securities comprise the Funds. In calendar years 2015 and 2016, the dates of regular holidays affecting the following securities markets present the worst-case redemption cycles* for a Fund as follows:
2015 |
||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Brazil | 02/11/15 | 02/19/15 | 8 | |||
02/12/15 | 02/20/15 | 8 | ||||
02/13/15 | 02/23/15 | 10 | ||||
China | 02/13/15 | 02/25/15 | 12 | |||
02/16/15 | 02/26/15 | 10 | ||||
02/17/15 | 02/27/15 | 10 | ||||
09/28/15 | 10/08/15 | 10 | ||||
09/29/15 | 10/09/15 | 10 | ||||
09/30/15 | 10/12/15 | 12 | ||||
Indonesia | 07/13/15 | 07/22/15 | 9 | |||
07/14/15 | 07/23/15 | 9 | ||||
07/15/15 | 07/24/15 | 9 | ||||
Ireland | 12/22/15 | 12/30/15 | 8 | |||
12/23/15 | 12/31/15 | 8 | ||||
Israel | 04/01/15 | 04/12/15 | 11 | |||
04/02/15 | 04/13/15 | 11 | ||||
09/21/15 | 10/06/15 | 15 | ||||
09/24/15 | 10/07/15 | 13 | ||||
Kazakhstan | 09/18/15 | 09/28/15 | 10 | |||
Philippines | 01/12/15 | 01/20/15 | 8 | |||
01/13/15 | 01/21/15 | 8 | ||||
01/14/15 | 01/22/15 | 8 | ||||
12/23/15 | 01/04/16 | 12 | ||||
12/28/15 | 01/05/16 | 8 | ||||
12/29/15 | 01/06/16 | 8 | ||||
Qatar | 07/14/15 | 07/22/15 | 8 | |||
07/15/15 | 07/23/15 | 8 | ||||
07/16/15 | 07/26/15 | 10 | ||||
09/09/15 | 09/17/15 | 8 | ||||
09/10/15 | 09/20/15 | 10 | ||||
09/13/15 | 09/21/15 | 8 | ||||
Russia | 12/28/15 | 01/13/16 | 16 | |||
12/29/15 | 01/14/16 | 16 | ||||
12/30/15 | 01/05/16 | 16 | ||||
South Africa | 03/27/15 | 04/07/15 | 11 | |||
03/30/15 | 04/08/15 | 9 | ||||
03/31/15 | 04/09/15 | 9 | ||||
04/01/15 | 04/10/15 | 9 | ||||
04/02/15 | 04/13/15 | 11 | ||||
04/20/15 | 04/28/15 | 8 | ||||
04/21/15 | 04/29/15 | 8 | ||||
04/22/15 | 04/30/15 | 8 | ||||
04/23/15 | 05/01/15 | 8 | ||||
04/24/15 | 05/05/15 | 11 | ||||
04/28/15 | 05/06/15 | 8 | ||||
04/29/15 | 05/07/15 | 8 |
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Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
04/30/15 | 05/08/15 | 8 | ||||
06/09/15 | 06/17/15 | 8 | ||||
06/10/15 | 06/18/15 | 8 | ||||
06/11/15 | 06/19/15 | 8 | ||||
06/12/15 | 06/22/15 | 10 | ||||
06/15/15 | 06/23/15 | 8 | ||||
08/03/15 | 08/11/15 | 8 | ||||
08/04/15 | 08/12/15 | 8 | ||||
08/05/15 | 08/13/15 | 8 | ||||
08/06/15 | 08/14/15 | 8 | ||||
08/07/15 | 08/17/15 | 10 | ||||
09/17/15 | 09/25/15 | 8 | ||||
09/18/15 | 09/28/15 | 10 | ||||
09/21/15 | 09/29/15 | 8 | ||||
09/22/15 | 09/30/15 | 8 | ||||
09/23/15 | 10/01/15 | 8 | ||||
12/09/15 | 12/17/15 | 8 | ||||
12/10/15 | 12/18/15 | 8 | ||||
12/11/15 | 12/21/15 | 10 | ||||
12/14/15 | 12/22/15 | 8 | ||||
12/15/15 | 12/23/15 | 8 | ||||
12/18/15 | 12/28/15 | 10 | ||||
12/21/15 | 12/29/15 | 8 | ||||
12/22/15 | 12/30/15 | 8 | ||||
12/23/15 | 12/31/15 | 8 | ||||
12/24/15 | 01/04/16 | 11 | ||||
Spain | 03/30/15 | 04/07/15 | 8 | |||
03/31/15 | 04/08/15 | 8 | ||||
04/01/15 | 04/09/15 | 8 | ||||
Thailand | 04/08/15 | 04/16/15 | 8 | |||
04/09/15 | 04/17/15 | 8 | ||||
04/10/15 | 04/20/15 | 10 |
2016 |
||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
China | 02/03/16 | 02/17/16 | 14 | |||
02/04/16 | 02/18/16 | 14 | ||||
02/05/16 | 02/19/16 | 14 | ||||
04/27/16 | 05/09/16 | 12 | ||||
04/28/16 | 05/10/16 | 12 | ||||
04/29/16 | 05/11/16 | 12 | ||||
09/28/16 | 10/11/16 | 13 | ||||
09/29/16 | 10/12/16 | 13 | ||||
09/30/16 | 10/13/16 | 13 |
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Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Colombia | 03/18/16 | 03/28/16 | 10 | |||
Indonesia | 06/29/16 | 07/11/16 | 12 | |||
06/30/16 | 07/12/16 | 12 | ||||
07/01/16 | 07/13/16 | 12 | ||||
Ireland | 12/21/16 | 12/29/16 | 8 | |||
12/22/16 | 01/02/17 | 11 | ||||
Israel | 04/20/16 | 05/01/16 | 11 | |||
04/21/16 | 05/02/16 | 11 | ||||
10/10/16 | 10/25/16 | 15 | ||||
10/13/16 | 10/26/16 | 13 | ||||
Malaysia | 07/01/16 | 07/11/16 | 10 | |||
07/04/16 | 07/12/16 | 8 | ||||
07/05/16 | 07/13/16 | 8 | ||||
Mexico | 03/18/16 | 03/28/16 | 10 | |||
Pakistan | 09/08/16 | 09/16/16 | 8 | |||
09/09/16 | 09/19/16 | 10 | ||||
Philippines | 12/23/15 | 01/04/16 | 12 | |||
12/28/15 | 01/05/16 | 8 | ||||
12/29/15 | 01/06/16 | 8 | ||||
Qatar | 09/06/16 | 09/18/16 | 12 | |||
09/07/16 | 09/19/16 | 12 | ||||
09/08/16 | 09/20/16 | 12 | ||||
Serbia | 04/26/16 | 05/04/16 | 8 | |||
04/27/16 | 05/05/16 | 8 | ||||
04/28/16 | 05/06/16 | 8 | ||||
South Africa | 12/24/15 | 01/04/16 | 11 | |||
12/28/15 | 01/05/16 | 8 | ||||
12/29/15 | 01/06/16 | 8 | ||||
12/30/15 | 01/07/16 | 8 | ||||
12/31/15 | 01/08/16 | 8 | ||||
03/14/16 | 03/22/16 | 8 | ||||
03/15/16 | 03/23/16 | 8 | ||||
03/16/16 | 03/24/16 | 8 | ||||
03/17/16 | 03/29/16 | 12 | ||||
03/18/16 | 03/30/16 | 12 | ||||
03/22/16 | 03/31/16 | 9 | ||||
03/23/16 | 04/01/16 | 9 | ||||
03/24/16 | 04/04/16 | 11 | ||||
04/20/16 | 04/28/16 | 8 | ||||
04/21/16 | 04/29/16 | 8 | ||||
04/22/16 | 05/03/16 | 11 | ||||
04/25/16 | 05/04/16 | 9 |
51
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
04/26/16 | 05/05/16 | 9 | ||||
04/28/16 | 05/06/16 | 8 | ||||
04/29/16 | 05/09/16 | 10 | ||||
06/09/16 | 06/17/16 | 8 | ||||
06/10/16 | 06/20/16 | 10 | ||||
06/13/16 | 06/21/16 | 8 | ||||
06/14/16 | 06/22/16 | 8 | ||||
06/15/16 | 06/23/16 | 8 | ||||
08/02/16 | 08/10/16 | 8 | ||||
08/03/16 | 08/11/16 | 8 | ||||
08/04/16 | 08/12/16 | 8 | ||||
08/05/16 | 08/15/16 | 10 | ||||
08/08/16 | 08/16/16 | 8 | ||||
12/09/16 | 12/19/16 | 10 | ||||
12/12/16 | 12/20/16 | 8 | ||||
12/13/16 | 12/21/16 | 8 | ||||
12/14/16 | 12/22/16 | 8 | ||||
12/15/16 | 12/28/16 | 13 | ||||
12/16/16 | 12/28/16 | 12 | ||||
12/19/16 | 12/29/16 | 10 | ||||
12/20/16 | 01/02/17 | 13 | ||||
12/21/16 | 01/03/17 | 13 | ||||
12/22/16 | 01/04/17 | 13 | ||||
12/28/16 | 01/05/17 | 8 | ||||
12/29/16 | 01/06/17 | 8 | ||||
Sweden | 12/30/15 | 01/07/16 | 8 | |||
Thailand | 04/08/16 | 04/18/16 | 10 | |||
04/11/16 | 04/19/16 | 8 | ||||
04/12/16 | 04/20/16 | 8 | ||||
Turkey | 07/01/16 | 07/11/16 | 10 | |||
07/04/16 | 07/12/16 | 8 | ||||
09/08/16 | 09/19/16 | 11 | ||||
09/09/16 | 09/20/16 | 11 | ||||
Ukraine | 12/31/15 | 01/08/16 | 8 | |||
United Arab Emirates | 09/07/16 | 09/15/16 | 8 | |||
09/08/16 | 09/18/16 | 10 |
* | These worst-case redemption cycles are based on information regarding regular holidays, which may be out of date. Based on changes in holidays, longer (worse) redemption cycles are possible. |
52
March 2015
FM Global Proxy Voting and Engagement Principles
SSGA Funds Management, Inc. (SSGA FM), one of the industrys largest institutional asset managers, is the investment management arm of State Street Bank and Trust Company, a wholly owned subsidiary of State Street Corporation, a leading provider of financial services to institutional investors. As an investment manager, SSGA FM has discretionary proxy voting authority over most of its client accounts, and SSGA FM votes these proxies in the manner that we believe will most likely protect and promote the long-term economic value of client investments as described in the SSGA FM Global Proxy Voting and Engagement Principles.
A-1
SSGA FM maintains Proxy Voting and Engagement Guidelines for select markets, including: the US, the EU, the UK, Australia, emerging markets and Japan. International markets that do not have specific guidelines are reviewed and voted consistent with our Global Proxy Voting and Engagement Principles; however, SSGA FM also endeavors to show sensitivity to local market practices when voting in these various markets.
SSGA FMs Approach to Proxy Voting and Issuer Engagement
At SSGA FM, we take our fiduciary duties as an asset manager very seriously. We have a dedicated team of corporate governance professionals who help us carry out our duties as a responsible investor. These duties include engaging with companies, developing and enhancing in-house corporate governance policies, analyzing corporate governance issues on a case-by-case basis at the company level, and exercising our voting rightsall to maximize shareholder value.
SSGA FMs Global Proxy Voting and Engagement Principles (the Principles) may take different perspectives on common governance issues that vary from one market to another and, likewise, engagement activity may take different forms in order to best achieve long-term engagement goals. We believe that proxy voting and engagement with portfolio companies is often the most direct and productive way shareholders can exercise their ownership rights, and taken together, we view these tools to be an integral part of the overall investment process.
We believe engagement and voting activity have a direct relationship. As a result, the integration of our engagement activities, while leveraging the exercise of our voting rights, provides a meaningful shareholder tool that we believe protects and enhances the long-term economic value of the holdings in our client accounts. SSGA FM maximizes its voting power and engagement by maintaining a centralized proxy voting and active ownership process covering all holdings, regardless of strategy. Despite the different investment views and objectives across SSGA FM, depending on the product or strategy, the fiduciary responsibilities of share ownership and voting for which SSGA FM has voting discretion are carried out with a single voice and objective.
The Principles support governance structures that we believe add to, or maximize shareholder value at the companies held in our clients portfolios. SSGA FM conducts issuer specific engagements with companies to discuss our principles, including sustainability related risks. In addition, we encourage issuers to find ways of increasing the amount of direct communication board members have with shareholders. We believe direct communication with executive board members and independent non-executive directors is critical to helping companies understand shareholder concerns. Conversely, where appropriate, we conduct collaborative engagement activities with multiple shareholders and communicate with company representatives about common concerns.
In conducting our engagements, SSGA FM also evaluates the various factors that play into the corporate governance framework of a country, including the macroeconomic conditions and broader political system, the quality of regulatory oversight, the enforcement of property and shareholder rights and the independence of the judiciary to name a few. SSGA FM understands that regulatory requirements and investor expectations relating to governance practices and engagement activities differ from country-to-country. As a result, SSGA FM engages with issuers, regulators, or both, depending on the market. SSGA FM also is a member of various investor associations that seek to address broader corporate governance related policy at the country level as well as issuer specific concerns at a company level.
2
To help mitigate company specific risk, the team may collaborate with members of the active investment teams to engage with companies on corporate governance issues and address any specific concerns, or to get more information regarding shareholder items that are to be voted on at upcoming shareholder meetings. Outside of proxy voting season, SSGA FM conducts issuer specific engagements with companies covering various corporate governance and sustainability related topics.
The SSGA FM Governance Team uses a blend of quantitative and qualitative research and data to support screens to help identify issuers where active engagement may be necessary to protect and promote shareholder value. Issuer engagement may also be event driven, focusing on issuer specific corporate governance, sustainability concerns or wider industry related trends. SSGA FM also gives consideration to the size of our total position of the issuer in question and/or the potential negative governance, performance profile, and circumstance at hand. As a result, SSGA FM believes issuer engagement can take many forms and be triggered under numerous circumstances. The following methods represent how SSGA FM defines engagement methods:
Active
SSGA FM uses screening tools designed to capture a mix of company specific data including governance and sustainability profiles to help us focus our voting and engagement activity.
SSGA FM will actively seek direct dialogue with the board and management of companies we have identified through our screening processes. Such engagements may lead to further monitoring to ensure the company improves its governance or sustainability practices. In these cases, the engagement process represents the most meaningful opportunity for SSGA FM to protect long-term shareholder value from excessive risk due to poor governance and sustainability practices.
Recurring
SSGA FM has ongoing dialogue with its largest holdings on corporate governance and sustainability issues. SSGA FM maintains regular face-to-face meetings with these issuers, allowing SSGA FM to reinforce key tenets of good corporate governance and actively advise these issuers around concerns that SSGA FM feels may negatively impact long-term shareholder value.
Reactive
Reactive engagement is initiated by the issuers. SSGA FM routinely discusses specific voting issues and items with the issuer community. Reactive engagement is an opportunity to address not only voting items, but also a wide range of governance and sustainability issues.
SSGA FM has established an engagement protocol that further describes our approach to issuer engagement.
Measurement
Assessing the effectiveness of our issuer engagement process is often difficult. To limit the subjectivity of measuring our success we actively seek issuer feedback and monitor the actions issuers take post-engagement to identify tangible changes. By doing so, we are able to establish indicators to gauge how issuers respond to our concerns and to what degree these responses satisfy our requests. It is also important to note that successful engagement activity can be measured over differing time periods depending on the facts and circumstances involved. Engagements can last as short as a single meeting or span multiple years.
Depending on the issue and whether the engagement activity is reactive, recurring, or active, engagement with issuers can take the form of written communication, conference calls, or face-to-face meetings.SSGA FM believes active engagement is best conducted directly with company management or board members. Collaborative engagement, where multiple shareholders communicate with company representatives, can serve as a potential forum for issues that are not identified by SSGA FM as requiring active engagement, such as shareholder conference calls.
3
Proxy Voting Procedure
Oversight
The SSGA FM Corporate Governance Team is responsible for developing and implementing the Proxy Voting and Engagement Guidelines (the Guidelines), case-by-case voting items, issuer engagement activities, and research and analysis of governance-related issues. The implementation of the Guidelines is overseen by the SSGA Global Proxy Review Committee (SSGA PRC), a committee of investment, compliance and legal professionals, who provide guidance on proxy issues as described in greater detail below. Oversight of the proxy voting process is ultimately the responsibility of the SSGA Investment Committee. The SSGA Investment Committee reviews and approves amendments to the Guidelines. The SSGA PRC reports to the SSGA Investment Committee, and may refer certain significant proxy items to that committee.
Proxy Voting Process
In order to facilitate SSGA FMs proxy voting process, SSGA FM retains Institutional Shareholder Services Inc. (ISS), a firm with expertise in proxy voting and corporate governance. SSGA FM utilizes ISSs services in three ways: (1) as SSGA FMs proxy voting agent (providing SSGA FM with vote execution and administration services); (2) for applying the Guidelines; and (3) as providers of research and analysis relating to general corporate governance issues and specific proxy items.
The SSGA FM Corporate Governance Team reviews the Guidelines with ISS on an annual basis or on a case-by-case basis as needed. On most routine proxy voting items (e.g., ratification of auditors), ISS will affect the proxy votes in accordance with the Guidelines.
In other cases, the Corporate Governance Team will evaluate the proxy solicitation to determine how to vote based on facts and circumstances, consistent with the Principles, and the accompanying Guidelines, that seek to maximize the value of our client accounts.
In some instances, the Corporate Governance Team may refer significant issues to the SSGA PRC for a determination of the proxy vote. In addition, in determining whether to refer a proxy vote to the SSGA PRC, the Corporate Governance. Team will consider whether a material conflict of interest exists between the interests of our client and those of SSGA FM or its affiliates (as explained in greater detail in our Conflict of Interest Policy).
SSGA FM votes in all markets where it is feasible; however, SSGA FM may refrain from voting meetings when power of attorney documentation is required, where voting will have a material impact on our ability to trade the security, where issuer-specific special documentation is required or where various market or issuer certifications are required. SSGA FM is unable to vote proxies when certain custodians, used by our clients, do not offer proxy voting in a jurisdiction, or when they charge a meeting specific fee in excess of the typical custody service agreement.
Conflict of Interest
See SSGAs standalone Conflicts of Interest Policy.
Proxy Voting and Engagement Principles
Directors and Boards
The election of directors is one of the most important fiduciary duties SSGA FM performs as a shareholder. SSGA FM believes that well-governed companies can protect and pursue shareholder interests better and withstand the challenges of an uncertain economic environment. As such, SSGA FM seeks to vote director elections in a way which we, as a fiduciary, believe will maximize the long-term value of each portfolios holdings.
Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. This concept establishes the standard by which board and director performance is measured. To achieve this fundamental principle, the role of the board, in SSGA FMs view, is to carry out its responsibilities in the best long-term interest of the company and its shareholders. An independent and effective board oversees management, provides guidance on strategic matters, selects the CEO and other senior executives, creates a succession plan for the board and management, provides risk oversight and assesses the performance of the CEO and management. In contrast, management implements the business and capital allocation strategies and runs the companys day-to-day operations. As part of SSGA FMs engagement process, SSGA FM routinely discusses the importance of these responsibilities with the boards of issuers.
4
SSGA FM believes the quality of a board is a measure of director independence, director succession planning, board evaluations and refreshment and company governance practices. In voting to elect nominees, SSGA FM considers many factors. SSGA FM believes independent directors are crucial to good corporate governance and help management establish sound corporate governance policies and practices. A sufficiently independent board will effectively monitor management, maintain appropriate governance practices, and perform oversight functions necessary to protect shareholder interests. SSGA FM also believes the right mix of skills, independence and qualifications among directors provides boards with the knowledge and direct experience to deal with risks and operating structures that are often unique and complex from one industry to another.
Accounting and Audit Related Issues
SSGA FM believes audit committees are critical and necessary as part of the boards risk oversight role. The audit committee is responsible for setting out an internal audit function to provide robust audit and internal control systems designed to effectively manage potential and emerging risks to the companys operations and strategy. SSGA FM believes audit committees should have independent directors as members, and SSGA FM will hold the members of the audit committee responsible for overseeing the management of the audit function.
The disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. As a result, board oversight of the internal controls and the independence of the audit process are essential if investors are to rely on financial statements. Also, it is important for the audit committee to appoint external auditors who are independent from management as we expect auditors to provide assurance as of a companys financial condition.
Capital Structure, Reorganization and Mergers
The ability to raise capital is critical for companies to carry out strategy, grow and achieve returns above their cost of capital. The approval of capital raising activities is fundamental to a shareholders ability to monitor the amounts of proceeds and to ensure capital is deployed efficiently. Altering the capital structure of a company is a critical decision for boards and in making such a critical decision, SSGA FM believes the company should have a well explained business rationale that is consistent with corporate strategy and not overly dilute its shareholders.
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation.
Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In evaluating mergers and acquisitions, SSGA FM considers the adequacy of the consideration and the impact of the corporate governance provisions to shareholders. In all cases, SSGA FM uses its discretion in order to maximize shareholder value.
Occasionally, companies add anti-takeover provisions that reduce the chances of a potential acquirer making an offer, or reducing the likelihood of a successful offer. SSGA FM does not support proposals that reduce shareholders rights, entrench management or reduce the likelihood of shareholders right to vote on reasonable offers.
Compensation
SSGA FM considers the boards responsibility to include setting the appropriate level of executive compensation. Despite the differences among the types of plans and the awards possible, there is a simple underlying philosophy that guides SSGA FMs analysis of executive compensation; SSGA FM believes that there should be a direct relationship between executive compensation and company performance over the long-term.
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, SSGA FM considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests, as well as with corporate strategy and performance. SSGA FM may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA FM may also consider executive compensation practices when re-electing members of the remuneration committee.
SSGA FM recognizes that compensation policies and practices are unique from market to market; often with significant differences between the level of disclosures, the amount and forms of compensation paid, and the ability of shareholders to approve executive compensation practices. As a result, our ability to assess the appropriateness of executive compensation is often dependent on market practices and laws.
5
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. Environmental and social factors may not only have an impact on the reputation of companies but may also represent significant operational risks and costs to business. Well-developed environmental and social management systems can generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. In our view, companies that manage all risks and consider opportunities related to environmental and social issues are able to adapt faster to changes and appear to be better placed to achieve sustainable competitive advantage in the long-term. Similarly, companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change, which could be the result of anything from regulation and litigation, physical threats (severe weather, climate change), economic trends to shifts in consumer behavior.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks and shareholder proposals relating to them on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on a company, its industry, operations, and geographic footprint. SSGA FM may also take action against the re-election of board members if we have serious concerns over ESG practices and the company has not been responsive to shareholder requests to amend them.
General/Routine
Although SSGA FM does not seek involvement in the day-to-day operations of an organization, SSGA FM recognizes the need for conscientious oversight and input into management decisions that may affect a companys value. SSGA FM supports proposals that encourage economically advantageous corporate practices and governance, while leaving decisions that are deemed to be routine or constitute ordinary business to management and the board of directors.
Securities on Loan
For funds where SSGA FM acts as trustee, SSGA FM may recall securities in instances where SSGA FM believes that a particular vote will have a material impact on the fund(s). Several factors shape this process. First, SSGA FM must receive notice of the vote in sufficient time to recall the shares on or before the record date. In many cases, SSGA FM does not receive timely notice, and is unable to recall the shares on or before the record date. Second, SSGA FM, exercising its discretion may recall shares if it believes the benefit of voting shares will outweigh the foregone lending income. This determination requires SSGA FM, with the information available at the time, to form judgments about events or outcomes that are difficult to quantify. Given past experience in this area, however, we believe that the recall of securities will rarely provide an economic benefit that outweighs the cost of the foregone lending income.
Reporting
Any client who wishes to receive information on how its proxies were voted should contact its SSGA FM relationship manager.
6
ssga.com
State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canay Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 28, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3430-INST-5405 0315 Exp. Date: 02/29/2016
March 2015
FM Proxy Voting and Engagement Guidelines
United States
SSGA Funds Management, Inc.s (SSGA FM) US Proxy Voting and Engagement Guidelines outline our expectations of companies listed on stock exchanges in the US. This policy complements and should be read in conjunction with SSGA FMs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGA FMs approach to voting and engaging with companies and SSGAs Conflicts of Interest Policy.
SSGA FMs US Proxy Voting and Engagement Guidelines address areas including board structure, director tenure, audit related issues, capital structure, executive compensation, environmental, social and other governance related issues. Principally, we believe the primary responsibility of the board of directors is to preserve and enhance shareholder value and protect shareholder interests. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy, overseeing executive management to monitoring the risks that arise from a companys business, including risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board.
When voting and engaging with companies in global markets, SSGA FM considers market specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. SSGA FM expects companies to observe the relevant laws and regulations of their respective markets as well as country specific best practice guidelines and corporate governance codes. When we feel that a countrys regulatory requirements do not address some of the key philosophical principles that SSGA FM believes are fundamental to its global voting guidelines, we may hold companies in such markets to our global standards.
In its analysis and research into corporate governance issues in the US, SSGA FM expects all companies to act in a transparent manner and provide detailed disclosure on board profiles, related-party transactions, executive compensation and other governance issues that impact shareholders long-term interests.
SSGA FMs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Corporate Governance Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA FM has established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. SSGA FM engages with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagements to address significant shareholder concerns and environmental, social and governance (ESG) issues in a manner consistent with maximizing shareholder value. The team works alongside members of SSGA FMs active investment teams; collaborating on issuer engagements and providing input on company specific fundamentals. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in the US.
SSGA FM is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the UK Stewardship Code. We are committed to sustainable investing and are working to further integrate ESG principles into investment and corporate governance practices, where applicable and consistent with our fiduciary duty.
Directors and Boards
SSGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering various factors including general market practice and availability of information on director skills and expertise. In principle, SSGA FM believes independent directors are crucial to good corporate governance and help management establish sound corporate governance policies and practices. A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests.
Director related proposals at US companies include issues submitted to shareholders that deal with the composition of the board or with members of a corporations board of directors. In deciding which director nominee to support, SSGA FM considers numerous factors.
Director Elections
SSGA FMs director election policy focuses on companies governance profile to identify if a company demonstrates appropriate governance practices or if it exhibits negative governance practices. Factors SSGA FM considers when evaluating governance practices include, but are not limited to the following:
| Shareholder rights; |
| Board independence; and |
| Board structure. |
2
If a company demonstrates appropriate governance practices, SSGA FM believes a director should be classified as independent based on the relevant listing standards or local market practice standards. In such cases, the composition of the key oversight committees of a board should meet the minimum standards of independence. Accordingly, SSGA FM will vote against a nominee at a company with appropriate governance practices if the director is classified as non-independent under relevant listing standards or local market practice AND serves on a key committee of the board (compensation, audit, nominating or committees required to be fully independent by local market standards).
Conversely, if a company demonstrates negative governance practices, SSGA FM believes the classification standards for director independence should be elevated. In such circumstances, we will evaluate all director nominees based on the following classification standards:
| Is the nominee an employee of or related to an employee of the issuer or its auditor; |
| Does the nominee provide professional services to the issuer; |
| Has the nominee attended an appropriate number of board meetings; or |
| Has the nominee received non-board related compensation from the issuer. |
Where companies demonstrate negative governance practices, these stricter standards will apply not only to directors who are a member of a key committee but to all directors on the board as market practice permits. Accordingly, SSGA FM will vote against a nominee (with the exception of the CEO) where the board has inappropriate governance practices and is considered not independent based on the above independence criteria.
Additionally, SSGA FM may withhold votes from directors based on the following:
| When overall average board tenure is excessive and/or individual director tenure is excessive. In assessing excessive tenure, SSGA FM gives consideration to factors such as the preponderance of long tenured directors, board refreshment practices, and classified board structures; |
| When directors attend less than 75% of board meetings without appropriate explanation or providing reason for their failure to meet the attendance threshold; |
| CEOs of a public company who sit on more than three public company boards; |
| Director nominees who sit on more than six public company boards; |
| Directors of companies that have ignored a shareholder proposal which received a majority of the shares outstanding at the last annual or special meeting, unless management submits the proposal(s) on the ballot as a binding management proposal, recommending shareholders vote for the particular proposal(s); |
| Directors of companies have unilaterally adopted/ amended company by-laws that negatively impact SSGA FMs shareholder rights (such as fee-shifting, forum selection and exclusion service by-laws) without putting such amendments to a shareholder vote; |
| Compensation committee members where there is a weak relationship between executive pay and performance over a five-year period; |
| Audit committee members if non-audit fees exceed 50% of total fees paid to the auditors; and |
| Directors who appear to have been remiss in their duties. |
Director Related Proposals
SSGA FM generally votes for the following director related proposals:
| Discharge of board members duties, in the absence of pending litigation, regulatory investigation, charges of fraud or other indications of significant concern; |
| Proposals to restore shareholders ability to remove directors with or without cause; |
| Proposals that permit shareholders to elect directors to fill board vacancies; and |
| Shareholder proposals seeking disclosure regarding the company, board, or compensation committees use of compensation consultants, such as company name, business relationship(s) and fees paid. |
SSGA FM generally votes against the following director related proposals:
| Requirements that candidates for directorships own large amounts of stock before being eligible to be elected; |
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| Proposals that relate to the transaction of other business as properly comes before the meeting, which extend blank check powers to those acting as proxy; and |
| Proposals requiring two candidates per board seat. |
Majority Voting
SSGA FM will generally support a majority vote standard based on votes cast for the election of directors.
SSGA FM will generally vote to support amendments to bylaws that would require simple majority of voting shares (i.e. shares cast) to pass or repeal certain provisions.
Annual Elections
SSGA FM generally supports the establishment of annual elections of the board of directors. Consideration is given to the overall level of board independence and the independence of the key committees as well as whether there is a shareholders rights plan.
Cumulative Voting
SSGA FM does not support cumulative voting structures for the election of directors.
Separation Chair/CEO
SSGA FM analyzes proposals for the separation of Chair/CEO on a case-by-case basis taking into consideration numerous factors, including but not limited to, the appointment of and role played by a lead director, a companys performance and the overall governance structure of the company.
Proxy Access
SSGA FM will consider proposals relating to Proxy Access on a case-by-case basis.
SSGA FM will evaluate the companys specific circumstances, the impact of the proposal on the target company and its potential effect on shareholder value.
Considerations include but are not limited to the following:
| The ownership thresholds and holding duration proposed in the resolution; |
| The binding nature of the proposal; |
| The number of directors that shareholders may be able to nominate each year; |
| Company performance; |
| Company governance structure; |
| Shareholder rights; and |
| Board performance. |
Age/Term Limits
Generally, SSGA FM will vote against age and term limits unless the company is found to have poor board refreshment and director succession practices and has a preponderance of non-executive directors with excessively long-tenures serving on the board.
Approve Remuneration of Directors
Generally, SSGA FM will support directors compensation, provided the amounts are not excessive relative to other issuers in the market or industry. In making our determination, we review whether the compensation is overly dilutive to existing shareholders.
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Indemnification
Generally, SSGA FM supports proposals to limit directors liability and/or expand indemnification and liability protection if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Classified Boards
SSGA FM generally supports annual elections for the board of directors.
Confidential Voting
SSGA FM will support confidential voting.
Board Size
SSGA FM will support proposals seeking to fix the board size or designate a range for the board size and will vote against proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval.
Audit Related Issues
Ratifying Auditors and Approving Auditor Compensation
SSGA FM supports the approval of auditors and auditor compensation provided that the issuer has properly disclosed audit and non-audit fees relative to market practice and the audit fees are not deemed excessive. SSGA FM deems audit fees to be excessive if the non-audit fees for the prior year constituted 50% or more of the total fees paid to the auditor. SSGA FM will support the disclosure of auditor and consulting relationships when the same or related entities are conducting both activities and will support the establishment of a selection committee responsible for the final approval of significant management consultant contract awards where existing firms are already acting in an auditing function. In circumstances where other fees include fees related to initial public offerings, bankruptcy emergence, and spin-offs, and the company makes public disclosure of the amount and nature of those fees which are determined to be an exception to the standard non-audit fee category, then such fees may be excluded from the non-audit fees considered in determining the ratio of non-audit to audit/audit-related fees/tax compliance and preparation for purposes of determining whether non-audit fees are excessive.
SSGA FM will support the discharge of auditors and requirements that auditors attend the annual meeting of shareholders. 1
Capital Related Issues
Capital structure proposals include requests by management for approval of amendments to the certificate of incorporation that will alter the capital structure of the company.
The most common request is for an increase in the number of authorized shares of common stock, usually in conjunction with a stock split or dividend. Typically, requests that are not unreasonably dilutive or enhance the rights of common shareholders are supported. In considering authorized share proposals, the typical threshold for approval is 100% over current authorized shares. However, the threshold may be increased if the company offers a specific need or purpose (merger, stock splits, growth purposes, etc.). All proposals are evaluated on a case-by-case basis taking into account the companys specific financial situation.
Increase in Authorized Common Shares
In general, SSGA FM supports share increases for general corporate purposes up to 100% of current authorized stock.
SSGA FM supports increases for specific corporate purposes up to 100% of the specific need plus 50% of current authorized common stock for US firms.
When applying the thresholds, SSGA FM will also consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Increase in Authorized Preferred Shares
SSGA FM votes on a case-by-case basis on proposals to increase the number of preferred shares.
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Generally, SSGA FM will vote for the authorization of preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable.
SSGA FM will support proposals to create declawed blank check preferred stock (stock that cannot be used as a takeover defense). However, SSGA FM will vote against proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose.
Unequal Voting Rights
SSGA FM will not support proposals authorizing the creation of new classes of common stock with superior voting rights and will vote against new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights. In addition, SSGA FM will not support capitalization changes that add blank check classes of stock (i.e. classes of stock with undefined voting rights) or classes that dilute the voting interests of existing shareholders.
However, SSGA FM will support capitalization changes that eliminate other classes of stock and/or unequal voting rights.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation.
Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported.
In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported.
SSGA FM will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock, especially in some non-US markets; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
| At the time of voting, the current market price of the security exceeds the bid price. |
Anti-Takeover Issues
Typically, these are proposals relating to requests by management to amend the certificate of incorporation or bylaws to add or delete a provision that is deemed to have an antitakeover effect. The majority of these proposals deal with managements attempt to add some provision that makes a hostile takeover more difficult or will protect incumbent management in the event of a change in control of the company.
Proposals that reduce shareholders rights or have the effect of entrenching incumbent management will not be supported.
Proposals that enhance the right of shareholders to make their own choices as to the desirability of a merger or other proposal are supported.
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Shareholder Rights Plans
SSGA FM will support mandates requiring shareholder approval of a shareholder rights plans (poison pill) and repeals of various anti-takeover related provisions.
In general, SSGA FM will vote against the adoption or renewal of a US issuers shareholder rights plan (poison pill).
SSGA FM will vote for an amendment to a shareholder rights plan (poison pill) where the terms of the new plans are more favorable to shareholders ability to accept unsolicited offers (i.e. if one of the following conditions are met: (i) minimum trigger, flip-in or flip-over of 20%, (ii) maximum term of three years, (iii) no dead hand, slow hand, no hand or similar feature that limits the ability of a future board to redeem the pill, and (iv) inclusion of a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced).
Special Meetings
SSGA FM will vote for shareholder proposals related to special meetings at companies that do not provide shareholders the right to call for a special meeting in their bylaws if:
| The company also does not allow shareholders to act by written consent; or |
| The company allows shareholders to act by written consent but the ownership threshold for acting by written consent is set above 25% of outstanding shares. |
SSGA FM will vote for shareholder proposals related to special meetings at companies that give shareholders (with a minimum 10% ownership threshold) the right to call for a special meeting in their bylaws if:
| The current ownership threshold to call for a special meeting is above 25% of outstanding shares. |
SSGA FM will vote for management proposals related to special meetings.
Written Consent
SSGA FM will vote for shareholder proposals on written consent at companies if:
| The company does not have provisions in their bylaws giving shareholders the right to call for a special meeting; or |
| The company allows shareholders the right to call for a special meeting but the current ownership threshold to call for a special meeting is above 25% of outstanding shares; and |
| The company has a poor governance profile. |
SSGA FM will vote management proposals on written consent on a case-by-case basis.
Super-Majority
SSGA FM will generally vote against amendments to bylaws requiring super-majority shareholder votes to pass or repeal certain provisions. SSGA FM will vote for the reduction or elimination of super-majority vote requirements, unless management of the issuer was concurrently seeking to or had previously made such a reduction or elimination.
Remuneration Issues
Despite the differences among the types of plans and the awards possible there is a simple underlying philosophy that guides the analysis of all compensation plans; namely, are the terms of the plan designed to provide an incentive for executives and/or employees to align their interests with those of the shareholders and thus work toward enhancing shareholder value. Plans which benefit participants only when the shareholders also benefit are those most likely to be supported.
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Advisory Vote on Executive Compensation and Frequency
SSGA FM believes executive compensation plays a critical role in aligning executives interest with shareholders, attracting, retaining and incentivizing key talent, and ensuring positive correlation between the performance achieved by management and the benefits derived by shareholders. SSGA FM supports management proposals on executive compensation where there is a strong relationship between executive pay and performance over a five-year period. SSGA FM seeks adequate disclosure of different compensation elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long term and short term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and performance. Further, shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance on an annual basis.
Employee Equity Award Plans
SSGA FM considers numerous criteria when examining equity award proposals. Generally, SSGA FM does not vote against plans for lack of performance or vesting criteria. Rather, the main criteria that will result in a vote against an equity award plan are:
Excessive voting power dilution To assess the dilutive effect, we divide the number of shares required to fully fund the proposed plan, the number of authorized but unissued shares and the issued but unexercised shares by the fully diluted share count. SSGA FM reviews that number in light of certain factors, including the industry of the issuer.
Historical option grants Excessive historical option grants over the past three years. Plans that provide for historical grant patterns of greater than eight to twelve percent are generally not supported.
Repricing SSGA FM will vote against any plan where repricing is expressly permitted. If a company has a history of repricing underwater options, the plan will not be supported.
Other criteria include the following:
| Number of participants or eligible employees; |
| The variety of awards possible; and |
| The period of time covered by the plan. |
There are numerous factors that we view as negative, and together, may result in a vote against a proposal:
| Grants to individuals or very small groups of participants; |
| Gun-jumping grants which anticipate shareholder approval of a plan or amendment; |
| The power of the board to exchange underwater options without shareholder approval; this pertains to the ability of a company to reprice options, not the actual act of repricing described above; |
| Below market rate loans to officers to exercise their options; |
| The ability to grant options at less than fair market value; |
| Acceleration of vesting automatically upon a change in control; and |
| Excessive compensation (i.e. compensation plans which are deemed by SSGA FM to be overly dilutive). |
Share Repurchases If a company makes a clear connection between a share repurchase program and its intent to offset dilution created from option plans and the company fully discloses the amount of shares being repurchased, the voting dilution calculation may be adjusted to account for the impact of the buy back.
Companies who do not (i) clearly state the intentions of any proposed share buy-back plan or (ii) disclose a definitive number of the shares to be bought back, (iii) specify the range of premium/discount to market price at which a company can repurchase shares and, (iv) disclose the time frame during which the shares will be bought back, will not have any such repurchase plan factored into the dilution calculation.
162(m) Plan Amendments If a plan would not normally meet the SSGA FM criteria described above, but is primarily being amended to add specific performance criteria to be used with awards designed to qualify for performance-based exception from the tax deductibility limitations of Section 162(m) of the Internal Revenue Code, then SSGA FM will support the proposal to amend the plan.
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Employee Stock Option Plans
SSGA FM generally votes for stock purchase plans with an exercise price of not less than 85% of fair market value. However, SSGA FM takes market practice into consideration.
Compensation Related Items
SSGA FM will generally support the following proposals:
| Expansions to reporting of financial or compensation-related information, within reason; and |
| Proposals requiring the disclosure of executive retirement benefits if the issuer does not have an independent compensation committee. |
SSGA FM will generally vote against the following proposals:
| Retirement bonuses for non-executive directors and auditors. |
Miscellaneous/Routine Items
SSGA FM generally supports the following miscellaneous/routine governance items:
| Reimbursement of all appropriate proxy solicitation expenses associated with the election when voting in conjunction with support of a dissident slate; |
| Opting out of business combination provision; |
| Proposals that remove restrictions on the right of shareholders to act independently of management; |
| Liquidation of the company if the company will file for bankruptcy if the proposal is not approved; |
| Shareholder proposals to put option repricings to a shareholder vote; |
| General updating of or corrective amendments to charter and bylaws not otherwise specifically addressed herein, unless such amendments would reasonably be expected to diminish shareholder rights (e.g. extension of directors term limits, amending shareholder vote requirement to amend the charter documents, insufficient information provided as to the reason behind the amendment); |
| Change in corporation name; |
| Mandates that amendments to bylaws or charters have shareholder approval; |
| Management proposals to change the date, time, and/or location of the annual meeting unless the proposed change is unreasonable; |
| Repeals, prohibitions or adoption of anti-greenmail provisions; |
| Management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced and proposals to implement a reverse stock split to avoid delisting; and |
| Exclusive forum provisions. |
SSGA FM generally does not support the following miscellaneous/ routine governance items:
| Proposals asking companies to adopt full tenure holding periods for their executives; |
| Reincorporation to a location that we believe has more negative attributes than its current location of incorporation; |
| Shareholder proposals to change the date, time, and/or location of the annual meeting unless the current scheduling or location is unreasonable; |
| Proposals to approve other business when it appears as voting item; |
| Proposals giving the board exclusive authority to amend the bylaws; and |
| Proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding unless there are compelling reasons to support the proposal. |
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Environmental and Social Issues
As a fiduciary, we consider the financial and economic implications of environmental and social issues first and foremost. Environmental and social factors not only can have an impact on the reputation of companies; they may also represent significant operational risks and costs to business.
Well-developed environmental and social management systems can also generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. In our view, companies that manage all risks and consider opportunities related to environmental and social issues are able to adapt faster to changes and appear to be better placed to achieve sustainable competitive advantage in the long-term. Similarly, companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change, which could result in anything from regulation and litigation, physical threats (severe weather, climate change), economic trends as well as shifts in consumer behavior.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks on an issuer-by-issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint.
1 | Common for non-US issuers; request from the issuer to discharge from liability the directors or auditors with respect to actions taken by them during the previous year. |
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State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended March 31, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Past performance is no guarantee of future results.
SSGA generally delegates commodities management for separately managed accounts to SSGA FM, a wholly owned subsidiary of State Street and an affiliate of SSGA. SSGA FM is registered as a commodity trading advisor (CTA) with the Commodity Futures Trading Commission and National Futures Association.
This communication is not specifically directed to investors of separately managed accounts (SMA) utilizing futures, options on futures or swaps. SSGA FM CTA clients should contact SSGA Relationship Management for important CTA materials.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3439-INST-5436 0315 Exp. Date: 03/31/2016
March 2015
FM Proxy Voting and Engagement Guidelines
Europe
SSGA Funds Management, Inc.s, (SSGA FM) European Proxy Voting and Engagement Guidelines cover different corporate governance frameworks and practices in European markets excluding the United Kingdom and Ireland. This policy complements and should be read in conjunction with SSGA FMs overarching Global Proxy Voting and Engagement Principles and SSGAs Conflicts of Interest Policy which provide a detailed explanation of SSGA FMs approach to voting and engaging with companies.
SSGA FMs Proxy Voting and Engagement Guidelines in European markets address areas including board structure, audit related issues, capital structure, remuneration, environmental, social and other governance related issues. Principally, we believe the primary responsibility of the board of directors is to preserve and enhance shareholder value and protect shareholder interests. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy, overseeing executive management and monitoring the risks that arise from a companys business, including risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board.
When voting and engaging with companies in European markets, SSGA FM considers market specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. SSGA FM expects companies to observe the relevant laws and regulations of their respective markets as well as country specific best practice guidelines and corporate governance codes. When we feel that a countrys regulatory requirements do not address some of the key philosophical principles that SSGA FM believes are fundamental to its global voting guidelines, we may hold companies in such markets to our global standards.
In its analysis and research in to corporate governance issues in European companies, SSGA FM also considers guidance issued by the European Commission. Companies should provide detailed explanations under diverse comply or explain approaches, especially where they fail to meet requirements and why any such non-compliance would serve shareholders long-term interests.
SSGA FMs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Corporate Governance Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA FM has established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. SSGA FM engages with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and environmental, social and governance (ESG) issues in a manner consistent with maximizing shareholder value.
The team works alongside members of SSGA FMs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in European markets.
SSGA FM is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the UK Stewardship Code. We are committed to sustainable investing and are working to further integrate ESG principles into investment and corporate governance practice, where applicable and consistent with our fiduciary duty.
Directors and Boards
SSGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. SSGA FM votes for the election/reelection of directors on a case-by-case basis after considering various factors including general market practice and availability of information on director skills and expertise. In principle, SSGA FM believes independent directors are crucial to good corporate governance and help management establish sound corporate governance policies and practices.
A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests.
SSGA FMs broad criteria for director independence in European companies include factors such as:
| Participation in related-party transactions and other business relations with the company; |
| Employment history with company; |
| Relations with controlling shareholders; |
| Family ties with any of the companys advisers, directors or senior employees; |
| Employee and government representatives; and |
| Overall average board tenure and individual director tenure at issuers with classified and de-classified boards, respectively. |
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While, overall board independence requirements and board structures differ from market to market, SSGA FM considers voting against directors it deems nonindependent if overall board independence is below one third. SSGA FM also assesses the division of responsibilities between chairman and CEO on a casebycase basis, giving consideration to factors such as overall level of independence on the board and general corporate governance standards in the company. SSGA FM may also not support a proposal to discharge the board, if a company fails to meet adequate governance standards or board level independence.
When considering the election or re-election of a non-executive director, SSGA FM also considers the number of outside board directorships a non-executive can undertake and attendance at board meetings. In addition, SSGA FM may vote against the election of a director whose biographical disclosures are insufficient to assess his or her role on the board and/or independence.
Although we generally are in favour of the annual election of directors, we recognise that director terms vary considerably in different European markets. SSGA FM may vote against article/ bylaw changes that seek to extend director terms. In addition, in certain markets, SSGA FM may vote against directors if their director terms extend beyond four years.
SSGA FM believes companies should have relevant board level committees for audit, remuneration and nomination oversight. The audit committee is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence as well their effectiveness and resource levels. Similarly, executive pay is an important aspect of corporate governance, and it should be determined by the board of directors and SSGA FM expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA FM may vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA FM considers whether board members have adequate skills to provide effective oversight of corporate strategy, operations and risks, including environmental and social issues. Boards should also have a regular evaluation process in place to assess the effectiveness of the board and the skills of board members to address issues such as emerging risks, changes to corporate strategy and diversification of operations and geographic footprint.
In certain European markets it is not uncommon for the election of directors to be presented in a single slate. In these cases, where executives serve on the audit or the remuneration committees, SSGA FM may vote against the entire slate.
SSGA FM may also consider factors such as board performance and directors who appear to be remiss in the performance of their oversight responsibilities. (e.g. fraud, criminal wrongdoing, breach of fiduciary responsibilities)
Indemnification and Limitations on Liability
Generally, SSGA FM supports proposals to limit directors liability and/or expand indemnification and liability protection up to the limit provided by law, if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Audit Related Issues
Companies should have robust internal audit and internal control systems designed for effective management of any potential and emerging risks to company operations and strategy. The responsibility of setting out an internal audit function lies with the audit committee, which should have as members independent non-executive directors.
Appointment of External Auditors
SSGA FM believes that a companys auditor is an essential feature of an effective and transparent system of external supervision and shareholders should be given the opportunity to vote on their appointment or re-appoint at the annual meeting. When appointing external auditors and approving audit fees, SSGA FM will take into consideration the level of detail in company disclosures and will generally not support such resolutions if adequate breakdown is not provided and if non-audit fees are more than 50% of audit fees. In addition, SSGA FM may vote against members of the audit committee if we have concerns with audit related issues or if the level of non-audit fees to audit fees is significant. In certain circumstances, SSGA FM may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA FM generally opposes limiting the legal liability of audit firms as we believe this could create a negative impact on the quality of the audit function.
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Shareholder Rights and Capital Related Issues
In some European markets, differential voting rights continue to exist. SSGA FM supports the one share one vote policy and favours a share structure where all shares have equal voting rights. SSGA FM believes pre-emption rights should be introduced for shareholders in order to provide adequate protection from being overly diluted from the issuance of new shares or convertible securities to third parties or a small number of select shareholders.
Unequal Voting Rights
SSGA FM generally opposes proposals authorizing the creation of new classes of common stock with superior voting rights and will generally oppose new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights. In addition, SSGA FM will not support capitalization changes that add classes of stock with undefined voting rights or classes that may dilute the voting interests of existing shareholders. SSGA FM supports proposals to abolish voting caps and capitalization changes that eliminate other classes of stock and/or unequal voting rights.
Increase in Authorized Capital
The ability raise capital is critical for companies to carry out strategy, grow, and achieve returns above their cost of capital. The approval of capital raising activities is fundamental to shareholders ability to monitor the amounts of proceeds and to ensure capital is deployed efficiently. SSGA FM supports capital increases that have sound business reasons and are not excessive relative to a companys existing capital base.
Pre-emption rights are a fundamental right for shareholders to protect their investment in a company. Where companies seek to issue new shares whilst dis-applying pre-emption rights, SSGA FM may vote against if such authorities are greater than 20% of the issued share capital. SSGA FM may also vote against resolutions seeking authority to issue capital with pre-emption rights if the aggregate amount allowed seems excessive and is not justified by the board. Generally, we are against capital issuance proposals greater than 100% of the issued share capital when the proceeds are not intended for a specific purpose.
Share Repurchase Programs
SSGA FM generally supports a proposal to repurchase shares, other than if the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, specify the range of premium/discount to market price at which a company can repurchase shares, and the time frame for the repurchase. SSGA FM may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA FM generally supports dividend payouts that constitute 30% or more of net income. SSGA FM may vote against the dividend payouts if the dividend payout ratio has been consistently below 30% without adequate explanation; or, the payout is excessive given the companys financial position. Particular attention will be paid where the payment may damage the companys long-term financial health.
Related Party Transactions
Certain companies in European markets have a controlled ownership structure and have complex cross-shareholdings between subsidiaries and parent companies (related companies). Such structures may result in the prevalence of related-party transactions between the company and its various stakeholders such as directors and management, subsidiaries and shareholders. In markets where shareholders are required to approve such transactions, SSGA FM expects companies to provide details of the transaction, such as the nature, value and purpose of such a transaction. It also encourages independent directors to ratify such transactions. Further, SSGA FM encourages companies to describe the level of independent board oversight and the approval process, including details of any independent valuations provided by financial advisors on related-party transactions.
4
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported.
SSGA FM will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
| At the time of voting, the current market price of the security exceeds the bid price |
Anti-Takeover Measures
European markets have diverse regulations concerning the use of share issuances as takeover defenses with legal restrictions lacking in some markets. SSGA FM supports a one-share, one-vote policy, for example, given that dual-class capital structures entrench certain shareholders and management, insulating them from possible takeovers. SSGA FM opposes unlimited share issuance authorizations as they may be used as antitakeover devices, and they have the potential for substantial voting and earnings dilution. SSGA FM also monitors the duration of authorities to issue shares and whether there are restrictions and caps on multiple issuance authorities during the specified time periods. SSGA FM opposes antitakeover defenses such as authorities for the board, when subject to a hostile takeover, to issue warrants convertible into shares to existing shareholders.
Remuneration
Executive Pay
Despite the differences among the types of plans and awards possible, there is a simple underlying philosophy that guides SSGA FMs analysis of executive paythere should be a direct relationship between remuneration and company performance over the long-term.
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, SSGA FM considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and performance. SSGA FM may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA FM may also vote against the re-election of members of the remuneration committee if we have serious concerns over remuneration practices and the company has not been responsive to shareholder pressure to review its approach.
Equity Incentives Plans
SSGA FM may not support proposals on equity-based incentive plans where insufficient information is provided on matters such as grant limits, performance metrics, performance and vesting periods and overall dilution. SSGA FM does not generally support options under such plans being issued at a discount to market price or plans that allow for re-testing of performance metrics.
5
Non-Executive Director Pay
In European markets, authorities seeking shareholder approval for non-executive directors fees are generally not controversial. SSGA FM generally supports resolutions regarding directors fees unless disclosure is poor and we are unable to determine whether they are excessive relative to fees paid by other companies in the same country or industry. SSGA FM will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA FM believes that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. SSGA FM allows boards discretion over how they provide oversight in this area. However, SSGA FM expects companies to disclose how the board provides oversight on its risk management system and to identify key risks facing the company. Boards should also review existing and emerging risks as they can change with a changing political and economic landscape, or as companies diversify or expand their operations into new areas.
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA FM supports environmental and social related items that we believe would protect or enhance shareholder value. Environmental and social factors not only can have an impact on the reputation of companies; they may also represent significant operational risks and costs to business. Well-developed environmental and social management systems can also generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. In our view, companies that manage all risks and consider opportunities related to environmental and social issues are able to adapt faster to changes and appear to be better placed to achieve sustainable competitive advantage in the long-term. Similarly, Companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change, which could result in anything from regulation and litigation, physical threats (severe weather, climate change), economic trends as well as shifts in consumer behavior.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks and shareholder proposals relating to them on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint. SSGA FM may also take action against the re-election of members of the board if we have serious concerns over ESG practices and the company has not been responsive to shareholder pressure.
6
ssga.com
State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 28, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3449-INST-5416 0315 Exp. Date: 03/31/2016
March 2015
FM Proxy Voting and Engagement Guidelines United Kingdom
SSGA Funds Management, Inc.s, (SSGA FM), UK Proxy Voting and Engagement Guidelines outline our expectations of companies listed on stock exchanges in the United Kingdom and Ireland. This policy complements and should be read in conjunction with SSGA FMs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGA FMs approach to voting and engaging with companies and SSGAs Conflicts of Interest Policy.
SSGA FMs UK Proxy Voting and Engagement Guidelines address areas including board structure, audit related issues, capital structure, remuneration, environmental, social and other governance related issues. Principally, we believe the primary responsibility of the board of directors is to preserve and enhance shareholder value and protect shareholder interests. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy, overseeing executive management to monitoring the risks that arise from a companys business, including risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board.
When voting and engaging with companies in global markets, SSGA FM considers market specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. SSGA FM expects companies to observe the relevant laws and regulations of their respective markets as well as country specific best practice guidelines and corporate governance codes. When we feel that a countrys regulatory requirements do not address some of the key philosophical principles that SSGA FM believes are fundamental to its global voting guidelines, we may hold companies in such markets to our global standards.
In its analysis and research into corporate governance issues in the UK and Ireland, SSGA FM expects all companies, regardless of domicile, that obtain a primary listing on the London Stock Exchange or the Irish Stock Exchange to comply with the UK Corporate Governance Code. Companies should provide detailed explanations under the Codes comply or explain approach, especially where they fail to meet requirements and why any such non-compliance would serve shareholders long-term interests.
SSGA FMs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Corporate Governance Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA FM has established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. SSGA FM engages with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and environmental, social and governance (ESG) issues in a manner consistent with maximizing shareholder value.
The team works alongside members of SSGA FMs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in the UK and European markets.
SSGA FM is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the UK Stewardship Code. We are committed to sustainable investing and are working to further integrate ESG principles into investment and corporate governance practice, where applicable and consistent with our fiduciary duty.
Directors and Boards
SSGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering various factors including general market practice and availability of information on director skills and expertise. In principle, SSGA FM believes independent directors are crucial to good corporate governance and help management establish sound corporate governance policies and practices.
A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests.
SSGA FMs broad criteria for director independence in UK companies include factors such as:
| Participation in related-party transactions and other business relations with the company; |
| Employment history with company; |
| Excessive tenure and a preponderance of long-tenured directors: |
| Relations with controlling shareholders; and |
| Family ties with any of the companys advisers, directors or senior employees. |
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When considering the election or re-election of a director, SSGA FM also considers the number of outside board directorships a non-executive and an executive may undertake as well as attendance at board meetings. In addition, SSGA FM monitors other factors that may influence the independence of a non-executive director, such as performance related pay, cross-directorships, significant shareholdings and tenure. SSGA FM supports the annual election of directors.
While SSGA FM is generally supportive of having the roles of chairman and CEO separated in the UK market, SSGA FM assesses the division of responsibilities between chairman and CEO on a case-by-case basis, giving consideration to factors such as the companys specific circumstances, overall level of independence on the board and general corporate governance standards in the company. Similarly, SSGA FM will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA FM may also consider factors such as board performance and directors who appear to be remiss in the performance of their oversight responsibilities when considering their suitability for reappointment. (e.g. fraud, criminal wrongdoing, breach of fiduciary responsibilities).
SSGA FM believes companies should have committees for audit, remuneration and nomination oversight. The audit committee is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence as well their effectiveness and resource levels. Similarly, executive pay is an important aspect of corporate governance, and it should be determined by the board of directors and SSGA FM expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA FM will vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA FM considers whether board members have adequate skills to provide effective oversight of corporate strategy, operations and risks, including environmental and social issues. Boards should also have a regular evaluation process in place to assess the effectiveness of the board and the skills of board members to address issues such as emerging risks, changes to corporate strategy and diversification of operations and geographic footprint. The nomination committee is responsible for evaluating and keeping under review the balance of skills, knowledge and experience of the board and ensuring that adequate succession plans are in place for directors and the CEO. SSGA FM may vote against the re-election of members of the nomination committee if, over time, the board has failed to address concerns over board structure or succession.
Indemnification and Limitations on Liability
Generally, SSGA FM supports proposals to limit directors liability and/or expand indemnification and liability protection up to the limit provided by law, if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in.
Audit Related Issues
Companies should have robust internal audit and internal control systems designed for effective management of any potential and emerging risks to company operations and strategy. The responsibility of setting out an internal audit function lies with the audit committee, which should have as members independent non-executive directors.
Appointment of External Auditors
SSGA FM believes that a companys auditor is an essential feature of an effective and transparent system of external supervision and shareholders should be given the opportunity to vote on their appointment or re-appoint at the annual meeting. When appointing external auditors and approving audit fees, SSGA FM will take into consideration the level of detail in company disclosures and will generally not support such resolutions if an adequate breakdown is not provided and if non-audit fees are more than 50% of audit fees. In addition, SSGA FM may vote against members of the audit committee if we have concerns with audit related issues or if the level of non-audit fees to audit fees is significant. In certain circumstances, SSGA FM may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA FM generally opposes limiting the legal liability of audit firms as we believe this could create a negative impact on the quality of the audit function.
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Shareholder Rights and Capital Related Issues
Share Issuances
The ability to raise capital is critical for companies to carry out strategy, grow, and achieve returns above their cost of capital. The approval of capital raising activities is fundamental to shareholders ability to monitor the amounts of proceeds and to ensure capital is deployed efficiently. SSGA FM supports capital increases that have sound business reasons and are not excessive relative to a companys existing capital base.
Pre-emption rights are a fundamental right for shareholders to protect their investment in a company. Where companies seeks to issue new shares whilst dis-applying pre-emption rights, SSGA FM may vote against if such authorities are greater than 20% of the issued share capital. SSGA FM may also vote against resolutions seeking authority to issue capital with pre-emption rights if the aggregate amount allowed seems excessive and is not justified by the board. Generally, we are against capital issuance proposals greater than 100% of the issued share capital when the proceeds are not intended for a specific purpose.
Share Repurchase Programs
SSGA FM generally supports a proposal to repurchase shares, other than if the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, specify the range of premium/discount to market price at which a company can repurchase shares, and the time frame for the repurchase. SSGA FM may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA FM generally supports dividend payouts that constitute 30% or more of net income. SSGA FM may vote against the dividend payouts if the dividend payout ratio has been consistently below 30% without adequate explanation; or, the payout is excessive given the companys financial position. Particular attention will be paid where the payment may damage the companys long term financial health.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported.
SSGA FM will generally support transactions that maximize share-holder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
| At the time of voting, the current market price of the security exceeds the bid price. |
Anti-Takeover Measures
SSGA FM opposes antitakeover defenses such as authorities for the board when subject to a hostile takeover to issue warrants convertible into shares to existing shareholders.
4
Remuneration
Executive Pay
Despite the differences among the types of plans and awards possible, there is a simple underlying philosophy that guides SSGA FMs analysis of executive paythere should be a direct relationship between remuneration and company performance over the long-term.
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration policies and reports, SSGA FM considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and performance. SSGA FM may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA FM may also vote against the re-election of members of the remuneration committee if we have serious concerns over remuneration practices and the company has not been responsive to shareholder pressure.
Equity Incentives Plans
SSGA FM may not support proposals on equity-based incentive plans where insufficient information is provided on matters such as grant limits, performance metrics, performance and vesting periods and overall dilution. SSGA FM does not generally support options under such plans being issued at a discount to market price or plans that allow for re-testing of performance metrics.
Non-Executive Director Pay
Authorities seeking shareholder approval for non-executive directors fees are generally not controversial. SSGA FM generally supports resolutions regarding directors fees unless disclosure is poor and we are unable to determine whether they are excessive relative to fees paid by other companies in the same country or industry. SSGA FM will evaluate on a company- by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA FM believes that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. SSGA FM allows boards discretion over how they provide oversight in this area. However, SSGA FM expects companies to disclose how the board provides oversight on its risk management system and to identify key risks facing the company. Boards should also review existing and emerging risks as they can change with a changing political and economic landscape, or as companies diversify or expand their operations into new areas.
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA FM supports environmental and social related items that we believe would protect or enhance shareholder value. Environmental and social factors not only can have an impact on the reputation of companies; they may also represent significant operational risks and costs to business. Well-developed environmental and social management systems can also generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. In our view, companies that manage all risks and consider opportunities related to environmental and social issues are able to adapt faster to changes and appear to be better placed to achieve sustainable competitive advantage in the long-term. Similarly, companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change, which could result in anything from regulation and litigation, physical threats (severe weather, climate change), economic trends as well as shifts in consumer behavior.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks and shareholder proposals relating to them on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint. SSGA FM may also take action against the re-election of members of the board if we have serious concerns over ESG practices and the company has not been responsive to shareholder pressure.
5
ssga.com
State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 19, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3445-INST-5412 0315 Exp. Date: 03/31/2016
March 2015
FM Proxy Voting and Engagement Guidelines
Emerging Markets
SSGA Funds Management, Inc.s (SSGA FM) Emerging Market Proxy Voting and Engagement Guidelines cover different corporate governance frameworks and practices in emerging markets. This policy complements and should be read in conjunction with SSGA FMs overarching Global Proxy Voting and Engagement Principles which provides a detailed explanation of SSGA FMs approach to voting and engaging with companies, and SSGAs Conflicts of Interest Policy.
At SSGA FM, we recognize that countries in emerging markets are disparate in their corporate governance frameworks and practices. Concurrent with developing a company specific voting and engagement program, SSGA FM also evaluates the various factors that play into the corporate governance framework of a country. These factors include: (i) the macroeconomic conditions and broader political system in a country; (ii) quality of regulatory oversight, enforcement of property and shareholder rights; and (iii) the independence of judiciaryto name a few. While emerging market countries tend to pose broad common governance issues across all markets, such as concentrated ownership, poor disclosure of financial and related-party transactions, and weak enforcement of rules and regulation, SSGA FMs emerging market proxy voting policy is designed to identify and address specific governance concerns in each market.
SSGA FMs Proxy Voting and Engagement Philosophy in Emerging Markets
SSGA FMs approach to proxy voting and issuer engagement in emerging markets is designed to increase the value of our investments through the mitigation of governance risks. Since the overall quality of the corporate governance framework in an emerging market country drives the level of governance risks investors assign to a country, improving the macro governance framework in a country may help reduce governance risks, in turn, increasing the overall value of SSGA FMs holdings over time. Therefore, in order to improve the overall governance framework and practices in a country, members of our proxy voting and engagement team endeavor to visit emerging market countries and meet with representatives from regulatory agencies and stock markets to highlight potential concerns with the macro governance framework of a country. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in emerging markets. To help mitigate company specific risk, the team works alongside members of the active fundamental and emerging market teams to engage with emerging market companies on governance issues and address any specific concerns or to get more information regarding shareholder items that are to be voted on at upcoming shareholder meetings. This integrated approach to engagement drives SSGA FMs proxy voting and engagement philosophy in emerging markets.
SSGA FMs proxy voting guidelines in emerging markets addresses six broad areas:
| Directors and Boards; |
| Accounting and Audit Related Issues; |
| Shareholder Rights and Capital Related Issues; |
| Remuneration; |
| Environmental and Social Issues; and |
| General/Routine Issues. |
Directors and Boards
SGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. However, several factors such as low overall independence level requirements by market regulators, poor biographical disclosure of director profiles, prevalence of related-party transactions and the general resistance from controlling shareholders to increase board independence renders the election of directors as one of the most important fiduciary duties SSGA FM performs in emerging market companies.
SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering various factors including general market practice and availability of information on director skills and expertise.
SSGA FMs broad criteria for director independence in emerging market companies include factors such as:
| Participation in related-party transactions; |
| Employment history with company; |
| Relations with controlling shareholders and other |
| employees; and |
| Attendance levels. |
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Audit Related Issues
The disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. As a result, board oversight of internal controls and the independence of the audit process are essential if investors are to rely on financial statements. SSGA FM believes that audit committees provide the necessary oversight on the selection and appointment of auditors, a companys internal controls and accounting policies, and the overall audit process. In emerging markets, SSGA FM encourages boards to appoint an audit committee composed of a majority of independent auditors.
Appointment of External Auditors
SSGA FM believes that a companys auditor is an essential feature of an effective and transparent system of external supervision and shareholders should be given the opportunity to vote on their appointment or re-appoint at the annual meeting. SSGA FM believes that it is imperative for audit committees to select outside auditors who are independent from management.
Shareholder Rights and Capital Related Issues
SSGA FM believes that changes to a companys capital structure such as changes in authorized share capital, share repurchase and debt issuances are critical decisions made by the board. SSGA FM believes the company should have a well explained business rationale that is consistent with corporate strategy and should not overly dilute its shareholders.
Related Party Transactions
Most companies in emerging markets have a controlled ownership structure that often include complex cross-shareholding between subsidiaries and parent companies (related companies). As a result, there is a high prevalence of related-party transactions between the company and its various stakeholders such as directors and management. In addition, inter-group loan and loan guarantees provided to related companies are some of the other related-party transactions that increase the risk profile of companies. In markets where shareholders are required to approve such transactions, SSGA FM expects companies to provide details of the transaction, such as the nature, value and purpose of such a transaction. It also encourages independent directors to ratify such transactions. Further, SSGA FM encourages companies to describe the level of independent board oversight and the approval process, including details of any independent valuations provided by financial advisors on related-party transactions.
Share Repurchase Programs
With regard to share repurchase programs, SSGA FM expects companies to clearly state the business purpose for the program, a definitive number of shares to be repurchase.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported.
SSGA FM evaluates mergers and structural reorganizations on a case-by-case basis. SSGA FM will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
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| At the time of voting, the current market price of the security exceeds the bid price. |
SSGA will actively seek direct dialogue with the board and management of companies we have identified through our screening processes. Such engagements may lead to further monitoring to ensure the company improves its governance or sustainability practices. In these cases, the engagement process represents the most meaningful opportunity for SSGA to protect long-term shareholder value from excessive risk due to poor governance and sustainability practices.
Remuneration
SSGA FM considers it to be the boards responsibility to set appropriate level of executive compensation. Despite the differences among the types of plans and the awards possible, there is a simple underlying philosophy that guides SSGA FMs analysis of executive compensation; there should be a direct relationship between executive compensation and company performance over the long term. In emerging markets we encourage companies to disclose information on senior executive remuneration.
With regard to director remuneration, SSGA FM supports director pay provided the amounts are not excessive relative to other issuers in the market or industry and are not overly dilutive to existing shareholders.
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA FM supports environmental and social related items that we believe would protect or enhance shareholder value. Environmental and social factors can not only have an impact on the reputation of companies; they may also represent significant operational risks and costs to business. Well-developed environmental and social management systems generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. Companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change. In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint. In emerging markets, shareholders seldom vote on environmental and social issues. Therefore, SSGA FM addresses a companys approach to identifying and managing environmental and social risks stemming for various aspects of its operations in its one-on-one engagement with companies.
General/Routine Issues
Some of the other issues that are routinely voted on in emerging markets include approving the allocation of income and accepting financial statements and statutory reports. For these voting items, SSGA FMs policies consider several factors including historical dividend payouts, pending litigation, governmental investigation, charges of fraud or other indication of significant concerns.
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The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 28, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3510-INST-5434 0315 Exp. Date: 03/31/2016
March 2015
FM Proxy Voting and Engagement Guidelines
Japan
SSGA Funds Management, Inc.s, (SSGA FM) Japan Proxy Voting and Engagement Guidelines complement and should be read in conjunction with SSGA FMs overarching Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGA FMs approach to voting and engaging with companies, and SSGAs Conflicts of Interest Policy.
SSGA FMs Proxy Voting and Engagement Guidelines in Japan address areas including; board structure, audit related issues, capital structure, remuneration, environmental, social and other governance related issues. Principally, we believe the primary responsibility of the board of directors is to preserve and enhance shareholder value and protect shareholder interests. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy, overseeing executive management to monitoring the risks that arise from a companys business, including risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board.
When voting and engaging with companies in Japan, SSGA FM takes into consideration the unique aspects of Japanese corporate governance structures. We recognize that under Japanese corporate law, companies may choose between two structures of corporate governance: the statutory auditor system or the committee structure. Most Japanese boards predominantly consist of executives and non-independent outsiders affiliated through commercial relationships or cross-shareholdings. Nonetheless, when evaluating companies, SSGA FM expects Japanese companies to address conflicts of interest, risk management and demonstrate an effective process for monitoring management. In its analysis and research into corporate governance issues in Japanese companies, SSGA FM also considers guidance issued by the Corporate Law Subcommittee of the Legislative Council within the Ministry of Justice as well as private study groups.
SSGA FMs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Corporate Governance Team consists of investment professionals with expertise in corporate governance and company law, remuneration, and environmental and social issues. SSGA FM has established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. SSGA FM engages with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and environmental, social and governance (ESG) issues in a manner consistent with maximizing shareholder value.
The team works alongside members of SSGA FMs active investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in Japan.
SSGA FM is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with UK Stewardship Code. We are committed to sustainable investing and are working to further integrate ESG principles into investment and corporate governance practice, where applicable and consistent with our fiduciary duty.
Directors and Boards
SSGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering various factors including general market practice.
Japanese companies have the option of having a traditional board of directors with statutory auditors, or a board with a committee structure. Most Japanese issuers prefer the traditional statutory auditor structure. Statutory auditors act in a quasi-compliance role as they are not involved in strategic decision-making nor are they part of the formal management decision process. Statutory auditors attend board meetings but do not have voting rights at the board; however, they have the right to seek an injunction and conduct broad investigations of unlawful behavior in the companys operations.
SSGA FM will support the election of statutory auditors, unless the outside statutory auditor nominee is regarded as non-independent based on SSGA FM criteria, the outside statutory auditor has attended less than 75 percent of meetings of the board of directors or board of statutory auditors during the year under review, or the statutory auditor has been remiss in the performance of their oversight responsibilities (fraud, criminal wrong doing, breach of fiduciary responsibilities).
For companies with a statutory auditor structure there is no legal requirement that boards have outside directors, however, SSGA FM believes there should be a transparent process of independent and external monitoring of management on behalf of shareholders.
| SSGA FM believes that non-controlled Japanese companies should appoint at least one outside director, otherwise, SSGA FM will oppose the top executive who is responsible for the director nomination process; and |
| For controlled companies with a statutory auditor structure, SSGA FM will oppose the top executive, if the board does not have at least two outside directors. |
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For companies with a committee structure, SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering general market practice, as well as the independence of the nominee. SSGA FM also takes into consideration the overall independence level of the committees. In determining director independence, SSGA FM considers the following factors:
| Participation in related-party transactions and other business relations with the company; |
| Past employment with the company; |
| Provides professional services to the company; and |
| Family ties with the company. |
Regardless of board structure, SSGA FM may oppose the election of a director for the following reasons:
| Failure to attend board meetings; or |
| In instances of egregious actions related to a directors service on the board. |
Indemnification and Limitations on Liability
Generally, SSGA FM supports proposals to limit directors and statutory auditors liability and/or expand indemnification and liability protection up to the limit provided by law, if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. SSGA FM believes limitations and indemnification are necessary to attract and retain qualified directors.
Audit Related Items
SSGA FM believes that a companys auditor is an essential feature of an effective and transparent system of external supervision and shareholders should have the opportunity to vote on their appointment at the annual meeting.
Ratifying External Auditors
SSGA FM will generally support the appointment of external auditors unless the external auditor is perceived as being non-independent and there are concerns about the accounts presented and the audit procedures followed.
Limit Legal Liability of External Auditors
SSGA FM generally opposes limiting the legal liability of audit firms as we believe this could create a negative impact on the quality of the audit function.
Capital Structure, Reorganization and Mergers
SSGA FM supports the one share one vote policy and favors a share structure where all shares have equal voting rights. SSGA FM supports proposals to abolish voting caps or multiple voting rights and will oppose measures to introduce these types of restrictions on shareholder rights. SSGA FM believes pre-emption rights should be introduced for shareholders in order to provide adequate protection from being overly diluted from the issuance of new shares or convertible securities to third parties or a small number of select shareholders.
Unequal Voting Rights
SSGA FM generally opposes proposals authorizing the creation of new classes of common stock with superior voting rights and will generally oppose new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights. In addition, SSGA FM will not support capitalization changes that add classes of stock with undefined voting rights or classes that may dilute the voting interests of existing shareholders.
However, SSGA FM will support capitalization changes that eliminate other classes of stock and/or unequal voting rights.
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Increase in Authorized Capital
SSGA FM generally supports increases in authorized capital where the company provides an adequate explanation for the use of shares. In the absence of an adequate explanation, SSGA FM may oppose the request if the increase in authorized capital exceeds 100 percent of the currently authorized capital. Where share issuance requests exceed our standard threshold, SSGA FM will consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Dividends
SSGA FM generally supports dividend payouts that constitute 30% or more of net income. SSGA FM may vote against the dividend payouts if the dividend payout ratio has been consistently below 30% without adequate explanation; or, the payout is excessive given the companys financial position. Particular attention will be paid where the payment may damage the companys long term financial health.
Share Repurchase Programs
Companies are allowed under Japan Corporate Law to amend their articles to authorize the repurchase of shares at the boards discretion. SSGA FM will oppose an amendment to articles allowing the repurchase of shares at the boards discretion. SSGA FM believes the company should seek shareholder approval for a share repurchase program at each years AGM, providing shareholders the right to evaluate the purpose of the repurchase.
SSGA FM generally supports a proposal to repurchase shares, other than if the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, and the time frame for the repurchase. SSGA FM may vote against share repurchase requests that allow share repurchases during a takeover period.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported.
SSGA FM evaluates mergers and structural reorganizations on a case-by-case basis. SSGA FM will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
| At the time of voting, the current market price of the security exceeds the bid price. |
Anti-Takeover Measures
In general, SSGA FM believes that adoption of poison pills that have been structured to protect management and to prevent takeover bids from succeeding is not in shareholders interest. A shareholder rights plan may lead to management entrenchment and discourage legitimate tender offers and acquisitions. Even if the premium paid to companies with a shareholder rights plan is higher than that offered to unprotected firms, a companys chances of receiving a takeover offer in the first place may be reduced by the presence of a shareholder rights plan.
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Proposals that reduce shareholders rights or have the effect of entrenching incumbent management will not be supported.
Proposals that enhance the right of shareholders to make their own choices as to the desirability of a merger or other proposal are supported.
Shareholder Rights Plans
In evaluating poison pills, the following conditions must be met before SSGA FM will recommend a vote in favor.
SSGA FM will support the adoption or renewal of a Japanese issuers shareholder rights plans (poison pill) if the following conditions are met: (i) minimum trigger, flip-in or flip-over of 20%, (ii) maximum term of three years, (iii) no dead hand, slow hand, no hand or similar feature that limits the ability of a future board to redeem the pill, and (iv) inclusion of a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced.
SSGA FM will vote for an amendment to a shareholder rights plan (poison pill) where the terms of the new plans are more favorable to shareholders ability to accept unsolicited offers (i.e. if one of the following conditions are met: (i) minimum trigger, flip-in or flip-over of 20%, (ii) maximum term of three years, (iii) no dead hand, slow hand, no hand or similar feature that limits the ability of a future board to redeem the pill, or (iv) inclusion of a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced).
Compensation
In Japan, excessive compensation is rarely an issue. Rather, the problem is the lack of connection between pay and performance. Fixed salaries and cash retirement bonuses tend to comprise a significant portion of the compensation structure while performance-based pay is generally a small portion of the total pay. SSGA FM, where possible, seeks to encourage the use of performance based compensation in Japan as an incentive for executives and as a way to align interests with shareholders.
Approve Adjustment to Aggregate Compensation Ceiling for Directors
Remuneration for directors is generally reasonable. Typically, each company sets the director compensation parameters as an aggregate thereby limiting the total pay to all directors. When requesting a change, a company must disclose the last time the ceiling was adjusted and management provides the rationale for the ceiling increase. SSGA FM will generally support proposed increases to the ceiling if the company discloses the rationale for the increase. SSGA FM may oppose proposals to increase the ceiling if there has been corporate malfeasance or sustained poor performance.
Approve Annual Bonuses for Directors/Statutory Auditors
In Japan, since there are no legal requirements that mandate companies to seek shareholder approval before awarding a bonus, SSGA FM believes that existing shareholder approval of the bonus should be considered best practice. As a result, SSGA FM supports management proposals on executive compensation where there is a strong relationship between executive pay and performance over a five-year period.
Approve Retirement Bonuses for Directors/ Statutory Auditors
Retirement bonuses make up a sizeable portion of directors and auditors lifetime compensation and are based on board tenure. While many companies in Japan have abolished this practice, there remain many proposals seeking shareholder approval for the total amounts paid to directors and statutory auditors as a whole. In general, SSGA FM supports these payments unless the recipient is an outsider or in instances where the amount is not disclosed.
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Approve Stock Plan
Most option plans in Japan are conservative, particularly at large companies. Japan corporate law requires companies to disclose the monetary value of the stock options for directors and/or statutory auditors. Some companies do not disclose the maximum number of options that can be issued per year and shareholders are unable to evaluate the dilution impact. In this case, SSGA FM cannot calculate the dilution level and, therefore, SSGA FM may oppose such plans for poor disclosure. SSGA FM also opposes plans that allow for the repricing of the exercise price.
Deep Discount Options
As Japanese companies move away from the retirement bonus system, deep discount options plans have become more popular. Typically, the exercise price is set at JPY 1 per share. SSGA FM evaluates deep discount options using the same criteria used to evaluate stock options as well as considering the vesting period.
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA FM supports environmental and social related items that we believe would protect or enhance shareholder value. Environmental and social factors can not only have an impact on the reputation of companies; they may also represent significant operational risks and costs to business. Well-developed environmental and social management systems generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. Companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint.
Miscellaneous/Routine Items
Expansion of Business Activities
Japanese companies articles of incorporation strictly define the types of businesses in which a company is permitted to engage. In general, SSGA FM views proposals to expand and diversify the companys business activities as routine and non-contentious. SSGA FM will monitor instances where there has been an inappropriate acquisition and diversification away from the companys main area of competence, which resulted in a decrease of shareholder value.
More Information
Any client who wishes to receive information on how its proxies were voted should contact its SSGA FM relationship manager.
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State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 28, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3454-INST-5418 0315 Exp. Date: 03/31/2016
March 2015
FM Proxy Voting and Engagement Guidelines
Australia
SSGA Funds Management, Inc.s (SSGA FM) Australia Proxy Voting and Engagement Guidelines outline our expectations of companies listed on stock exchanges in Australia. This policy complements and should be read in conjunction with SSGA FMs Global Proxy Voting and Engagement Principles which provide a detailed explanation of SSGA FMs approach to voting and engaging with companies, and SSGAs Conflict of Interest Policy.
SSGA FMs Australia Proxy Voting and Engagement Guidelines address areas including board structure, audit related issues, capital structure, remuneration, environmental, social and other governance related issues. Principally, we believe the primary responsibility of the board of directors is to preserve and enhance shareholder value and protect shareholder interests. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy, overseeing executive management to monitoring the risks that arise from a companys business, including risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board.
When voting and engaging with companies in global markets, SSGA FM considers market specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. SSGA FM expects companies to observe the relevant laws and regulations of their respective markets as well as country specific best practice guidelines and corporate governance codes. When we feel that a countrys regulatory requirements do not address some of the key philosophical principles that SSGA FM believes are fundamental to its global voting guidelines, we may hold companies in such markets to our global standards.
In its analysis and research in to corporate governance issues in Australia, SSGA FM expects all companies at a minimum to comply with the ASX Corporate Governance Principles. Companies should provide detailed explanations under the Principles comply or explain approach, especially where they fail to meet requirements and why any such non-compliance would serve shareholders long-term interests. On some governance matters, such as composition of audit committees, we hold Australian companies to our global standards requiring all directors on the committee to be independent of management.
SSGA FMs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Corporate Governance Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA FM has established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. SSGA FM engages with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and environmental, social and governance (ESG) issues in a manner consistent with maximizing shareholder value.
The team works alongside members of SSGA FMs active fundamental and the Asia-Pacific (APAC) investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA FM is also a member of various investor associations that seek to address broader corporate governance related policy issues in the region.
SSGA FM is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the UK Stewardship Code. We are committed to sustainable investing and are working to further integrate ESG principles into investment and corporate governance practice, where applicable and consistent with our fiduciary duty.
Directors and Boards
SSGA FM believes that a well constituted board of directors, with a good balance of skills, expertise and independence, provides the foundations for a well governed company. SSGA FM votes for the election/re-election of directors on a case-by-case basis after considering various factors including general market practice and availability of information on director skills and expertise. In principle, SSGA FM believes independent directors are crucial to good corporate governance and help management establish sound ESG policies and practices. A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests.
SSGA FMs broad criteria for director independence in Australian companies include factors such as:
| Participation in related-party transactions and other business relations with the company; |
| Employment history with company; |
| Relations with controlling shareholders; and |
| Family ties with any of the companys advisers, directors or senior employees. |
When considering the election or re-election of a director, SSGA FM also considers the number of outside board director-ships a non-executive and an executive may undertake as well as attendance at board meetings. In addition, SSGA FM monitors other factors that may influence the independence of a non-executive director, such as performance related pay, cross-directorships, significant shareholdings and tenure. SSGA FM supports the annual election of directors and encourages Australian companies to adopt this practice.
While SSGA FM is generally supportive of having the roles of chairman and CEO separated in the Australia market, SSGA FM assesses the division of responsibilities between chairman and CEO on a case-by-case basis, giving consideration to factors such as the
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companys specific circumstances, overall level of independence on the board and general corporate governance standards in the company. Similarly, SSGA FM will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA FM may also consider factors such as board performance and directors who appear to be remiss in the performance of their oversight responsibilities when considering their suitability for reappointment. (e.g. fraud, criminal wrongdoing, breach of fiduciary responsibilities)
SSGA FM believes companies should have committees for audit, remuneration and nomination oversight. The audit committee is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence as well their effectiveness and resource levels. Australian Corporate Governance Principles requires ASX listed companies to have an audit committee of at least three members all of whom are non-executive directors and a majority of whom are independent directors. It also requires that the committee be chaired by an independent director who is not the chair of the board. SSGA FM holds Australian companies to its global standards for developed financial markets, by requiring that all members of the audit committee be independent directors.
In its analysis of boards, SSGA FM considers whether board members have adequate skills to provide effective oversight of corporate strategy, operations and risks, including environmental and social issues. Boards should also have a regular evaluation process in place to assess the effectiveness of the board and the skills of board members to address issues such as emerging risks, changes to corporate strategy and diversification of operations and geographic footprint. The nomination committee is responsible for evaluating and keeping under review the balance of skills, knowledge and experience of the board and ensuring that adequate succession plans are in place for directors and the CEO. SSGA FM may vote against the re-election of members of the nomination committee if, over time, the board has failed to address concerns over board structure or succession.
Executive pay is another important aspect of corporate governance. SSGA FM believes that executive pay should be determined by the board of directors and SSGA FM expects companies to have in place remuneration committees to provide independent oversight over executive pay. Australian Corporate Governance Principles requires ASX listed companies to have a remuneration committee of at least three members all of whom are non-executive directors and a majority of whom are independent directors. Since Australia has a non-binding vote on pay with a two-strike rule requiring a board spill in the event of a second strike, SSGA FM believes that the vote provides investors a mechanism to address concerns it may have on the quality of oversight provided by the board on remuneration issues. Accordingly SSGA FM voting guidelines accommodate local market practice.
Indemnification and limitations on liability
Generally, SSGA FM supports proposals to limit directors liability and/or expand indemnification and liability protection up to the limit provided by law, if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Audit Related Issues
Companies should have robust internal audit and internal control systems designed for effective management of any potential and emerging risks to company operations and strategy. The responsibility of setting out an internal audit function lies with the audit committee, which should have as members independent non-executive directors.
Appointment of External Auditors
SSGA FM believes that a companys auditor is an essential feature of an effective and transparent system of external supervision and shareholders should be given the opportunity to vote on their appointment or re-appoint at the annual meeting. When appointing external auditors and approving audit fees, SSGA FM will take into consideration the level of detail in company disclosures and will generally not support such resolutions if adequate breakdown is not provided and if non-audit fees are more than 50% of audit fees. In addition, SSGA FM may vote against members of the audit committee if we have concerns with audit related issues or if the level of non-audit fees to audit fees is significant. In certain circumstances, SSGA FM may consider auditor tenure when evaluating the audit process.
Shareholder Rights and Capital Related Issues
Share Issuances
The ability to raise capital is critical for companies to carry out strategy, grow, and achieve returns above their cost of capital. The approval of capital raising activities is fundamental to shareholders ability to monitor the amounts of proceeds and to ensure capital is deployed efficiently. SSGA FM supports capital increases that have sound business reasons and are not excessive relative to a companys existing capital base.
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Pre-emption rights are a fundamental right for shareholders to protect their investment in a company. Where companies seeks to issue new shares whilst dis-applying pre-emption rights, SSGA FM may vote against if such authorities are greater than 20% of the issued share capital. SSGA FM may also vote against resolutions seeking authority to issue capital with pre-emption rights if the aggregate amount allowed seems excessive and is not justified by the board. Generally, we are against capital issuance proposals greater than 100% of the issued share capital when the proceeds are not intended for specific purpose.
Share Repurchase Programs
SSGA FM generally supports a proposal to repurchase shares, other than if the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, and the time frame for the repurchase. SSGA FM may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA FM generally supports dividend payouts that constitute 30% or more of net income. SSGA FM may vote against the dividend payouts if the dividend payout ratio has been consistently below 30% without adequate explanation; or, the payout is excessive given the companys financial position. Particular attention will be paid where the payment may damage the companys long-term financial health.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders rights are not supported. SSGA FM will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
| Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest; |
| Offers made at a premium and where there are no other higher bidders; and |
| Offers in which the secondary market price is substantially lower than the net asset value. |
SSGA FM may vote against a transaction considering the following:
| Offers with potentially damaging consequences for minority shareholders because of illiquid stock; |
| Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders; and |
| At the time of voting, the current market price of the security exceeds the bid price. |
Anti-Takeover Measures
SSGA FM opposes antitakeover defenses, such as authorities for the board, when subject to a hostile takeover, to issue warrants convertible into shares to existing shareholders.
Remuneration
Executive Pay
There is a simple underlying philosophy that guides SSGA FMs analysis of executive paythere should be a direct relationship between remuneration and company performance over the long-term. Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, SSGA FM considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long term and short term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and performance. SSGA FM may oppose remuneration reports where there seems to be a misalignment between pay and shareholders
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interests and where incentive policies and schemes have a re-test option or feature. SSGA FM may also vote against the re-election of members of the remuneration committee if we have serious concerns over remuneration practices and the company has not been responsive to shareholder pressure to review its approach.
Equity Incentives Plans
SSGA FM may not support proposals on equity-based incentive plans where insufficient information is provided on matters such as grant limits, performance metrics, performance and vesting periods and overall dilution. SSGA FM does not generally support options under such plans being issued at a discount to market price or plans that allow for re-testing of performance metrics.
Non-Executive Director Pay
Authorities seeking shareholder approval for non-executive directors fees are generally not controversial. SSGA FM generally supports resolutions regarding directors fees unless disclosure is poor and we are unable to determine whether they are excessive relative to fees paid by other companies in the same country or industry. SSGA FM will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA FM believes that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. SSGA FM allows boards discretion over how they provide oversight in this area. However, SSGA FM expects companies to disclose how the board provides oversight on its risk management system and to identify key risks facing the company. Boards should also review existing and emerging risks as they can change with a changing political and economic landscape, or as companies diversify or expand their operations into new areas.
Environmental and Social Issues
As a fiduciary, SSGA FM considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA FM supports environmental and social related items that we believe would protect or enhance shareholder value. Environmental and social factors not only can have an impact on the reputation of companies; they may also represent significant operational risks and costs to business. Well-developed environmental and social management systems can also generate efficiencies and enhance productivity, both of which impact shareholder value in the long-term.
SSGA FM encourages companies to be transparent about the environmental and social risks and opportunities they face and adopt robust policies and processes to manage such issues. In our view, companies that manage all risks and consider opportunities related to environmental and social issues are able to adapt faster to changes and appear to be better placed to achieve sustainable competitive advantage in the long-term. Similarly, companies with good risk management systems, which include environmental and social policies, have a stronger position relative to their peers to manage risk and change, which could result in anything from regulation and litigation, physical threats (severe weather, climate change), economic trends as well as shifts in consumer behavior.
In their public reporting, we expect companies to disclose information on relevant management tools and material environmental and social performance metrics. We support efforts by companies to try to demonstrate how sustainability fits into operations and business activities. SSGA FMs team of analysts evaluates these risks and shareholder proposals relating to them on an issuer by issuer basis; understanding that environmental and social risks can vary widely depending on company industry, its operations, and geographic footprint. SSGA FM may also take action against the re-election of members of the board if we have serious concerns over ESG practices and the company has not been responsive to shareholder pressure.
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ssga.com
State Street Global Advisors Worldwide Entities
Australia : State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611. Belgium : State Street Global Advisors Belgium, Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Canada : State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C 3G6. T: +647 775 5900. Dubai : State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates. T: +971 (0)4 4372800. F: +971 (0)4 4372818. France : State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany : State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440. Hong Kong : State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200. Ireland : State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy : State Street Global Advisors Italy, Sede Secondaria di Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Japan : State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association. Netherlands : State Street Global Advisors Netherlands, Adam Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Singapore : State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Registered Number: 200002719D). T: +65 6826 7500. F: +65 6826 7501. Switzerland : State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom : State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81. Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350. United States : State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of SSGA Corporate Governance Team through the period ended February 28, 2015 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGAs express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
© 2015 State Street Corporation. All Rights Reserved.
ID3503-INST-5431 0315 Exp. Date: 03/31/2016
February 2015
Managing Conflicts of Interest arising from SSGAs Proxy Voting and Engagement Activities
State Street Corporation has a comprehensive standalone Conflicts of Interest Policy and other policies that address a range of conflicts of interests identified by our parent company. In addition, SSGA maintains a conflicts register that identifies key conflicts and describes systems in place to mitigate the conflicts. This policy is designed to act in conjunction with related policies and practices employed by other groups within the organization. Further, they complement those policies and practices by providing specific guidance on managing the conflicts of interests that may arise through SSGAs proxy voting activities.
Managing Conflicts of Interest Related to Proxy Voting
SSGA has policies and procedures designed to prevent undue influence on SSGAs voting activities that may arise from relationships between proxy issuers or companies and State Street Corporation (STT) SSGA, SSGA affiliates, SSGA Funds or SSGA Fund affiliates.
Protocols designed to help mitigate potential conflicts of interest include:
| Providing sole voting discretion to members of SSGAs Corporate Governance Team. Members of the corporate governance team may from time to time discuss views on proxy voting matters, company performance, strategy etc. with other STT or SSGA employees including portfolio managers, senior executives and relationship managers. However, final voting decisions are made solely by the corporate governance team, in a manner that is consistent with the best interests of all clients, taking into account various perspectives on risks and opportunities with a view of maximizing the value of client assets; |
| Exercising a singular vote decision for each ballot item regardless of SSGAs investment strategy; |
| Prohibiting members of SSGAs corporate governance team from disclosing SSGAs voting decision to any individual not affiliated with the proxy voting process prior to the meeting or date of written consent, as the case may be; |
| Mandatory disclosure by members of the SSGAs Corporate Governance Team, Global Proxy Review Committee (PRC) and Investment Committee (IC) of any personal conflict of interest (e.g., familial relationship with company management) to the Head of the Corporate Governance Team. Members are required to recuse themselves from any engagement or proxy voting activities related to the conflict; |
| In certain instances, client accounts and/or SSGA pooled funds, where SSGA acts as trustee, may hold shares in STT or other SSGA affiliated entities, such as mutual funds affiliated with SSGA Funds Management, Inc. In general, SSGA will outsource any voting decision relating to a shareholder meeting of STT or other SSGA affiliated entities to independent outside third parties. Delegated third parties exercise vote decisions based upon SSGAs in-house policies; and |
| Reporting of voting policy overrides, if any, to the PRC on a quarterly basis. |
In general, we do not believe matters that fall within the Guidelines and are voted consistently with the Guidelines present any potential conflicts, since the vote on the matter has effectively been determined without reference to the soliciting entity. However, where matters do not fall within the Guidelines or where we believe that voting in accordance with the Guidelines is unwarranted, we conduct an additional review to determine whether there is a conflict of interest. In circumstances where a conflict has been identified and either: (i) the matter does not fall clearly within the Guidelines; or (ii) SSGA determines that voting in accordance with such policies or guidance is not in the best interests of its clients, the Head of SSGAs Corporate Governance Team will determine whether a Material Relationship exists. If so, the matter is referred to the SSGA PRC. The SSGA PRC then reviews the matter and determines whether a conflict of interest exists, and if so, how to best resolve such conflict. For example, the SSGA PRC may (i) determine that the proxy vote does not give rise to a conflict due to the issues presented, (ii) refer the matter to the SSGA Investment Committee for further evaluation or (iii) retain an independent fiduciary to determine the appropriate vote.
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ssga.com
State Street Global Advisors Worldwide Entities
Australia
: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an
Australian Financial Services Licence (AFSL Number 238276). Registered Office: Level 17, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240 7600. F: +612 9240 7611.
Belgium
: State Street Global Advisors Belgium,
Chausse de La Hulpe 120, 1000 Brussels, Belgium. T: +32 2 663 2036, F: +32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by
the Financial Conduct Authority in the United Kingdom.
Canada
: State Street Global Advisors, Ltd., 770 Sherbrooke Street West, Suite 1200 Montreal, Quebec, H3A 1G1, T: +514 282 2400 and 30 Adelaide Street East Suite 500, Toronto, Ontario M5C
3G6. T: +647 775 5900.
Dubai
: State Street Bank and Trust Company (Representative Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall & Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates.
T: +971 (0)4 4372800. F: +971 (0)4 4372818.
France
: State Street Global Advisors France. Authorised and regulated by the Autorité des Marchés Financiers. Registered with the Register of Commerce and Companies of
Nanterre under the number: 412 052 680. Registered Office: Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92.
Germany
: State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89 55878 100. F: +49 (0)89 55878 440.
Hong Kong
: State Street Global Advisors Asia Limited, 68/F, Two International Finance
Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103 0288. F: +852 2103 0200.
Ireland
: State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park
Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300.
Italy
: State Street Global Advisors Italy, Sede Secondaria di
Milano, Via dei Bossi, 4 20121 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. State Street Global Advisors Italy is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is
authorised and regulated by the Financial Conduct Authority in the United Kingdom.
Japan
: State Street Global Advisors (Japan) Co., Ltd., 9-7-1 Akasaka, Minato-ku, Tokyo 107-6239. T: +813 4530 7380. Financial Instruments Business Operator,
Kanto Local Financial Bureau (Kinsho #345). Japan Investment Advisers Association, Investment Trusts Association Japan, Japan Securities Dealers Association.
Netherland
s: State Street Global Advisors Netherlands, Adam Smith Building, Thomas
Malthusstraat 1-3, 1066 JR Amsterdam, Netherlands. T: +31 (0)20 7181701. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the
Financial Conduct Authority in the United Kingdom.
Singapore
: State Street Global Advisors Singapore Limited, 168, Robinson Road,
#33-01
Capital Tower, Singapore 068912 (Company Registered Number:
200002719D). T: +65 6826 7500. F: +65 6826 7501.
Switzerland
: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich.
T: +41 (0)44 245 70 00.
F: +41 (0)44 245 70 16.
United Kingdom
: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered Number: 2509928. VAT Number: 5776591 81.
Registered Office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: +020 3395 6000. F: +020 3395 6350.
United States
: State Street Global Advisors, One Lincoln Street, Boston, MA 02111-2900. T: +617 664 7727.
The views expressed in this material are the views of Feely, John S through the period ended February 28, 2015 and are subject to change based on market and other conditions. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investors particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Past performance is not a guarantee of future results.
Investing involves risk including the risk of loss of principal.
Risk associated with equity investing include stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions.
Standard & Poors (S&P) S&P Indices are a registered trademark of Standard & Poors Financial Services LLC.
© 2015 State Street Corporation. All Rights Reserved.
ID3455-INST-5419 0315 Exp. Date: 03/31/2016
PART C
OTHER INFORMATION
Item 28. | Exhibits |
(a)(i) | First Amended and Restated Declaration of Trust of StreetTracks (SM) Series Trust (now, SPDR ® Series Trust) (the Trust or the Registrant) dated June 9, 1998, as amended September 6, 2000, is incorporated herein by reference to Exhibit (a)(ii) of Pre-Effective Amendment No. 3 to the Registrants Registration Statement on Form N-1A, as filed with the U.S. Securities and Exchange Commission (the SEC) on September 25, 2000. | |
(a)(ii) | Amendment No. 1, dated August 1, 2007, to the Registrants First Amended and Restated Declaration of Trust dated June 9, 1998, as amended September 6, 2000, is incorporated herein by reference to Exhibit (a)(ii) of Post-Effective Amendment No. 23 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on August 10, 2007. | |
(b) | Registrants Amended and Restated By-Laws, dated August 26, 2015, is incorporated herein by reference to Exhibit (b) of Post-Effective Amendment No. 143 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on September 17, 2015. | |
(c) | Global Certificates of Beneficial Interest, evidencing shares of Beneficial Interest, $.01 par value, are incorporated herein by reference to Exhibit (c) of Pre-Effective Amendment No. 3 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on September 25, 2000. | |
(d)(i)(1) | Amended and Restated Investment Advisory Agreement between the Trust and SSGA Funds Management, Inc. (SSGA FM), dated September 1, 2003, is incorporated herein by reference to Exhibit (d)(1) of Post-Effective Amendment No. 4 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on October 28, 2003. | |
(d)(i)(2) | Revised Exhibit A (Schedule of Series) to the Amended and Restated Investment Advisory Agreement between the Trust and SSGA FM, adding SPDR S&P 500 High Dividend ETF is filed herewith. | |
(d)(ii) | Fee Waiver Letter Agreement dated June 18, 2012, with respect to the SPDR BofA Merrill Lynch Crossover Corporate Bond ETF is incorporated herein by reference to Exhibit (d)(iii) of Post-Effective Amendment No. 86 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on June 18, 2012. | |
(d)(iii) | Fee Waiver Letter Agreement dated October 14, 2011, with respect to the SPDR Nuveen S&P High Yield Municipal Bond ETF, is incorporated herein by reference to Exhibit (d)(iii) of Post-Effective Amendment No. 73 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on October 28, 2011. | |
(d)(iv) | Fee Waiver Letter Agreement dated October 23, 2007, with respect to the SPDR Barclays Aggregate Bond ETF (formerly, the SPDR Lehman Aggregate Bond ETF), is incorporated herein by reference to Exhibit (d)(iv) of Post-Effective Amendment No. 28 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on October 26, 2007. | |
(d)(v) | Fee Waiver Letter Agreement dated October 27, 2010, with respect to the SPDR Nuveen Barclays Municipal Bond ETF (formerly, the SPDR Lehman Municipal Bond ETF), is incorporated herein by reference to Exhibit (d)(v) of Post-Effective Amendment No. 52 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on October 28, 2010. |
(d)(vi) | Sub-Advisory Agreement dated April 1, 2010 between SSGA FM and Nuveen Asset Management, with respect to the municipal bond ETFs, is incorporated herein by reference to Exhibit (d)(ix) of Post-Effective Amendment No. 49 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on May 12, 2010. | |
(d)(vii) | Sub-Advisory Agreement dated May 19, 2010 between SSGA FM and State Street Global Advisors LTD, with respect to SPDR Barclays International Corporate Bond ETF, is incorporated herein by reference to Exhibit (d)(x) of Post-Effective Amendment No. 50 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on May 19, 2010. | |
(d)(viii) | Amended Appendix A to the Sub-Advisory Agreement between SSGA FM and State Street Global Advisors LTD, adding SPDR Barclays International High Yield Bond ETF, is incorporated herein by reference to Exhibit (d)(xi) of Post-Effective Amendment No. 117 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on March 12, 2014. | |
(d)(ix) | Amendment to the Sub-Advisory Agreement between SSGA FM and Nuveen Asset Management, adding SPDR Nuveen S&P High Yield Municipal Bond ETF, is incorporated herein by reference to Exhibit (d)(xii) of Post-Effective Amendment No. 61 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on April 13, 2011. | |
(e)(i)(1) | Distribution Agreement dated September 22, 2000, between the Trust and State Street Global Markets, LLC (formerly, State Street Capital Markets, LLC), is incorporated herein by reference to Exhibit (e) of Pre-Effective Amendment No. 3 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on September 25, 2000. | |
(e)(i)(2) | Amended Annex I (Schedule of Series) to the Distribution Agreement between the Trust and State Street Global Markets, adding SPDR S&P 500 High Dividend ETF, is filed herewith. | |
(f) | Not applicable. | |
(g)(i) | Custodian Agreement dated September 22, 2000, between the Trust and State Street Bank and Trust Company, is incorporated herein by reference to Exhibit (g) of Pre-Effective Amendment No. 3 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on September 25, 2000. | |
(g)(ii) | Amendment dated October 14, 2005 to the Custodian Agreement dated September 22, 2000, between the Trust and State Street Bank and Trust Company, is incorporated herein by reference to Exhibit (g)(iv) of Post-Effective Amendment No. 13 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on October 28, 2005. | |
(g)(iii) | Amended Schedule of Series to the Custodian Agreement between the Trust and State Street Bank and Trust Company, adding SPDR S&P 500 High Dividend ETF, is filed herewith. | |
(h)(i)(1) | Administration Agreement between the Trust and SSGA FM, dated June 1, 2015, is filed herewith. | |
(h)(i)(2) | Schedule A (Schedule of Series) to the Administration Agreement between the Trust and SSGA FM, adding SPDR S&P 500 High Dividend ETF, is filed herewith. | |
(h)(ii)(1) | Sub-Administration Agreement between SSGA FM and State Street Bank and Trust Company, dated June 1, 2015, is filed herewith. |
(h)(ii)(2) | Schedule A (Schedule of Series) to the Sub-Administration Agreement between SSGA FM and State Street Bank and Trust Company, adding SPDR S&P 500 High Dividend ETF, is filed herewith. | |
(h)(iii) | Transfer Agency and Services Agreement dated September 22, 2000, between the Trust and State Street Bank and Trust Company, is incorporated herein by reference to Exhibit (h)(ii) of Pre-Effective Amendment No. 3 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on September 25, 2000. | |
(h)(iv) | Addendum dated April 5, 2004 to Transfer Agency and Services Agreement dated September 22, 2000, between the Trust and State Street Bank and Trust Company, is incorporated herein by reference to Exhibit (h)(iii) of Post-Effective Amendment No. 13 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on October 28, 2005. | |
(h)(v) | Amended Annex A (Schedule of Series) to the Transfer Agency Services Agreement between the Trust and State Street Bank and Trust Company, adding SPDR S&P 500 High Dividend ETF, is filed herewith. | |
(h)(vi) | Form of Participant Agreement is incorporated herein by reference to Exhibit (h)(iv) of Post-Effective Amendment No. 43 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on August 26, 2009. | |
(h)(vii) | Form of Investor Services Agreement is incorporated herein by reference to Exhibit (h)(iv) of Pre-Effective Amendment No. 3 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on September 25, 2000. | |
(h)(viii) | Securities Lending Authorization Agreement dated November 28, 2007, between the Trust and State Street Bank and Trust Company, is incorporated herein by reference to Exhibit (h)(vi) of Post-Effective Amendment No. 34 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on August 8, 2008. | |
(h)(ix) | Amended Schedule B (Schedule of Series) to the Securities Lending Authorization Agreement between the Trust and State Street Bank and Trust Company, adding SPDR Barclays International High Yield Bond ETF, is incorporated herein by reference to Exhibit (h)(ix) of Post-Effective Amendment No. 117 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on March 12, 2014. | |
(i) | Opinion and Consent of counsel, Morgan, Lewis & Bockius LLP, is filed herewith. | |
(j) | Consent of Independent Registered Public Accounting Firm, is filed herewith. | |
(k) | Not applicable. | |
(l) | Subscription Agreement dated September 22, 2000, between the Trust and State Street Capital Markets, LLC, is incorporated herein by reference to Exhibit (l) of Pre-Effective Amendment No. 3 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on September 25, 2000. | |
(m)(i)(1) | Distribution and Service Plan, as adopted on September 11, 2000, is incorporated herein by reference to Exhibit (m) of Post-Effective Amendment No. 8 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on August 30, 2004. | |
(m)(i)(2) | Amended Exhibit A to the Distribution and Service Plan, adding SPDR S&P 500 High Dividend ETF, is filed herewith. |
(n) | Not applicable. | |
(p)(i) | Registrants Revised Code of Ethics, as adopted November 15, 2004 and revised February 23, 2010, is incorporated herein by reference to Exhibit (p)(i) of Post-Effective Amendment No. 47 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on March 5, 2010. | |
(p)(ii) | Code of Ethics of SSGA FM, dated April 16, 2013 (which also applies to applicable reporting personnel of the Distributor), is incorporated herein by reference to Exhibit (p)(ii) of Post-Effective Amendment No. 129 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on February 3, 2015. | |
(p)(iii) | Code of Ethics of Nuveen Asset Management, in its capacity as investment sub-adviser to certain Funds of the Trust, is incorporated herein by reference to Exhibit (p)(iv) of Post-Effective Amendment No. 97 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on May 29, 2013. | |
(p)(iv) | Code of Ethics of State Street Global Advisors Limited, in its capacity as investment sub-adviser to certain Fund(s) of the Trust, is incorporated herein by reference to Exhibit (p)(v) of Post-Effective Amendment No. 50 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on May 19, 2010. | |
(q) | Power of Attorney for Ms. Boatman, Ms. Needham, Messrs. Churchill, Kelly, Nesvet, Ross, Verboncoeur and Hallett, dated May 27, 2015, is incorporated herein by reference to Exhibit (q) of Post-Effective Amendment No. 138 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on July 13, 2015. |
Item 29. | Persons Controlled By or Under Common Control With Registrant |
The Board of Trustees of the Trust is the same as the board of the SPDR Index Shares Funds, SSGA Master Trust and SSGA Active Trust. In addition, the officers of the Trust are substantially identical to the officers of the SPDR Index Shares Funds, SSGA Master Trust and SSGA Active Trust. Additionally, the Trusts investment adviser, SSGA Funds Management, Inc., also serves as investment adviser to each series of the SPDR Index Shares Funds, SSGA Master Trust and SSGA Active Trust. Nonetheless, the Trust takes the position that it is not under common control with other trusts because the power residing in the respective boards and officers arises as the result of an official position with the respective trusts.
Additionally, see the Control Persons and Principal Holders of Securities section of the Statement of Additional Information for a list of shareholders who own more than 5% of a specific funds outstanding shares and such information is incorporated by reference to this Item.
Item 30. | Indemnification |
Pursuant to Section 5.3 of the Registrants Amended and Restated Declaration of Trust and under Section 4.9 of the Registrants By-Laws, the Trust will indemnify any person who is, or has been, a Trustee, officer, employee or agent of the Trust against all expenses reasonably incurred or paid by him/her in connection with any claim, action, suit or proceeding in which he/she becomes involved as a party or otherwise by virtue of his/her being or having been a Trustee, officer, employee or agent and against amounts paid or incurred by him/her in the settlement thereof, if he/she acted in good faith and in a manner he/she reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his/her conduct was
unlawful. In addition, indemnification is permitted only if it is determined that the actions in question did not render him/her liable by reason of willful misfeasance, bad faith or gross negligence in the performance of his/her duties or by reason of reckless disregard of his/her obligations and duties to the Registrant. The Registrant may also advance money for litigation expenses provided that Trustees, officers, employees and/or agents give their undertakings to repay the Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrants Amended and Restated Declaration of Trust, no Trustee, officer, employee or agent of the Registrant shall be liable for any action or failure to act, except in the case of willful misfeasance, bad faith or gross negligence or reckless disregard of duties to the Registrant. Pursuant to paragraph 9 of the Registrants Investment Advisory Agreement, the Adviser shall not be liable for any action or failure to act, except in the case of willful misfeasance, bad faith or gross negligence or reckless disregard of duties to the Registrant.
Insofar as indemnification for liability arising under the Securities Act of 1933 (the Act) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions of Rule 484 under the Act, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification provision of its By-Laws in a manner consistent with Release 11330 of the SEC under the Investment Company Act of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such Act remains in effect.
The Registrant maintains insurance on behalf of any person who is or was a Trustee, officer, employee or agent of the Registrant, or who is or was serving at the request of the Registrant as a trustee, director, officer, employee or agent of another trust or corporation, against any liability asserted against him/her and incurred by him/her or arising out of his/her position. However, in no event will the Registrant maintain insurance to indemnify any such person for any act for which the Registrant itself is not permitted to indemnify him/her.
Item 31. | Business And Other Connections of Investment Adviser |
Any other business, profession, vocation or employment of a substantial nature in which each director or principal officer of each investment adviser is or has been, at any time during the last two fiscal years, engaged for his or her own account or in the capacity of director, officer, employee, partner or trustee are as follows:
SSGA Funds Management, Inc. (SSGA FM or the Adviser) serves as the investment adviser for each series of the Trust. SSGA FM is a wholly-owned subsidiary of State Street Corporation, a publicly held bank holding company. SSGA FM and other advisory affiliates of State Street Corporation make up State Street Global Advisors (SSGA), the investment arm of State Street Corporation. The principal address of the Adviser is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111. SSGA FM is an investment adviser registered under the Investment Advisers Act of 1940.
Name |
Capacity With Adviser |
Business Name and Address of Other Position | ||
Keith Crawford |
Treasurer | Chief Financial Officer and Global Head of Strategy, State Street Global Advisors, a division of State Street Bank and Trust Company, Boston, MA | ||
Alyssa Albertelli |
Chief Compliance Officer |
Chief Compliance Officer, State Street Global Advisors, a division of State Street Bank and Trust Company, Boston, MA | ||
James E. Ross |
Chairman & Director |
Executive Vice President, State Street Global Advisors, a division of State Street Bank and Trust Company, Boston, MA | ||
Ellen Needham |
President & Director |
Senior Managing Director, State Street Global Advisors, a division of State Street Bank and Trust Company, Boston, MA | ||
Phillip Gillespie |
Chief Legal Officer | General Counsel, State Street Global Advisors, a division of State Street Bank and Trust Company, Boston, MA | ||
Kristi Mitchem |
CTAChief Marketing Officer |
Executive Vice President, State Street Global Advisors, a division of State Street Bank and Trust Company, Boston, MA | ||
Barry Smith |
Director | Senior Managing Director, State Street Global Advisors, a division of State Street Bank and Trust Company, Boston, MA | ||
Ann Carpenter |
Chief Operating Officer |
Vice President of State Street Global Advisors, a division of State Street Bank and Trust Company, Boston, MA |
Nuveen Asset Management (NAM) serves as the investment sub-adviser to SPDR Nuveen Barclays Municipal Bond ETF, SPDR Nuveen Barclays California Municipal Bond ETF, SPDR Nuveen Barclays New York Municipal Bond ETF, SPDR Nuveen Barclays Short Term Municipal Bond ETF, SPDR Nuveen S&P High Yield Municipal Bond ETF and SPDR Nuveen Barclays Build America Bond ETF. State Street Global Advisors Limited (SSGA LTD) serves as the the investment sub-adviser for the SPDR Barclays International Corporate Bond ETF, SPDR Barclays Emerging Markets Local Bond ETF and SPDR Barclays International High Yield Bond ETF.
See Management in the applicable Prospectus and Management of the Trust in the applicable Statement of Additional Information for information regarding the business of SSGA FM, NAM and SSGA LTD. For information regarding broker-dealers and investment advisers affiliated with the SSGA FM, NAM and SSGA LTD, reference is made to SSGA FMs, NAMs and SSGA LTDs respective Form ADV, as amended, filed with the SEC and incorporated herein by reference.
Item 32. | Principal Underwriters |
(a) | State Street Global Markets, LLC, State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111, serves as the Trusts principal underwriter and also serves as the principal underwriter for the following investment companies: SPDR Index Shares Funds, SSgA Active Trust, State Street Institutional Investment Trust and SSGA Funds. |
(b) | The following is a list of the executive officers, directors and partners of State Street Global Markets, LLC (except as noted, none of the persons set forth below holds a position or office with the Trust): |
Nicholas J. Bonn | Chief Executive Officer, Chief Operations Officer and Chairman | |
Howard Fairweather | Director | |
Stefan Gavell | Director | |
Christopher P. Jensen | Senior Vice President, Chief Financial Officer and Director | |
Mark Snyder | Director | |
James Ross | Director | |
Peter Williams | Director |
R. Bryan Woodard |
Senior Vice President, Chief Legal Counsel and Director | |
Mark Trabucco |
Vice President and Chief Compliance Officer | |
Melissa McKay |
Managing Director and Secretary | |
David MacInnis |
Vice President and Compliance Officer | |
John Conway |
Vice President, FINOP |
(c) | Not applicable. |
Item 33. | Location Of Accounts and Records |
All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are maintained at the offices of SSGA Funds Management, Inc. and/or State Street Bank and Trust Company, each with offices located at One Lincoln Street, Boston, Massachusetts 02111.
Item 34. | Management Services |
Not applicable.
Item 35. | Undertakings |
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, SPDR ® Series Trust, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933, as amended, and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston and Commonwealth of Massachusetts on the 28 th day of October, 2015.
SPDR SERIES TRUST | ||
By: | /s/ Ellen M. Needham | |
Ellen M. Needham President |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated:
SIGNATURES | TITLE | DATE | ||
/s/ Bonny E. Boatman* Bonny E. Boatman |
Trustee | October 28, 2015 | ||
/s/ Dwight D. Churchill* Dwight D. Churchill |
Trustee | October 28, 2015 | ||
/s/ David M. Kelly* David M. Kelly |
Trustee | October 28, 2015 | ||
/s/ Frank Nesvet* Frank Nesvet |
Trustee | October 28, 2015 | ||
/s/ Carl G. Verboncoeur* Carl G. Verboncoeur |
Trustee | October 28, 2015 | ||
/s/ James E. Ross* James E. Ross |
Trustee | October 28, 2015 | ||
/s/ Ellen M. Needham Ellen M. Needham |
President and Principal Executive Officer | October 28, 2015 | ||
/s/ Chad C. Hallett Chad C. Hallett |
Treasurer and Principal Financial Officer | October 28, 2015 |
*By: | /s/ Christopher A. Madden | |
Christopher A. Madden | ||
As Attorney-in-Fact | ||
Pursuant to Power of Attorney |
EXHIBIT LIST
Item 28
(d)(i)(2) | Revised Exhibit A (Schedule of Series) to the Amended and Restated Investment Advisory Agreement | |
(e)(i)(2) | Amended Annex I (Schedule of Series) to the Distribution Agreement | |
(g)(iii) | Amended Schedule of Series to the Custodian Agreement | |
(h)(i)(1) | Administration Agreement between the Trust and SSGA FM | |
(h)(i)(2) | Schedule A (Schedule of Series) to the Administration Agreement | |
(h)(ii)(1) | Sub-Administration Agreement between SSGA FM and State Street Bank and Trust Company | |
(h)(ii)(2) | Schedule A (Schedule of Series) to the Sub-Administration Agreement | |
(h)(v) | Amended Annex A (Schedule of Series) to the Transfer Agency Services Agreement | |
(i) | Opinion and Consent of Morgan, Lewis & Bockius LLP | |
(j) | Consent of Independent Registered Public Accounting Firm | |
(m)(i)(2) | Amended Exhibit A to the Distribution and Service Plan |
EXHIBIT A
To the Amended and Restated Investment Advisory Agreement
Between SSGA Funds Management, Inc. and SPDR ® Series Trust
As consideration for the Advisers services to each of the following Funds, the Adviser shall receive from each Fund a unitary fee, accrued daily at the rate of 1/365th of the applicable fee rate and payable monthly on the first business day of each month, of the following annual percentages of the Funds average daily net assets during the month. The Adviser will pay all of the expenses of each Fund of the Trust except for the advisory fee, payments under each Funds Rule 12b-1 plan, brokerage expenses, taxes, interest, fees and expenses of the Independent Trustees (including any Trustees counsel fees), acquired fund fees and expenses, litigation expenses and other extraordinary expenses.
Fund |
Annual % of average
daily net assets |
|||
SPDR Russell 3000 ® ETF |
0.10 | % | ||
SPDR Russell 1000 ® ETF |
0.10 | % | ||
SPDR S&P ® 500 Growth ETF |
0.15 | % | ||
SPDR S&P 500 Value ETF |
0.15 | % | ||
SPDR Russell Small Cap Completeness ® ETF |
0.10 | % | ||
SPDR S&P 400 Mid Cap Growth ETF |
0.15 | % | ||
SPDR S&P 400 Mid Cap Value ETF |
0.15 | % | ||
SPDR S&P 600 Small Cap ETF |
0.15 | % | ||
SPDR S&P 600 Small Cap Growth ETF |
0.15 | % | ||
SPDR S&P 600 Small Cap Value ETF |
0.15 | % | ||
SPDR Global Dow ETF |
0.50 | % | ||
SPDR Dow Jones REIT ETF |
0.25 | % | ||
SPDR S&P Bank ETF |
0.35 | % | ||
SPDR S&P Capital Markets ETF |
0.35 | % | ||
SPDR S&P Insurance ETF |
0.35 | % | ||
SPDR Morgan Stanley Technology ETF |
0.35 | % | ||
SPDR S&P Dividend ETF |
0.35 | % | ||
SPDR S&P Aerospace & Defense ETF |
0.35 | % | ||
SPDR S&P Biotech ETF |
0.35 | % | ||
SPDR S&P Health Care Equipment ETF |
0.35 | % | ||
SPDR S&P Health Care Services ETF |
0.35 | % | ||
SPDR S&P Homebuilders ETF |
0.35 | % | ||
SPDR S&P Metals & Mining ETF |
0.35 | % | ||
SPDR S&P Oil & Gas Equipment & Services ETF |
0.35 | % | ||
SPDR S&P Oil & Gas Exploration & Production ETF |
0.35 | % | ||
SPDR S&P Pharmaceuticals ETF |
0.35 | % | ||
SPDR S&P Retail ETF |
0.35 | % | ||
SPDR S&P Semiconductor ETF |
0.35 | % | ||
SPDR S&P Software & Services ETF |
0.35 | % | ||
SPDR S&P Telecom ETF |
0.35 | % | ||
SPDR S&P Transportation ETF |
0.35 | % | ||
SPDR S&P Regional Banking ETF |
0.35 | % | ||
SPDR Barclays 1-3 Month T-Bill ETF |
0.1345 | % | ||
SPDR Barclays Intermediate Term Treasury ETF |
0.10 | % |
1
Fund |
Annual % of average
daily net assets |
|||
SPDR Barclays Long Term Treasury ETF |
0.10 | % | ||
SPDR Barclays TIPS ETF |
0.15 | % | ||
SPDR Barclays Aggregate Bond ETF |
0.08 | % | ||
SPDR Nuveen Barclays Municipal Bond ETF |
0.30 | % | ||
SPDR Barclays International Treasury Bond ETF |
0.50 | % | ||
SPDR Nuveen Barclays Short Term Municipal Bond ETF |
0.20 | % | ||
SPDR Nuveen Barclays California Municipal Bond ETF |
0.20 | % | ||
SPDR Nuveen Barclays New York Municipal Bond ETF |
0.20 | % | ||
SPDR Barclays High Yield Bond ETF |
0.40 | % | ||
SPDR DB International Government Inflation-Protected Bond ETF |
0.50 | % | ||
SPDR Barclays Short Term International Treasury Bond ETF |
0.35 | % | ||
SPDR Barclays Intermediate Term Corporate Bond ETF |
0.12 | % | ||
SPDR Barclays Long Term Corporate Bond ETF |
0.12 | % | ||
SPDR Barclays Convertible Securities ETF |
0.40 | % | ||
SPDR Barclays Mortgage Backed Bond ETF |
0.20 | % | ||
SPDR Wells Fargo Preferred Stock ETF |
0.45 | % | ||
SPDR Barclays Short Term Corporate Bond ETF |
0.12 | % | ||
SPDR Nuveen Barclays Build America Bond ETF |
0.35 | % | ||
SPDR Barclays International Corporate Bond ETF |
0.50 | % | ||
SPDR Barclays Emerging Markets Local Bond ETF |
0.50 | % | ||
SPDR Barclays Issuer Scored Corporate Bond ETF |
0.16 | % | ||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
0.50 | % | ||
SPDR Barclays Short Term Treasury ETF |
0.10 | % | ||
SPDR Barclays Investment Grade Floating Rate ETF |
0.15 | % | ||
SPDR Barclays Short Term High Yield Bond ETF |
0.40 | % | ||
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
0.50 | % | ||
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
0.40 | % | ||
SPDR S&P 1500 Value Tilt ETF |
0.12 | % | ||
SPDR S&P 1500 Momentum Tilt ETF |
0.12 | % | ||
SPDR Russell 1000 Low Volatility ETF |
0.12 | % | ||
SPDR Russell 2000 Low Volatility ETF |
0.12 | % | ||
SPDR Barclays 1-10 Year TIPS ETF |
0.15 | % | ||
SPDR Russell 2000 ETF |
0.12 | % | ||
SPDR Barclays 0-5 Year TIPS ETF |
0.15 | % | ||
SPDR Barclays International High Yield Bond ETF |
0.40 | % | ||
SPDR S&P 500 Buyback ETF |
0.35 | % | ||
SPDR MSCI USA Quality Mix ETF |
0.15 | % | ||
SPDR S&P 500 High Dividend ETF |
0.12 | % |
Dated: October 21, 2015
2
ANNEX 1
To the Distribution Agreement by and between
SPDR ® Series Trust and State Street Global Markets, LLC
ETF |
Trading
Symbol |
|||
SPDR Russell 3000 ® ETF |
THRK | |||
SPDR Russell 1000 ® ETF |
ONEK | |||
SPDR S&P 500 Growth ETF |
SPYG | |||
SPDR S&P 500 Value ETF |
SPYV | |||
SPDR Russell Small Cap Completeness ® ETF |
RSCO | |||
SPDR S&P 400 Mid Cap Growth ETF |
MDYG | |||
SPDR S&P 400 Mid Cap Value ETF |
MDYV | |||
SPDR S&P 600 Small Cap ETF |
SLY | |||
SPDR S&P 600 Small Cap Growth ETF |
SLYG | |||
SPDR S&P 600 Small Cap Value ETF |
SLYV | |||
SPDR Global Dow ETF |
DGT | |||
SPDR Dow Jones REIT ETF |
RWR | |||
SPDR S&P ® Bank ETF |
KBE | |||
SPDR S&P Capital Markets ETF |
KCE | |||
SPDR S&P Insurance ETF |
KIE | |||
SPDR Morgan Stanley Technology ETF |
MTK | |||
SPDR S&P Dividend ETF |
SDY | |||
SPDR S&P Aerospace & Defense ETF |
XAR | |||
SPDR S&P Biotech ETF |
XBI | |||
SPDR S&P Health Care Equipment ETF |
XHE | |||
SPDR S&P Health Care Services ETF |
XHS | |||
SPDR S&P Homebuilders ETF |
XHB | |||
SPDR S&P Metals & Mining ETF |
XME | |||
SPDR S&P Oil & Gas Equipment & Services ETF |
XES | |||
SPDR S&P Oil & Gas Exploration & Production ETF |
XOP | |||
SPDR S&P Pharmaceuticals ETF |
XPH | |||
SPDR S&P Retail ETF |
XRT | |||
SPDR S&P Semiconductor ETF |
XSD | |||
SPDR S&P Software & Services ETF |
XSW | |||
SPDR S&P Telecom ETF |
XTL | |||
SPDR S&P Transportation ETF |
XTN | |||
SPDR S&P Regional Banking (SM) ETF |
KRE | |||
SPDR Barclays 1-3 Month T-Bill ETF |
BIL | |||
SPDR Barclays Intermediate Term Treasury ETF |
ITE | |||
SPDR Barclays Long Term Treasury ETF |
TLO | |||
SPDR Barclays TIPS ETF |
IPE | |||
SPDR Barclays Aggregate Bond ETF |
LAG | |||
SPDR Nuveen Barclays Municipal Bond ETF |
TFI | |||
SPDR Barclays International Treasury Bond ETF |
BWX | |||
SPDR Nuveen Barclays Short Term Municipal Bond ETF |
SHM |
1
ETF |
Trading
Symbol |
|||
SPDR Nuveen Barclays California Municipal Bond ETF |
CXA | |||
SPDR Nuveen Barclays New York Municipal Bond ETF |
INY | |||
SPDR Barclays High Yield Bond ETF |
JNK | |||
SPDR DB International Government Inflation-Protected Bond ETF |
WIP | |||
SPDR Barclays Short Term International Treasury Bond ETF |
BWZ | |||
SPDR Barclays Intermediate Term Corporate Bond ETF |
ITR | |||
SPDR Barclays Long Term Corporate Bond ETF |
LWC | |||
SPDR Barclays Convertible Securities ETF |
CWB | |||
SPDR Barclays Mortgage Backed Bond ETF |
MBG | |||
SPDR Wells Fargo Preferred Stock ETF |
PSK | |||
SPDR Barclays Short Term Corporate Bond ETF |
SCPB | |||
SPDR Nuveen Barclays Build America Bond ETF |
BABS | |||
SPDR Barclays International Corporate Bond ETF |
IBND | |||
SPDR Barclays Emerging Markets Local Bond ETF |
EBND | |||
SPDR Barclays Issuer Scored Corporate Bond ETF |
CBND | |||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
HYMB | |||
SPDR Barclays Short Term Treasury ETF |
SST | |||
SPDR Barclays Investment Grade Floating Rate ETF |
FLRN | |||
SPDR Barclays Short Term High Yield Bond ETF |
SJNK | |||
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
EMCD | |||
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
XOVR | |||
SPDR S&P 1500 Value Tilt ETF |
VLU | |||
SPDR S&P 1500 Momentum Tilt ETF |
MMTM | |||
SPDR Russell 1000 Low Volatility ETF |
LGLV | |||
SPDR Russell 2000 Low Volatility ETF |
SMLV | |||
SPDR Barclays 1-10 Year TIPS ETF |
TIPX | |||
SPDR Russell 2000 ® ETF |
TWOK | |||
SPDR Barclays 0-5 Year TIPS ETF |
SIPE | |||
SPDR Barclays International High Yield Bond ETF |
IJNK | |||
SPDR S&P 500 Buyback ETF |
SPYB | |||
SPDR MSCI USA Quality Mix ETF |
QUS | |||
SPDR S&P 500 High Dividend ETF |
SPYD |
Dated: October 21, 2015
2
SCHEDULE OF SERIES PORTFOLIOS OF SPDR ® SERIES TRUST
Dated: October 21, 2015
Fund Name |
SPDR Russell 3000 ® ETF |
SPDR Russell 1000 ® ETF |
SPDR S&P 500 ® Growth ETF |
SPDR S&P 500 Value ETF |
SPDR Russell Small Cap Completeness ® ETF |
SPDR S&P 400 Mid Cap Growth ETF |
SPDR S&P 400 Mid Cap Value ETF |
SPDR S&P 600 Small Cap ETF |
SPDR S&P 600 Small Cap Growth ETF |
SPDR S&P 600 Small Cap Value ETF |
SPDR Global Dow ETF |
SPDR Dow Jones REIT ETF |
SPDR S&P Bank ETF |
SPDR S&P Capital Markets ETF |
SPDR S&P Insurance ETF |
SPDR Morgan Stanley Technology ETF |
SPDR S&P Dividend ETF |
SPDR S&P Aerospace & Defense ETF |
SPDR S&P Biotech ETF |
SPDR S&P Health Care Equipment ETF |
SPDR S&P Health Care Services ETF |
SPDR S&P Homebuilders ETF |
SPDR S&P Metals & Mining ETF |
SPDR S&P Oil & Gas Equipment & Services ETF |
SPDR S&P Oil & Gas Exploration & Production ETF |
SPDR S&P Pharmaceuticals ETF |
SPDR S&P Retail ETF |
SPDR S&P Semiconductor ETF |
SPDR S&P Software & Services ETF |
SPDR S&P Telecom ETF |
SPDR S&P Transportation ETF |
SPDR S&P Regional Banking ETF |
SPDR Barclays 1-3 Month T-Bill ETF |
SPDR Barclays Intermediate Term Treasury ETF |
SPDR Barclays Long Term Treasury ETF |
SPDR Barclays TIPS ETF |
SPDR Barclays Aggregate Bond ETF |
SPDR Nuveen Barclays Municipal Bond ETF |
SPDR Barclays International Treasury Bond ETF |
SPDR Nuveen Barclays Short Term Municipal Bond ETF |
SPDR Nuveen Barclays California Municipal Bond ETF |
SPDR Nuveen Barclays New York Municipal Bond ETF |
SPDR Barclays High Yield Bond ETF |
SPDR DB International Government Inflation-Protected Bond ETF |
Fund Name |
SPDR Barclays Short Term International Treasury Bond ETF |
SPDR Barclays Intermediate Term Corporate Bond ETF |
SPDR Barclays Long Term Corporate Bond ETF |
SPDR Barclays Convertible Securities ETF |
SPDR Barclays Mortgage Backed Bond ETF |
SPDR Wells Fargo Preferred Stock ETF |
SPDR Barclays Short Term Corporate Bond ETF |
SPDR Nuveen Barclays Build America Bond ETF |
SPDR Barclays International Corporate Bond ETF |
SPDR Barclays Emerging Markets Local Bond ETF |
SPDR Barclays Issuer Scored Corporate Bond ETF |
SPDR Nuveen S&P High Yield Municipal Bond ETF |
SPDR Barclays Short Term Treasury ETF |
SPDR Barclays Investment Grade Floating Rate ETF |
SPDR Barclays Short Term High Yield Bond ETF |
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
SPDR Barclays Global Convertible Securities ETF |
SPDR S&P 1500 Value Tilt ETF |
SPDR S&P 1500 Momentum Tilt ETF |
SPDR Russell 1000 Low Volatility ETF |
SPDR Russell 2000 Low Volatility ETF |
SPDR Barclays 1-10 Year TIPS ETF |
SPDR Russell 2000 ® ETF |
SPDR Barclays 0-5 Year TIPS ETF |
SPDR Barclays International High Yield Bond ETF |
SPDR S&P 500 Buyback ETF |
SPDR MSCI USA Quality Mix ETF |
SPDR S&P 500 High Dividend ETF |
SPDR
ADMINISTRATION AGREEMENT
This Administration Agreement ( Agreement ) dated and effective as of June 1, 2015, is by and between SSGA Funds Management, Inc., a Massachusetts corporation (the Administrator ), and each of SPDR Series Trust, SPDR Index Shares Funds, SSGA Active Trust and SSGA Master Trust, each a Massachusetts business trust (together, the Trust ). 1
WHEREAS, the Trust is an open-end management investment company comprised of multiple series (each, a Fund and collectively, the Funds ), and is registered with the U.S. Securities and Exchange Commission ( SEC ) by means of a registration statement ( Registration Statement ) under the Securities Act of 1933, as amended (the 1933 Act ), and the Investment Company Act of 1940, as amended (the 1940 Act ); and
WHEREAS, the Trust desires to retain the Administrator to furnish certain administrative services to the Trust, and the Administrator is willing to furnish, or cause to be furnished, such services, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:
1. | A PPOINTMENT OF A DMINISTRATOR |
The Trust hereby appoints the Administrator to act as administrator to the Trust for purposes of providing the administrative services described herein for the period and on the terms set forth in this Agreement. The Administrator accepts such appointment and agrees to render, or cause to be rendered, such services. The Administrator is authorized to and may employ, associate or contract with such person or persons as the Administrator may deem desirable to assist it in performing its duties under this Agreement; provided, however , that the compensation of such person or persons shall be paid by the Administrator and that the Administrator shall be as fully responsible to the Trust for the acts and omissions of any such person or persons as it is for its own acts and omissions.
The Trust currently consists of the Funds as listed in Schedule A to this Agreement. In the event that the Trust establishes one or more additional Fund(s) with respect to which it wishes to retain the Administrator to act as administrator hereunder, the Trust shall notify the Administrator in writing. Upon written acceptance by the Administrator, such Fund(s) shall become subject to the provisions of this Agreement to the same extent as the existing Funds, except to the extent that such provisions (including those relating to compensation and expenses payable) may be modified with respect to such Fund(s) in writing by the Trust and the Administrator at the time of the addition of such Fund(s). Each such writing shall be considered an amendment to, and become a part of, this Agreement.
1 | Unless otherwise noted, the singular term Trust used throughout this document means each of SPDR Series Trust, SPDR Index Shares Funds, SSGA Active Trust and SSGA Master Trust. |
SPDR
2. | D ELIVERY OF D OCUMENTS |
The Trust will promptly deliver to the Administrator copies of each of the following documents and all future amendments and supplements, if any, as applicable:
a. | The Trusts Amended and Restated Declaration of Trust (the Declaration of Trust ) and By-Laws; |
b. | The Trusts currently effective Registration Statement under the 1933 Act and/or the 1940 Act and each Prospectus and Statement of Additional Information ( SAI ) relating to the Fund(s) and all amendments and supplements thereto as in effect from time to time; |
c. | Copies of the resolutions of the Board of Trustees of the Trust (the Board ) certified by the Trusts Secretary authorizing (1) the Trust to enter into this Agreement and (2) certain individuals on behalf of the Trust to (a) give instructions to the Administrator pursuant to this Agreement and (b) sign checks and pay expenses; |
d. | A copy of the investment advisory agreement between the Trust and its investment adviser; and |
e. | Such other certificates, documents or opinions which the Administrator may, in its reasonable discretion, deem necessary or appropriate in the proper performance of its duties. |
3. | R EPRESENTATIONS AND W ARRANTIES OF THE A DMINISTRATOR |
The Administrator represents and warrants to the Trust that:
a. | It is a Massachusetts corporation, duly organized and existing under the laws of The Commonwealth of Massachusetts; |
b. | It has the corporate power and authority to carry on its business in The Commonwealth of Massachusetts; |
c. | All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; |
d. | No legal or administrative proceedings have been instituted or threatened which would materially impair the Administrators ability to perform its duties and obligations under this Agreement; and |
e. | Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Administrator or any law or regulation applicable to it. |
f. | The Administrator has duly adopted written policies and procedures that are reasonably designed to prevent violation of the Federal Securities Laws (as defined |
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SPDR
in Rule 38a-1 under the 1940 Act) with respect to the services provided hereunder to the Trust and the Funds. |
4. | R EPRESENTATIONS AND W ARRANTIES OF THE T RUST |
The Trust represents and warrants to the Administrator that:
a. | It is a business trust, duly organized, existing and in good standing under the laws of The Commonwealth of Massachusetts; |
b. | It has the requisite power and authority under applicable laws and by its Declaration of Trust and By-Laws to enter into and perform this Agreement; |
c. | All requisite proceedings have been taken to authorize it to enter into and perform this Agreement; |
d. | It is an investment company properly registered with the SEC under the 1940 Act; |
e. | The Registration Statement has been filed and will be effective and remain effective during the term of this Agreement. The Trust also warrants to the Administrator that as of the effective date of this Agreement, all necessary filings under the securities laws of the states in which the Trust offers or sells its shares have been made; |
f. | No legal or administrative proceedings have been instituted or threatened which would impair the Trusts ability to perform its duties and obligations under this Agreement; |
g. | Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Trust or any law or regulation applicable to it; |
h. | The Trust is authorized to issue unlimited shares of beneficial interest and the Trustees have authorized the establishment of the series of shares listed on Schedule A ; and |
i. |
Where information provided by the Trust or the Trusts investors includes information about an identifiable individual ( Personal Information ), the Trust represents and warrants that it has obtained all consents and approvals, as required by all applicable laws, regulations, by-laws and ordinances that regulate the collection, processing, use or disclosure of Personal Information, necessary to disclose such Personal Information to the Administrator, and as required for the Administrator to use and disclose such Personal Information in connection with the performance of the services hereunder. The Trust acknowledges that the Administrator may perform any of the services, and may use and disclose Personal Information outside of the jurisdiction in which it was initially collected by the Trust, including the United States and that information relating to the Trust, including Personal Information may be accessed by national security authorities, law enforcement and courts. The Administrator shall be kept indemnified by and be without liability to the Trust for any action taken or omitted by it in reliance |
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SPDR
upon this representation and warranty, including without limitation, any liability or costs in connection with claims or complaints for failure to comply with any applicable law that regulates the collection, processing, use or disclosure of Personal Information. |
5. | A DMINISTRATION S ERVICES |
The Administrator shall provide, or cause to be provided, the following services, subject to the control, supervision, authorization and direction of the Board and, in each case where appropriate, the review and comment by the Funds independent accountants and outside counsel and in accordance with procedures which may be established from time to time between the Trust and the Administrator:
General Services
a. | Monitor and coordinate the activities of the other service providers of the Funds, including the distributor, investment adviser, custodian, transfer agent, sub-administrator, the Funds outside counsel and independent accountants, as well as coordination of the Funds compliance efforts and support for the Trusts chief compliance officer; |
b. | Upon request, report to the Board regarding the activities of each of the service providers; |
c. | Assist the Funds in preparing for and handling regulatory examinations, inquiries and investigations, including working closely with outside counsel to the Funds and counsel to the trustees who are not interested persons of the Funds under the 1940 Act ( Independent Trustees ); |
d. | Provide and maintain office facilities for the Funds (which may be in the offices of the Administrator or an affiliate); |
e. | Cause to be furnished for the Trust a Secretary and one or more Assistant Secretaries as provided by the Trusts By-Laws, if so appointed by the Board, who shall perform corporate secretarial services as provided in the By-Laws, including assisting in the coordination of Board meetings and the preparation and distribution of materials and reports for meetings of the Board, the Independent Trustees and committees of the Board; |
f. | Provide suitable personnel to serve as officers of the Trust as provided by the Trusts By-Laws, if so qualified and appointed by the Board; |
g. | Except as otherwise provided in this Section 5, monitor and generally assist in all aspects of the Trusts operations and provide mutually agreed upon reports to the Board and the Trusts Chief Compliance Officer; provided, however, that nothing contained herein shall be deemed to relieve or deprive the Board of its responsibility for and control of the conduct of the Trusts affairs; |
h. | Provide assistance with investor and public relations matters; |
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SPDR
i. | Prepare responses to major industry questionnaires; |
j. | Perform agreed-upon shareholder servicing and processing functions not assumed by shareholder servicing agents or any other party; |
k. | Prepare reports relating to the business and affairs of the Trust as may be mutually agreed upon and not otherwise prepared by the Trusts investment adviser, custodian, outside counsel or independent accountants. |
l. | Assist the Trust in the development of additional investment portfolios; |
m. | Implement and maintain a disaster recovery program for the Trusts records, and the business continuity plan for the Trust; |
n. | Supervise, negotiate contractual arrangements with (to the extent appropriate) and monitor the performance of, third party accounting agents, custodians, depositories, transfer agent, pricing agents, independent accountants, attorneys, printers, insurers, shareholder servicing and processing agents, banks (for lines of credit) and other persons in any capacity deemed to be necessary or desirable to Trust or Fund operations; |
o. | To the extent relevant to the Trust, perform the Trusts policies and procedures with respect to market timing, anti-money laundering, customer identification, privacy, sales load breakpoints and redemption fees, to the extent these policies and procedures have been adopted and have not been delegated to another service provider of the Trust; |
p. | Otherwise assist the Trust as it may reasonably request in the conduct of each Funds business. |
Without limiting the generality of the foregoing, the Administration Services will also include the following duties:
Fund Administration Treasury Services
q. | Monitor and coordinate all aspects of the Funds accounting functions, including, without limitation, as applicable to the operations of the Funds, internal controls over financial reporting, income and expense accruals, accounts receivable and payable, portfolio valuation (including reviewing and reporting on asset valuations), securities lending, interfund lending, Rule 12b-1 and certain servicing payments; |
r. | Prepare, in cooperation with and subject to review by the Funds investment adviser and Fund Counsel where applicable, all necessary financial information that will be included in the Funds semi-annual and annual shareholder reports, Form N-CSR, Form N-Q and other of the Funds regulatory filings and quarterly reports to the Trusts Board (as mutually agreed upon by the Board, Counsel to the Independent Trustees, the Fund Counsel or the Funds investment adviser, as appropriate), including tax footnote disclosures where applicable; |
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SPDR
s. | Coordinate and, subject to the authority of the Trusts Audit Committee, direct the audit of the Funds financial statements, including (subject to the review and approval of the Trusts Audit Committee) the negotiation of engagement letters, preparation of supporting workpapers and other schedules, and (2) make such reports and recommendations to the Board or its Audit Committee concerning the performance of the Funds independent accountants as the Board or the Audit Committee may reasonably request; |
t. | Prepare, in cooperation with and subject to review by the Funds investment adviser and Fund Counsel where applicable, the Funds periodic financial reports required to be filed with the SEC on Forms N-SAR, N-CSR, and Form N-Q and financial and other information required by Form N-1A and periodic updates thereto, proxy statements and such other reports, forms or filings as set forth herein and as may be mutually agreed upon; |
u. | Prepare for review by an officer of the Trust, the Funds annual expense budgets, perform accrual analyses and rollforward calculations and recommend changes to Fund expense accruals on a periodic basis, review calculations, submit for approval by officers of the Trust and arrange for payment of the Funds expenses, review calculations of fees paid to the Funds investment adviser, custodian, fund accountant, distributor, and transfer agent, and obtain authorization of accrual changes and expense payments; |
v. | Provide periodic post trade testing of the Funds with respect to compliance with the Internal Revenue Codes mandatory qualification requirements, the requirements of the 1940 Act and limitations for each Fund contained in the Registration Statement for the Funds, including quarterly compliance reporting to the Trusts officers as well as preparation of Board compliance materials; |
w. | Provide total return performance data for each Fund, including such information on an after-tax basis, calculated in accordance with all applicable securities laws and regulatory requirements, and as may be reasonably requested by the Trusts management; |
x. | Prepare and disseminate information related to reviews of the Funds service providers, vendor surveys and other related information as reasonably requested; |
y. | Prepare and coordinate the filing of Rule 24f-2 notices, including coordination of payment to the SEC by the Funds; |
z. | Periodically review the Funds internal controls over financial reporting, and conduct periodic meetings of the Trusts Disclosure Controls and Procedures Committee, including the representation of the Administrator in such meetings; |
aa. | Maintain certain books and records of the Funds as required under Rule 31a-1(b) of the 1940 Act and as may be mutually agreed upon; |
bb. | Consult with the Trusts officers, fund accountant, independent accountants and, when necessary or appropriate, Fund Counsel, the custodian, investment adviser and transfer agent in establishing the accounting policies of the Funds; |
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SPDR
cc. | Assist in the resolution of accounting issues that may arise with respect to each Funds operations and consult with each Funds independent accountants, Fund Counsel and each Funds other agents as necessary in connection therewith; |
dd. | Oversee the determination and publication of the Funds net asset values in accordance with the Funds policy as adopted from time to time by the Board; |
ee. | Provide, or through the Funds other service providers coordinate the provision of, accounting, tax and related technical support to the Funds, including the review and presentation to the Board for approval of securities valuation methods and sources and reporting on the services provided by the Funds custodians portfolio accounting group; |
Fund Administration Legal Services
ff. | Prepare and distribute the agenda and background materials for all Board meetings and the meetings of the Boards committees, attend and make presentations at Board and Board committee meetings where appropriate or requested, prepare minutes for all Board and Board committee meetings; facilitate communications with, and the activities of, the Trusts Independent Trustees and their counsel; facilitate meetings of the Trusts independent chairman; monitor and coordinate the follow-up on matters raised at any Board, Board committee and chairmans meetings; and attend shareholder meetings and prepare minutes of all such meetings; |
gg. | Refer to the Trusts officers or transfer agent, and, as appropriate the Board, any shareholder inquiries relating to the Funds to the extent that the Administrator is the first party to become aware of such inquiries. |
hh. | Coordinate and oversee the vendors providing state securities (blue sky) registration and maintenance and, in connection therewith, perform the services detailed in Schedule B hereto; |
ii. | Compile and maintain the Trusts Trustees and Officers Questionnaires; |
jj. | In cooperation with the Trusts Chief Compliance Officer and investment adviser, prepare and file with the SEC: Form N-CSR; Form N-Q; Form N-PX; and Form N-1A, including all necessary amendments, updates and sticker supplements of the prospectus and statement of additional information for each Fund as well as certain of the Funds other communications with the SEC regarding the Funds regulatory filings; |
kk. | In cooperation with and subject to review by the Trusts investment adviser and Fund Counsel, prepare any necessary proxy statements, file such statements with the SEC and provide consultation on proxy solicitation matters; |
ll. | Assist the Trust in all other required filings of the Funds made with the SEC (such as exemptive applications and no-action letter requests) or any other regulatory entities, including state corporation reports and private letter ruling requests with the IRS; |
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mm. | Maintain general Board calendars and regulatory filings calendars; |
nn. | Maintain copies of the Trusts Declaration of Trust and By-Laws. |
oo. | Act as liaison to Fund Counsel and counsel to the Independent Trustees; |
pp. | In cooperation with and subject to review by the Trusts Chief Compliance Officer and investment adviser, assist in developing and periodically reviewing the Funds 1940 Act Rule 38a-1 Compliance Policies and Procedures Manual; |
qq. | Maintain continuing awareness of significant emerging regulatory and legislative developments that may affect the Funds, update the Board, Trust officers and the investment adviser on those developments and provide related planning assistance where requested or appropriate; |
rr. | Coordinate the Trusts insurance coverage, including facilitating the solicitation of bids for Directors & Officers/Errors & Omissions (D&O/E&O) insurance and fidelity bond coverage, file fidelity bonds with the SEC and make related Board presentations; |
ss. | Coordinate the quarterly and annual compliance reporting of the Administrator for review by the Trusts Chief Compliance Officer; |
tt. | Participate and assist in the preparation and filing of responses to inspections or examinations, where applicable, by the SEC and other regulatory authorities; |
uu. | Coordinate the printing of the prospectus and shareholder financial reports; |
vv. | Coordinate legal guidance on alternative distribution structures for the Funds shares; |
ww. | Review all contracts concerning the acquisition of other investment companies or the liquidation of a Fund; draft, negotiate and file various documentation required in connection therewith; provide guidance on the manner such transactions should be structured to comply with applicable law; and obtain at the Trusts expense legal opinions and regulatory authority rulings necessary for such transactions to comply with applicable law; |
xx. | Prepare and file, or oversee the preparation and filing of, any claims in connection with class actions involving portfolio securities, handle administrative matters in connection with the litigation or settlement of such claims, and prepare reports to the Board regarding such matters; |
yy. | Prepare or oversee the preparation of all press releases and notices to the national securities exchange on which the Funds shares are listed. |
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SPDR
Fund Administration Tax Services
zz. | Compute tax basis provisions for both excise and income tax purposes; |
aaa. | Prepare initial federal, state and local income tax returns for the Funds and direct, assist and coordinate the review of the Funds federal, state, and local income tax returns and any required extension requests by the Funds independent accountants, as paid tax preparers, and execution and filing by the Trusts treasurer, including Form 1120-RIC, Form 8613 and Forms 1099; |
bbb. | Coordinate Form 1099 mailings; |
ccc. | Review and approve periodic income distribution calculations, including estimates, and annual minimum distribution calculations (income and capital gain) prior to their declaration; and |
ddd. | Provide consultation, as needed or requested, to the Trusts officers and the adviser supporting tax elections and policies of the Funds. |
The Administrator shall perform such other services for the Funds for which the Trust will pay such fees, including the Administrators reasonable out-of-pocket expenses, as may be mutually agreed upon by the Board and Administrator from time to time. The provision of such services shall be subject to the terms and conditions of this Agreement.
6. | F EES ; E XPENSES ; E XPENSE R EIMBURSEMENT |
The Administrator shall receive from the Trust such compensation for the Administrators services provided pursuant to this Agreement as may be agreed to from time to time in a written Fee Schedule approved by the parties. The fees are accrued daily and billed monthly and shall be due and payable upon receipt of the invoice. Upon the termination of this Agreement before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable upon the date of termination of this Agreement. In addition, the Trust shall reimburse the Administrator for its out-of-pocket costs incurred in connection with this Agreement. All rights of compensation and expense reimbursement under this Agreement for services performed as of the termination date shall survive the termination of this Agreement.
The Trust agrees promptly to reimburse the Administrator for any equipment and supplies specially ordered by or for the Trust through the Administrator and for any other expenses not contemplated by this Agreement that the Administrator may incur on the Trusts behalf at the Trusts request or with the Trusts consent.
The Trust will bear all expenses that are incurred in its operation and not specifically assumed by the Administrator or another party. Expenses to be borne by the Trust include, but are not limited to: organizational expenses; cost of services of independent accountants and Fund Counsel (including such counsels review of the Registration Statement, Form N-CSR, Form N-Q, Form N-PX, Form N-SAR, proxy materials, federal and state tax qualification as a regulated investment company and other notices, registrations, reports, filings and materials prepared by the Administrator under this Agreement); cost of any services contracted for by the Trust directly from parties other than the Administrator; cost of trading operations and brokerage fees,
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commissions and transfer taxes in connection with the purchase and sale of securities for the Trust; investment advisory fees; taxes, insurance premiums and other fees and expenses applicable to its operation; costs incidental to any meetings of shareholders including, but not limited to, legal and accounting fees, proxy filing fees and the costs of preparation ( e.g. , typesetting, XBRL-tagging, page changes and all other print vendor and EDGAR charges, collectively referred to herein as Preparation ), printing, distribution and mailing of any proxy materials; costs incidental to Board meetings, including fees of Independent Trustees and expenses of Board members; the salary and expenses of any officer or Trustee of the Trust; costs of Preparation, printing, distribution and mailing, as applicable, of the Trusts Registration Statements and any amendments and supplements thereto and shareholder reports; cost of Preparation and filing of the Trusts tax returns, Form N-1A, Form N-CSR, Form N-Q, Form N-PX, Form N-SAR and all notices, registrations and amendments associated with applicable federal and state tax and securities laws; all applicable registration fees and filing fees required under federal and state securities laws; the cost of fidelity bond and D&O/E&O liability insurance; and the cost of independent pricing services used in computing the Funds net asset value.
7. | I NSTRUCTIONS AND A DVICE |
At any time, the Administrator may apply to any officer of the Trust or his or her designee for instructions and may consult with the independent accountants for the Trust at the expense of the Trust, with respect to any matter arising in connection with the services to be performed by the Administrator under this Agreement.
The Administrator shall not be liable, and shall be indemnified by the Trust, for any action taken or omitted by it in good faith in reliance upon any such instructions or advice or upon any paper or document believed by it to be genuine and to have been signed by the proper person or persons. The Administrator shall not be held to have notice of any change of authority of any person until receipt of written notice thereof from the Trust. Nothing in this section shall be construed as imposing upon the Administrator any obligation to seek such instructions or advice, or to act in accordance with such advice when received.
8. | L IMITATION OF L IABILITY AND I NDEMNIFICATION |
The Administrator shall be responsible for the performance only of such duties as are set forth in this Agreement and, except as otherwise provided under Section 1, shall have no responsibility for the actions or activities of any other party, including other service providers. The Administrator shall have no liability for any error of judgment or mistake of law or for any loss or damage resulting from the performance or nonperformance of its duties hereunder unless such loss or damage arises directly from, and then only to the extent of, the gross negligence or willful misconduct of the Administrator, or any subcontractor engaged by the Administrator to provide services hereunder, and their respective officers and employees. The Administrator shall not be liable for any special, indirect, incidental, punitive or consequential damages, including lost profits, of any kind whatsoever (including, without limitation, attorneys fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder, each of which is hereby excluded by agreement of the parties regardless of whether such damages were foreseeable or whether either party or any entity had been advised of the possibility of such damages. In any event, except as otherwise agreed to in writing by the parties hereto, the Administrators cumulative liability for each calendar year (a Liability Period ) with respect to the Trust under this Agreement regardless of the form of action or legal theory shall be limited to
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its total annual compensation earned and fees payable hereunder during the preceding Compensation Period, as defined herein, for any liability or loss suffered by the Trust including, but not limited to, any liability relating to qualification of the Trust as a regulated investment company or any liability relating to the Trusts compliance with any federal or state tax or securities statute, regulation or ruling during such Liability Period. Compensation Period shall mean the calendar year ending immediately prior to each Liability Period in which the event(s) giving rise to the Administrators liability for that period have occurred. Notwithstanding the foregoing, the Compensation Period for purposes of calculating the annual cumulative liability of the Administrator for the Liability Period commencing on the date of this Agreement and terminating on May 31, 2016 shall be the date of this Agreement through May 31, 2016 calculated on an annualized basis.
The Administrator shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its control, including without limitation, work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action or communication disruption.
The Trust shall indemnify and hold the Administrator and its directors, officers, employees and agents harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by the Administrator resulting from any claim, demand, action or suit in connection with the Administrators acceptance of this Agreement, any action or omission by it in the performance of its duties hereunder, or as a result of acting upon any instructions reasonably believed by it to have been duly authorized by the Trust or upon reasonable reliance on information or records given or made by the Trust or its investment adviser, provided that this indemnification shall not apply to actions or omissions of the Administrator, or any subcontractor engaged by the Administrator to provide services hereunder, or to their respective officers or employees in cases of its or their own gross negligence or willful misconduct.
The limitation of liability and indemnification contained herein shall survive the termination of this Agreement.
9. | C ONFIDENTIALITY |
All information provided under this agreement by a party (the Disclosing Party ) to the other party (the Receiving Party ) regarding the Disclosing Partys business and operations shall be treated as confidential. Subject to Section 17 below, all confidential information provided under this Agreement by Disclosing Party shall be used, including disclosure to third parties, by the Receiving Party, or its agents or service providers, solely for the purpose of performing or receiving the services and discharging the Receiving Partys other obligations under the Agreement or managing the business of the Receiving Party and its Affiliates (as defined in Section 17 below), including financial and operational management and reporting, risk management, legal and regulatory compliance and client service management.
The foregoing shall not be applicable to any information (a) that is publicly available when provided or thereafter becomes publicly available, other than through a breach of this Agreement, (b) that is independently derived by the Receiving Party without the use of any information provided by the Disclosing Party in connection with this Agreement, (c) that is disclosed to comply with any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, (d) that is disclosed as required
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by operation of law or regulation or as required to comply with the requirements of any market infrastructure that the Disclosing Party or its agents direct the Administrator or its Affiliates to employ (or which is required in connection with the holding or settlement of instruments included in the assets subject to this Agreement) or (e) where the party seeking to disclose has received the prior written consent of the party providing the information, which consent shall not be unreasonably withheld.
The undertakings and obligations contained in this Section shall survive the termination or expiration of this Agreement for a period of five (5) years.
10. | C OMPLIANCE WITH G OVERNMENTAL R ULES AND R EGULATIONS ; R ECORDS |
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Administrator agrees that all records which it maintains for the Trust shall at all times remain the property of the Trust, shall be readily accessible during normal business hours, and shall be promptly surrendered upon the termination of the Agreement or otherwise on written request except as otherwise provided in Section 12. The Administrator further agrees that all records that it maintains for the Trust pursuant to Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as provided above. Records may be surrendered in either written or machine-readable form, at the option of the Administrator.
11. | S ERVICES N OT E XCLUSIVE |
The services of the Administrator are not to be deemed exclusive, and the Administrator shall be free to render similar services to others. The Administrator shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized by the Trust from time to time, have no authority to act or represent the Trust in any way or otherwise be deemed an agent of the Trust.
12. | E FFECTIVE P ERIOD AND T ERMINATION |
The Agreement shall commence on June 1, 2015 and shall continue for an initial term until May 31, 2016 (the Initial Term), and thereafter shall automatically continue for successive one year periods (each a Renewal Term ); provided however, that at any time during the Initial Term or any Renewal Term either party may terminate the Agreement on sixty (60) days prior written notice to the other party. Termination of this Agreement with respect to any Fund shall in no way affect the continued validity of this Agreement with respect to the Trust or any other Fund. Upon termination of this Agreement pursuant to this paragraph with respect to the Trust or any Fund, the Trust or applicable Fund shall pay Administrator its compensation due for services rendered prior to the termination date, and shall reimburse Administrator for its costs, expenses and disbursements with respect to services rendered prior to the termination date. Upon termination of this Agreement, the Administrator will deliver the Trusts or such Funds records as set forth herein.
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13. | N OTICES |
Any notice or other communication authorized or required by this Agreement to be given to either party shall be in writing and deemed to have been given when delivered in person or by confirmed facsimile, by overnight delivery through a commercial courier service, or posted by certified mail, return receipt requested, to the following address (or such other address as a party may specify by written notice to the other):
If to the Trust:
SPDR Series Trust / SPDR Index Shares Funds / SSGA Master Trust / SSGA Active
Trust
One Lincoln Street
Boston, MA 02111
Attn: Ellen Needham, President
Facsimile: 617-664-4011
If to the Administrator:
SSGA Funds Management, Inc.
One Lincoln Street
Boston, MA 02111
Attn: Ann Carpenter, Chief Operating Officer
Facsimile: 617-664-4011
14. | A MENDMENT |
This Agreement may be amended at any time in writing by mutual agreement of the parties hereto.
15. | A SSIGNMENT |
This Agreement shall not be assigned by either party hereto without the prior consent in writing of the other party, except that the Administrator may assign this Agreement to an affiliate that is the successor to all or a substantial portion of its business.
16. | S UCCESSORS |
This Agreement shall be binding on and shall inure to the benefit of the Trust and the Administrator and their respective successors and permitted assigns.
17. | D ATA P ROTECTION |
a. |
The Administrator shall implement and maintain a comprehensive written information security program that contains appropriate security measures to safeguard the personal information of the Trusts shareholders, Trustees and/or officers that the Administrator receives, stores, maintains, processes or otherwise accesses in connection with the provision of services hereunder. For these purposes, personal information shall mean (i) an individuals name (first initial |
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and last name or first name and last name), address or telephone number plus (a) social security number, (b) drivers license number, (c) state identification card number, (d) debit or credit card number, (e) financial account number or (f) personal identification number or password that would permit access to a persons account or (ii) any combination of the foregoing that would allow a person to log onto or access an individuals account. Notwithstanding the foregoing personal information shall not include information that is lawfully obtained from publicly available information, or from federal, state or local government records lawfully made available to the general public. |
b. | In connection with the provision of the services and the discharge of its other obligations under this Agreement, the Administrator (which term for purposes of this Section 17 includes each of its parent company, branches and affiliates ( Affiliates )) may collect and store information regarding the Trust or Fund(s) and share such information with its Affiliates, agents and service providers in order and to the extent reasonably necessary (i) to carry out the provision of services contemplated under this Agreement and other agreements between the Administrator or any of its Affiliates and the Trust and (ii) to carry out management of its businesses, including, but not limited to, financial and operational management and reporting, risk management, legal and regulatory compliance and client service management. |
c. | Subject to paragraph (d) below, the Administrator and/or its Affiliates (except those Affiliates or business divisions principally engaged in the business of asset management) may use any data or other information ( Data ) obtained by such entities in the performance of their services under this Agreement or any other agreement between the Trust and the Administrator or one of its Affiliates, including Data regarding transactions and portfolio holdings relating to the Trust/Fund, and publish, sell, distribute or otherwise commercialize the Data; provided that, unless the Trust and the Administrator otherwise consents, Data is combined or aggregated with information relating to (i) other customers of the Administrator and/or its Affiliates or (ii) information derived from other sources, in each case such that any published information will be displayed in a manner designed to prevent attribution to or identification of such Data with the Trust/Fund. The Trust agrees that Administrator and /or its Affiliates may seek to profit and realize economic benefit from the commercialization and use of the Data, that such benefit will constitute part of the Administrators compensation for services under this Agreement or such other agreement, and the Administrator and/or its Affiliates shall be entitled to retain and not be required to disclose, except to the Board for purposes of Section 15(c) of the 1940 Act, the amount of such economic benefit and profit to the Administrator or the Trust/Fund. |
d. | Except as expressly contemplated by this Agreement, nothing in this Section 17 shall limit the confidentiality and data-protection obligations of the Administrator and its Affiliates under this Agreement and applicable law. The Administrator shall cause any Affiliate, agent or service provider to which it has disclosed Data pursuant to this Section 17 to comply at all times with confidentiality and data-protection obligations as if it were a party to this Agreement. |
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18. | E NTIRE A GREEMENT |
This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous representations, warranties or commitments regarding the services to be performed hereunder whether oral or in writing.
19. | W AIVER |
The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver nor shall it deprive such party of the right thereafter to insist upon strict adherence to that term or any term of this Agreement. Any waiver must be in writing signed by the waiving party.
20. | S EVERABILITY |
If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance it shall nevertheless remain applicable to all other persons and circumstances.
21. | G OVERNING L AW |
This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts, without regard to its conflicts of laws provisions.
22. | R EPRODUCTION OF D OCUMENTS |
This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, xerographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
23. | C OUNTERPARTS |
This Agreement may be executed by the parties hereto on multiple counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
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24. | L IMITATION OF L IABILITY OF THE T RUSTEES AND S HAREHOLDERS |
The Declaration of Trust, establishing the Trust, which is hereby referred to and a copy of which is on file with the Secretary of The Commonwealth of Massachusetts, provides that the Trust means the Trustees from time to time serving (as Trustees but not personally) under such Declaration of Trust. It is expressly acknowledged and agreed that the obligations of the Trust hereunder shall not be binding upon any of the shareholders, Trustees, officers, employees or agents of the Trust, personally, but shall bind only the trust property of the Trust, as provided in its Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees of the Trust and signed by an officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of the Trust as provided in its Declaration of Trust.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first written above.
SPDR SERIES TRUST | ||
By: | /s/ Chad Hallett | |
Name: | Chad Hallett | |
Title: | Treasurer |
SPDR INDEX SHARES FUNDS | ||
By: | /s/ Chad Hallett | |
Name: | Chad Hallett | |
Title: | Treasurer |
SSGA MASTER TRUST | ||
By: | /s/ Chad Hallett | |
Name: | Chad Hallett | |
Title: | Treasurer |
SSGA ACTIVE TRUST | ||
By: | /s/ Chad Hallett | |
Name: | Chad Hallett | |
Title: | Treasurer |
SSGA FUNDS MANAGEMENT, INC. | ||
By: | /s/ Ellen M. Needham | |
Name: | Ellen M. Needham | |
Title: | President |
Administration Agreement
ADMINISTRATION AGREEMENT
SCHEDULE A
Listing of Funds
SPDR Index Shares Funds
OPERATIONAL ETFS
SPDR STOXX ® Europe 50 ETF
SPDR EURO STOXX 50 ® ETF
SPDR EURO STOXX Small Cap ETF
SPDR S&P ® Emerging Asia Pacific ETF
SPDR S&P Russia ETF
SPDR S&P China ETF
SPDR S&P Emerging Markets ETF
SPDR S&P Emerging Markets Dividend ETF
SPDR S&P BRIC 40 ETF
SPDR S&P Emerging Europe ETF
SPDR S&P Emerging Latin America ETF
SPDR S&P Emerging Middle East & Africa ETF
SPDR S&P World ex-US ETF
SPDR S&P International Small Cap ETF
SPDR Dow Jones International Real Estate ETF
SPDR S&P Global Infrastructure ETF
SPDR S&P Global Natural Resources ETF
SPDR MSCI ACWI ex-US ETF
SPDR MSCI ACWI IMI ETF
SPDR MSCI ACWI Low Carbon Target ETF
SPDR MSCI EM 50 ETF
SPDR MSCI EM Beyond BRIC ETF
SPDR MSCI EAFE Quality Mix ETF
SPDR MSCI Emerging Markets Quality Mix ETF
SPDR MSCI World Quality Mix ETF
SPDR MSCI Australia Quality Mix ETF
SPDR MSCI Canada Quality Mix ETF
SPDR MSCI Germany Quality Mix ETF
SPDR MSCI Japan Quality Mix ETF
SPDR MSCI Mexico Quality Mix ETF
SPDR MSCI South Korea Quality Mix ETF
SPDR MSCI Spain Quality Mix ETF
SPDR MSCI Taiwan Quality Mix ETF
SPDR MSCI United Kingdom Quality Mix ETF
SPDR Russell/Nomura PRIME TM Japan ETF
SPDR Russell/Nomura Small Cap TM Japan ETF
SPDR S&P Global Dividend ETF
SPDR S&P International Dividend ETF
B-1
SPDR
SPDR S&P International Mid Cap ETF
SPDR S&P Emerging Markets Small Cap ETF
SPDR Dow Jones Global Real Estate ETF
SPDR S&P International Consumer Discretionary Sector ETF
SPDR S&P International Consumer Staples Sector ETF
SPDR S&P International Energy Sector ETF
SPDR S&P International Financial Sector ETF
SPDR S&P International Health Care Sector ETF
SPDR S&P International Industrial Sector ETF
SPDR S&P International Materials Sector ETF
SPDR S&P International Technology Sector ETF
SPDR S&P International Telecommunications Sector ETF
SPDR S&P International Utilities Sector ETF
SHELF ETFS
SPDR S&P Asia Pacific ETF
SPDR S&P Europe ETF
SPDR S&P Small Cap Emerging Europe ETF
SPDR S&P Emerging Africa ETF
SPDR S&P Emerging South East Asia ETF
SPDR S&P Emerging GCC-Middle East ETF
SPDR S&P Small Cap Emerging Middle East & Africa ETF
SPDR S&P Ireland ETF
SPDR S&P Brazil ETF
SPDR S&P India ETF
SPDR S&P Small Cap Emerging Latin America ETF
SPDR MSCI France Quality Mix ETF
SPDR MSCI Hong Kong Quality Mix ETF
SPDR MSCI Italy Quality Mix ETF
SPDR MSCI Switzerland Quality Mix ETF
SPDR Series Trust
OPERATIONAL ETFS
SPDR Russell 3000 ETF
SPDR Russell 1000 ETF
SPDR Russell 2000 ETF
SPDR S&P 500 Growth ETF
SPDR S&P 500 Value ETF
SPDR Russell Small Cap Completeness ETF
SPDR S&P 400 Mid Cap Growth ETF
SPDR S&P 400 Mid Cap Value ETF
SPDR S&P 600 Small Cap ETF
SPDR S&P 600 Small Cap Growth ETF
SPDR S&P 600 Small Cap Value ETF
SPDR Global Dow ETF
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SPDR Dow Jones REIT ETF
SPDR S&P Bank ETF
SPDR S&P Capital Markets ETF
SPDR S&P Insurance ETF
SPDR S&P Regional Banking SM ETF
SPDR Morgan Stanley Technology ETF
SPDR S&P Dividend ETF
SPDR S&P Aerospace & Defense ETF
SPDR S&P Biotech ETF
SPDR S&P Health Care Equipment ETF
SPDR S&P Health Care Services ETF
SPDR S&P Homebuilders ETF
SPDR S&P Metals & Mining ETF
SPDR S&P Oil & Gas Equipment & Services ETF
SPDR S&P Oil & Gas Exploration & Production ETF
SPDR S&P Pharmaceuticals ETF
SPDR S&P Retail ETF
SPDR S&P Semiconductor ETF
SPDR S&P Software & Services ETF
SPDR S&P Telecom ETF
SPDR S&P Transportation ETF
SPDR S&P 1500 Value Tilt ETF
SPDR S&P 1500 Momentum Tilt ETF
SPDR Russell 1000 Low Volatility ETF
SPDR Russell 2000 Low Volatility ETF
SPDR Wells Fargo Preferred Stock ETF
SPDR Barclays 1-3 Month T-Bill ETF
SPDR Barclays TIPS ETF
SPDR Barclays 0-5 Year TIPS ETF
SPDR Barclays 1-10 Year TIPS ETF
SPDR Barclays Short Term Treasury ETF
SPDR Barclays Intermediate Term Treasury ETF
SPDR Barclays Long Term Treasury ETF
SPDR Barclays Short Term Corporate Bond ETF
SPDR Barclays Intermediate Term Corporate Bond ETF
SPDR Barclays Long Term Corporate Bond ETF
SPDR Barclays Issuer Scored Corporate Bond ETF
SPDR Barclays Convertible Securities ETF
SPDR Barclays Mortgage Backed Bond ETF
SPDR Barclays Aggregate Bond ETF
SPDR Nuveen Barclays Municipal Bond ETF
SPDR Nuveen Barclays California Municipal Bond ETF
SPDR Nuveen Barclays New York Municipal Bond ETF
SPDR Nuveen Barclays Short Term Municipal Bond ETF
SPDR Nuveen S&P High Yield Municipal Bond ETF
SPDR Nuveen Barclays Build America Bond ETF
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SPDR DB International Government Inflation-Protected Bond ETF
SPDR Barclays Short Term International Treasury Bond ETF
SPDR Barclays International Treasury Bond ETF
SPDR Barclays International Corporate Bond ETF
SPDR Barclays Emerging Markets Local Bond ETF
SPDR Barclays High Yield Bond ETF
SPDR Barclays International High Yield Bond ETF
SPDR Barclays Short Term High Yield Bond ETF
SPDR Barclays Investment Grade Floating Rate ETF
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF
SPDR S&P 500 Buyback ETF
SPDR MSCI USA Quality Mix ETF
SHELF ETFS
SPDR S&P Building & Construction ETF
SPDR S&P Computer Hardware ETF
SPDR S&P Food & Beverage ETF
SPDR S&P LeisureTime ETF
SPDR S&P Outsourcing & IT Consulting ETF
SPDR S&P 1500 Volatility Tilt ETF
SPDR S&P Commercial Paper ETF
SPDR S&P Agency Bond ETF
SPDR Barclays Corporate Bond ETF
SPDR Barclays Corporate Industrial Bond ETF
SPDR Barclays Corporate Financial Bond ETF
SPDR Barclays Corporate Utility Bond ETF
SPDR Barclays Zero Coupon Bond ETF
SPDR Barclays CMBS ETF
SPDR Barclays Global Convertible Securities ETF
SPDR Barclays Breakeven Inflation ETF
SPDR S&P Commercial Paper ex-Financials ETF
SPDR Barclays Floating Rate Treasury ETF
SSGA Active Trust
OPERATIONAL ETFS AND PORTFOLIOS
SPDR SSGA Multi-Asset Real Return ETF
SPDR SSGA Income Allocation ETF
SPDR SSGA Global Allocation ETF
SPDR Blackstone/GSO Senior Loan ETF
SPDR SSGA Ultra Short Term Bond ETF
SPDR MFS Systematic Core Equity ETF
SPDR MFS Systematic Growth Equity ETF
SPDR MFS Systematic Value Equity ETF
SPDR SSGA Risk Aware ETF
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State Street Clarion Global Infrastructure & MLP Portfolio
SPDR DoubleLine Total Return Tactical ETF
SHELF ETFS
SPDR SSGA Conservative Global Allocation ETF
SPDR SSGA Aggressive Global Allocation ETF
SPDR SSGA Conservative Ultra Short Term Bond ETF
SPDR SSGA Aggressive Ultra Short Term Bond ETF
SPDR SSGA Large Cap Risk Aware ETF
SPDR SSGA Small Cap Risk Aware ETF
SPDR SSGA US Minimum Volatility ETF
SPDR SSGA Global Managed Volatility ETF (formerly, SPDR SSgA Global Minimum Volatility ETF)
SPDR SSGA Emerging Markets Minimum Volatility ETF
SSGA Funds
SSGA U.S. Government Money Fund*
SSGA Money Market Fund*
SSGA High Yield Bond Fund*
SSGA Dynamic Small Cap Fund*
SSGA Enhanced Small Cap Fund*
SSGA Emerging Markets Fund*
SSGA International Stock Selection Fund*
SSGA Clarion Real Estate Fund*
SSGA U.S. Treasury Money Market Fund*
SSGA Prime Money Market Fund*
SSGA S&P 500 Index Fund*
SSGA Master Trust
OPERATIONAL PORTFOLIOS
SSGA Multi-Asset Real Return Portfolio
SSGA Income Allocation Portfolio
SSGA Global Allocation Portfolio
Blackstone / GSO Senior Loan Portfolio
SSGA Ultra Short Term Bond Portfolio
SSGA MFS Systematic Core Equity Portfolio
SSGA MFS Systematic Growth Equity Portfolio
SSGA MFS Systematic Value Equity Portfolio
State Street Risk Aware Portfolio
State Street DoubleLine Total Return Tactical Portfolio
SHELF PORTFOLIOS
SSGA Conservative Global Allocation Portfolio
SSGA Aggressive Global Allocation Portfolio
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State Street Institutional Investment Trust
State Street Equity 500 Index Fund*
State Street Aggregate Bond Index Fund*
State Street Institutional Liquid Reserves Fund*
State Street Institutional U.S. Government Money Market Fund*
State Street Institutional Tax Free Money Market Fund*
State Street Institutional Treasury Money Market Fund*
State Street Institutional Treasury Plus Money Market Fund*
State Street Global Equity ex-U.S. Index Fund*
State Street Strategic Real Return Fund
State Street Target Retirement 2015 Fund*
State Street Target Retirement 2020 Fund*
State Street Target Retirement 2025 Fund*
State Street Target Retirement 2030 Fund*
State Street Target Retirement 2035 Fund*
State Street Target Retirement 2040 Fund*
State Street Target Retirement 2045 Fund*
State Street Target Retirement 2050 Fund*
State Street Target Retirement 2055 Fund*
State Street Target Retirement 2060 Fund*
State Street Target Retirement Fund*
State Street Global Managed Volatility Fund*
State Street Opportunistic Emerging Markets Equity Fund
State Street Equity 500 Index II Portfolio
State Street Aggregate Bond Index Portfolio
State Street Strategic Real Return Portfolio
State Street Global Equity ex-U.S. Index Portfolio
State Street Clarion Global Infrastructure & MLP Fund*
State Street Global Macro Absolute Return Fund
State Street Clarion Global Real Estate Income Fund*
State Street Green Bond Fund
State Street ESG Emerging Markets Fund*
State Street International Developed Equity Index Fund*
State Street Hedged International Developed Equity Index*
State Street Macro Absolute Return Bond Fund
State Street Income Allocation Fund
State Street Multi-Asset Real Return Fund
State Street Global Allocation Fund
State Street Small/Mid Cap Equity Index Portfolio
State Street Small/Mid Cap Equity Index Fund
State Street 60 Day Money Market Portfolio
State Street 60 Day Money Market Fund
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SPDR
State Street Cash Reserves Portfolio
State Street Cash Reserves Fund
State Street Institutional Liquid Assets Portfolio
State Street Institutional Liquid Assets Fund
State Street Current Yield Portfolio
State Street Current Yield Fund
State Street Conservative Income Portfolio
State Street Conservative Income Fund
State Street Ultra Short Term Bond Portfolio
State Street Ultra Short Term Bond Fund
State Street Emerging Markets Equity Index Fund
State Street Small Cap Emerging Markets Equity Fund
State Street Master Funds
State Street Equity 500 Index Portfolio
State Street Money Market Portfolio
State Street Tax Free Money Market Portfolio
State Street U.S. Government Money Market Portfolio
State Street Treasury Money Market Portfolio
State Street Treasury Plus Money Market Portfolio
State Street Navigator Securities Lending Trust
State Street Navigator Securities Lending Prime Portfolio
State Street Navigator Securities Lending TIAA-CREF Short Term Lending Portfolio State
Street Navigator Securities Lending MET Portfolio
State Street Navigator Securities Lending Government Portfolio
State Street Navigator Securities Lending Short-Term Bond Portfolio
*Receiving blue sky services pursuant to Section 5(cc).
As of June 1, 2015
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SCHEDULE B
Notice Filing with State Securities Administrators
At the specific direction of the Trust, the Administrator will prepare required documentation and make Notice Filings in accordance with the securities laws of each jurisdiction in which Fund shares are to be offered or sold pursuant to instructions given to the Administrator by the Trust.
The Trust shall be solely responsible for the determination of (i) those jurisdictions in which Notice Filings are to be submitted and (ii) the number of Trust shares to be permitted to be sold in each such jurisdiction. In the event that the Administrator becomes aware of (a) the sale of Fund shares in a jurisdiction in which no Notice Filing has been made or (b) the sale of Fund shares in excess of the number of Fund shares permitted to be sold in such jurisdiction, the Administrator shall report such information to the Trust, and it shall be the Trusts responsibility to determine appropriate corrective action and instruct the Administrator with respect thereto.
The Blue Sky services shall consist of the following:
1. | Filing of Trusts Initial Notice Filings, as directed by the Trust; |
2. | Filing of Trusts renewals and amendments as required; |
3. | Filing of amendments to the Trusts registration statement where required; |
4. | Filing Trust sales reports where required; |
5. | Payment at the expense of the Trust of all Trust Notice Filing fees; |
6. | Filing the Prospectuses and Statements of Additional Information and any amendments or supplements thereto where required; |
7. | Filing of annual reports and proxy statements where required; and |
8. | The performance of such additional services as the Administrator and the Trust may agree upon in writing. |
Unless otherwise specified in writing by the Administrator, Blue Sky services by the Administrator shall not include determining the availability of exemptions under a jurisdictions blue sky law or ensuring the proper application of any such exemptions. Any such determinations shall be made by the Trust or its legal counsel.
If the Trust has elected to deliver Fund share sales information to the Administrator via broker-dealer feeds, the Administrators processing of any such feeds is subject to the supervision and approval of the Trust and the following shall apply.
1. | Activation of any broker-dealer feeds, including transfer agent codes or broker codes, will commence as soon as practical after written instructions are received from the Trust. The Administrator will assume all sales from such feeds are Blue Sky reportable. |
2. | The Administrator will accept and pay Blue Sky fees based on all active and live direct broker-dealer feeds, as instructed by the Trust in writing. |
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SPDR
3. | The originating entity, and not the Administrator, is responsible for the accuracy of all broker-dealer feed information. Without limiting the generality of the foregoing, the Administrator will not be responsible for (i) reconciling any direct broker-dealer feeds with the Trusts accounting records, (ii) ensuring that omnibus suppressions are effected, (iii) the accuracy of any files transmitted from the transfer agent or broker-dealer systems or (iv) errors or omissions in sales data. The Administrator will not alter or otherwise manipulate or change the contents of any transfer agent or broker-dealer files routed to the Administrator. |
4. | The Trust will be responsible for ensuring that any direct broker-dealer feeds are deactivated from the main omnibus feed at the Trusts transfer agent as appropriate. The Trust acknowledges that all dropped and dead transfer agent or broker-dealer feeds will automatically be deactivated. |
In connection with the services described herein, the Trust shall issue in favor of the Administrator a power of attorney to submit Notice Filings on behalf of the Trust, which power of attorney shall be substantially in the form of Exhibit I attached hereto.
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EXHIBIT 1
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of that each of SPDR Series Trust, SPDR Index Shares Funds, SSGA Master Trust and SSGA Active Trust (the Trust ) on behalf of its currently existing series and all future series (the Funds ), with principal offices at , makes, constitutes, and appoints SSGA FUNDS MANAGEMENT, INC. (the Administrator ) with principal offices at One Lincoln Street, Boston, Massachusetts its lawful attorney-in-fact for it to do as if it were itself acting, the following:
1. NOTICE FILINGS FOR FUND SHARES. The power to submit (in any format accepted) notice filings for the Funds in each jurisdiction in which the Funds shares are offered or sold and in connection therewith the power to prepare, execute, and deliver and file (in any format accepted) any and all of the Funds applications including without limitation, applications to provide notice for the Funds shares, consents, including consents to service of process, reports, including without limitation, all periodic reports, or other documents and instruments now or hereafter required or appropriate in the judgment of the Administrator in connection with the notice filings of the Funds shares.
2. TRANSMIT FILING FEES. The power to draw, endorse, and deposit checks and/or transmit electronic payments in the name of the Funds in connection with the notice filings of the Funds shares with state securities administrators.
3. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney, individuals holding the titles of Officer, Blue Sky Manager or Senior Blue Sky Administrator at the Administrator shall have authority to act on behalf of the Funds with respect to items 1 and 2 above.
The execution of this limited power of attorney shall be deemed coupled with an interest and shall be revocable only upon receipt by the Administrator of such termination of authority. Nothing herein shall be construed to constitute the appointment of the Administrator as or otherwise authorize the Administrator to act as an officer, director or employee of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed in its name and on its behalf by and through its duly authorized officer, as of the date first written above.
SPDR SERIES TRUST | ||
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SPDR INDEX SHARES FUNDS | ||
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Exh-1
SSGA MASTER TRUST | ||
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Title: |
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SSGA ACTIVE TRUST | ||
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Subscribed and sworn to before me
this day of 20
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Notary Public | ||||
State of |
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In and for the County of
My Commission expires
Exh-2
ADMINISTRATION AGREEMENT
SCHEDULE A
Listing of Funds
SPDR Series Trust
OPERATIONAL ETFS
SPDR Russell 3000 ETF
SPDR Russell 1000 ETF
SPDR Russell 2000 ETF
SPDR S&P 500 Growth ETF
SPDR S&P 500 Value ETF
SPDR Russell Small Cap Completeness ETF
SPDR S&P 400 Mid Cap Growth ETF
SPDR S&P 400 Mid Cap Value ETF
SPDR S&P 600 Small Cap ETF
SPDR S&P 600 Small Cap Growth ETF
SPDR S&P 600 Small Cap Value ETF
SPDR Global Dow ETF
SPDR Dow Jones REIT ETF
SPDR S&P Bank ETF
SPDR S&P Capital Markets ETF
SPDR S&P Insurance ETF
SPDR S&P Regional Banking SM ETF
SPDR Morgan Stanley Technology ETF
SPDR S&P Dividend ETF
SPDR S&P Aerospace & Defense ETF
SPDR S&P Biotech ETF
SPDR S&P Health Care Equipment ETF
SPDR S&P Health Care Services ETF
SPDR S&P Homebuilders ETF
SPDR S&P Metals & Mining ETF
SPDR S&P Oil & Gas Equipment & Services ETF
SPDR S&P Oil & Gas Exploration & Production ETF
SPDR S&P Pharmaceuticals ETF
SPDR S&P Retail ETF
SPDR S&P Semiconductor ETF
SPDR S&P Software & Services ETF
SPDR S&P Telecom ETF
SPDR S&P Transportation ETF
SPDR S&P 1500 Value Tilt ETF
SPDR S&P 1500 Momentum Tilt ETF
SPDR Russell 1000 Low Volatility ETF
SPDR Russell 2000 Low Volatility ETF
SPDR Wells Fargo Preferred Stock ETF
SPDR Barclays 1-3 Month T-Bill ETF
SPDR Barclays TIPS ETF
SPDR Barclays 0-5 Year TIPS ETF
SPDR Barclays 1-10 Year TIPS ETF
SPDR Barclays Short Term Treasury ETF
SPDR Barclays Intermediate Term Treasury ETF
SPDR Barclays Long Term Treasury ETF
SPDR Barclays Short Term Corporate Bond ETF
SPDR Barclays Intermediate Term Corporate Bond ETF
SPDR Barclays Long Term Corporate Bond ETF
SPDR Barclays Issuer Scored Corporate Bond ETF
SPDR Barclays Convertible Securities ETF
SPDR Barclays Mortgage Backed Bond ETF
SPDR Barclays Aggregate Bond ETF
SPDR Nuveen Barclays Municipal Bond ETF
SPDR Nuveen Barclays California Municipal Bond ETF
SPDR Nuveen Barclays New York Municipal Bond ETF
SPDR Nuveen Barclays Short Term Municipal Bond ETF
SPDR Nuveen S&P High Yield Municipal Bond ETF
SPDR Nuveen Barclays Build America Bond ETF
SPDR DB International Government Inflation-Protected Bond ETF
SPDR Barclays Short Term International Treasury Bond ETF
SPDR Barclays International Treasury Bond ETF
SPDR Barclays International Corporate Bond ETF
SPDR Barclays Emerging Markets Local Bond ETF
SPDR Barclays High Yield Bond ETF
SPDR Barclays International High Yield Bond ETF
SPDR Barclays Short Term High Yield Bond ETF
SPDR Barclays Investment Grade Floating Rate ETF
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF
SPDR S&P 500 Buyback ETF
SPDR MSCI USA Quality Mix ETF
SPDR S&P 500 High Dividend ETF
SHELF ETFS
SPDR S&P Building & Construction ETF
SPDR S&P Computer Hardware ETF
SPDR S&P Food & Beverage ETF
SPDR S&P LeisureTime ETF
SPDR S&P Outsourcing & IT Consulting ETF
SPDR S&P 1500 Volatility Tilt ETF
SPDR S&P Commercial Paper ETF
SPDR S&P Agency Bond ETF
SPDR Barclays Corporate Bond ETF
SPDR Barclays Corporate Industrial Bond ETF
SPDR Barclays Corporate Financial Bond ETF
SPDR Barclays Corporate Utility Bond ETF
SPDR Barclays Zero Coupon Bond ETF
SPDR Barclays CMBS ETF
SPDR Barclays Global Convertible Securities ETF
SPDR Barclays Breakeven Inflation ETF
SPDR S&P Commercial Paper ex-Financials ETF
SPDR Barclays Floating Rate Treasury ETF
[REDACTED]
As of October 21, 2015
Execution copy
MASTER SUB-ADMINISTRATION AGREEMENT
This Master Sub-Administration Agreement (Agreement) dated and effective as of June 1, 2015, is by and between State Street Bank and Trust Company, a Massachusetts trust company (the Sub-Administrator), and SSGA Funds Management, Inc., a Massachusetts corporation (the Administrator).
WHEREAS, each of the entities listed on Schedule A attached hereto (each, a Trust) is an open-end management investment company comprised of multiple series (each, a Fund and collectively, the Funds), and is registered with the U.S. Securities and Exchange Commission (SEC) by means of a registration statement (Registration Statement) under the Securities Act of 1933, as amended (the 1933 Act), and the Investment Company Act of 1940, as amended (the 1940 Act), as applicable;
WHEREAS, each Trust has retained the Administrator to furnish certain administrative services to the Trust and/or Funds; and
WHEREAS, the Administrator desires to retain the Sub-Administrator to furnish certain administrative services to the Trust and/or Funds, and the Sub-Administrator is willing to furnish such services, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:
1. | A PPOINTMENT OF S UB -A DMINISTRATOR |
The Administrator hereby appoints the Sub-Administrator to act as administrator to the Trust for purposes of providing the administrative services described herein for the period and on the terms set forth in this Agreement. The Sub-Administrator accepts such appointment and agrees to render such services.
Each Trust currently consists of the Funds and their respective classes of shares, as applicable, as listed in Schedule A to this Agreement. In the event that the Trust establishes one or more additional Funds with respect to which the Administrator wishes to retain the Sub-Administrator to act as administrator hereunder, the Administrator shall notify the Sub-Administrator in writing. Upon written acceptance by the Sub-Administrator, such Fund(s) shall become subject to the provisions of this Agreement to the same extent as the existing Funds, except to the extent that such provisions (including those relating to compensation and expenses payable) may be modified with respect to such Fund in writing by the Administrator and the Sub-Administrator at the time of the addition of such Fund. Each such writing shall be considered an amendment to, and become a part of, this Agreement.
2. | D ELIVERY OF D OCUMENTS |
With respect to each Trust, the Administrator will promptly deliver to the Sub-Administrator copies of each of the following documents and all future amendments and supplements, if any:
a. | The Trusts Declaration of Trust or Master Trust Agreement (the Declaration of Trust) and By-laws, each as amended; |
b. | The Trusts currently effective Registration Statement under the 1933 Act and/or the 1940 Act and each Prospectus, Statement of Additional Information (SAI) and Confidential Offering Memorandum, as applicable, relating to the Funds and all amendments and supplements thereto as in effect from time to time; |
c. | Copies of a Clerks certification certifying to (1) the authority of the Administrator to enter into this Agreement; and (2) the identity of certain individuals on behalf of the Administrator to (a) give instructions to the Sub-Administrator pursuant to this Agreement and (b) sign checks and pay expenses; |
d. | A copy of the Administration Agreement and any other service agreements between the Trust and the Administrator; and |
e. | Such other certificates, documents or opinions which the Sub-Administrator may, in its reasonable discretion, deem necessary or appropriate in the proper performance of its duties. |
3. | R EPRESENTATIONS AND W ARRANTIES OF THE S UB -A DMINISTRATOR |
The Sub-Administrator represents and warrants to the Administrator that:
a. | It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts; |
b. | It has the requisite power and authority to carry on its business in The Commonwealth of Massachusetts; |
c. | All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; |
d. | No legal or administrative proceedings have been instituted or threatened which would materially impair the Sub-Administrators ability to perform its duties and obligations under this Agreement; |
e. | Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Sub-Administrator or any law or regulation applicable to it; and |
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f. | The Sub-Administrator has duly adopted written policies and procedures that are reasonably designed to prevent violation of the Federal Securities Laws (as defined in Rule 38a-1 under the 1940 Act) with respect to the services provided hereunder in respect of the Trust and the Funds. |
4. | R EPRESENTATIONS AND W ARRANTIES OF THE A DMINISTRATOR |
The Administrator represents and warrants to the Sub-Administrator that:
a. | It is a corporation, duly organized, existing and in good standing under the laws of The Commonwealth of Massachusetts; |
b. | It has the requisite power and authority under applicable laws and by its organizational documents to enter into and perform this Agreement; |
c. | All requisite proceedings have been taken to authorize it to enter into and perform this Agreement; |
d. | No legal or administrative proceedings have been instituted or threatened which would impair the Administrators ability to perform its duties and obligations under this Agreement; |
e. | Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Administrator or any law or regulation applicable to it; |
f. | Where information provided by the Administrator, the Trust or the Trusts investors includes information about an identifiable individual (Personal Information), the Administrator represents and warrants that it has obtained all consents and approvals, as required by all applicable laws, regulations, by-laws and ordinances that regulate the collection, processing, use or disclosure of Personal Information, necessary to disclose such Personal Information to the Sub-Administrator, and as required for the Sub-Administrator to use and disclose such Personal Information in connection with the performance of the services hereunder. The Administrator acknowledges that the Sub-Administrator may perform any of the services, and may use and disclose Personal Information outside of the jurisdiction in which it was initially collected by the Administrator or the Trust, including the United States and that information relating to the Trust, including Personal Information may be accessed by national security authorities, law enforcement and courts. The Sub-Administrator shall be kept indemnified by the Administrator and be without liability to the Administrator or the Trust for any action taken or omitted by it in reliance upon this representation and warranty, including without limitation, any liability or costs in connection with claims or complaints for failure to comply with any applicable law that regulates the collection, processing, use or disclosure of Personal Information. |
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g. | With respect to the Trust, the Sub-Administrator is not responsible for ensuring that: |
(1) | The Trust is a business trust duly organized, existing and in good standing under the laws of the state of its formation; |
(2) | The Trust is an investment company properly registered under the 1940 Act; |
(3) | The registration statement under the 1933 Act and 1940 Act has been filed by the Trust and is effective and will remain in effect during the term of this Agreement; |
(4) | As of the effective date of this Agreement, all necessary filings under the securities laws of the states in which the Trust offers or sells its shares have been made; and |
(5) | As of the close of business on the date of this Agreement, the Trust is authorized to issue shares of beneficial interest. |
5. | S UB -A DMINISTRATION S ERVICES |
The Sub-Administrator shall provide the following services, subject to the control, supervision, authorization and direction of the Administrator, the Trust or the Fund and, in each case where appropriate, the review and comment by the Administrators or the Trusts auditors and legal counsel and in accordance with procedures which may be established from time to time between the Administrator and the Sub-Administrator:
General Services
a. | Assist the Funds in preparing for and handling regulatory examinations, inquiries and investigations, including working closely with counsel to the Funds and counsel to the trustees that are not interested persons of the Funds under the 1940 Act (Independent Trustees); |
b. | Provide and maintain office facilities for the Funds (which may be in the offices of the Sub-Administrator or an affiliate); |
c. | Furnish for the Trust a Secretary and one or more Assistant Secretaries as provided by the Funds Bylaws, if so appointed by the Board, who shall perform corporate secretarial services as provided in the Bylaws, including assisting in the coordination of Board meetings and the preparation and distribution of materials and reports for meetings of the Board, the Independent Trustees and committees of the Board of Trustees of the Board (the Board); |
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Without limiting the generality of the foregoing, the Sub-Administration Services will also include the following duties:
Fund Administration Treasury Services
d. | Monitor and coordinate all aspects of the Funds accounting functions, including, without limitation, as applicable internal controls over financial reporting, income and expense accruals, accounts receivable and payable, portfolio valuation (including monitoring compliance with Rule 2a-7 as well as reviewing and reporting on asset valuations), securities lending, interfund lending, Rule 12b-1 and certain servicing payments and the Independent Trustees deferred compensation plan; |
e. | Prepare, in cooperation with and subject to review by the Funds investment adviser and Fund counsel where applicable, all necessary financial information that will be included in the Funds semi-annual and annual shareholder reports, Form N-CSR, Form N-Q and other of the Funds regulatory filings and quarterly reports to the Funds Board (as mutually agreed upon by the Board, Counsel to the Independent Trustees, the Funds Counsel or the Funds investment adviser, as appropriate), including tax footnote disclosures where applicable; |
f. | Prepare, in cooperation with and subject to review by the Funds investment adviser and Fund counsel where applicable, the Funds periodic financial reports required to be filed with the SEC on Forms N-SAR and N-CSR and financial information required by Form N-1A and periodic updates thereto, proxy statements and such other reports, forms or filings as set forth in section (y) hereto and as may be mutually agreed upon; |
g. | Prepare for review by an officer of the Funds, the Funds annual fund expense budgets, perform accrual analyses and rollforward calculations and recommend changes to fund expense accruals on a periodic basis, review calculations, submit for approval by officers of the Funds and arrange for payment of the Funds expenses, review calculations of fees paid to the Funds investment adviser, custodian, fund accountant, distributor, and transfer agent, and obtain authorization of accrual changes and expense payments; |
h. | Provide periodic post trade testing of the Funds with respect to compliance with the Internal Revenue Codes mandatory qualification requirements, the requirements of the 1940 Act and limitations for each Fund contained in the Registration Statement for the Funds, including quarterly compliance reporting to the Funds officers as well as preparation of Board compliance materials; |
i. | Provide total return performance data for each Fund, including such information on an after-tax basis, calculated in accordance with all applicable securities laws and regulatory requirement, and as may be reasonably requested by the Funds management; |
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j. | Prepare and coordinate the filing of Rule 24f-2 notices, including coordination of payment to the SEC by the Funds; |
k. | Maintain certain books and records of the Funds as required under Rule 31a-1(b) of the 1940 Act and as may be mutually agreed upon; |
Fund Administration Money Market Fund Services
The following services enumerated as l., m. and n. below are applicable to those Funds which are money market funds under Rule 2a-7 of the 1940 Act:
l. | Prepare for posting on the Funds website each money market funds monthly schedule of portfolio investments; |
m. | Prepare and coordinate each money market funds monthly filing of Form N-MFP; |
n. | Prepare and coordinate each money market funds filing of Form N-CR pursuant to language to be agreed upon between the parties in an amendment to this Agreement no later than the effective date of Form N-CR. |
Fund Administration Legal Services
o. | Prepare and distribute the agenda and background materials for all Board meetings and the meetings of the Boards committees, attend and make presentations at Board and Board committee meetings where appropriate or requested, prepare minutes for all Board and Board committee meetings; facilitate communications with, and the activities of, the Funds Independent Trustees and their Counsel; facilitate meetings of the Funds independent chairman, monitor and coordinate the follow-up on matters raised at any Board, Board committee and chairmans meetings; and attend shareholder meetings and prepare minutes of all such meetings; |
p. | Refer to the Funds officers or transfer agent, and, as appropriate the Board, any shareholder inquiries relating to the Funds to the extent that the Sub-Administrator is the first party to become aware of such inquiries. |
q. | Compile and maintain the Funds Trustees and Officers Questionnaires; |
r. | In cooperation with the Funds Chief Compliance Officer and investment adviser, prepare and file with the SEC: Form N-CSR; Form N-Q; Form N-PX; and Form N-1A, including all necessary amendments, updates and sticker supplements of the prospectus and statement of additional information for each Fund as well as certain of the Funds other communications with the SEC regarding the Funds regulatory filings; |
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s. | In cooperation with and subject to review by the Funds investment adviser, prepare any necessary proxy statements, file such statements with the SEC and provide consultation on proxy solicitation matters; |
t. | Assist the Funds in all other required filings of the Funds made with the SEC (such as exemptive applications and no-action letter requests) or any other regulatory entities, including state corporation reports and private letter ruling requests with the IRS; |
u. | Maintain general Board calendars and regulatory filings calendars; |
v. | Act as liaison to counsel to the Funds and counsel to the Independent Trustees; |
w. | In cooperation with and subject to review by the Funds Chief Compliance Officer and investment adviser, assist in developing and periodically reviewing the Funds 1940 Act Rule 38a-1 Compliance Policies and Procedures Manual; |
x. | Maintain continuing awareness of significant emerging regulatory and legislative developments that may affect the Funds, update the Board, Fund officers and the investment adviser or sub-adviser on those developments and provide related planning assistance where requested or appropriate; |
y. | Coordinate the Funds insurance coverage, including facilitating the solicitation of bids for Directors & Officers/Errors & Omissions (D&O/E&O) insurance and fidelity bond coverage, file fidelity bonds with the SEC and make related Board presentations; |
z. | Coordinate the quarterly and annual compliance reporting of the Sub-Administrator for review by the Funds Chief Compliance Officer; |
aa. | Participate and assist in the preparation and filing of responses to inspections or examinations, where applicable, by the SEC and other regulatory authorities; |
bb. | Coordinate the printing of the prospectus and shareholder financial reports; |
cc. | With respect to the Funds so designated on Schedule A, coordinate and oversee the vendors providing state securities (blue sky) registration and maintenance and, in connection therewith, perform the services detailed in Schedule B hereto, as amended, modified, or supplemented from time to time; |
Fund Administration Tax Services
dd. | Compute tax basis provisions for both excise and income tax purposes; |
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ee. | Prepare initial federal, state and local income tax returns for the Funds and direct, assist and coordinate the review of the Funds federal, state, and local income tax returns and any required extension requests by the Funds independent accountants, as paid tax preparers, and execution and filing by the Funds treasurer, including Form 1120-RIC, Form 8613 and Forms 1099; |
ff. | Coordinate Form 1099 mailings; and |
gg. | Review and approve periodic income distribution calculations, including estimates, and annual minimum distribution calculations (income and capital gain) prior to their declaration. |
The Sub-Administrator shall perform such other services for the Administrator for which the Administrator will pay such fees, including the Sub-Administrators reasonable out-of-pocket expenses as may be mutually agreed upon by the Administrator and Sub-Administrator from time to time. The provision of such services shall be subject to the terms and conditions of this Agreement.
6. | F EES ; E XPENSES ; E XPENSE R EIMBURSEMENT |
The Sub-Administrator shall receive such compensation for the Sub-Administrators services provided pursuant to this Agreement as may be agreed to from time to time in a written Fee Schedule approved by the parties. The fees are accrued daily and billed monthly and shall be due and payable upon receipt of the invoice. Upon the termination of this Agreement before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable upon the date of termination of this Agreement. In addition, the Sub-Administrator shall be reimbursed for its out-of-pocket costs incurred in connection with this Agreement and agreed to from time to time in a written Fee Schedule approved by the parties. All rights of compensation and expense reimbursement under this Agreement for services performed as of the termination date shall survive the termination of this Agreement.
The Administrator agrees promptly to reimburse the Sub-Administrator for any equipment and supplies specially ordered by or for the Trust through the Sub-Administrator and for any other expenses not contemplated by this Agreement that the Sub-Administrator may incur on the Administrators or Trusts behalf at the Administrators or Trusts request or with the Administrators or Trusts consent.
The Administrator and/or the Trust, as the case may be, will bear all expenses that are incurred in the operation of the Trust and not specifically assumed by the Sub-Administrator. Trust expenses not assumed by the Sub-Administrator include, but are not limited to: organizational expenses; cost of services of independent accountants and outside legal and tax counsel (including such counsels review of the Registration Statement, Form N-CSR, Form N-Q, Form N-PX, Form N-MFP, Form N-SAR, proxy materials, federal and state tax qualification as a regulated investment company and other notices, registrations, reports, filings and materials prepared by the Sub-Administrator under this Agreement); cost of any services contracted for by
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the Trust directly from parties other than the Sub-Administrator; cost of trading operations and brokerage fees, commissions and transfer taxes in connection with the purchase and sale of securities for the Trust; investment advisory fees; taxes, insurance premiums and other fees and expenses applicable to its operation; costs incidental to any meetings of shareholders including, but not limited to, legal and accounting fees, proxy filing fees and the costs of preparation (e.g., typesetting, XBRL-tagging, page changes and all other print vendor and EDGAR charges, collectively referred to herein as Preparation), printing, distribution and mailing of any proxy materials; costs incidental to Board meetings, including fees and expenses of Board members; the salary and expenses of any officer, director\trustee or employee of the Trust; costs of Preparation, printing, distribution and mailing, as applicable, of the Trusts Registration Statements and any amendments and supplements thereto and shareholder reports; cost of Preparation and filing of the Trusts tax returns, Form N-1A, Form N-CSR, Form N-Q, Form N-PX, Form N-MFP and Form N-SAR, and all notices, registrations and amendments associated with applicable federal and state tax and securities laws; all applicable registration fees and filing fees required under federal and state securities laws; the cost of fidelity bond and D&O/E&O liability insurance; and the cost of independent pricing services used in computing the Fund(s) net asset value.
The Sub-Administrator is authorized to and may employ, associate or contract with such person or persons as the Sub-Administrator may deem desirable to assist it in performing its duties under this Agreement; provided, however, that the compensation of such person or persons shall be paid by the Sub-Administrator and that the Sub-Administrator shall be as fully responsible to the Administrator for the acts and omissions of any such person or persons as it is for its own acts and omissions.
7. | I NSTRUCTIONS AND A DVICE |
At any time, the Sub-Administrator may apply to any officer of the Administrator or his or her designee for instructions and may consult with the independent accountants for the Administrator or the Trust at the expense of the Administrator, with respect to any matter arising in connection with the services to be performed by the Sub-Administrator under this Agreement.
The Sub-Administrator shall not be liable, and shall be indemnified by the Administrator, for any action taken or omitted by it in good faith in reliance upon any such instructions or advice or upon any paper or document believed by it to be genuine and to have been signed by the proper person or persons. The Sub-Administrator shall not be held to have notice of any change of authority of any person until receipt of written notice thereof from the Fund(s). Nothing in this section shall be construed as imposing upon the Sub-Administrator any obligation to seek such instructions or advice, or to act in accordance with such advice when received.
8. | L IMITATION OF L IABILITY AND I NDEMNIFICATION |
The Sub-Administrator shall be responsible for the performance only of such duties as are set forth in this Agreement and, except as otherwise provided under Section 6, shall have no responsibility for the actions or activities of any other party, including other service providers. The Sub-Administrator shall have no liability in respect of any loss, damage or expense suffered by the Administrator insofar as such loss, damage or expense arises from the performance of the Sub-Administrators duties hereunder in reliance upon records that were maintained for the Administrator or the Trust by entities other than the Sub-Administrator prior to the Sub-
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Administrators appointment as administrator for the Administrator. The Sub-Administrator shall have no liability for any error of judgment or mistake of law or for any loss or damage resulting from the performance or nonperformance of its duties hereunder unless such loss or damage arises directly from, and then only to the extent of, the negligence or willful misconduct of the Sub-Administrator, its officers or employees. The Sub-Administrator shall not be liable for any special, indirect, incidental, punitive or consequential damages, including lost profits, of any kind whatsoever (including, without limitation, attorneys fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder, each of which is hereby excluded by agreement of the parties regardless of whether such damages were foreseeable or whether either party or any entity had been advised of the possibility of such damages. In any event, except as otherwise agreed to in writing by the parties hereto, the Sub-Administrators cumulative liability for each calendar year (a Liability Period) with respect to the services performed under this Agreement regardless of the form of action or legal theory shall be limited to its total annual compensation earned and fees payable hereunder during the preceding Compensation Period, as defined herein, for any liability or loss suffered by the Administrator including, but not limited to, any liability relating to qualification of the Trust as a regulated investment company or any liability relating to the Trusts compliance with any federal or state tax or securities statute, regulation or ruling during such Liability Period. Compensation Period shall mean the calendar year ending immediately prior to each Liability Period in which the event(s) giving rise to the Sub-Administrators liability for that period have occurred. Notwithstanding the foregoing, the Compensation Period for purposes of calculating the annual cumulative liability of the Sub-Administrator for the Liability Period commencing on the date of this Agreement and terminating on December 31, 2015 shall be the date of this Agreement through December 31, 2015, calculated on an annualized basis, and the Compensation Period for the Liability Period commencing January 1, 2016 and terminating on December 31, 2016 shall be the date of this Agreement through December 31, 2015, calculated on an annualized basis.
The Sub-Administrator shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its control, including without limitation, work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action or communication disruption.
The Administrator shall indemnify and hold the Sub-Administrator and its directors, officers, employees and agents harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by the Sub-Administrator resulting from any claim, demand, action or suit in connection with the Sub-Administrators acceptance of this Agreement, any action or omission by it in the performance of its duties hereunder, or as a result of acting upon any instructions reasonably believed by it to have been duly authorized by the Administrator or the Trust or upon reasonable reliance on information or records given or made by the Administrator or the Trust or the Trusts investment adviser, provided that this indemnification shall not apply to actions or omissions of the Sub-Administrator, its officers or employees in cases of its or their own negligence or willful misconduct.
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The limitation of liability and indemnification contained herein shall survive the termination of this Agreement.
9. | C ONFIDENTIALITY |
All information provided under this agreement by a party (the Disclosing Party) to the other party (the Receiving Party) regarding the Disclosing Partys business and operations shall be treated as confidential. Subject to Section 10 below, all confidential information provided under this Agreement by Disclosing Party shall be used, including disclosure to third parties, by the Receiving Party, or its agents or service providers, solely for the purpose of performing or receiving the services and discharging the Receiving Partys other obligations under the Agreement or managing the business of the Receiving Party and its Affiliates (as defined in Section 10 below), including financial and operational management and reporting, risk management, legal and regulatory compliance and client service management. The foregoing shall not be applicable to any information (a) that is publicly available when provided or thereafter becomes publicly available, other than through a breach of this Agreement, (b) that is independently derived by the Receiving Party without the use of any information provided by the Disclosing Party in connection with this Agreement, (c) that is disclosed to comply with any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, (d) that is disclosed as required by operation of law or regulation or as required to comply with the requirements of any market infrastructure that the Disclosing Party or its agents direct the Sub-Administrator or its Affiliates to employ (or which is required in connection with the holding or settlement of instruments included in the assets subject to this Agreement) or (e) where the party seeking to disclose has received the prior written consent of the party providing the information, which consent shall not be unreasonably withheld.
The undertakings and obligations contained in this Section shall survive the termination or expiration of this Agreement for a period of five (5) years.
10. | U SE OF D ATA |
(a) | In connection with the provision of the services and the discharge of its other obligations under this Agreement, the Sub-Administrator (which term for purposes of this Section 10 includes each of its parent company, braches and affiliates ( Affiliates)) may collect and store information regarding the Administrator or the Trust or Fund and share such information with its Affiliates, agents and service providers in order and to the extent reasonably necessary (i) to carry out the provision of services contemplated under this Agreement and other agreements between the Administrator and the Sub-Administrator or any of its Affiliates and (ii) to carry out management of its businesses, including, but not limited to, financial and operational management and reporting, risk management, legal and regulatory compliance and client service management. |
(b) |
Subject to paragraph (c) below, the Sub-Administrator and/or its Affiliates (except those Affiliates or business divisions principally engaged in the business of asset |
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management) may use any data or other information (Data) obtained by such entities in the performance of their services under this Agreement or any other agreement between the Administrator and the Sub-Administrator or one of its Affiliates, including Data regarding transactions and portfolio holdings relating to the Trust/Fund, and publish, sell, distribute or otherwise commercialize the Data; provided that, unless the Administrator otherwise consents, Data is combined or aggregated with information relating to (i) other customers of the Sub-Administrator and/or its Affiliates or (ii) information derived from other sources, in each case such that any published information will be displayed in a manner designed to prevent attribution to or identification of such Data with the Trust/Fund. The Administrator agrees that Sub-Administrator and /or its Affiliates may seek to profit and realize economic benefit from the commercialization and use of the Data, that such benefit will constitute part of the Sub-Administrators compensation for services under this Agreement or such other agreement, and the Sub-Administrator and/or its Affiliates shall be entitled to retain and not be required to disclose the amount of such economic benefit and profit to the Administrator or the Trust/Fund, except upon the reasonable request of the Administrator, acting on behalf of the Board of Trustees of each Trust, for purposes of Section 15(c) of the 1940 Act. |
(c) | Except as expressly contemplated by this Agreement, nothing in this Section 10 shall limit the confidentiality and data-protection obligations of the Sub-Administrator and its Affiliates under this Agreement and applicable law. The Sub-Administrator shall cause any Affiliate, agent or service provider to which it has disclosed Data pursuant to this Section 10 to comply at all times with confidentiality and data-protection obligations as if it were a party to this Agreement. |
11. | C OMPLIANCE WITH G OVERNMENTAL R ULES AND R EGULATIONS ; R ECORDS |
The Administrator acknowledges that the Administrator and Trust assume full responsibility for complying with all securities, tax, commodities and other laws, rules and regulations applicable to each respectively.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Sub-Administrator agrees that all records which it maintains for the Administrator shall at all times remain the property of the Administrator, shall be readily accessible during normal business hours, and shall be promptly surrendered upon the termination of the Agreement or otherwise on written request except as otherwise provided in Section 13. The Sub-Administrator further agrees that all records that it maintains for the Trust, or for the Administrator on behalf of the Trust, pursuant to Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as provided above. Records may be surrendered in either written or machine-readable form, at the option of the Sub-Administrator.
-12-
12. | S ERVICES N OT E XCLUSIVE |
The services of the Sub-Administrator are not to be deemed exclusive, and the Sub-Administrator shall be free to render similar services to others. The Sub-Administrator shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized by the Administrator or the Trust from time to time, have no authority to act or represent the Administrator or the Trust in any way or otherwise be deemed an agent of the Administrator or the Trust.
13. | E FFECTIVE P ERIOD AND T ERMINATION |
The Agreement shall commence on June 1, 2015 and shall continue for an initial term until May 31, 2016 (the Initial Term), and thereafter shall automatically continue for successive one year periods (each a Renewal Term); provided however, that at any time during the Initial Term or any Renewal Term either party may terminate the Agreement on sixty (60) days prior written notice to the other party. Termination of this Agreement with respect to any Fund shall in no way affect the continued validity of this Agreement with respect to the Trust or any other Fund. Upon termination of this Agreement pursuant to this paragraph with respect to the Trust or any Fund, the Administrator shall pay the Sub-Administrator its compensation due for services rendered prior to the termination date, and shall reimburse Sub-Administrator for its costs, expenses and disbursements with respect to services rendered prior to the termination date. Upon termination of this Agreement, the Sub-Administrator will deliver the Trusts or such Funds records as set forth herein.
14. | N OTICES |
Any notice or other communication authorized or required by this Agreement to be given to either party shall be in writing and deemed to have been given when delivered in person or by confirmed facsimile, by overnight delivery through a commercial courier service, or posted by certified mail, return receipt requested, to the following address (or such other address as a party may specify by written notice to the other):
If to the Administrator:
SSGA Funds Management, Inc.
One Lincoln Street
Boston, MA 02111
Attn: Ellen Needham, President
Facsimile: 617-664-4011
If to the Sub-Administrator:
State Street Bank and Trust Company
P.O. Box 5049
Boston, MA 02206-5049
Attn: Senior Vice President and Senior Managing Counsel
Facsimile: 617-662-2702
-13-
15. | A MENDMENT |
This Agreement may be amended at any time in writing by mutual agreement of the parties hereto. Each impacted Trust will be notified by the Administrator of any material amendment to this Agreement.
16. | A SSIGNMENT |
This Agreement shall not be assigned by either party hereto without the prior consent in writing of the other party, except that the Sub-Administrator may assign this Agreement to an affiliate that is the successor to all or a substantial portion of its business.
17. | S UCCESSORS |
This Agreement shall be binding on and shall inure to the benefit of the Administrator and the Sub-Administrator and their respective successors and permitted assigns.
18. | D ATA P ROTECTION |
The Sub-Administrator shall implement and maintain a comprehensive written information security program that contains appropriate security measures to safeguard the personal information of the Trusts shareholders, employees, directors and/or officers that the Sub-Administrator receives, stores, maintains, processes or otherwise accesses in connection with the provision of services hereunder. For these purposes, personal information shall mean (i) an individuals name (first initial and last name or first name and last name), address or telephone number plus (a) social security number, (b) drivers license number, (c) state identification card number, (d) debit or credit card number, (e) financial account number or (f) personal identification number or password that would permit access to a persons account or (ii) any combination of the foregoing that would allow a person to log onto or access an individuals account. Notwithstanding the foregoing personal information shall not include information that is lawfully obtained from publicly available information, or from federal, state or local government records lawfully made available to the general public.
19. | E NTIRE A GREEMENT |
This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous representations, warranties or commitments regarding the services to be performed hereunder whether oral or in writing, including, without limitation, the agreements set forth in Schedule C hereto (as amended, modified or supplemented, the Prior Agreements). The parties agree that upon the effectiveness of this Agreement, the Prior Agreements shall be terminated.
20. | W AIVER |
The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver nor shall it deprive such party of the right thereafter to insist upon strict adherence to that term or any term of this Agreement. Any waiver must be in writing signed by the waiving party.
-14-
21. | S EVERABILITY |
If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance it shall nevertheless remain applicable to all other persons and circumstances.
22. | G OVERNING L AW |
This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts, without regard to its conflicts of laws provisions.
23. | R EPRODUCTION OF D OCUMENTS |
This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, xerographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
24. | C OUNTERPARTS |
This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
[Remainder of page intentionally left blank.]
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first written above.
SSGA FUNDS MANAGEMENT, INC. | ||
By: |
/s/ Ellen Needham | |
Name: |
Ellen Needham | |
Title: |
President |
STATE STREET BANK AND TRUST COMPANY | ||
By: |
/s/ Gunjan Kedia | |
Name: |
Gunjan Kedia | |
Title: |
Executive Vice President |
Master Sub-Administration Agreement
SUB-ADMINISTRATION AGREEMENT
SCHEDULE A
Listing of Fund(s)
SPDR Index Shares Funds
OPERATIONAL ETFS
SPDR STOXX ® Europe 50 ETF
SPDR EURO STOXX 50 ® ETF
SPDR EURO STOXX Small Cap ETF
SPDR S&P ® Emerging Asia Pacific ETF
SPDR S&P Russia ETF
SPDR S&P China ETF
SPDR S&P Emerging Markets ETF
SPDR S&P Emerging Markets Dividend ETF
SPDR S&P BRIC 40 ETF
SPDR S&P Emerging Europe ETF
SPDR S&P Emerging Latin America ETF
SPDR S&P Emerging Middle East & Africa ETF
SPDR S&P World ex-US ETF
SPDR S&P International Small Cap ETF
SPDR Dow Jones International Real Estate ETF
SPDR S&P Global Infrastructure ETF
SPDR S&P Global Natural Resources ETF
SPDR MSCI ACWI ex-US ETF
SPDR MSCI ACWI IMI ETF
SPDR MSCI ACWI Low Carbon Target ETF
SPDR MSCI EM 50 ETF
SPDR MSCI EM Beyond BRIC ETF
SPDR MSCI EAFE Quality Mix ETF
SPDR MSCI Emerging Markets Quality Mix ETF
SPDR MSCI World Quality Mix ETF
SPDR MSCI Australia Quality Mix ETF
SPDR MSCI Canada Quality Mix ETF
SPDR MSCI Germany Quality Mix ETF
SPDR MSCI Japan Quality Mix ETF
SPDR MSCI Mexico Quality Mix ETF
SPDR MSCI South Korea Quality Mix ETF
SPDR MSCI Spain Quality Mix ETF
SPDR MSCI Taiwan Quality Mix ETF
SPDR MSCI United Kingdom Quality Mix ETF
SPDR Russell/Nomura PRIME TM Japan ETF
SPDR Russell/Nomura Small Cap TM Japan ETF
SPDR S&P Global Dividend ETF
SPDR S&P International Dividend ETF
A-1
SPDR S&P International Mid Cap ETF
SPDR S&P Emerging Markets Small Cap ETF
SPDR Dow Jones Global Real Estate ETF
SPDR S&P International Consumer Discretionary Sector ETF
SPDR S&P International Consumer Staples Sector ETF
SPDR S&P International Energy Sector ETF
SPDR S&P International Financial Sector ETF
SPDR S&P International Health Care Sector ETF
SPDR S&P International Industrial Sector ETF
SPDR S&P International Materials Sector ETF
SPDR S&P International Technology Sector ETF
SPDR S&P International Telecommunications Sector ETF
SPDR S&P International Utilities Sector ETF
SHELF ETFS
SPDR S&P Asia Pacific ETF
SPDR S&P Europe ETF
SPDR S&P Small Cap Emerging Europe ETF
SPDR S&P Emerging Africa ETF
SPDR S&P Emerging South East Asia ETF
SPDR S&P Emerging GCC-Middle East ETF
SPDR S&P Small Cap Emerging Middle East & Africa ETF
SPDR S&P Ireland ETF
SPDR S&P Brazil ETF
SPDR S&P India ETF
SPDR S&P Small Cap Emerging Latin America ETF
SPDR MSCI France Quality Mix ETF
SPDR MSCI Hong Kong Quality Mix ETF
SPDR MSCI Italy Quality Mix ETF
SPDR MSCI Switzerland Quality Mix ETF
SPDR Series Trust
OPERATIONAL ETFS
SPDR Russell 3000 ETF
SPDR Russell 1000 ETF
SPDR Russell 2000 ETF
SPDR S&P 500 Growth ETF
SPDR S&P 500 Value ETF
SPDR Russell Small Cap Completeness ETF
SPDR S&P 400 Mid Cap Growth ETF
SPDR S&P 400 Mid Cap Value ETF
SPDR S&P 600 Small Cap ETF
SPDR S&P 600 Small Cap Growth ETF
SPDR S&P 600 Small Cap Value ETF
SPDR Global Dow ETF
A-2
SPDR Dow Jones REIT ETF
SPDR S&P Bank ETF
SPDR S&P Capital Markets ETF
SPDR S&P Insurance ETF
SPDR S&P Regional Banking SM ETF
SPDR Morgan Stanley Technology ETF
SPDR S&P Dividend ETF
SPDR S&P Aerospace & Defense ETF
SPDR S&P Biotech ETF
SPDR S&P Health Care Equipment ETF
SPDR S&P Health Care Services ETF
SPDR S&P Homebuilders ETF
SPDR S&P Metals & Mining ETF
SPDR S&P Oil & Gas Equipment & Services ETF
SPDR S&P Oil & Gas Exploration & Production ETF
SPDR S&P Pharmaceuticals ETF
SPDR S&P Retail ETF
SPDR S&P Semiconductor ETF
SPDR S&P Software & Services ETF
SPDR S&P Telecom ETF
SPDR S&P Transportation ETF
SPDR S&P 1500 Value Tilt ETF
SPDR S&P 1500 Momentum Tilt ETF
SPDR Russell 1000 Low Volatility ETF
SPDR Russell 2000 Low Volatility ETF
SPDR Wells Fargo Preferred Stock ETF
SPDR Barclays 1-3 Month T-Bill ETF
SPDR Barclays TIPS ETF
SPDR Barclays 0-5 Year TIPS ETF
SPDR Barclays 1-10 Year TIPS ETF
SPDR Barclays Short Term Treasury ETF
SPDR Barclays Intermediate Term Treasury ETF
SPDR Barclays Long Term Treasury ETF
SPDR Barclays Short Term Corporate Bond ETF
SPDR Barclays Intermediate Term Corporate Bond ETF
SPDR Barclays Long Term Corporate Bond ETF
SPDR Barclays Issuer Scored Corporate Bond ETF
SPDR Barclays Convertible Securities ETF
SPDR Barclays Mortgage Backed Bond ETF
SPDR Barclays Aggregate Bond ETF
SPDR Nuveen Barclays Municipal Bond ETF
SPDR Nuveen Barclays California Municipal Bond ETF
SPDR Nuveen Barclays New York Municipal Bond ETF
SPDR Nuveen Barclays Short Term Municipal Bond ETF
SPDR Nuveen S&P High Yield Municipal Bond ETF
SPDR Nuveen Barclays Build America Bond ETF
A-3
SPDR DB International Government Inflation-Protected Bond ETF
SPDR Barclays Short Term International Treasury Bond ETF
SPDR Barclays International Treasury Bond ETF
SPDR Barclays International Corporate Bond ETF
SPDR Barclays Emerging Markets Local Bond ETF
SPDR Barclays High Yield Bond ETF
SPDR Barclays International High Yield Bond ETF
SPDR Barclays Short Term High Yield Bond ETF
SPDR Barclays Investment Grade Floating Rate ETF
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF
SPDR S&P 500 Buyback ETF
SPDR MSCI USA Quality Mix ETF
SHELF ETFS
SPDR S&P Building & Construction ETF
SPDR S&P Computer Hardware ETF
SPDR S&P Food & Beverage ETF
SPDR S&P LeisureTime ETF
SPDR S&P Outsourcing & IT Consulting ETF
SPDR S&P 1500 Volatility Tilt ETF
SPDR S&P Commercial Paper ETF
SPDR S&P Agency Bond ETF
SPDR Barclays Corporate Bond ETF
SPDR Barclays Corporate Industrial Bond ETF
SPDR Barclays Corporate Financial Bond ETF
SPDR Barclays Corporate Utility Bond ETF
SPDR Barclays Zero Coupon Bond ETF
SPDR Barclays CMBS ETF
SPDR Barclays Global Convertible Securities ETF
SPDR Barclays Breakeven Inflation ETF
SPDR S&P Commercial Paper ex-Financials ETF
SPDR Barclays Floating Rate Treasury ETF
SSGA Active Trust
OPERATIONAL ETFS AND PORTFOLIOS
SPDR SSGA Multi-Asset Real Return ETF
SPDR SSGA Income Allocation ETF
SPDR SSGA Global Allocation ETF
SPDR Blackstone/GSO Senior Loan ETF
SPDR SSGA Ultra Short Term Bond ETF
SPDR MFS Systematic Core Equity ETF
SPDR MFS Systematic Growth Equity ETF
SPDR MFS Systematic Value Equity ETF
SPDR SSGA Risk Aware ETF
A-4
State Street Clarion Global Infrastructure & MLP Portfolio
SPDR DoubleLine Total Return Tactical ETF
SHELF ETFS
SPDR SSGA Conservative Global Allocation ETF
SPDR SSGA Aggressive Global Allocation ETF
SPDR SSGA Conservative Ultra Short Term Bond ETF
SPDR SSGA Aggressive Ultra Short Term Bond ETF
SPDR SSGA Large Cap Risk Aware ETF
SPDR SSGA Small Cap Risk Aware ETF
SPDR SSGA US Minimum Volatility ETF
SPDR SSGA Global Managed Volatility ETF (formerly, SPDR SSgA Global Minimum Volatility ETF)
SPDR SSGA Emerging Markets Minimum Volatility ETF
SSGA Funds
SSGA U.S. Government Money Fund*
SSGA Money Market Fund*
SSGA High Yield Bond Fund*
SSGA Dynamic Small Cap Fund*
SSGA Enhanced Small Cap Fund*
SSGA Emerging Markets Fund*
SSGA International Stock Selection Fund*
SSGA Clarion Real Estate Fund*
SSGA U.S. Treasury Money Market Fund*
SSGA Prime Money Market Fund*
SSGA S&P 500 Index Fund*
SSGA Master Trust
OPERATIONAL PORTFOLIOS
SSGA Multi-Asset Real Return Portfolio
SSGA Income Allocation Portfolio
SSGA Global Allocation Portfolio
Blackstone / GSO Senior Loan Portfolio
SSGA Ultra Short Term Bond Portfolio
SSGA MFS Systematic Core Equity Portfolio
SSGA MFS Systematic Growth Equity Portfolio
SSGA MFS Systematic Value Equity Portfolio
State Street Risk Aware Portfolio
State Street DoubleLine Total Return Tactical Portfolio
SHELF PORTFOLIOS
SSGA Conservative Global Allocation Portfolio
SSGA Aggressive Global Allocation Portfolio
A-5
State Street Institutional Investment Trust
State Street Equity 500 Index Fund*
State Street Aggregate Bond Index Fund*
State Street Institutional Liquid Reserves Fund*
State Street Institutional U.S. Government Money Market Fund*
State Street Institutional Tax Free Money Market Fund*
State Street Institutional Treasury Money Market Fund*
State Street Institutional Treasury Plus Money Market Fund*
State Street Global Equity ex-U.S. Index Fund*
State Street Strategic Real Return Fund
State Street Target Retirement 2015 Fund*
State Street Target Retirement 2020 Fund*
State Street Target Retirement 2025 Fund*
State Street Target Retirement 2030 Fund*
State Street Target Retirement 2035 Fund*
State Street Target Retirement 2040 Fund*
State Street Target Retirement 2045 Fund*
State Street Target Retirement 2050 Fund*
State Street Target Retirement 2055 Fund*
State Street Target Retirement 2060 Fund*
State Street Target Retirement Fund*
State Street Global Managed Volatility Fund*
State Street Opportunistic Emerging Markets Equity Fund
State Street Equity 500 Index II Portfolio
State Street Aggregate Bond Index Portfolio
State Street Strategic Real Return Portfolio
State Street Global Equity ex-U.S. Index Portfolio
State Street Clarion Global Infrastructure & MLP Fund*
State Street Global Macro Absolute Return Fund
State Street Clarion Global Real Estate Income Fund*
State Street Green Bond Fund
State Street ESG Emerging Markets Fund*
State Street International Developed Equity Index Fund*
State Street Hedged International Developed Equity Index*
State Street Macro Absolute Return Bond Fund
State Street Income Allocation Fund
State Street Multi-Asset Real Return Fund
State Street Global Allocation Fund
State Street Small/Mid Cap Equity Index Portfolio
State Street Small/Mid Cap Equity Index Fund
State Street 60 Day Money Market Portfolio
State Street 60 Day Money Market Fund
A-6
State Street Cash Reserves Portfolio
State Street Cash Reserves Fund
State Street Institutional Liquid Assets Portfolio
State Street Institutional Liquid Assets Fund
State Street Current Yield Portfolio
State Street Current Yield Fund
State Street Conservative Income Portfolio
State Street Conservative Income Fund
State Street Ultra Short Term Bond Portfolio
State Street Ultra Short Term Bond Fund
State Street Emerging Markets Equity Index Fund
State Street Small Cap Emerging Markets Equity Fund
State Street Master Funds
State Street Equity 500 Index Portfolio
State Street Money Market Portfolio
State Street Tax Free Money Market Portfolio
State Street U.S. Government Money Market Portfolio
State Street Treasury Money Market Portfolio
State Street Treasury Plus Money Market Portfolio
State Street Navigator Securities Lending Trust
State Street Navigator Securities Lending Prime Portfolio
State Street Navigator Securities Lending TIAA-CREF Short Term Lending Portfolio State
Street Navigator Securities Lending MET Portfolio
State Street Navigator Securities Lending Government Portfolio
State Street Navigator Securities Lending Short-Term Bond Portfolio
* | Receiving blue sky services pursuant to Section 5(cc). |
A-7
SUB-ADMINISTRATION AGREEMENT
SCHEDULE B
Notice Filing with State Securities Administrators
At the specific direction of the Administrator or the Trust, the Sub-Administrator will prepare required documentation and make Notice Filings in accordance with the securities laws of each jurisdiction in which Trust shares are to be offered or sold pursuant to instructions given to the Sub-Administrator by the Administrator or the Trust.
The Administrator shall be solely responsible for the determination (i) of those jurisdictions in which Notice Filings are to be submitted and (ii) the number of Trust shares to be permitted to be sold in each such jurisdiction. In the event that the Sub-Administrator becomes aware of (a) the sale of Trust shares in a jurisdiction in which no Notice Filing has been made or (b) the sale of Trust shares in excess of the number of Trust shares permitted to be sold in such jurisdiction, the Sub-Administrator shall report such information to the Administrator or the Trust, and it shall be the Administrators or the Trusts responsibility to determine appropriate corrective action and instruct the Sub-Administrator with respect thereto.
The Blue Sky services shall consist of the following:
1. | Filing of Trusts Initial Notice Filings, as directed by the Trust; |
2. | Filing of Trusts renewals and amendments as required; |
3. | Filing of amendments to the Trusts registration statement where required; |
4. | Filing Trust sales reports where required; |
5. | Payment at the expense of the Trust of all Trust Notice Filing fees; |
6. | Filing the Prospectuses and Statements of Additional Information and any amendments or supplements thereto where required; |
7. | Filing of annual reports and proxy statements where required; and |
8. | The performance of such additional services as the Sub-Administrator and the Administrator may agree upon in writing. |
Unless otherwise specified in writing by the Sub-Administrator, Blue Sky services by the Sub-Administrator shall not include determining the availability of exemptions under a jurisdictions blue sky law or ensuring the proper application of any such exemptions. Any such determinations shall be made by the Administrator or the Trust or their legal counsel.
B-1
If the Administrator or the Trust has elected to deliver Trust share sales information to the Sub-Administrator via broker-dealer feeds, the Sub-Administrators processing of any such feeds is subject to the supervision and approval of the Trust and the following shall apply.
1. | Activation of any broker-dealer feeds, including transfer agent codes or broker codes, will commence as soon as practical after written instructions are received from the Trust. The Sub-Administrator will assume all sales from such feeds are Blue Sky reportable. |
2. | The Sub-Administrator will accept and pay Blue Sky fees based on all active and live direct broker-dealer feeds, as instructed by the Trust in writing. |
3. | The originating entity, and not the Sub-Administrator, is responsible for the accuracy of all broker-dealer feed information. Without limiting the generality of the foregoing, the Sub-Administrator will not be responsible for (i) reconciling any direct broker-dealer feeds with the Trusts accounting records, (ii) ensuring that omnibus suppressions are effected, (iii) the accuracy of any files transmitted from the transfer agent or broker-dealer systems or (iv) errors or omissions in sales data. The Sub-Administrator will not alter or otherwise manipulate or change the contents of any transfer agent or broker-dealer files routed to the Sub-Administrator. |
4. | The Administrator or the Trust will be responsible for ensuring that any direct broker-dealer feeds are deactivated from the main omnibus feed at the Trusts transfer agent as appropriate. The Trust acknowledges that all dropped and dead transfer agent or broker-dealer feeds will automatically be deactivated. |
In connection with the services described herein, the Trust shall issue in favor of the Sub-Administrator a power of attorney to submit Notice Filings on behalf of the Trust, which power of attorney shall be substantially in the form of Exhibit I attached hereto.
B-2
EXHIBIT 1
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of that (the Trust) on behalf of its currently existing series and all future series (the Funds), with principal offices at , makes, constitutes, and appoints BOSTON FINANCIAL DATA SERVICES, INC. (Boston Financial) with principal offices at 200 Crown Colony Drive, Quincy, Massachusetts 02169 its lawful attorney-in-fact for it to do as if it were itself acting, the following:
1. NOTICE FILINGS FOR FUND SHARES. The power to submit (in any format accepted) notice filings for the Funds in each jurisdiction in which the Funds shares are offered or sold and in connection therewith the power to prepare, execute, and deliver and file (in any format accepted) any and all of the Funds applications including without limitation, applications to provide notice for the Funds shares, consents, including consents to service of process, reports, including without limitation, all periodic reports, or other documents and instruments now or hereafter required or appropriate in the judgment of the Boston Financial in connection with the notice filings of the Funds shares.
2. TRANSMIT FILING FEES. The power to draw, endorse, and deposit checks and/or transmit electronic payments in the name of the Funds in connection with the notice filings of the Funds shares with state securities administrators.
3. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney, individuals holding the titles of Managing Director, Vice President, Compliance Officer, Compliance Group Manager, Compliance Manager, or Compliance Fund Administrator at Boston Financial shall have authority to act on behalf of the Funds with respect to items 1 and 2 above.
The execution of this limited power of attorney shall be deemed coupled with an interest and shall be revocable only upon receipt by Boston Financial of such termination of authority. Nothing herein shall be construed to constitute the appointment of Boston Financial as or otherwise authorize Boston Financial to act as an officer, director or employee of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed in its name and on its behalf by and through its duly authorized officer, as of the date first written above.
[NAME]
By: |
|
Name: |
|
Title: |
|
Subscribed and sworn to before me
this day of 20
|
Exh1-1
Notary Public
State of
In and for the County of
My Commission expires
Exh1-2
SUB-ADMINISTRATION AGREEMENT
SCHEDULE C
Prior Agreements
| Administration Agreement dated as of February 15, 2002 by and between State Street Bank and Trust Company and SPDR Index Shares Funds |
| Administration Agreement dated as of September 22, 2000 by and between State Street Bank and Trust Company and SPDR Series Trust |
| Administration Agreement, dated as of April 18, 2012 by and between State Street Bank and Trust Company and SSgA Active Trust |
| Administration Agreement dated as of January 1, 2013 by and between State Street Bank and Trust Company and SSgA Funds 1 |
| Administration Agreement dated as of April 18, 2012 by and between State Street Bank and Trust Company and SSgA Master Trust |
| Administration Agreement dated as of February 28, 2000 by and between State Street Bank and Trust Company and State Street Institutional Investment Trust |
| Sub-Administration Agreement dated as of February 1, 2011 by and among State Street Bank and Trust Company, SSGA Funds Management, Inc. and State Street Institutional Investment Trust |
| Administration Agreement dated as of March 1, 2000 by and between State Street Bank and Trust Company and State Street Master Funds |
| Administration Agreement dated as of March 4, 1996 by and between State Street Bank and Trust Company and State Street Navigator Securities Lending Trust |
| Money Market Services Agreement dated as of September 1, 2010 by and between State Street Master Funds and State Street Institutional Investment Trust and State Street Bank and Trust Company |
1 | Note that this Agreement superseded the Money Market Services Agreement dated September 1, 2010 by and between SSgA Funds and State Street Bank and Trust Company |
C-1
SUB-ADMINISTRATION AGREEMENT
SCHEDULE A
Listing of Fund(s)
SPDR Series Trust
OPERATIONAL ETFS
SPDR Russell 3000 ETF
SPDR Russell 1000 ETF
SPDR Russell 2000 ETF
SPDR S&P 500 Growth ETF
SPDR S&P 500 Value ETF
SPDR Russell Small Cap Completeness ETF
SPDR S&P 400 Mid Cap Growth ETF
SPDR S&P 400 Mid Cap Value ETF
SPDR S&P 600 Small Cap ETF
SPDR S&P 600 Small Cap Growth ETF
SPDR S&P 600 Small Cap Value ETF
SPDR Global Dow ETF
SPDR Dow Jones REIT ETF
SPDR S&P Bank ETF
SPDR S&P Capital Markets ETF
SPDR S&P Insurance ETF
SPDR S&P Regional Banking SM ETF
SPDR Morgan Stanley Technology ETF
SPDR S&P Dividend ETF
SPDR S&P Aerospace & Defense ETF
SPDR S&P Biotech ETF
SPDR S&P Health Care Equipment ETF
SPDR S&P Health Care Services ETF
SPDR S&P Homebuilders ETF
SPDR S&P Metals & Mining ETF
SPDR S&P Oil & Gas Equipment & Services ETF
SPDR S&P Oil & Gas Exploration & Production ETF
SPDR S&P Pharmaceuticals ETF
SPDR S&P Retail ETF
SPDR S&P Semiconductor ETF
SPDR S&P Software & Services ETF
SPDR S&P Telecom ETF
SPDR S&P Transportation ETF
SPDR S&P 1500 Value Tilt ETF
SPDR S&P 1500 Momentum Tilt ETF
SPDR Russell 1000 Low Volatility ETF
SPDR Russell 2000 Low Volatility ETF
SPDR Wells Fargo Preferred Stock ETF
SPDR Barclays 1-3 Month T-Bill ETF
SPDR Barclays TIPS ETF
SPDR Barclays 0-5 Year TIPS ETF
SPDR Barclays 1-10 Year TIPS ETF
SPDR Barclays Short Term Treasury ETF
SPDR Barclays Intermediate Term Treasury ETF
SPDR Barclays Long Term Treasury ETF
SPDR Barclays Short Term Corporate Bond ETF
SPDR Barclays Intermediate Term Corporate Bond ETF
SPDR Barclays Long Term Corporate Bond ETF
SPDR Barclays Issuer Scored Corporate Bond ETF
SPDR Barclays Convertible Securities ETF
SPDR Barclays Mortgage Backed Bond ETF
SPDR Barclays Aggregate Bond ETF
SPDR Nuveen Barclays Municipal Bond ETF
SPDR Nuveen Barclays California Municipal Bond ETF
SPDR Nuveen Barclays New York Municipal Bond ETF
SPDR Nuveen Barclays Short Term Municipal Bond ETF
SPDR Nuveen S&P High Yield Municipal Bond ETF
SPDR Nuveen Barclays Build America Bond ETF
SPDR DB International Government Inflation-Protected Bond ETF
SPDR Barclays Short Term International Treasury Bond ETF
SPDR Barclays International Treasury Bond ETF
SPDR Barclays International Corporate Bond ETF
SPDR Barclays Emerging Markets Local Bond ETF
SPDR Barclays High Yield Bond ETF
SPDR Barclays International High Yield Bond ETF
SPDR Barclays Short Term High Yield Bond ETF
SPDR Barclays Investment Grade Floating Rate ETF
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF
SPDR S&P 500 Buyback ETF
SPDR MSCI USA Quality Mix ETF
SPDR S&P 500 High Dividend ETF
SHELF ETFS
SPDR S&P Building & Construction ETF
SPDR S&P Computer Hardware ETF
SPDR S&P Food & Beverage ETF
SPDR S&P LeisureTime ETF
SPDR S&P Outsourcing & IT Consulting ETF
SPDR S&P 1500 Volatility Tilt ETF
SPDR S&P Commercial Paper ETF
SPDR S&P Agency Bond ETF
SPDR Barclays Corporate Bond ETF
SPDR Barclays Corporate Industrial Bond ETF
SPDR Barclays Corporate Financial Bond ETF
SPDR Barclays Corporate Utility Bond ETF
SPDR Barclays Zero Coupon Bond ETF
SPDR Barclays CMBS ETF
2
SPDR Barclays Global Convertible Securities ETF
SPDR Barclays Breakeven Inflation ETF
SPDR S&P Commercial Paper ex-Financials ETF
SPDR Barclays Floating Rate Treasury ETF
[REDACTED]
As of October 21, 2015
3
ANNEX A
To the Transfer Agency and Service Agreement, as amended,
by and between
SPDR ® Series Trust and State Street Bank and Trust Company
ETF |
Trading
Symbol |
|
SPDR Russell 3000 ® ETF |
THRK | |
SPDR Russell 1000 ® ETF |
ONEK | |
SPDR S&P ® 500 Growth ETF |
SPYG | |
SPDR S&P 500 Value ETF |
SPYV | |
SPDR Russell Small Cap Completeness ® ETF |
RSCO | |
SPDR S&P 400 Mid Cap Growth ETF |
MDYG | |
SPDR S&P 400 Mid Cap Value ETF |
MDYV | |
SPDR S&P 600 Small Cap ETF |
SLY | |
SPDR S&P 600 Small Cap Growth ETF |
SLYG | |
SPDR S&P 600 Small Cap Value ETF |
SLYV | |
SPDR Global Dow ETF |
DGT | |
SPDR Dow Jones REIT ETF |
RWR | |
SPDR S&P Bank ETF |
KBE | |
SPDR S&P Capital Markets ETF |
KCE | |
SPDR S&P Insurance ETF |
KIE | |
SPDR Morgan Stanley Technology ETF |
MTK | |
SPDR S&P Dividend ETF |
SDY | |
SPDR S&P Aerospace & Defense ETF |
XAR | |
SPDR S&P Biotech ETF |
XBI | |
SPDR S&P Health Care Equipment ETF |
XHE | |
SPDR S&P Health Care Services ETF |
XHS | |
SPDR S&P Homebuilders ETF |
XHB | |
SPDR S&P Metals & Mining ETF |
XME | |
SPDR S&P Oil & Gas Equipment & Services ETF |
XES | |
SPDR S&P Oil & Gas Exploration & Production ETF |
XOP | |
SPDR S&P Pharmaceuticals ETF |
XPH | |
SPDR S&P Retail ETF |
XRT | |
SPDR S&P Semiconductor ETF |
XSD | |
SPDR S&P Software & Services ETF |
XSW | |
SPDR S&P Telecom ETF |
XTL | |
SPDR S&P Transportation ETF |
XTN | |
SPDR S&P Regional Banking ETF |
KRE | |
SPDR Barclays 1-3 Month T-Bill ETF |
BIL | |
SPDR Barclays Intermediate Term Treasury ETF |
ITE | |
SPDR Barclays Long Term Treasury ETF |
TLO | |
SPDR Barclays TIPS ETF |
IPE | |
SPDR Barclays Aggregate Bond ETF |
LAG | |
SPDR Nuveen Barclays Municipal Bond ETF |
TFI | |
SPDR Barclays International Treasury Bond ETF |
BWX |
1
SPDR Nuveen Barclays Short Term Municipal Bond ETF |
SHM | |
SPDR Nuveen Barclays California Municipal Bond ETF |
CXA | |
SPDR Nuveen Barclays New York Municipal Bond ETF |
INY | |
SPDR Barclays High Yield Bond ETF |
JNK | |
SPDR DB International Government Inflation-Protected Bond ETF |
WIP | |
SPDR Barclays Short Term International Treasury Bond ETF |
BWZ | |
SPDR Barclays Intermediate Term Corporate Bond ETF |
ITR | |
SPDR Barclays Long Term Corporate Bond ETF |
LWC | |
SPDR Barclays Convertible Securities ETF |
CWB | |
SPDR Barclays Mortgage Backed Bond ETF |
MBG | |
SPDR Wells Fargo Preferred Stock ETF |
PSK | |
SPDR Barclays Short Term Corporate Bond ETF |
SCPB | |
SPDR Nuveen Barclays Build America Bond ETF |
BABS | |
SPDR Barclays International Corporate Bond ETF |
IBND | |
SPDR Barclays Emerging Markets Local Bond ETF |
EBND | |
SPDR Barclays Issuer Scored Corporate Bond ETF |
CBND | |
SPDR Nuveen S&P High Yield Municipal Bond ETF |
HYMB | |
SPDR Barclays Short Term Treasury ETF |
SST | |
SPDR Barclays Investment Grade Floating Rate ETF |
FLRN | |
SPDR Barclays Short Term High Yield Bond ETF |
SJNK | |
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
EMCD | |
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
XOVR | |
SPDR S&P 1500 Value Tilt ETF |
VLU | |
SPDR S&P 1500 Momentum Tilt ETF |
MMTM | |
SPDR Russell 1000 Low Volatility ETF |
LGLV | |
SPDR Russell 2000 Low Volatility ETF |
SMLV | |
SPDR Barclays 1-10 Year TIPS ETF |
TIPX | |
SPDR Russell 2000 ETF |
TWOK | |
SPDR Barclays 0-5 Year TIPS ETF |
SIPE | |
SPDR Barclays International High Yield Bond ETF |
IJNK | |
SPDR S&P 500 Buyback ETF |
SPYB | |
SPDR MSCI USA Quality Mix ETF |
QUS | |
SPDR S&P 500 High Dividend ETF |
SPYD |
Dated: October 21, 2015
2
Morgan, Lewis & Bockius LLP
2020 K Street NW
Washington, DC 20006-1806
Tel. +1.202.373.6000
Fax: +1.202.373.6001
www.morganlewis.com
October 28, 2015
SPDR ® Series Trust
One Lincoln Street
Boston, Massachusetts 02111
Re: SPDR ® Series Trust
Ladies and Gentlemen:
We have acted as counsel to SPDR ® Series Trust, a Massachusetts voluntary association (commonly known as a business trust) (the Trust), in connection with Post-Effective Amendment No. 146 to the Trusts Registration Statement on Form N-1A to be filed with the Securities and Exchange Commission (the Commission) on or about October 28, 2015 (the Registration Statement), with respect to the issuance of shares of beneficial interest, with $0.01 par value per share (the Shares), of each separate series of the Trust listed on Schedule A hereto (collectively, the Funds). You have requested that we deliver this opinion to you in connection with the Trusts filing of the Registration Statement.
In connection with the furnishing of this opinion, we have examined the following documents:
(a) | A certificate of the Secretary of the Commonwealth of Massachusetts as to the existence of the Trust; |
(b) | A copy, stamped as filed with the Secretary of the Commonwealth of Massachusetts, of the Trusts First Amended and Restated Declaration of Trust dated June 9, 1998 as amended and restated September 6, 2000 and as amended August 1, 2007 (the Declaration); |
(c) | A certificate executed by the Secretary of the Trust, certifying as to, and attaching copies of, the Trusts Declaration, the Trusts Amended and Restated By-Laws adopted September 25, 2000 and last amended August 1, 2007 (the By-Laws), and certain resolutions adopted by the Trustees of the Trust authorizing the issuance of the Shares of the Funds (the Resolutions); and |
(d) | A printers proof of the Registration Statement. |
In such examination, we have assumed the genuineness of all signatures, the conformity to the originals of all of the documents reviewed by us as copies, including conformed copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document. We have assumed that the Registration Statement as filed with the Commission will be in substantially the form of the printers proof referred to in paragraph (d)
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SPDR ® Series Trust
October 28, 2015
above. We have also assumed that the Declaration, By-laws and the Resolutions will not have been amended, modified or withdrawn with respect to matters relating to the Shares and will be in full force and effect on the date of the issuance of such Shares.
This opinion is based entirely on our review of the documents listed above and such investigation of law as we have deemed necessary or appropriate. We have made no other review or investigation of any kind whatsoever, and we have assumed, without independent inquiry, the accuracy of the information set forth in such documents.
As to any opinion below relating to the formation or existence of the Trust under the laws of the Commonwealth of Massachusetts, our opinion relies entirely upon and is limited by the certificate of public officials referred to in (a) above.
This opinion is limited solely to the internal substantive laws of the Commonwealth of Massachusetts, as applied by courts located in Massachusetts (other than Massachusetts securities laws, as to which we express no opinion), to the extent that the same may apply to or govern the transactions referred to herein. No opinion is given herein as to the choice of law which any tribunal may apply to such transaction. In addition, to the extent that the Declaration or the By-laws refer to, incorporate or require compliance with the Investment Company Act of 1940, as amended (the 1940 Act), or any other law or regulation applicable to the Trust, except for the internal substantive laws of the Commonwealth of Massachusetts, as aforesaid, we have assumed compliance by the Trust with the 1940 Act and such other laws and regulations.
We understand that all of the foregoing assumptions and limitations are acceptable to you.
Based upon and subject to the foregoing, please be advised that it is our opinion that:
1. | The Trust has been formed and is existing under the Trusts Declaration and the laws of the Commonwealth of Massachusetts as a voluntary association with transferable shares of beneficial interest commonly referred to as a Massachusetts business trust. |
2. | The Shares, when issued and sold in accordance with the Trusts Declaration and By-laws and for the consideration described in the Registration Statement, will be validly issued, fully paid, and nonassessable under the laws of the Commonwealth of Massachusetts except that, as set forth in the Registration Statement, shareholders of the Trust may under certain circumstances be held personally liable for its obligations. |
This opinion is given as of the date hereof and we assume no obligation to update this opinion to reflect any changes in law or any other facts or circumstances which may hereafter come to our attention. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In rendering this opinion and giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Commission thereunder.
Very truly yours,
/s/Morgan, Lewis & Bockius LLP
SPDR ® Series Trust
October 28, 2015
Schedule A
Fund Name |
SPDR Russell 3000 ® ETF |
SPDR Russell 1000 ® ETF |
SPDR Russell 2000 ETF |
SPDR S&P ® 500 Buyback ETF |
SPDR S&P 500 High Dividend ETF |
SPDR S&P 500 Growth ETF |
SPDR S&P 500 Value ETF |
SPDR Russell Small Cap Completeness ® ETF |
SPDR S&P 400 Mid Cap Growth ETF |
SPDR S&P 400 Mid Cap Value ETF |
SPDR S&P 600 Small Cap ETF |
SPDR S&P 600 Small Cap Growth ETF |
SPDR S&P 600 Small Cap Value ETF |
SPDR Global Dow ETF |
SPDR Dow Jones REIT ETF |
SPDR S&P Bank ETF |
SPDR S&P Capital Markets ETF |
SPDR S&P Insurance ETF |
SPDR S&P Regional Banking ETF |
SPDR Morgan Stanley Technology ETF |
SPDR S&P Dividend ETF |
SPDR S&P Aerospace & Defense ETF |
SPDR S&P Biotech ETF |
SPDR S&P Building & Construction ETF |
SPDR S&P Computer Hardware ETF |
SPDR S&P Food & Beverage ETF |
SPDR S&P Health Care Equipment ETF |
SPDR S&P Health Care Services ETF |
SPDR S&P Homebuilders ETF |
SPDR S&P LeisureTime ETF |
SPDR S&P Metals & Mining ETF |
SPDR S&P Oil & Gas Equipment & Services ETF |
SPDR S&P Oil & Gas Exploration & Production ETF |
SPDR S&P Outsourcing & IT Consulting ETF |
SPDR S&P Pharmaceuticals ETF |
SPDR S&P Retail ETF |
SPDR S&P Semiconductor ETF |
SPDR S&P Software & Services ETF |
SPDR S&P Telecom ETF |
SPDR S&P Transportation ETF |
SPDR S&P 1500 Value Tilt ETF |
SPDR S&P 1500 Momentum Tilt ETF |
SPDR S&P 1500 Volatility Tilt ETF |
SPDR Russell 1000 Low Volatility ETF |
SPDR Russell 2000 Low Volatility ETF |
SPDR Wells Fargo ® Preferred Stock ETF |
SPDR MSCI USA Quality Mix ETF |
SPDR ® Series Trust
October 28, 2015
Fund Name |
SPDR Barclays 1-3 Month T-Bill ETF |
SPDR Barclays TIPS ETF |
SPDR Barclays 0-5 Year TIPS ETF |
SPDR Barclays 1-10 Year TIPS ETF |
SPDR Barclays Short Term Treasury ETF |
SPDR Barclays Intermediate Term Treasury ETF |
SPDR Barclays Long Term Treasury ETF |
SPDR Barclays Short Term Corporate Bond ETF |
SPDR Barclays Intermediate Term Corporate Bond ETF |
SPDR Barclays Long Term Corporate Bond ETF |
SPDR Barclays Issuer Scored Corporate Bond ETF |
SPDR Barclays Convertible Securities ETF |
SPDR Barclays Mortgage Backed Bond ETF |
SPDR Barclays Aggregate Bond ETF |
SPDR Nuveen Barclays Municipal Bond ETF |
SPDR Nuveen Barclays California Municipal Bond ETF |
SPDR Nuveen Barclays New York Municipal Bond ETF |
SPDR Nuveen Barclays Short Term Municipal Bond ETF |
SPDR Nuveen S&P High Yield Municipal Bond ETF |
SPDR Nuveen Barclays Build America Bond ETF |
SPDR DB International Government Inflation-Protected Bond ETF |
SPDR Barclays Short Term International Treasury Bond ETF |
SPDR Barclays International Treasury Bond ETF |
SPDR Barclays International Corporate Bond ETF |
SPDR Barclays Emerging Markets Local Bond ETF |
SPDR Barclays High Yield Bond ETF |
SPDR Barclays International High Yield Bond ETF |
SPDR Barclays Short Term High Yield Bond ETF |
SPDR Barclays Investment Grade Floating Rate ETF |
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
SPDR BofA Merrill Lynch Crossover Corporate Bond ETF |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the references to our firm under the captions General Information and Financial Highlights in each Prospectus and Counsel and Independent Registered Public Accounting Firm and Financial Statements in the Statement of Additional Information, included in Post-Effective Amendment No. 144 to the Registration Statement (Form N-1A, No. 333-57793) of SPDR ® Series Trust.
We also consent to the incorporation by reference into the Statement of Additional Information of our reports, dated August 31, 2015, with respect to the financial statements and financial highlights of SPDR Barclays 1-3 Month T-Bill ETF, SPDR Barclays TIPS ETF, SPDR Barclays 0-5 Year TIPS ETF, SPDR Barclays 1-10 Year TIPS ETF, SPDR Barclays Short Term Treasury ETF, SPDR Barclays Intermediate Term Treasury ETF, SPDR Barclays Long Term Treasury ETF, SPDR Barclays Short Term Corporate Bond ETF, SPDR Barclays Intermediate Term Corporate Bond ETF, SPDR Barclays Long Term Corporate Bond ETF, SPDR Barclays Issuer Scored Corporate Bond ETF, SPDR Barclays Convertible Securities ETF, SPDR Barclays Mortgage Backed Bond ETF, SPDR Barclays Aggregate Bond ETF, SPDR Nuveen Barclays Municipal Bond ETF, SPDR Nuveen Barclays California Municipal Bond ETF, SPDR Nuveen Barclays New York Municipal Bond ETF, SPDR Nuveen Barclays Short Term Municipal Bond ETF, SPDR Nuveen S&P High Yield Municipal Bond ETF, SPDR Nuveen Barclays Build America Bond ETF, SPDR DB International Government Inflation-Protected Bond ETF, SPDR Barclays Short Term International Treasury Bond ETF, SPDR Barclays International Treasury Bond ETF, SPDR Barclays International Corporate Bond ETF, SPDR Barclays Emerging Markets Local Bond ETF, SPDR Barclays International High Yield Bond ETF, SPDR Barclays High Yield Bond ETF, SPDR Barclays Short Term High Yield Bond ETF, SPDR Barclays Investment Grade Floating Rate ETF, SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF, SPDR BofA Merrill Lynch Crossover Corporate Bond ETF, SPDR Russell 3000 ETF, SPDR Russell 1000 ETF, SPDR Russell 2000 ETF, SPDR S&P 500 Buyback ETF, SPDR S&P 500 Growth ETF, SPDR S&P 500 Value ETF, SPDR Russell Small Cap Completeness ETF, SPDR S&P 400 Mid Cap Growth ETF, SPDR S&P 400 Mid Cap Value ETF, SPDR S&P 600 Small Cap ETF, SPDR S&P 600 Small Cap Growth ETF, SPDR S&P 600 Small Cap Value ETF, SPDR Global Dow ETF, SPDR Dow Jones REIT ETF, SPDR S&P Bank ETF, SPDR S&P Capital Markets ETF, SPDR S&P Insurance ETF, SPDR S&P Regional Banking ETF, SPDR Morgan Stanley Technology ETF, SPDR S&P Dividend ETF, SPDR S&P Aerospace & Defense ETF, SPDR S&P Biotech ETF, SPDR S&P Health Care Equipment ETF, SPDR S&P Health Care Services ETF, SPDR S&P Homebuilders ETF, SPDR S&P Metals & Mining ETF, SPDR S&P Oil & Gas Equipment & Services ETF, SPDR S&P Oil & Gas Exploration & Production ETF, SPDR S&P Pharmaceuticals ETF, SPDR S&P Retail ETF, SPDR S&P Semiconductor ETF, SPDR S&P Software & Services ETF, SPDR S&P Telecom ETF, SPDR S&P Transportation ETF, SPDR S&P 1500 Value Tilt ETF, SPDR S&P 1500 Momentum Tilt ETF, SPDR S&P 1500 Volatility Tilt ETF, SPDR Russell 1000 Low Volatility ETF, SPDR Russell 2000 Low Volatility ETF, SPDR MSCI USA Quality Mix ETF and SPDR Wells Fargo Preferred Stock ETF (seventy one of the portfolios comprising SPDR ® Series Trust), included in the respective June 30, 2015 Annual Reports of SPDR ® Series Trust.
/s/ Ernst & Young
Boston, Massachusetts
October 27, 2015
Exhibit A
ETF |
SPDR ® Russell 1000 ® ETF |
SPDR ® Russell 2000 ETF |
SPDR ® S&P ® 500 Growth ETF |
SPDR ® S&P ® 500 Value ETF |
SPDR ® Russell Small Cap Completeness ® ETF |
SPDR ® S&P ® 400 Mid Cap Growth ETF |
SPDR ® S&P ® 400 Mid Cap Value ETF |
SPDR ® S&P ® 600 Small Cap ETF |
SPDR ® S&P ® 600 Small Cap Growth ETF |
SPDR ® S&P ® 600 Small Cap Value ETF |
SPDR ® Global Dow ETF |
SPDR ® Dow Jones REIT ETF |
SPDR ® S&P ® Bank ETF |
SPDR ® S&P ® Capital Markets ETF |
SPDR ® S&P ® Insurance ETF |
SPDR ® Morgan Stanley Technology ETF |
SPDR ® S&P ® Dividend ETF |
SPDR ® S&P ® Aerospace & Defense ETF |
SPDR ® S&P ® Biotech ETF |
SPDR ® S&P ® Health Care Equipment ETF |
SPDR ® S&P ® Health Care Services ETF |
SPDR ® S&P ® Homebuilders ETF |
SPDR ® S&P ® Metals & Mining ETF |
SPDR ® S&P ® Oil & Gas Equipment & Services ETF |
SPDR ® S&P ® Oil & Gas Exploration & Production ETF |
SPDR ® S&P ® Pharmaceuticals ETF |
SPDR ® S&P ® Retail ETF |
SPDR ® S&P ® Semiconductor ETF |
SPDR ® S&P ® Software & Services ETF |
SPDR ® S&P ® Telecom ETF |
SPDR ® S&P ® Transportation ETF |
SPDR ® S&P ® Regional Banking (SM) ETF |
SPDR ® Barclays 1-3 Month T-Bill ETF |
SPDR ® Barclays Intermediate Term Treasury ETF |
SPDR ® Barclays Long Term Treasury ETF |
SPDR ® Barclays TIPS ETF |
SPDR ® Barclays 0-5 Year TIPS ETF |
SPDR ® Barclays 1-10 Year TIPS ETF |
SPDR ® Barclays Aggregate Bond ETF |
SPDR ® Nuveen Barclays Municipal Bond ETF |
SPDR ® Barclays International Treasury Bond ETF |
SPDR ® Nuveen Barclays Short Term Municipal Bond ETF |
SPDR ® Nuveen Barclays California Municipal Bond ETF |
SPDR ® Nuveen Barclays New York Municipal Bond ETF |
SPDR ® Barclays High Yield Bond ETF |
SPDR ® Barclays International High Yield Bond ETF |
1
ETF |
SPDR ® DB International Government Inflation-Protected Bond ETF |
SPDR ® Barclays Short Term International Treasury Bond ETF |
SPDR ® Barclays Intermediate Term Corporate Bond ETF |
SPDR ® Barclays Long Term Corporate Bond ETF |
SPDR ® Barclays Convertible Securities ETF |
SPDR ® Barclays Mortgage Backed Bond ETF |
SPDR ® Wells Fargo Preferred Stock ETF |
SPDR ® Barclays Short Term Corporate Bond ETF |
SPDR ® Nuveen Barclays Capital Build America Bond ETF |
SPDR ® Barclays International Corporate Bond ETF |
SPDR ® Barclays Emerging Markets Local Bond ETF |
SPDR ® Barclays Issuer Scored Corporate Bond ETF |
SPDR ® Nuveen S&P ® High Yield Municipal Bond ETF |
SPDR ® Barclays Short Term Treasury ETF |
SPDR ® Barclays Investment Grade Floating Rate ETF |
SPDR ® Barclays Short Term High Yield Bond ETF |
SPDR ® BofA Merrill Lynch Emerging Markets Corporate Bond ETF |
SPDR ® BofA Merrill Lynch Crossover Corporate Bond ETF |
SPDR ® S&P ® 1500 Value Tilt ETF |
SPDR ® S&P ® 1500 Momentum Tilt ETF |
SPDR ® Russell 1000 ® Low Volatility ETF |
SPDR ® Russell 2000 Low Volatility ETF |
SPDR ® S&P 500 Buyback ETF |
SPDR ® MSCI USA Quality Mix ETF |
SPDR S&P 500 High Dividend ETF |
Effective With SEC, But Not Operational |
SPDR S&P Building & Construction ETF |
SPDR S&P Computer Hardware ETF |
SPDR S&P Food & Beverage ETF |
SPDR S&P LeisureTime ETF |
SPDR S&P Outsourcing & IT Consulting ETF |
SPDR S&P 1500 Volatility Tilt ETF |
SPDR S&P Commercial Paper ETF |
SPDR S&P Agency Bond ETF |
SPDR Barclays Corporate Bond ETF |
SPDR Barclays Corporate Industrial Bond ETF |
SPDR Barclays Corporate Financial Bond ETF |
SPDR Barclays Corporate Utilities Bond ETF |
SPDR Barclays Zero Coupon Bond ETF |
SPDR Barclays CMBS ETF |
SPDR Barclays Global Convertible Securities ETF |
SPDR Barclays Breakeven Inflation ETF |
SPDR S&P Commercial Paper ex-Financials ETF |
SPDR Barclays Floating Rate Treasury ETF |
Dated: October 21, 2015
2