As filed with the Securities and Exchange Commission on October 29, 2018
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 | ☒ | |
Post-Effective Amendment No. 211 | ||
And | ||
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |
☒ |
Amendment No. 213
SPDR ® SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
One Iron Street
Boston, Massachusetts 02210
(Address of Principal Executive Offices)
Registrants Telephone Number: (617) 664-7037
Joshua A. Weinberg, Esq.
Managing Director and Managing Counsel
c/o SSGA Funds Management, Inc.
One Iron Street
Boston, Massachusetts 02210
(Name and Address of Agent for Service)
Copies to:
W. John McGuire, Esq.
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004
It is proposed that this filing will become effective:
☐ |
immediately upon filing pursuant to Rule 485, paragraph (b) |
☒ |
on October 31, 2018 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. |
Investment Objective |
The SPDR Russell 1000 Yield Focus ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Russell 1000 Yield Focused Factor Index. |
Management fees | 0.20% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.20% |
Year 1 | Year 3 | Year 5 | Year 10 |
$20 | $64 | $113 | $255 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 6.06%. |
One
Year |
Since
Inception
(12/02/15) |
|
Return Before Taxes | 15.19% | 16.70% |
Return After Taxes on Distributions | 11.31% | 13.52% |
Return After Taxes on Distributions and Sale of Fund Shares | 9.66% | 11.86% |
Russell 1000 Yield Focused Factor Index (reflects no deduction for fees, expenses or taxes) | 15.64% | 17.03% |
Investment Objective |
The SPDR Russell 1000 Momentum Focus ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Russell 1000 Momentum Focused Factor Index. |
Management fees | 0.20% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.20% |
Year 1 | Year 3 | Year 5 | Year 10 |
$20 | $64 | $113 | $255 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 5.84%. |
One
Year |
Since
Inception
(12/02/15) |
|
Return Before Taxes | 20.71% | 14.75% |
Return After Taxes on Distributions | 18.19% | 13.31% |
Return After Taxes on Distributions and Sale of Fund Shares | 12.99% | 11.16% |
Russell 1000 Momentum Focused Factor Index (reflects no deduction for fees, expenses or taxes) | 21.07% | 15.05% |
Investment Objective |
The SPDR Russell 1000 Low Volatility Focus ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Russell 1000 Low Volatility Focused Factor Index. |
Management fees | 0.20% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.20% |
Year 1 | Year 3 | Year 5 | Year 10 |
$20 | $64 | $113 | $255 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 7.07%. |
One
Year |
Since
Inception
(12/02/15) |
|
Return Before Taxes | 17.89% | 15.35% |
Return After Taxes on Distributions | 15.30% | 13.39% |
Return After Taxes on Distributions and Sale of Fund Shares | 10.89% | 11.25% |
Russell 1000 Low Volatility Focused Factor Index (reflects no deduction for fees, expenses or taxes) | 18.22% | 15.65% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 8.17%. |
One
Year |
Since
Inception
(2/04/2015) |
|
Return Before Taxes | 20.95% | 9.95% |
Return After Taxes on Distributions | 20.27% | 9.35% |
Return After Taxes on Distributions and Sale of Fund Shares | 12.11% | 7.57% |
S&P 500 Buyback Index (reflects no deduction for fees, expenses or taxes) | 21.43% | 10.39% |
Investment Objective |
The SPDR Portfolio 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 | 0.04% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.04% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$4 | $13 | $23 | $51 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 17.19%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 27.20% | 16.78% | 9.97% |
Return After Taxes on Distributions | 26.71% | 16.34% | 9.64% |
Return After Taxes on Distributions and Sale of Fund Shares | 15.69% | 13.49% | 8.15% |
S&P 500 Growth Index (reflects no deduction for fees, expenses or taxes) | 27.44% | 17.00% | 9.99% |
Investment Objective |
The SPDR Portfolio 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 | 0.04% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.04% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$4 | $13 | $23 | $51 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 3.50%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 15.18% | 14.04% | 6.81% |
Return After Taxes on Distributions | 14.18% | 13.32% | 6.21% |
Return After Taxes on Distributions and Sale of Fund Shares | 8.97% | 11.11% | 5.34% |
S&P 500 Value Index (reflects no deduction for fees, expenses or taxes) | 15.36% | 14.24% | 6.80% |
Investment Objective |
The SPDR Portfolio 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 1 | 0.07% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.07% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$7 | $23 | $40 | $90 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 3.55%. |
One
Year |
Since
Inception
(10/21/2015) |
|
Return Before Taxes | 12.59% | 15.87% |
Return After Taxes on Distributions | 10.89% | 14.05% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.65% | 11.67% |
S&P 500 High Dividend Index (reflects no deduction for fees, expenses or taxes) | 12.76% | 16.07% |
Investment Objective |
The SPDR S&P 500 Fossil Fuel Reserves Free ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Fossil Fuel Free Index. |
Management fees | 0.25% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.25% |
Less contractual fee waiver 1 | (0.05)% |
Net annual Fund operating expenses | 0.20% |
1 | SSGA Funds Management, Inc. (“SSGA FM” or “Adviser”) has contractually agreed to waive a portion of its management fee and/or reimburse certain expenses, until October 31, 2019, so that the net annual Fund operating expenses, before application of any fees and expenses not paid by the Adviser pursuant to the Investment Advisory Agreement, if any, are limited to 0.20% of the Fund's average daily net assets. The contractual fee waiver and/or reimbursement does not provide for the recoupment by the Adviser of any fees the Adviser previously waived. The Adviser may continue the waiver and/or reimbursement from year to year, but there is no guarantee that the Adviser will do so and the waiver and/or reimbursement may be cancelled or modified at any time after October 31, 2019. This waiver and/or reimbursement may not be terminated prior to October 31, 2019 except with the approval of the Fund's Board of Trustees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$20 | $75 | $136 | $313 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 10.60%. |
One
Year |
Since
Inception
(11/30/2015) |
|
Return Before Taxes | 22.88% | 15.27% |
Return After Taxes on Distributions | 22.36% | 14.73% |
Return After Taxes on Distributions and Sale of Fund Shares | 13.33% | 11.75% |
S&P 500 Fossil Fuel Free Index (reflects no deduction for fees, expenses or taxes) | 23.16% | 15.53% |
Investment Objective |
The SPDR Portfolio Mid 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 mid- to small-capitalization exchange traded U.S. equity securities. |
Management fees 1 | 0.05% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.05% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$5 | $16 | $28 | $64 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 9.57%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 15.27% | 14.25% | 9.60% |
Return After Taxes on Distributions | 14.42% | 12.53% | 8.56% |
Return After Taxes on Distributions and Sale of Fund Shares | 8.78% | 10.81% | 7.48% |
S&P 1000 Index (reflects no deduction for fees, expenses or taxes) | 15.33% | 15.32% | 10.10% |
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 | 0.15% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 8.76%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 19.74% | 14.75% | 10.24% |
Return After Taxes on Distributions | 18.97% | 14.18% | 9.89% |
Return After Taxes on Distributions and Sale of Fund Shares | 11.56% | 11.70% | 8.36% |
S&P MidCap 400 Growth Index (reflects no deduction for fees, expenses or taxes) | 19.92% | 14.93% | 10.35% |
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 | 0.15% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 5.93%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 12.16% | 14.59% | 9.12% |
Return After Taxes on Distributions | 11.14% | 13.44% | 8.26% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.07% | 11.21% | 7.07% |
S&P MidCap 400 Value Index (reflects no deduction for fees, expenses or taxes) | 12.32% | 14.83% | 9.46% |
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 | 0.15% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 14.52%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 13.14% | 15.83% | 10.64% |
Return After Taxes on Distributions | 12.18% | 14.70% | 9.90% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.74% | 12.39% | 8.52% |
S&P SmallCap 600 Index (reflects no deduction for fees, expenses or taxes) | 13.23% | 15.99% | 10.43% |
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 | 0.15% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 19.31%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 14.56% | 16.21% | 10.97% |
Return After Taxes on Distributions | 13.22% | 15.15% | 10.38% |
Return After Taxes on Distributions and Sale of Fund Shares | 9.17% | 12.80% | 8.92% |
S&P SmallCap 600 Growth Index (reflects no deduction for fees, expenses or taxes) | 14.79% | 16.39% | 10.82% |
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 | 0.15% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 9.89%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 11.45% | 15.30% | 10.31% |
Return After Taxes on Distributions | 9.24% | 13.57% | 9.20% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.84% | 11.62% | 8.03% |
S&P SmallCap 600 Value Index (reflects no deduction for fees, expenses or taxes) | 11.51% | 15.52% | 9.99% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.50% |
Year 1 | Year 3 | Year 5 | Year 10 |
$51 | $160 | $280 | $628 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 3.14%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 24.46% | 11.49% | 3.36% |
Return After Taxes on Distributions | 23.94% | 10.90% | 2.87% |
Return After Taxes on Distributions and Sale of Fund Shares | 14.38% | 9.07% | 2.59% |
The Global Dow (1) (reflects no deduction for fees, expenses or taxes other than withholding taxes on reinvested dividends) | 24.61% | 11.56% | N/A |
MSCI World Index (2) (reflects no deduction for fees, expenses or taxes other than withholding taxes on reinvested dividends) | 22.40% | 11.64% | 5.03% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.25% |
Year 1 | Year 3 | Year 5 | Year 10 |
$26 | $80 | $141 | $318 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 2.42%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 3.53% | 8.79% | 6.90% |
Return After Taxes on Distributions | 2.16% | 7.18% | 5.39% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.98% | 6.11% | 4.72% |
Dow Jones U.S. Select REIT Index (reflects no deduction for fees, expenses or taxes) | 3.76% | 9.09% | 7.07% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -0.09%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 10.37% | 16.58% | 2.74% |
Return After Taxes on Distributions | 9.99% | 16.13% | 2.34% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.14% | 13.33% | 2.04% |
S&P Banks Select Industry Index (1) (reflects no deduction for fees, expenses or taxes) | 10.69% | 16.99% | N/A |
S&P 500 Index (reflects no deduction for fees, expenses or taxes) | 21.83% | 15.79% | 8.50% |
(1) | 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -0.89%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 31.45% | 13.51% | 0.59% |
Return After Taxes on Distributions | 30.68% | 12.82% | 0.08% |
Return After Taxes on Distributions and Sale of Fund Shares | 18.17% | 10.61% | 0.30% |
S&P Capital Markets Select Industry Index (1) (reflects no deduction for fees, expenses or taxes) | 31.87% | 13.80% | N/A |
S&P 500 Index (reflects no deduction for fees, expenses or taxes) | 21.83% | 15.79% | 8.50% |
(1) | 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 5.74%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 12.91% | 17.87% | 7.60% |
Return After Taxes on Distributions | 12.48% | 18.33% | 8.17% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.64% | 15.40% | 7.02% |
S&P Insurance Select Industry Index (1) (reflects no deduction for fees, expenses or taxes) | 13.29% | 18.30% | N/A |
S&P 500 Index (reflects no deduction for fees, expenses or taxes) | 21.83% | 15.79% | 8.50% |
(1) | 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 2.09%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 7.54% | 17.97% | 6.78% |
Return After Taxes on Distributions | 7.16% | 17.50% | 6.31% |
Return After Taxes on Distributions and Sale of Fund Shares | 4.55% | 14.50% | 5.31% |
S&P Regional Banks Select Industry Index (1) (reflects no deduction for fees, expenses or taxes) | 7.95% | 18.46% | N/A |
S&P 500 Index (reflects no deduction for fees, expenses or taxes) | 21.83% | 15.79% | 8.50% |
(1) | The S&P Regional Banks Select Industry Index inception date is September 12, 2011. |
Investment Objective |
The SPDR NYSE 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 technology companies. |
Management fees | 0.35% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 13.23%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 40.27% | 20.95% | 11.41% |
Return After Taxes on Distributions | 39.82% | 20.64% | 11.21% |
Return After Taxes on Distributions and Sale of Fund Shares | 23.13% | 17.10% | 9.45% |
NYSE Technology Index (reflects no deduction for fees, expenses or taxes) | 40.65% | 21.40% | 11.85% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 5.68%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 15.84% | 15.35% | 10.06% |
Return After Taxes on Distributions | 14.36% | 13.85% | 8.95% |
Return After Taxes on Distributions and Sale of Fund Shares | 9.78% | 11.89% | 7.90% |
S&P High Yield Dividend Aristocrats Index (reflects no deduction for fees, expenses or taxes) | 16.35% | 15.85% | 10.39% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 20.18%. |
One
Year |
Five
Years |
Since
Inception
(9/28/11) |
|
Return Before Taxes | 32.81% | 23.06% | 23.21% |
Return After Taxes on Distributions | 32.50% | 22.49% | 22.65% |
Return After Taxes on Distributions and Sale of Fund Shares | 18.71% | 18.74% | 19.23% |
S&P Aerospace & Defense Select Industry Index (reflects no deduction for fees, expenses or taxes) | 33.36% | 23.53% | 23.68% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 13.30%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 43.67% | 24.29% | 16.15% |
Return After Taxes on Distributions | 43.59% | 24.05% | 16.00% |
Return After Taxes on Distributions and Sale of Fund Shares | 24.78% | 19.96% | 13.71% |
S&P Biotechnology Select Industry Index (reflects no deduction for fees, expenses or taxes) | 43.85% | 23.85% | 16.07% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 36.70%. |
One
Year |
Five
Years |
Since
Inception
(1/26/11) |
|
Return Before Taxes | 30.00% | 20.36% | 16.51% |
Return After Taxes on Distributions | 29.64% | 19.68% | 15.94% |
Return After Taxes on Distributions and Sale of Fund Shares | 17.05% | 16.41% | 13.46% |
S&P Health Care Equipment Select Industry Index (reflects no deduction for fees, expenses or taxes) | 30.44% | 20.70% | 16.87% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 24.63%. |
One
Year |
Five
Years |
Since
Inception
(9/28/11) |
|
Return Before Taxes | 17.12% | 13.78% | 16.73% |
Return After Taxes on Distributions | 17.06% | 13.54% | 16.32% |
Return After Taxes on Distributions and Sale of Fund Shares | 9.74% | 10.98% | 13.59% |
S&P Health Care Services Select Industry Index (reflects no deduction for fees, expenses or taxes) | 17.50% | 14.16% | 17.14% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -12.57%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 31.66% | 11.33% | 9.77% |
Return After Taxes on Distributions | 31.41% | 11.18% | 9.51% |
Return After Taxes on Distributions and Sale of Fund Shares | 18.09% | 9.01% | 7.96% |
S&P Homebuilders Select Industry Index (reflects no deduction for fees, expenses or taxes) | 32.16% | 11.71% | 9.98% |
Investment Objective |
The SPDR S&P Internet 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 internet segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 43.76%. |
One
Year |
Since
Inception
(06/27/16) |
|
Return Before Taxes | 30.30% | 31.63% |
Return After Taxes on Distributions | 25.57% | 27.81% |
Return After Taxes on Distributions and Sale of Fund Shares | 17.48% | 22.81% |
S&P Internet Select Industry Index (reflects no deduction for fees, expenses or taxes) | 30.99% | 32.34% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -4.07%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 20.14% | -2.82% | -5.09% |
Return After Taxes on Distributions | 19.69% | -3.29% | -5.40% |
Return After Taxes on Distributions and Sale of Fund Shares | 11.56% | -2.27% | -3.67% |
S&P Metals & Mining Select Industry Index (reflects no deduction for fees, expenses or taxes) | 20.63% | -3.03% | -5.09% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -2.00%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | -21.96% | -12.01% | -7.37% |
Return After Taxes on Distributions | -22.33% | -12.34% | -7.59% |
Return After Taxes on Distributions and Sale of Fund Shares | -12.23% | -8.53% | -5.04% |
S&P Oil & Gas Equipment & Services Select Industry Index (reflects no deduction for fees, expenses or taxes) | -21.83% | -11.90% | -7.21% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 16.77%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | -9.33% | -6.16% | -2.38% |
Return After Taxes on Distributions | -9.51% | -6.47% | -2.62% |
Return After Taxes on Distributions and Sale of Fund Shares | -5.16% | -4.58% | -1.75% |
S&P Oil & Gas Exploration & Production Select Industry Index (reflects no deduction for fees, expenses or taxes) | -9.07% | -6.08% | -2.25% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 11.99%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 12.04% | 12.70% | 12.47% |
Return After Taxes on Distributions | 11.86% | 11.46% | 11.72% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.96% | 9.78% | 10.21% |
S&P Pharmaceuticals Select Industry Index (reflects no deduction for fees, expenses or taxes) | 12.18% | 12.89% | 12.65% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 14.08%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 4.15% | 8.93% | 11.71% |
Return After Taxes on Distributions | 3.60% | 8.55% | 11.30% |
Return After Taxes on Distributions and Sale of Fund Shares | 2.49% | 6.96% | 9.61% |
S&P Retail Select Industry Index (reflects no deduction for fees, expenses or taxes) | 4.16% | 9.11% | 11.94% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 9.53%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 25.24% | 26.10% | 12.41% |
Return After Taxes on Distributions | 25.05% | 25.91% | 12.25% |
Return After Taxes on Distributions and Sale of Fund Shares | 14.42% | 21.61% | 10.34% |
S&P Semiconductor Select Industry Index (reflects no deduction for fees, expenses or taxes) | 25.58% | 26.47% | 12.47% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 31.32%. |
One
Year |
Five
Years |
Since
Inception
(9/28/11) |
|
Return Before Taxes | 27.58% | 18.30% | 19.19% |
Return After Taxes on Distributions | 27.41% | 17.95% | 18.73% |
Return After Taxes on Distributions and Sale of Fund Shares | 15.70% | 14.74% | 15.71% |
S&P Software & Services Select Industry Index (reflects no deduction for fees, expenses or taxes) | 28.04% | 18.60% | 19.53% |
Investment Objective |
The SPDR S&P Technology 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 technology hardware segment of a U.S. total market composite index. |
Management fees | 0.35% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 8.85%. |
One
Year |
Since
Inception
(06/27/16) |
|
Return Before Taxes | 25.38% | 36.66% |
Return After Taxes on Distributions | 21.39% | 33.13% |
Return After Taxes on Distributions and Sale of Fund Shares | 14.63% | 26.91% |
S&P Technology Hardware Select Industry Index (reflects no deduction for fees, expenses or taxes) | 25.69% | 37.23% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 13.36%. |
One
Year |
Five
Years |
Since
Inception
(1/26/11) |
|
Return Before Taxes | 0.45% | 9.82% | 5.81% |
Return After Taxes on Distributions | -0.20% | 9.41% | 5.40% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.50% | 7.67% | 4.47% |
S&P Telecom Select Industry Index (reflects no deduction for fees, expenses or taxes) | -0.08% | 9.91% | 5.98% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 3.58%. |
One
Year |
Five
Years |
Since
Inception
(1/26/11) |
|
Return Before Taxes | 21.63% | 20.17% | 15.31% |
Return After Taxes on Distributions | 21.42% | 19.97% | 15.15% |
Return After Taxes on Distributions and Sale of Fund Shares | 12.38% | 16.46% | 12.61% |
S&P Transportation Select Industry Index (reflects no deduction for fees, expenses or taxes) | 22.10% | 20.57% | 15.72% |
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 | 0.12% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.01% |
Total annual Fund operating expenses | 0.13% |
Year 1 | Year 3 | Year 5 | Year 10 |
$13 | $42 | $73 | $166 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 7.14%. |
One
Year |
Five
Years |
Since
Inception
(10/24/12) |
|
Return Before Taxes | 17.77% | 15.21% | 15.11% |
Return After Taxes on Distributions | 17.14% | 13.92% | 13.83% |
Return After Taxes on Distributions and Sale of Fund Shares | 10.43% | 11.81% | 11.75% |
S&P 1500 Low Valuation Tilt Index (reflects no deduction for fees, expenses or taxes) | 17.84% | 15.48% | 15.41% |
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 | 0.12% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.12% |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 13.79%. |
One
Year |
Five
Years |
Since
Inception
(10/24/12) |
|
Return Before Taxes | 23.72% | 15.64% | 15.25% |
Return After Taxes on Distributions | 23.19% | 15.05% | 14.65% |
Return After Taxes on Distributions and Sale of Fund Shares | 13.73% | 12.43% | 12.12% |
S&P 1500 Positive Momentum Tilt Index (reflects no deduction for fees, expenses or taxes) | 23.93% | 15.91% | 15.54% |
Investment Objective |
The SPDR MSCI USA StrategicFactors SM 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 9.55%. |
One
Year |
Since
Inception
(4/15/15) |
|
Return Before Taxes | 21.19% | 11.90% |
Return After Taxes on Distributions | 20.55% | 11.28% |
Return After Taxes on Distributions and Sale of Fund Shares | 12.34% | 9.11% |
MSCI USA Factor Mix A-Series Capped Index (reflects no deduction for fees, expenses or taxes) | 21.44% | 12.06% |
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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.45% |
Year 1 | Year 3 | Year 5 | Year 10 |
$46 | $144 | $252 | $567 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 0.23%. |
One
Year |
Five
Years |
Since
Inception
(9/16/09) |
|
Return Before Taxes | 10.49% | 5.54% | 7.46% |
Return After Taxes on Distributions | 8.68% | 3.43% | 5.35% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.54% | 3.51% | 5.14% |
Wells Fargo Hybrid and Preferred Securities Aggregate Index (reflects no deduction for fees, expenses or taxes) | 10.92% | 5.83% | 7.77% |
Investment Objective |
The SPDR FactSet Innovative Technology ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the FactSet Innovative Technology Index. |
Management fees | 0.45% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.45% |
Year 1 | Year 3 | Year 5 | Year 10 |
$46 | $144 | $252 | $567 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 33.12%. |
One
Year |
Since
Inception
(01/13/16) |
|
Return Before Taxes | 35.57% | 27.42% |
Return After Taxes on Distributions | 34.87% | 26.60% |
Return After Taxes on Distributions and Sale of Fund Shares | 20.44% | 21.10% |
FactSet Innovative Technology Index (reflects no deduction for fees, expenses or taxes) | 36.03% | 27.94% |
Fund Name | SPDR Russell 1000 Yield Focus ETF | SPDR Russell 1000 Momentum Focus ETF | SPDR Russell 1000 Low Volatility Focus ETF | SPDR S&P 500 Buyback ETF | SPDR Portfolio S&P 500 Growth ETF | SPDR Portfolio S&P 500 Value ETF | SPDR Portfolio S&P 500 High Dividend ETF | SPDR S&P 500 Fossil Fuel Reserves Free ETF |
Aerospace and Defense Companies Risk | ||||||||
Banking Companies Risk | ||||||||
Biotechnology Companies Risk | ||||||||
Buyback Risk | x | |||||||
Capital Markets Companies Risk | ||||||||
Communication Services Sector Risk | ||||||||
Computer Software/Services Companies Risk | ||||||||
Concentration Risk | ||||||||
Consumer Discretionary Sector Risk | x | x | x | x | x | |||
Consumer Staples Sector Risk | ||||||||
Counterparty Risk | ||||||||
Currency Risk | ||||||||
Depositary Receipts Risk | ||||||||
Derivatives Risk |
Fund Name | SPDR Russell 1000 Yield Focus ETF | SPDR Russell 1000 Momentum Focus ETF | SPDR Russell 1000 Low Volatility Focus ETF | SPDR S&P 500 Buyback ETF | SPDR Portfolio S&P 500 Growth ETF | SPDR Portfolio S&P 500 Value ETF | SPDR Portfolio S&P 500 High Dividend ETF | SPDR S&P 500 Fossil Fuel Reserves Free ETF |
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | ||||||||
Dividend Paying Securities Risk | x | x | ||||||
Electronics Companies Risk | ||||||||
Emerging Markets Risk | ||||||||
Energy Sector Risk | ||||||||
Equity Investing Risk | x | x | x | x | x | x | x | x |
Financial Institutions Risk | ||||||||
Financial Sector Risk | x | x | x | x | ||||
Fossil Fuel Reserves Free Ownership Risk | x | |||||||
Geographic Focus Risk | ||||||||
Europe | ||||||||
Growth Stock Risk | x | |||||||
Health Care Equipment Companies Risk | ||||||||
Health Care Sector Risk | x | x | ||||||
Health Care Services Companies Risk | ||||||||
Homebuilding Companies Risk | ||||||||
Indexing Strategy/Index Tracking Risk | x | x | x | x | x | x | x | x |
Industrial Sector Risk | x | |||||||
Insurance Companies Risk | ||||||||
Internet Segment Risk | ||||||||
Large-Capitalization Securities Risk | x | x | x | x | x | x | x | x |
Leveraging Risk | ||||||||
Liquidity Risk | ||||||||
Low Volatility Risk | x | |||||||
Market Risk | x | x | x | x | x | x | x | x |
Materials Sector Risk | ||||||||
Metals and Mining Companies Risk | ||||||||
Mid-Capitalization Securities Risk | ||||||||
Momentum Risk | x | |||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Fund Name | SPDR Russell 1000 Yield Focus ETF | SPDR Russell 1000 Momentum Focus ETF | SPDR Russell 1000 Low Volatility Focus ETF | SPDR S&P 500 Buyback ETF | SPDR Portfolio S&P 500 Growth ETF | SPDR Portfolio S&P 500 Value ETF | SPDR Portfolio S&P 500 High Dividend ETF | SPDR S&P 500 Fossil Fuel Reserves Free ETF |
Non-U.S. Securities Risk | ||||||||
Oil and Gas Companies Risk | ||||||||
Pharmaceuticals Companies Risk | ||||||||
Portfolio Turnover Risk | x | |||||||
Preferred Securities Risk | ||||||||
Quality Risk | x | x | x | |||||
Real Estate Sector Risk | x | |||||||
REIT Risk | x | |||||||
Retail Companies Risk | ||||||||
Semiconductor Companies Risk | ||||||||
Settlement Risk | ||||||||
Small-Capitalization Securities Risk | ||||||||
Technology Hardware Companies Risk | ||||||||
Technology Sector Risk | x | x | x | |||||
Electronic Media Companies Risk | ||||||||
Telecommunications Sector Risk | ||||||||
Transportation Companies Risk | ||||||||
Unconstrained Sector Risk | x | x | x | x | x | x | x | x |
Utilities Sector Risk | x | |||||||
Valuation Risk | ||||||||
Value Stock Risk | x | x | x | x |
Fund Name | SPDR Portfolio Mid Cap 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 |
Aerospace and Defense Companies Risk | ||||||||
Banking Companies Risk | ||||||||
Biotechnology Companies Risk | ||||||||
Buyback Risk | ||||||||
Capital Markets Companies Risk | ||||||||
Communication Services Sector Risk | ||||||||
Computer Software/Services Companies Risk | ||||||||
Concentration Risk | x | |||||||
Consumer Discretionary Sector Risk | x | x | ||||||
Consumer Staples Sector Risk | ||||||||
Counterparty Risk | ||||||||
Currency Risk | x | |||||||
Depositary Receipts Risk | x | |||||||
Derivatives Risk | ||||||||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | ||||||||
Dividend Paying Securities Risk | ||||||||
Electronics Companies Risk | ||||||||
Emerging Markets Risk | x | |||||||
Energy Sector Risk | ||||||||
Equity Investing Risk | x | x | x | x | x | x | x | x |
Financial Institutions Risk | ||||||||
Financial Sector Risk | x | x | x | x | x | |||
Fossil Fuel Reserves Free Ownership Risk | ||||||||
Geographic Focus Risk | x | |||||||
Europe | x | |||||||
Growth Stock Risk | x | x | ||||||
Health Care Equipment Companies Risk | ||||||||
Health Care Sector Risk | x | |||||||
Health Care Services Companies Risk | ||||||||
Homebuilding Companies Risk | ||||||||
Indexing Strategy/Index Tracking Risk | x | x | x | x | x | x | x | x |
Fund Name | SPDR Portfolio Mid Cap 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 |
Industrial Sector Risk | x | x | x | x | x | |||
Insurance Companies Risk | ||||||||
Internet Segment Risk | ||||||||
Large-Capitalization Securities Risk | ||||||||
Leveraging Risk | ||||||||
Liquidity Risk | x | x | x | x | x | |||
Low Volatility Risk | ||||||||
Market Risk | x | x | x | x | x | x | x | x |
Materials Sector Risk | ||||||||
Metals and Mining Companies Risk | ||||||||
Mid-Capitalization Securities Risk | x | x | x | |||||
Momentum Risk | ||||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | x | |||||||
Oil and Gas Companies Risk | ||||||||
Pharmaceuticals Companies Risk | ||||||||
Portfolio Turnover Risk | ||||||||
Preferred Securities Risk | ||||||||
Quality Risk | ||||||||
Real Estate Sector Risk | x | |||||||
REIT Risk | x | |||||||
Retail Companies Risk | ||||||||
Semiconductor Companies Risk | ||||||||
Settlement Risk | x | |||||||
Small-Capitalization Securities Risk | x | x | x | x | ||||
Technology Hardware Companies Risk | ||||||||
Technology Sector Risk | x | x | x | x | x | |||
Electronic Media Companies Risk | ||||||||
Telecommunications Sector Risk | ||||||||
Transportation Companies Risk | ||||||||
Unconstrained Sector Risk | x | x | x | x | x | x | x | |
Utilities Sector Risk |
Fund Name | SPDR Portfolio Mid Cap 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 |
Valuation Risk | x | x | x | x | x | x | x | |
Value Stock Risk | x | x |
Fund Name | SPDR S&P Bank ETF | SPDR S&P Capital Markets ETF | SPDR S&P Insurance ETF | SPDR S&P Regional Banking ETF | SPDR NYSE Technology ETF | SPDR S&P Dividend ETF | SPDR S&P Aerospace & Defense ETF | SPDR S&P Biotech ETF |
Aerospace and Defense Companies Risk | x | |||||||
Banking Companies Risk | x | x | ||||||
Biotechnology Companies Risk | x | |||||||
Buyback Risk | ||||||||
Capital Markets Companies Risk | x | |||||||
Communication Services Sector Risk | ||||||||
Computer Software/Services Companies Risk | ||||||||
Concentration Risk | x | x | x | x | x | x | x | |
Consumer Discretionary Sector Risk | x | |||||||
Consumer Staples Sector Risk | x | |||||||
Counterparty Risk | ||||||||
Currency Risk | ||||||||
Depositary Receipts Risk | ||||||||
Derivatives Risk | ||||||||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | ||||||||
Dividend Paying Securities Risk | x | |||||||
Electronics Companies Risk | ||||||||
Emerging Markets Risk | ||||||||
Energy Sector Risk | ||||||||
Equity Investing Risk | x | x | x | x | x | x | x | x |
Financial Institutions Risk | x | x | ||||||
Financial Sector Risk | x | x | x | |||||
Fossil Fuel Reserves Free Ownership Risk | ||||||||
Geographic Focus Risk | ||||||||
Europe | ||||||||
Growth Stock Risk | ||||||||
Health Care Equipment Companies Risk | ||||||||
Health Care Sector Risk | x | |||||||
Health Care Services Companies Risk | ||||||||
Homebuilding Companies Risk | ||||||||
Indexing Strategy/Index Tracking Risk | x | x | x | x | x | x | x | x |
Fund Name | SPDR S&P Bank ETF | SPDR S&P Capital Markets ETF | SPDR S&P Insurance ETF | SPDR S&P Regional Banking ETF | SPDR NYSE Technology ETF | SPDR S&P Dividend ETF | SPDR S&P Aerospace & Defense ETF | SPDR S&P Biotech ETF |
Industrial Sector Risk | x | x | ||||||
Insurance Companies Risk | x | |||||||
Internet Segment Risk | ||||||||
Large-Capitalization Securities Risk | ||||||||
Leveraging Risk | ||||||||
Liquidity Risk | ||||||||
Low Volatility Risk | ||||||||
Market Risk | x | x | x | x | x | x | x | x |
Materials Sector Risk | ||||||||
Metals and Mining Companies Risk | ||||||||
Mid-Capitalization Securities Risk | ||||||||
Momentum Risk | ||||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | ||||||||
Oil and Gas Companies Risk | ||||||||
Pharmaceuticals Companies Risk | ||||||||
Portfolio Turnover Risk | ||||||||
Preferred Securities Risk | ||||||||
Quality Risk | ||||||||
Real Estate Sector Risk | ||||||||
REIT Risk | ||||||||
Retail Companies Risk | ||||||||
Semiconductor Companies Risk | ||||||||
Settlement Risk | ||||||||
Small-Capitalization Securities Risk | ||||||||
Technology Hardware Companies Risk | ||||||||
Technology Sector Risk | x | |||||||
Electronic Media Companies Risk | ||||||||
Telecommunications Sector Risk | ||||||||
Transportation Companies Risk | ||||||||
Unconstrained Sector Risk | x | |||||||
Utilities Sector Risk |
Fund Name | SPDR S&P Bank ETF | SPDR S&P Capital Markets ETF | SPDR S&P Insurance ETF | SPDR S&P Regional Banking ETF | SPDR NYSE Technology ETF | SPDR S&P Dividend ETF | SPDR S&P Aerospace & Defense ETF | SPDR S&P Biotech ETF |
Valuation Risk | ||||||||
Value Stock Risk |
Fund Name | SPDR S&P Health Care Equipment ETF | SPDR S&P Health Care Services ETF | SPDR S&P Homebuilders ETF | SPDR S&P Internet 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 |
Aerospace and Defense Companies Risk | ||||||||
Banking Companies Risk | ||||||||
Biotechnology Companies Risk | ||||||||
Buyback Risk | ||||||||
Capital Markets Companies Risk | ||||||||
Communication Services Sector Risk | x | |||||||
Computer Software/Services Companies Risk | ||||||||
Concentration Risk | x | x | x | x | x | x | x | x |
Consumer Discretionary Sector Risk | x | x | ||||||
Consumer Staples Sector Risk | ||||||||
Counterparty Risk | ||||||||
Currency Risk | ||||||||
Depositary Receipts Risk | ||||||||
Derivatives Risk | ||||||||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | ||||||||
Dividend Paying Securities Risk | ||||||||
Electronics Companies Risk | ||||||||
Emerging Markets Risk | ||||||||
Energy Sector Risk | x | x | ||||||
Equity Investing Risk | x | x | x | x | x | x | x | x |
Financial Institutions Risk | ||||||||
Financial Sector Risk | ||||||||
Fossil Fuel Reserves Free Ownership Risk | ||||||||
Geographic Focus Risk | ||||||||
Europe | ||||||||
Growth Stock Risk | ||||||||
Health Care Equipment Companies Risk | x | |||||||
Health Care Sector Risk | x | x | x |
Fund Name | SPDR S&P Health Care Equipment ETF | SPDR S&P Health Care Services ETF | SPDR S&P Homebuilders ETF | SPDR S&P Internet 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 |
Health Care Services Companies Risk | x | |||||||
Homebuilding Companies Risk | x | |||||||
Indexing Strategy/Index Tracking Risk | x | x | x | x | x | x | x | x |
Industrial Sector Risk | x | |||||||
Insurance Companies Risk | ||||||||
Internet Segment Risk | x | |||||||
Large-Capitalization Securities Risk | ||||||||
Leveraging Risk | ||||||||
Liquidity Risk | ||||||||
Low Volatility Risk | ||||||||
Market Risk | x | x | x | x | x | x | x | x |
Materials Sector Risk | x | |||||||
Metals and Mining Companies Risk | x | |||||||
Mid-Capitalization Securities Risk | ||||||||
Momentum Risk | ||||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | ||||||||
Oil and Gas Companies Risk | x | x | ||||||
Pharmaceuticals Companies Risk | x | |||||||
Portfolio Turnover Risk | ||||||||
Preferred Securities Risk | ||||||||
Quality Risk | ||||||||
Real Estate Sector Risk | ||||||||
REIT Risk | ||||||||
Retail Companies Risk | x | |||||||
Semiconductor Companies Risk | ||||||||
Settlement Risk | ||||||||
Small-Capitalization Securities Risk | ||||||||
Technology Hardware Companies Risk |
Fund Name | SPDR S&P Health Care Equipment ETF | SPDR S&P Health Care Services ETF | SPDR S&P Homebuilders ETF | SPDR S&P Internet 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 |
Technology Sector Risk | x | |||||||
Electronic Media Companies Risk | ||||||||
Telecommunications Sector Risk | ||||||||
Transportation Companies Risk | ||||||||
Unconstrained Sector Risk | ||||||||
Utilities Sector Risk | ||||||||
Valuation Risk | ||||||||
Value Stock Risk |
Fund Name | SPDR S&P Retail ETF | SPDR S&P Semiconductor ETF | SPDR S&P Software & Services ETF | SPDR S&P Technology Hardware 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 |
Aerospace and Defense Companies Risk | ||||||||
Banking Companies Risk | ||||||||
Biotechnology Companies Risk | ||||||||
Buyback Risk | ||||||||
Capital Markets Companies Risk | ||||||||
Communication Services Sector Risk | ||||||||
Computer Software/Services Companies Risk | x | |||||||
Concentration Risk | x | x | x | x | x | x | ||
Consumer Discretionary Sector Risk | x | x | ||||||
Consumer Staples Sector Risk | x | |||||||
Counterparty Risk | ||||||||
Currency Risk | ||||||||
Depositary Receipts Risk | ||||||||
Derivatives Risk | ||||||||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | ||||||||
Dividend Paying Securities Risk | ||||||||
Electronics Companies Risk | ||||||||
Emerging Markets Risk | ||||||||
Energy Companies Risk | ||||||||
Equity Investing Risk | x | x | x | x | x | x | x | x |
Financial Institutions Risk | ||||||||
Financial Sector Risk | x | |||||||
Fossil Fuel Reserves Free Ownership Risk | ||||||||
Geographic Focus Risk | ||||||||
Europe | ||||||||
Growth Stock Risk | ||||||||
Health Care Equipment Companies Risk | ||||||||
Health Care Sector Risk | ||||||||
Health Care Services Companies Risk | ||||||||
Homebuilding Companies Risk | ||||||||
Indexing Strategy/Index Tracking Risk | x | x | x | x | x | x | x | x |
Fund Name | SPDR S&P Retail ETF | SPDR S&P Semiconductor ETF | SPDR S&P Software & Services ETF | SPDR S&P Technology Hardware 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 |
Industrial Sector Risk | x | |||||||
Insurance Companies Risk | ||||||||
Internet Segment Risk | ||||||||
Large-Capitalization Securities Risk | ||||||||
Leveraging Risk | ||||||||
Liquidity Risk | ||||||||
Low Volatility Risk | ||||||||
Market Risk | x | x | x | x | x | x | x | x |
Materials Sector Risk | ||||||||
Metals and Mining Companies Risk | ||||||||
Mid-Capitalization Securities Risk | ||||||||
Momentum Risk | x | |||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x |
Non-U.S. Securities Risk | ||||||||
Oil and Gas Companies Risk | ||||||||
Pharmaceuticals Companies Risk | ||||||||
Portfolio Turnover Risk | ||||||||
Preferred Securities Risk | ||||||||
Quality Risk | ||||||||
Real Estate Sector Risk | ||||||||
REIT Risk | ||||||||
Retail Companies Risk | x | |||||||
Semiconductor Companies Risk | x | |||||||
Settlement Risk | ||||||||
Small-Capitalization Securities Risk | ||||||||
Technology Hardware Companies Risk | x | |||||||
Technology Sector Risk | x | x | x | x | ||||
Electronic Media Companies Risk | ||||||||
Telecommunications Sector Risk | x | |||||||
Transportation Companies Risk | x | |||||||
Unconstrained Sector Risk | x | x | ||||||
Utilities Sector Risk |
Fund Name | SPDR S&P Retail ETF | SPDR S&P Semiconductor ETF | SPDR S&P Software & Services ETF | SPDR S&P Technology Hardware 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 |
Valuation Risk | ||||||||
Value Stock Risk | x |
Fund Name | SPDR MSCI USA StrategicFactors ETF | SPDR Wells Fargo Preferred Stock ETF | SPDR FactSet Innovative Technology ETF |
Aerospace and Defense Companies Risk | |||
Banking Companies Risk | |||
Biotechnology Companies Risk | |||
Buyback Risk | |||
Capital Markets Companies Risk | |||
Communication Services Sector Risk | |||
Computer Software/Services Companies Risk | |||
Concentration Risk | x | ||
Consumer Discretionary Sector Risk | |||
Consumer Staples Sector Risk | |||
Counterparty Risk | x | ||
Currency Risk | |||
Depositary Receipts Risk | x | x | |
Derivatives Risk | x | ||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | x | ||
Dividend Paying Securities Risk | |||
Electronics Companies Risk | |||
Emerging Markets Risk | |||
Energy Companies Risk | |||
Equity Investing Risk | x | x | x |
Financial Institutions Risk | |||
Financial Sector Risk | x | ||
Fossil Fuel Reserves Free Ownership Risk | |||
Geographic Focus Risk | |||
Europe | |||
Growth Stock Risk | x | ||
Health Care Equipment Companies Risk | |||
Health Care Sector Risk | |||
Health Care Services Companies Risk | |||
Homebuilding Companies Risk | |||
Indexing Strategy/Index Tracking Risk | x | x | x |
Fund Name | SPDR MSCI USA StrategicFactors ETF | SPDR Wells Fargo Preferred Stock ETF | SPDR FactSet Innovative Technology ETF |
Industrial Sector Risk | |||
Insurance Companies Risk | |||
Internet Segment Risk | |||
Large-Capitalization Securities Risk | x | ||
Leveraging Risk | x | ||
Liquidity Risk | x | ||
Low Volatility Risk | x | ||
Market Risk | x | x | x |
Materials Sector Risk | |||
Metals and Mining Companies Risk | |||
Mid-Capitalization Securities Risk | x | ||
Momentum Risk | |||
Non-Diversification Risk | x | x | x |
Non-U.S. Securities Risk | x | ||
Oil and Gas Companies Risk | |||
Pharmaceuticals Companies Risk | |||
Portfolio Turnover Risk | |||
Preferred Securities Risk | x | ||
Quality Risk | x | ||
Real Estate Sector Risk | |||
REIT Risk | |||
Retail Companies Risk | |||
Semiconductor Companies Risk | |||
Settlement Risk | x | ||
Small-Capitalization Securities Risk | |||
Technology Hardware Companies Risk | |||
Technology Sector Risk | x | x | |
Electronic Media Companies Risk | x | ||
Telecommunications Sector Risk | |||
Transportation Companies Risk | |||
Unconstrained Sector Risk | x | x |
Fund Name | SPDR MSCI USA StrategicFactors ETF | SPDR Wells Fargo Preferred Stock ETF | SPDR FactSet Innovative Technology ETF |
Utilities Sector Risk | |||
Valuation Risk | x | ||
Value Stock Risk | x |
SPDR Russell 1000 Yield Focus
ETF
|
0.20% |
SPDR Russell 1000 Momentum Focus
ETF
|
0.20% |
SPDR Russell 1000 Low Volatility Focus
ETF
|
0.20% |
SPDR S&P 500 Buyback
ETF
|
0.35% |
SPDR Portfolio S&P 500 Growth
ETF
|
0.06% (1) |
SPDR Portfolio S&P 500 Value
ETF
|
0.05% (1) |
SPDR Portfolio S&P 500 High Dividend
ETF
|
0.08% (2) |
SPDR S&P 500 Fossil Fuel Reserves Free
ETF
|
0.20% (3) |
SPDR Portfolio Mid Cap
ETF
|
0.06% (4) |
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 S&P Regional Banking
ETF
|
0.35% |
SPDR NYSE 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 Internet
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 Technology Hardware
ETF
|
0.35% |
SPDR S&P Telecom
ETF
|
0.35% |
SPDR S&P Transportation
ETF
|
0.35% |
SPDR S&P 1500 Value Tilt
ETF
|
0.12% |
SPDR S&P 1500 Momentum Tilt
ETF
|
0.12% |
SPDR MSCI USA StrategicFactors
ETF
|
0.15% |
SPDR Wells Fargo Preferred Stock
ETF
|
0.45% |
SPDR FactSet Innovative Technology
ETF
|
0.45% |
(1) | Effective October 16, 2017, the management fee of the Fund was reduced from 0.15% to 0.04% of the Fund's average daily net assets. |
(2) | Effective October 16, 2017, the management fee of the Fund was reduced from 0.12% to 0.07% of the Fund's average daily net assets. |
(3) | The Adviser has contractually agreed to waive a portion of its management fee and/or reimburse certain expenses, until October 31, 2019, so that the net annual Fund operating expenses, before application of any fees and expenses not paid by the Adviser pursuant to the Investment Advisory Agreement, if any, are limited to 0.20% of the Fund's average daily net assets. The contractual fee waiver and/or reimbursement does |
not provide for the recoupment by the Adviser of any fees the Adviser previously waived. The Adviser may continue the waiver and/or reimbursement from year to year, but there is no guarantee that the Adviser will do so and the waiver and/or reimbursement may be cancelled or modified at any time after October 31, 2019. This waiver and/or reimbursement may not be terminated prior to October 31, 2019 except with the approval of the Fund's Board of Trustees. | |
(4) | Effective October 16, 2017, the management fee of the Fund was reduced from 0.10% to 0.05% of the Fund's average daily net assets. |
Portfolio Management Team | Fund |
Michael Feehily, Karl Schneider and Amy Cheng | SPDR S&P Technology Hardware ETF |
Michael Feehily, Karl Schneider and David Chin | SPDR S&P 600 Small Cap Growth ETF, SPDR S&P 600 Small Cap Value ETF |
Michael Feehily, Karl Schneider and Raymond Donofrio | SPDR S&P Insurance ETF, SPDR S&P Biotech ETF, SPDR S&P Health Care Services ETF, SPDR S&P Homebuilders ETF, SPDR S&P Internet ETF, SPDR S&P Metals & Mining ETF |
Michael Feehily, Karl Schneider and Michael Finocchi | SPDR S&P Telecom ETF, SPDR S&P Transportation ETF, SPDR FactSet Innovative Technology ETF |
Michael Feehily, Karl Schneider and Payal Gupta | SPDR S&P Regional Banking ETF |
Michael Feehily, Karl Schneider and Ted Janowsky | SPDR S&P Retail ETF |
Michael Feehily, Karl Schneider and Melissa Kapitulik | SPDR S&P Bank ETF, SPDR S&P Oil & Gas Equipment & Services ETF, SPDR S&P Software & Services ETF |
Michael Feehily, Karl Schneider and Mark Krivitsky | SPDR Portfolio S&P 500 Growth ETF, SPDR Portfolio Mid Cap ETF, SPDR Portfolio S&P 500 Value ETF, SPDR S&P 600 Small Cap ETF |
Michael Feehily, Karl Schneider and John Law | SPDR Russell 1000 Yield Focus ETF, SPDR Portfolio S&P 500 High Dividend ETF, SPDR S&P 1500 Momentum Tilt ETF, SPDR S&P 1500 Value Tilt ETF, SPDR MSCI USA StrategicFactors ETF |
Michael Feehily, Karl Schneider and Kathleen Morgan | SPDR Global Dow ETF, SPDR NYSE Technology ETF |
Michael Feehily, Karl Schneider and Kala O'Donnell | SPDR S&P Capital Markets ETF, SPDR S&P Health Care Equipment ETF, SPDR S&P Semiconductor ETF |
Portfolio Management Team | Fund |
Michael Feehily, Karl Schneider and Emiliano Rabinovich | SPDR Russell 1000 Momentum Focus ETF, SPDR Russell 1000 Low Volatility Focus ETF, SPDR S&P Dividend ETF |
Michael Feehily, Karl Schneider and Keith Richardson | SPDR S&P Aerospace & Defense ETF, SPDR S&P Pharmaceuticals ETF |
Michael Feehily, Karl Schneider and Amy
Scofield
|
SPDR Wells Fargo Preferred Stock ETF |
Michael Feehily, Karl Schneider and David Swallow | SPDR S&P 400 Mid Cap Growth ETF, SPDR S&P 400 Mid Cap Value ETF |
Michael Feehily, Karl Schneider and Daniel TenPas | SPDR Dow Jones REIT ETF |
Michael Feehily, Karl Schneider and Eric Viliott | SPDR S&P 500 Buyback ETF, SPDR S&P 500 Fossil Fuel Reserves Free ETF |
Michael Feehily, Karl Schneider and Olga Winner | SPDR S&P Oil & Gas Exploration & Production ETF |
SPDR Russell 1000 Yield Focus ETF | |||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
For
the
Period 12/3/15* - 6/30/16 |
|||
Net asset value, beginning of period
|
$ 69.70 | $ 63.57 | $ 60.00 | ||
Income (loss) from investment operations: | |||||
Net investment income (loss)
(a)
|
2.21 | 2.08 | 1.21 | ||
Net realized and unrealized gain (loss)
(b)
|
6.14 | 8.30 | 3.48 | ||
Total from investment operations
|
8.35 | 10.38 | 4.69 | ||
Net equalization credits and charges
(a)
|
(0.00)(c) | 0.00(c) | 0.01 | ||
Distributions to shareholders from: | |||||
Net investment income
|
(2.36) | (2.15) | (1.13) | ||
Net realized gains
|
(5.26) | (2.10) | — | ||
Total distributions
|
(7.62) | (4.25) | (1.13) | ||
Net asset value, end of period
|
$ 70.43 | $ 69.70 | $ 63.57 | ||
Total return
(d)
|
12.25% | 16.61% | 7.93% | ||
Ratios and Supplemental Data: | |||||
Net assets, end of period (in 000s)
|
$404,979 | $397,306 | $359,191 | ||
Ratios to average net assets: | |||||
Total expenses
|
0.20% | 0.20% | 0.20%(e) | ||
Net investment income (loss)
|
3.15% | 3.06% | 3.50%(e) | ||
Portfolio turnover rate
(f)
|
36% | 42% | 44%(g) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Annualized. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(g) | Not annualized. |
SPDR Russell 1000 Momentum Focus ETF | |||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
For
the
Period 12/3/15* - 6/30/16 |
|||
Net asset value, beginning of period
|
$ 68.99 | $ 61.23 | $ 60.00 | ||
Income (loss) from investment operations: | |||||
Net investment income (loss)
(a)
|
1.16 | 1.11 | 0.65 | ||
Net realized and unrealized gain (loss)
(b)
|
8.38 | 7.80 | 1.19 | ||
Total from investment operations
|
9.54 | 8.91 | 1.84 | ||
Net equalization credits and charges
(a)
|
0.02 | 0.00(c) | 0.00(c) | ||
Distributions to shareholders from: | |||||
Net investment income
|
(1.19) | (1.15) | (0.61) | ||
Net realized gains
|
(4.44) | — | — | ||
Total distributions
|
(5.63) | (1.15) | (0.61) | ||
Net asset value, end of period
|
$ 72.92 | $ 68.99 | $ 61.23 | ||
Total return
(d)
|
13.97% | 14.66% | 3.10% | ||
Ratios and Supplemental Data: | |||||
Net assets, end of period (in 000s)
|
$601,571 | $469,132 | $345,946 | ||
Ratios to average net assets: | |||||
Total expenses
|
0.20% | 0.20% | 0.20%(e) | ||
Net investment income (loss)
|
1.59% | 1.70% | 1.91%(e) | ||
Portfolio turnover rate
(f)
|
112% | 101% | 55%(g) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Annualized. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(g) | Not annualized. |
SPDR Russell 1000 Low Volatility Focus ETF | |||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
For
the
Period 12/3/15* - 6/30/16 |
|||
Net asset value, beginning of period
|
$ 70.31 | $ 63.78 | $ 60.00 | ||
Income (loss) from investment operations: | |||||
Net investment income (loss)
(a)
|
1.36 | 1.26 | 0.79 | ||
Net realized and unrealized gain (loss)
(b)
|
6.31 | 7.69 | 3.73 | ||
Total from investment operations
|
7.67 | 8.95 | 4.52 | ||
Net equalization credits and charges
(a)
|
0.00(c) | 0.00(c) | 0.01 | ||
Distributions to shareholders from: | |||||
Net investment income
|
(1.41) | (1.29) | (0.75) | ||
Net realized gains
|
(3.66) | (1.13) | — | ||
Total distributions
|
(5.07) | (2.42) | (0.75) | ||
Net asset value, end of period
|
$ 72.91 | $ 70.31 | $ 63.78 | ||
Total return
(d)
|
11.03% | 14.27% | 7.60% | ||
Ratios and Supplemental Data: | |||||
Net assets, end of period (in 000s)
|
$455,698 | $432,422 | $385,862 | ||
Ratios to average net assets: | |||||
Total expenses
|
0.20% | 0.20% | 0.20%(e) | ||
Net investment income (loss)
|
1.87% | 1.88% | 2.28%(e) | ||
Portfolio turnover rate
(f)
|
31% | 37% | 68%(g) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Annualized. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(g) | Not annualized. |
SPDR S&P 500 Buyback ETF | |||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
For
the
Period 2/4/15* - 6/30/15 |
||||
Net asset value, beginning of period
|
$ 55.99 | $46.16 | $50.09 | $ 50.00 | |||
Income (loss) from investment operations: | |||||||
Net investment income (loss)
(a)
|
0.78 | 0.71 | 0.78 | 0.26 | |||
Net realized and unrealized gain (loss)
(b)
|
7.06 | 9.79 | (3.50) | — | |||
Total from investment operations
|
7.84 | 10.50 | (2.72) | 0.26 | |||
Net equalization credits and charges
(a)
|
0.03 | (0.01) | (0.01) | 0.07 | |||
Distributions to shareholders from: | |||||||
Net investment income
|
(1.17) | (0.74) | (0.80) | (0.24) | |||
Net realized gains
|
— | — | (0.40) | — | |||
Total distributions
|
(1.17) | (0.74) | (1.20) | (0.24) | |||
Net asset value, end of period
|
$ 62.69 | $55.99 | $46.16 | $ 50.09 | |||
Total return
(c)
|
14.08% | 23.02%(d) | (5.43)% | 0.67% | |||
Ratios and Supplemental Data: | |||||||
Net assets, end of period (in 000s)
|
$15,673 | $8,399 | $9,232 | $15,028 | |||
Ratios to average net assets: | |||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35%(e) | |||
Net investment income (loss)
|
1.28% | 1.36% | 1.65% | 1.28%(e) | |||
Portfolio turnover rate
(f)
|
78% | 97% | 98% | 18%(g) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | If the Adviser had not made a contribution during the period ended June 30, 2017, the total return would have remained 22.82%. See Note 3. |
(e) | Annualized. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(g) | Not annualized. |
SPDR Portfolio S&P 500 Growth ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 29.56 | $ 25.22 | $ 24.62 | $ 22.74 | $ 18.21 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.48 | 0.42 | 0.39 | 0.36 | 0.32 | ||||
Net realized and unrealized gain (loss)
(c)
|
5.50 | 4.36 | 0.60 | 1.87 | 4.52 | ||||
Total from investment operations
|
5.98 | 4.78 | 0.99 | 2.23 | 4.84 | ||||
Net equalization credits and charges
(b)
|
0.05 | (0.00)(d) | 0.01 | 0.01 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.47) | (0.44) | (0.40) | (0.36) | (0.32) | ||||
Net asset value, end of period
|
$ 35.12 | $ 29.56 | $ 25.22 | $ 24.62 | $ 22.74 | ||||
Total return
(e)
|
20.51% | 19.07%(f) | 4.12% | 9.90% | 26.78% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$2,648,124 | $839,515 | $711,123 | $556,464 | $427,451 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.06% | 0.15% | 0.15% | 0.18% | 0.20% | ||||
Net investment income (loss)
|
1.43% | 1.52% | 1.59% | 1.51% | 1.54% | ||||
Portfolio turnover rate
(g)
|
13% | 20% | 23% | 22% | 23% |
(a) | On October 16, 2017, the SPDR Portfolio S&P 500 Growth ETF underwent a 4-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. See Note 11. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Reflects a non-recurring litigation payment received by the Fund from State Street Corp., an affiliate, which amounted to less than $0.005 per share outstanding as of March 20, 2017. This payment resulted in an increase to total return of less than 0.005% for the period ended June 30, 2017. |
(g) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Portfolio S&P 500 Value ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 28.38 | $ 25.13 | $ 24.98 | $ 24.49 | $ 20.57 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.75 | 0.65 | 0.63 | 0.58 | 0.51 | ||||
Net realized and unrealized gain (loss)
(c)
|
1.25 | 3.27 | 0.14 | 0.48 | 3.92 | ||||
Total from investment operations
|
2.00 | 3.92 | 0.77 | 1.06 | 4.43 | ||||
Net equalization credits and charges
(b)
|
0.12 | (0.01) | 0.01 | 0.01 | (0.01) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.73) | (0.66) | (0.63) | (0.58) | (0.50) | ||||
Net realized gains
|
(0.17) | — | — | — | — | ||||
Total distributions
|
(0.90) | (0.66) | (0.63) | (0.58) | (0.50) | ||||
Net asset value, end of period
|
$ 29.60 | $ 28.38 | $ 25.13 | $ 24.98 | $ 24.49 | ||||
Total return
(d)
|
7.49% | 15.70% | 3.29% | 4.40% | 21.67% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$1,355,967 | $340,648 | $246,308 | $229,890 | $205,773 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.06% | 0.15% | 0.15% | 0.18% | 0.20% | ||||
Net investment income (loss)
|
2.49% | 2.40% | 2.61% | 2.31% | 2.26% | ||||
Portfolio turnover rate
(e)
|
16% | 21% | 24% | 24% | 23% |
(a) | On October 16, 2017, the SPDR Portfolio S&P 500 Value ETF underwent a 4-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. See Note 11. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Portfolio S&P 500 High Dividend ETF | |||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
For
the
Period 10/22/15* - 6/30/16 |
|||
Net asset value, beginning of period
|
$ 35.27 | $ 33.54 | $ 30.00 | ||
Income (loss) from investment operations: | |||||
Net investment income (loss)
(a)
|
1.52 | 1.40 | 0.98 | ||
Net realized and unrealized gain (loss)
(b)
|
2.15 | 1.72 | 3.26 | ||
Total from investment operations
|
3.67 | 3.12 | 4.24 | ||
Net equalization credits and charges
(a)
|
0.13 | 0.18 | 0.23 | ||
Distributions to shareholders from: | |||||
Net investment income
|
(1.49) | (1.41) | (0.93) | ||
Net realized gains
|
(0.31) | (0.16) | — | ||
Total distributions
|
(1.80) | (1.57) | (0.93) | ||
Net asset value, end of period
|
$ 37.27 | $ 35.27 | $ 33.54 | ||
Total return
(c)
|
10.96% | 9.94% | 15.20% | ||
Ratios and Supplemental Data: | |||||
Net assets, end of period (in 000s)
|
$566,538 | $167,523 | $31,866 | ||
Ratios to average net assets: | |||||
Total expenses
|
0.08% | 0.12% | 0.12%(d) | ||
Net investment income (loss)
|
4.17% | 4.00% | 4.50%(d) | ||
Portfolio turnover rate
(e)
|
35% | 40% | 23%(f) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Annualized. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(f) | Not annualized. |
SPDR S&P 500 Fossil Fuel Reserves Free ETF | |||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
For
the
Period 12/1/15* - 6/30/16 |
|||
Net asset value, beginning of period
|
$ 58.69 | $ 50.16 | $ 50.00 | ||
Income (loss) from investment operations: | |||||
Net investment income (loss)
(a)
|
1.10 | 1.02 | 0.58 | ||
Net realized and unrealized gain (loss)
(b)
|
6.84 | 8.52 | 0.11 | ||
Total from investment operations
|
7.94 | 9.54 | 0.69 | ||
Net equalization credits and charges
(a)
|
0.04 | 0.03 | 0.03 | ||
Distributions to shareholders from: | |||||
Net investment income
|
(1.10) | (1.04) | (0.56) | ||
Net realized gains
|
(0.02) | 0.00(c) | — | ||
Total distributions
|
(1.12) | (1.04) | (0.56) | ||
Net asset value, end of period
|
$ 65.55 | $ 58.69 | $ 50.16 | ||
Total return
(d)
|
13.67% | 19.22% | 1.48% | ||
Ratios and Supplemental Data: | |||||
Net assets, end of period (in 000s)
|
$281,885 | $152,600 | $100,328 | ||
Ratios to average net assets: | |||||
Total expenses
|
0.25% | 0.25% | 0.25%(e) | ||
Net expenses
|
0.20% | 0.20% | 0.20%(e) | ||
Net investment income (loss)
|
1.72% | 1.86% | 2.05%(e) | ||
Portfolio turnover rate
(f)
|
5% | 4% | 6%(g) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Annualized. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(g) | Not annualized. |
SPDR Portfolio Mid Cap ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 30.80 | $ 26.08 | $ 29.00 | $ 28.92 | $ 25.34 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.52 | 0.42 | 0.41 | 0.39 | 0.38 | ||||
Net realized and unrealized gain (loss)
(c)
|
4.16 | 4.93 | (1.94) | 1.28 | 6.20 | ||||
Total from investment operations
|
4.68 | 5.35 | (1.53) | 1.67 | 6.58 | ||||
Net equalization credits and charges
(b)
|
0.07 | — | (0.01) | 0.01 | (0.02) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.50) | (0.46) | (0.43) | (0.39) | (0.38) | ||||
Net realized gains
|
(0.19) | (0.17) | (0.95) | (1.21) | (2.60) | ||||
Total distributions
|
(0.69) | (0.63) | (1.38) | (1.60) | (2.98) | ||||
Net asset value, end of period
|
$ 34.86 | $ 30.80 | $ 26.08 | $ 29.00 | $ 28.92 | ||||
Total return
(d)
|
15.56% | 20.65% | (5.20)% | 6.03% | 26.70% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$780,885 | $180,166 | $62,580 | $100,062 | $78,077 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.06% | 0.10% | 0.10% | 0.10% | 0.11% | ||||
Net investment income (loss)
|
1.56% | 1.44% | 1.57% | 1.36% | 1.37% | ||||
Portfolio turnover rate
(e)
|
11% | 37% | 16% | 17% | 75% |
(a) | On October 16, 2017, the SPDR Portfolio Mid Cap ETF underwent a 3-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. See Note 11. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 400 Mid Cap Growth ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 47.77 | $ 41.10 | $ 41.68 | $ 38.94 | $ 31.93 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.56 | 0.51 | 0.45 | 0.42 | 0.30 | ||||
Net realized and unrealized gain (loss)
(c)
|
6.74 | 6.72 | (0.06) | 3.01 | 7.00 | ||||
Total from investment operations
|
7.30 | 7.23 | 0.39 | 3.43 | 7.30 | ||||
Net equalization credits and charges
(b)
|
0.06 | 0.02 | 0.01 | 0.01 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.59) | (0.58) | (0.49) | (0.42) | (0.30) | ||||
Net realized gains
|
(0.56) | — | (0.49) | (0.28) | — | ||||
Total distributions
|
(1.15) | (0.58) | (0.98) | (0.70) | (0.30) | ||||
Net asset value, end of period
|
$ 53.98 | $ 47.77 | $ 41.10 | $ 41.68 | $ 38.94 | ||||
Total return
(d)
|
15.51% | 17.74% | 1.07% | 8.92% | 22.94% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$1,195,700 | $573,287 | $345,259 | $243,839 | $175,250 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.15% | 0.15% | 0.15% | 0.21% | 0.25% | ||||
Net investment income (loss)
|
1.08% | 1.14% | 1.13% | 1.04% | 0.82% | ||||
Portfolio turnover rate
(e)
|
50% | 54% | 55% | 53% | 43% |
(a) | After the close of trading on June 12, 2018, the SPDR S&P 400 Mid Cap Growth ETF underwent a 3-for-1 share split. The historical per share activity presented here has been retroactively adjusted to reflect this split. See Note 10. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 400 Mid Cap Value ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 48.14 | $ 41.47 | $ 42.85 | $ 43.14 | $ 34.49 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.96 | 0.80 | 0.80 | 0.70 | 0.66 | ||||
Net realized and unrealized gain (loss)
(c)
|
4.18 | 6.72 | (0.51) | 0.74 | 8.60 | ||||
Total from investment operations
|
5.14 | 7.52 | 0.29 | 1.44 | 9.26 | ||||
Net equalization credits and charges
(b)
|
0.10 | 0.03 | 0.06 | (0.02) | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.95) | (0.88) | (0.81) | (0.69) | (0.62) | ||||
Net realized gains
|
(0.42) | — | (0.92) | (1.02) | (0.01) | ||||
Total distributions
|
(1.37) | (0.88) | (1.73) | (1.71) | (0.63) | ||||
Net asset value, end of period
|
$ 52.01 | $ 48.14 | $ 41.47 | $ 42.85 | $ 43.14 | ||||
Total return
(d)
|
10.98% | 18.31% | 1.13% | 3.31% | 27.04% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$767,185 | $346,625 | $207,342 | $124,247 | $112,157 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.15% | 0.15% | 0.15% | 0.21% | 0.25% | ||||
Net investment income (loss)
|
1.90% | 1.73% | 2.02% | 1.62% | 1.67% | ||||
Portfolio turnover rate
(e)
|
45% | 51% | 40% | 44% | 36% |
(a) | After the close of trading on June 12, 2018, the SPDR S&P 400 Mid Cap Value ETF underwent a 2-for-1 share split. The historical per share activity presented here has been retroactively adjusted to reflect this split. See Note 10. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 600 Small Cap ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 61.60 | $ 52.17 | $ 54.13 | $ 52.70 | $ 43.42 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.87 | 0.79 | 0.73 | 0.67 | 0.56 | ||||
Net realized and unrealized gain (loss)
(c)
|
11.52 | 10.80 | (0.89) | 2.75 | 10.34 | ||||
Total from investment operations
|
12.39 | 11.59 | (0.16) | 3.42 | 10.90 | ||||
Net equalization credits and charges
(b)
|
0.01 | 0.02 | 0.02 | (0.02) | 0.00(d) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.89) | (0.77) | (0.74) | (0.70) | (0.55) | ||||
Net realized gains
|
(0.87) | (1.41) | (1.08) | (1.27) | (1.07) | ||||
Total distributions
|
(1.76) | (2.18) | (1.82) | (1.97) | (1.62) | ||||
Net asset value, end of period
|
$ 72.24 | $ 61.60 | $ 52.17 | $ 54.13 | $ 52.70 | ||||
Total return
(e)
|
20.38% | 22.35% | (0.10)% | 6.55% | 25.23% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$1,043,840 | $751,493 | $443,392 | $411,346 | $426,877 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.15% | 0.15% | 0.15% | 0.18% | 0.20% | ||||
Net investment income (loss)
|
1.30% | 1.33% | 1.44% | 1.28% | 1.12% | ||||
Portfolio turnover rate
(f)
|
14% | 22% | 25% | 16% | 18% |
(a) | After the close of trading on June 12, 2018, the SPDR S&P 600 Small Cap ETF underwent a 2-for-1 share split. The historical per share activity presented here has been retroactively adjusted to reflect this split. See Note 10. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 600 Small Cap Growth ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 54.12 | $ 44.56 | $ 47.46 | $ 45.41 | $ 36.45 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.55 | 0.55 | 0.57 | 0.48 | 0.31 | ||||
Net realized and unrealized gain (loss)
(c)
|
11.19 | 9.53 | (0.99) | 3.64 | 8.94 | ||||
Total from investment operations
|
11.74 | 10.08 | (0.42) | 4.12 | 9.25 | ||||
Net equalization credits and charges
(b)
|
0.02 | 0.02 | 0.02 | 0.02 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.60) | (0.54) | (0.60) | (0.47) | (0.28) | ||||
Net realized gains
|
(2.11) | — | (1.90) | (1.62) | (0.02) | ||||
Total distributions
|
(2.71) | (0.54) | (2.50) | (2.09) | (0.30) | ||||
Net asset value, end of period
|
$ 63.17 | $ 54.12 | $ 44.56 | $ 47.46 | $ 45.41 | ||||
Total return
(d)
|
22.28% | 22.75% | (0.73)% | 9.40% | 25.40% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$1,989,969 | $1,298,877 | $686,130 | $560,024 | $399,562 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.15% | 0.15% | 0.15% | 0.20% | 0.25% | ||||
Net investment income (loss)
|
0.95% | 1.08% | 1.29% | 1.06% | 0.73% | ||||
Portfolio turnover rate
(e)
|
44% | 59% | 57% | 49% | 54% |
(a) | After the close of trading on June 12, 2018, the SPDR S&P 600 Small Cap Growth ETF underwent a 4-for-1 share split. The historical per share activity presented here has been retroactively adjusted to reflect this split. See Note 10. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 600 Small Cap Value ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 59.60 | $ 50.13 | $ 53.04 | $ 55.11 | $ 44.88 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
1.04 | 0.93 | 0.79 | 0.81 | 0.74 | ||||
Net realized and unrealized gain (loss)
(c)
|
9.55 | 9.89 | (0.72) | 1.08 | 10.46 | ||||
Total from investment operations
|
10.59 | 10.83 | 0.07 | 1.89 | 11.20 | ||||
Net equalization credits and charges
(b)
|
0.07 | 0.05 | 0.03 | 0.03 | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.05) | (0.91) | (0.79) | (0.84) | (0.71) | ||||
Net realized gains
|
(2.46) | (0.49) | (2.22) | (3.15) | (0.28) | ||||
Total distributions
|
(3.51) | (1.40) | (3.01) | (3.99) | (0.99) | ||||
Net asset value, end of period
|
$ 66.75 | $ 59.60 | $ 50.13 | $ 53.04 | $ 55.11 | ||||
Total return
(d)
|
18.25% | 21.76% | 0.56% | 3.50% | 25.09% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$1,511,950 | $1,001,379 | $501,368 | $392,578 | $308,732 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.15% | 0.15% | 0.15% | 0.21% | 0.25% | ||||
Net investment income (loss)
|
1.65% | 1.61% | 1.63% | 1.52% | 1.43% | ||||
Portfolio turnover rate
(e)
|
42% | 53% | 48% | 42% | 41% |
(a) | After the close of trading on June 12, 2018, the SPDR S&P 600 Small Cap Value ETF underwent a 2-for-1 share split. The historical per share activity presented here has been retroactively adjusted to reflect this split. See Note 10. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Global Dow ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 76.65 | $ 64.07 | $ 69.67 | $ 72.15 | $ 58.79 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.75 | 1.54 | 1.55 | 1.65 | 1.77 | ||||
Net realized and unrealized gain (loss)
(b)
|
5.81 | 12.69 | (5.53) | (2.55) | 13.34 | ||||
Total from investment operations
|
7.56 | 14.23 | (3.98) | (0.90) | 15.11 | ||||
Net equalization credits and charges
(a)
|
0.00(c) | (0.03) | (0.03) | (0.01) | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.78) | (1.62) | (1.59) | (1.57) | (1.77) | ||||
Net asset value, end of period
|
$ 82.43 | $ 76.65 | $ 64.07 | $ 69.67 | $ 72.15 | ||||
Total return
(d)
|
9.86% | 22.34% | (5.68)% | (1.25)% | 25.86% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$90,710 | $88,185 | $86,521 | $108,027 | $115,474 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.50% | 0.50% | 0.50% | 0.50% | 0.51% | ||||
Net investment income (loss)
|
2.11% | 2.18% | 2.39% | 2.33% | 2.63% | ||||
Portfolio turnover rate
(e)
|
10% | 10% | 15% | 13% | 10% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Dow Jones REIT ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 92.99 | $ 99.44 | $ 84.38 | $ 82.99 | $ 75.91 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
2.47 | 1.62 | 2.83 | 2.28 | 2.03 | ||||
Net realized and unrealized gain (loss)
(b)
|
1.20 | (4.28) | 15.72 | 1.91 | 7.56 | ||||
Total from investment operations
|
3.67 | (2.66) | 18.55 | 4.19 | 9.59 | ||||
Net equalization credits and charges
(a)
|
(0.04) | (0.09) | 0.03 | 0.01 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(2.82) | (3.70) | (3.52) | (2.81) | (2.52) | ||||
Net asset value, end of period
|
$ 93.80 | $ 92.99 | $ 99.44 | $ 84.38 | $ 82.99 | ||||
Total return
(c)
|
4.03% | (2.73)% | 22.43% | 4.97% | 13.02% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$2,563,630 | $3,015,901 | $3,816,521 | $2,863,030 | $2,579,540 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.25% | 0.25% | 0.25% | 0.25% | 0.25% | ||||
Net investment income (loss)
|
2.72% | 1.71% | 3.14% | 2.55% | 2.66% | ||||
Portfolio turnover rate
(d)
|
6% | 9% | 10% | 5% | 6% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Bank ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 43.58 | $ 30.51 | $ 36.27 | $ 33.41 | $ 28.67 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.72 | 0.59 | 0.58 | 0.55 | 0.49 | ||||
Net realized and unrealized gain (loss)
(b)
|
3.60 | 13.05(c) | (5.73) | 2.86 | 4.71 | ||||
Total from investment operations
|
4.32 | 13.64 | (5.15) | 3.41 | 5.20 | ||||
Net equalization credits and charges
(a)
|
0.00(d) | 0.02 | (0.02) | 0.01 | (0.00)(d) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.71) | (0.59) | (0.59) | (0.56) | (0.46) | ||||
Net asset value, end of period
|
$ 47.19 | $ 43.58 | $ 30.51 | $ 36.27 | $ 33.41 | ||||
Total return
(e)
|
9.91% | 44.97%(c) | (14.30)% | 10.36% | 18.21% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$3,633,782 | $3,270,400 | $2,041,171 | $3,023,444 | $2,492,584 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
1.54% | 1.50% | 1.76% | 1.67% | 1.54% | ||||
Portfolio turnover rate
(f)
|
29% | 35% | 40% | 18% | 29% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Reflects a non-recurring litigation payment received by the Fund from State Street Corp., an affiliate, which amounted to $0.01 per share outstanding as of March 20, 2017. This payment resulted in an increase to total return of 0.02% for the period ended June 30, 2017. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Capital Markets ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 49.10 | $ 36.17 | $ 50.69 | $ 49.21 | $ 39.95 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.21 | 1.08 | 0.94 | 0.94 | 0.95 | ||||
Net realized and unrealized gain (loss)
(b)
|
8.83 | 12.90(c) | (14.51) | 1.48 | 9.13 | ||||
Total from investment operations
|
10.04 | 13.98 | (13.57) | 2.42 | 10.08 | ||||
Net equalization credits and charges
(a)
|
(0.02) | 0.03 | 0.09 | (0.01) | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.20) | (1.08) | (1.04) | (0.93) | (0.84) | ||||
Net asset value, end of period
|
$ 57.92 | $ 49.10 | $ 36.17 | $ 50.69 | $ 49.21 | ||||
Total return
(d)
|
20.43% | 39.07%(c) | (26.75)% | 4.92% | 25.39% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$136,109 | $103,116 | $84,998 | $177,409 | $199,312 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
2.14% | 2.45% | 2.17% | 1.92% | 2.03% | ||||
Portfolio turnover rate
(e)
|
24% | 43% | 29% | 28% | 33% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Reflects a non-recurring litigation payment received by the Fund from State Street Corp., an affiliate, which amounted to $0.06 per share outstanding as of March 20, 2017. This payment resulted in an increase to total return of 0.18% for the period ended June 30, 2017. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Insurance ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 29.37 | $ 23.71 | $ 22.70 | $ 21.38 | $ 18.01 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.52 | 0.46 | 0.43 | 0.40 | 0.32 | ||||
Net realized and unrealized gain (loss)
(c)
|
0.43 | 5.64 | 0.99 | 1.28 | 3.36 | ||||
Total from investment operations
|
0.95 | 6.10 | 1.42 | 1.68 | 3.68 | ||||
Net equalization credits and charges
(b)
|
0.02 | 0.02 | 0.01 | 0.03 | (0.00)(d) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.53) | (0.45) | (0.41) | (0.39) | (0.31) | ||||
Net asset value, end of period
|
$ 29.81 | $ 29.37 | $ 23.71 | $ 22.70 | $ 21.38 | ||||
Total return
(e)
|
3.28% | 25.92% | 6.37% | 8.05% | 20.52% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$708,100 | $885,536 | $594,003 | $377,924 | $272,622 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
1.71% | 1.68% | 1.87% | 1.84% | 1.62% | ||||
Portfolio turnover rate
(f)
|
24% | 26% | 32% | 17% | 16% |
(a) | On November 29, 2017, the SPDR S&P Insurance ETF underwent a 3-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. See Note 11. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Regional Banking ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 54.97 | $ 38.45 | $ 44.16 | $ 40.32 | $ 33.85 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.93 | 0.78 | 0.77 | 0.71 | 0.61 | ||||
Net realized and unrealized gain (loss)
(b)
|
5.91 | 16.48 | (5.70) | 3.79 | 6.45 | ||||
Total from investment operations
|
6.84 | 17.26 | (4.93) | 4.50 | 7.06 | ||||
Net equalization credits and charges
(a)
|
0.05 | 0.04 | 0.01 | 0.04 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.90) | (0.78) | (0.79) | (0.70) | (0.60) | ||||
Net asset value, end of period
|
$ 60.96 | $ 54.97 | $ 38.45 | $ 44.16 | $ 40.32 | ||||
Total return
(c)
|
12.56% | 45.19% | (11.16)% | 11.40% | 20.94% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$5,404,393 | $3,850,902 | $1,615,033 | $2,755,536 | $2,576,688 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
1.56% | 1.54% | 1.89% | 1.76% | 1.59% | ||||
Portfolio turnover rate
(d)
|
33% | 52% | 86% | 27% | 28% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR NYSE Technology ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 72.80 | $ 52.63 | $ 50.26 | $ 47.72 | $ 37.09 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.55 | 0.54 | 0.49 | 0.48 | 0.48 | ||||
Net realized and unrealized gain (loss)
(c)
|
20.98 | 20.17 | 2.31 | 2.48 | 10.64 | ||||
Total from investment operations
|
21.53 | 20.71 | 2.80 | 2.96 | 11.12 | ||||
Net equalization credits and charges
(b)
|
0.00(d) | 0.00(d) | 0.00(d) | 0.03 | (0.01) | ||||
Voluntary contribution from Adviser
|
— | — | 0.06 | — | — | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.48) | (0.54) | (0.49) | (0.45) | (0.48) | ||||
Net realized gains
|
(0.56) | — | — | — | — | ||||
Total distributions
|
(1.04) | (0.54) | (0.49) | (0.45) | (0.48) | ||||
Net asset value, end of period
|
$ 93.29 | $ 72.80 | $ 52.63 | $ 50.26 | $ 47.72 | ||||
Total return
(e)
|
29.71% | 39.46% | 5.73%(f) | 6.27% | 30.05% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$974,885 | $711,637 | $489,477 | $412,108 | $224,296 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.42% | 0.50% | ||||
Net investment income (loss)
|
0.64% | 0.85% | 0.94% | 0.94% | 1.09% | ||||
Portfolio turnover rate
(g)
|
36% | 14% | 32% | 9% | 24% |
(a) | On September 8, 2015, the SPDR NYSE Technology ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | If the Adviser had not made a contribution during the year ended June 30, 2016, the total return would have been 5.62%. |
(g) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Dividend ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 88.93 | $ 83.91 | $ 76.23 | $ 76.57 | $ 66.41 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
2.31 | 1.81 | 2.01 | 1.88 | 1.69 | ||||
Net realized and unrealized gain (loss)
(b)
|
6.10 | 6.01 | 10.29 | 1.59 | 11.42 | ||||
Total from investment operations
|
8.41 | 7.82 | 12.30 | 3.47 | 13.11 | ||||
Net equalization credits and charges
(a)
|
(0.03) | 0.01 | 0.01 | 0.00(c) | (0.02) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(2.33) | (2.22) | (2.02) | (1.86) | (1.70) | ||||
Net realized gains
|
(2.33) | (0.59) | (2.61) | (1.95) | (1.23) | ||||
Total distributions
|
(4.66) | (2.81) | (4.63) | (3.81) | (2.93) | ||||
Net asset value, end of period
|
$ 92.65 | $ 88.93 | $ 83.91 | $ 76.23 | $ 76.57 | ||||
Total return
(d)
|
9.44% | 9.46% | 16.94% | 4.45% | 20.00% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$15,351,950 | $15,478,187 | $14,009,561 | $12,925,516 | $12,806,768 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
2.51% | 2.10% | 2.62% | 2.41% | 2.35% | ||||
Portfolio turnover rate
(e)
|
24% | 32% | 32% | 28% | 33% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Aerospace & Defense ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 70.38 | $ 55.85 | $ 57.12 | $ 49.81 | $ 38.36 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.57 | 0.61 | 0.41 | 0.51 | 0.88 | ||||
Net realized and unrealized gain (loss)
(c)
|
16.70 | 14.41 | (0.54) | 7.20 | 11.77 | ||||
Total from investment operations
|
17.27 | 15.02 | (0.13) | 7.71 | 12.65 | ||||
Net equalization credits and charges
(b)
|
0.04 | 0.21 | 0.00(d) | 0.07 | 0.04 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.62) | (0.70) | (0.42) | (0.47) | (0.79) | ||||
Net realized gains
|
— | — | (0.72) | — | (0.45) | ||||
Total distributions
|
(0.62) | (0.70) | (1.14) | (0.47) | (1.24) | ||||
Net asset value, end of period
|
$ 87.07 | $ 70.38 | $ 55.85 | $ 57.12 | $ 49.81 | ||||
Total return
(e)
|
24.64% | 27.40% | (0.11)% | 15.63% | 33.22% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$1,279,944 | $651,016 | $181,497 | $159,928 | $49,808 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.68% | 0.94% | 0.78% | 0.93% | 1.81% | ||||
Portfolio turnover rate
(f)
|
32% | 36% | 30% | 42% | 33% |
(a) | On September 8, 2015, the SPDR S&P Aerospace & Defense ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Biotech ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 77.15 | $ 54.16 | $ 84.11 | $ 51.33 | $ 34.97 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.20 | 0.20 | 0.29 | 0.52 | 0.37 | ||||
Net realized and unrealized gain (loss)
(c)
|
18.06 | 22.97 | (29.93) | 32.83 | 16.33 | ||||
Total from investment operations
|
18.26 | 23.17 | (29.64) | 33.35 | 16.70 | ||||
Net equalization credits and charges
(b)
|
0.01 | (0.00)(d) | (0.01) | 0.01 | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.19) | (0.18) | (0.30) | (0.58) | (0.36) | ||||
Net asset value, end of period
|
$ 95.23 | $ 77.15 | $ 54.16 | $ 84.11 | $ 51.33 | ||||
Total return
(e)
|
23.69% | 42.80% | (35.30)% | 65.37% | 48.59% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$5,232,982 | $3,548,969 | $1,873,833 | $2,750,480 | $1,108,657 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.23% | 0.30% | 0.45% | 0.81% | 0.84% | ||||
Portfolio turnover rate
(f)
|
62% | 59% | 75% | 78% | 86% |
(a) | On September 8, 2015, the SPDR S&P Biotech ETF underwent a 3-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Health Care Equipment ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 61.27 | $ 47.36 | $ 47.03 | $ 39.40 | $ 31.68 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.02 | 0.05 | 0.13 | 0.14 | 0.15 | ||||
Net realized and unrealized gain (loss)
(c)
|
17.45 | 13.91 | 3.41 | 8.27 | 7.68 | ||||
Total from investment operations
|
17.47 | 13.96 | 3.54 | 8.41 | 7.83 | ||||
Net equalization credits and charges
(b)
|
(0.02) | (0.00)(d) | (0.00)(d) | 0.01 | (0.00)(d) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.01) | (0.05) | (0.13) | (0.14) | (0.11) | ||||
Net realized gains
|
(0.48) | — | (3.08) | (0.65) | — | ||||
Total distributions
|
(0.49) | (0.05) | (3.21) | (0.79) | (0.11) | ||||
Net asset value, end of period
|
$ 78.23 | $ 61.27 | $ 47.36 | $ 47.03 | $ 39.40 | ||||
Total return
(e)
|
28.66% | 29.49% | 7.91% | 21.52% | 24.74% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$465,494 | $140,927 | $47,364 | $47,027 | $31,522 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.03% | 0.09% | 0.28% | 0.31% | 0.39% | ||||
Portfolio turnover rate
(f)
|
41% | 40% | 39% | 40% | 46% |
(a) | On September 8, 2015, the SPDR S&P Health Care Equipment ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Health Care Services ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 64.40 | $ 57.28 | $ 65.55 | $ 50.01 | $ 40.48 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.16 | 0.13 | 0.13 | 0.12 | 0.14 | ||||
Net realized and unrealized gain (loss)
(c)
|
4.89 | 7.15 | (7.83) | 16.07 | 9.63 | ||||
Total from investment operations
|
5.05 | 7.28 | (7.70) | 16.19 | 9.77 | ||||
Net equalization credits and charges
(b)
|
(0.00)(d) | (0.03) | (0.00)(d) | (0.02) | (0.01) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.16) | (0.13) | (0.11) | (0.10) | (0.11) | ||||
Net realized gains
|
— | — | (0.46) | (0.53) | (0.12) | ||||
Total distributions
|
(0.16) | (0.13) | (0.57) | (0.63) | (0.23) | ||||
Net asset value, end of period
|
$ 69.29 | $ 64.40 | $ 57.28 | $ 65.55 | $ 50.01 | ||||
Total return
(e)
|
7.87% | 12.69% | (11.74)% | 32.52% | 24.16% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$97,011 | $115,913 | $283,542 | $196,629 | $80,011 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.25% | 0.22% | 0.23% | 0.21% | 0.30% | ||||
Portfolio turnover rate
(f)
|
32% | 34% | 36% | 37% | 33% |
(a) | On September 8, 2015, the SPDR S&P Health Care Services ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Homebuilders ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 38.53 | $ 33.56 | $ 36.60 | $ 32.75 | $ 29.45 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.35 | 0.27 | 0.20 | 0.18 | 0.14 | ||||
Net realized and unrealized gain (loss)
(b)
|
1.03 | 4.97 | (3.04) | 3.86 | 3.30 | ||||
Total from investment operations
|
1.38 | 5.24 | (2.84) | 4.04 | 3.44 | ||||
Net equalization credits and charges
(a)
|
(0.00)(c) | (0.00)(c) | (0.00)(c) | (0.01) | (0.01) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.35) | (0.27) | (0.20) | (0.18) | (0.13) | ||||
Net asset value, end of period
|
$ 39.56 | $ 38.53 | $ 33.56 | $ 36.60 | $ 32.75 | ||||
Total return
(d)
|
3.55% | 15.65% | (7.77)% | 12.37% | 11.64% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$828,757 | $1,051,857 | $1,240,151 | $1,757,020 | $1,897,730 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.86% | 0.76% | 0.57% | 0.53% | 0.44% | ||||
Portfolio turnover rate
(e)
|
35% | 26% | 44% | 25% | 31% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Internet ETF | |||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
For
the
Period 6/28/16* - 6/30/16 |
|||
Net asset value, beginning of period
|
$ 67.40 | $52.65 | $50.00 | ||
Income (loss) from investment operations: | |||||
Net investment income (loss)
(a)
|
(0.06) | (0.05) | (0.00)(b) | ||
Net realized and unrealized gain (loss)
(c)
|
27.23 | 15.85 | 2.65 | ||
Total from investment operations
|
27.17 | 15.80 | 2.65 | ||
Net equalization credits and charges
(a)
|
(0.25) | 0.02 | — | ||
Distributions to shareholders from: | |||||
Net realized gains
|
(6.69) | (1.07) | — | ||
Net asset value, end of period
|
$ 87.63 | $67.40 | $52.65 | ||
Total return
(d)
|
42.73% | 30.34% | 5.31% | ||
Ratios and Supplemental Data: | |||||
Net assets, end of period (in 000s)
|
$35,051 | $3,370 | $5,265 | ||
Ratios to average net assets: | |||||
Total expenses
|
0.35% | 0.35% | 0.35%(e) | ||
Net investment income (loss)
|
(0.07)% | (0.08)% | (0.35)%(e) | ||
Portfolio turnover rate
(f)
|
67% | 63% | 0%(g)(h) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | Amount is less than $0.005 per share. |
(c) | 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. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Annualized. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(g) | Amount is less than 0.5%. |
(h) | Not annualized. |
SPDR S&P Metals & Mining ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 29.96 | $ 24.37 | $ 24.34 | $ 42.26 | $ 33.20 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.73 | 0.23 | 0.39 | 0.50 | 0.56 | ||||
Net realized and unrealized gain (loss)
(b)
|
5.51 | 5.61 | (0.04) | (17.82) | 9.07 | ||||
Total from investment operations
|
6.24 | 5.84 | 0.35 | (17.32) | 9.63 | ||||
Net equalization credits and charges
(a)
|
0.07 | (0.01) | 0.09 | (0.01) | (0.04) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.75) | (0.24) | (0.41) | (0.59) | (0.53) | ||||
Net asset value, end of period
|
$ 35.52 | $ 29.96 | $ 24.37 | $ 24.34 | $ 42.26 | ||||
Total return
(c)
|
21.01% | 23.93% | 2.53% | (41.32)% | 28.96% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$852,506 | $692,084 | $665,428 | $266,503 | $494,491 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
2.12% | 0.77% | 2.03% | 1.55% | 1.41% | ||||
Portfolio turnover rate
(d)
|
32% | 51% | 57% | 38% | 35% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Oil & Gas Equipment & Services ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 15.50 | $ 18.74 | $ 26.05 | $ 49.28 | $ 39.15 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.26 | 0.10 | 0.27 | 0.51 | 0.34 | ||||
Net realized and unrealized gain (loss)
(b)
|
1.49 | (3.24) | (7.30) | (23.24) | 10.13 | ||||
Total from investment operations
|
1.75 | (3.14) | (7.03) | (22.73) | 10.47 | ||||
Net equalization credits and charges
(a)
|
0.02 | (0.00)(c) | 0.01 | (0.00)(c) | (0.00)(c) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.30) | (0.10) | (0.29) | (0.50) | (0.34) | ||||
Contribution from
Affiliate
|
0.00(c) | — | — | — | — | ||||
Net asset value, end of period
|
$ 16.97 | $ 15.50 | $ 18.74 | $ 26.05 | $ 49.28 | ||||
Total return
(d)
|
11.48% | (16.88)% | (26.87)% | (46.22)% | 26.84% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$402,923 | $258,000 | $238,941 | $246,186 | $349,887 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
1.62% | 0.50% | 1.45% | 1.56% | 0.77% | ||||
Portfolio turnover rate
(e)
|
44% | 34% | 51% | 36% | 26% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Oil & Gas Exploration & Production ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 31.90 | $ 34.79 | $ 46.73 | $ 82.28 | $ 58.23 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.27 | 0.30 | 0.44 | 0.71 | 0.59 | ||||
Net realized and unrealized gain (loss)
(b)
|
11.14 | (2.91) | (11.91) | (35.58) | 23.89 | ||||
Total from investment operations
|
11.41 | (2.61) | (11.47) | (34.87) | 24.48 | ||||
Net equalization credits and charges
(a)
|
0.00(c) | 0.02 | 0.02 | 0.04 | 0.07 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.27) | (0.30) | (0.49) | (0.72) | (0.50) | ||||
Net asset value, end of period
|
$ 43.04 | $ 31.90 | $ 34.79 | $ 46.73 | $ 82.28 | ||||
Total return
(d)
|
35.90% | (7.53)% | (24.38)% | (42.42)% | 42.27% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$3,107,237 | $2,319,165 | $1,943,140 | $1,420,613 | $1,456,408 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.76% | 0.81% | 1.34% | 1.29% | 0.85% | ||||
Portfolio turnover rate
(e)
|
36% | 34% | 44% | 44% | 46% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Pharmaceuticals ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 43.04 | $ 41.84 | $ 62.34 | $ 51.86 | $ 35.20 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.25 | 0.25 | 0.26 | 0.41 | 0.27 | ||||
Net realized and unrealized gain (loss)
(c)
|
(0.04) | 1.21 | (17.20) | 13.08 | 17.28 | ||||
Total from investment operations
|
0.21 | 1.46 | (16.94) | 13.49 | 17.55 | ||||
Net equalization credits and charges
(b)
|
(0.00)(d) | (0.00)(d) | (0.00)(d) | (0.00)(d) | 0.02 | ||||
Voluntary contribution from Adviser
|
— | — | — | 0.05 | — | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.26) | (0.26) | (0.24) | (0.42) | (0.27) | ||||
Net realized gains
|
— | — | (3.32) | (2.64) | (0.64) | ||||
Total distributions
|
(0.26) | (0.26) | (3.56) | (3.06) | (0.91) | ||||
Net asset value, end of period
|
$ 42.99 | $ 43.04 | $ 41.84 | $ 62.34 | $ 51.86 | ||||
Total return
(e)
|
0.46% | 3.50% | (28.21)% | 26.97%(f) | 50.33% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$335,310 | $454,110 | $508,393 | $1,134,542 | $954,135 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.60% | 0.58% | 0.51% | 0.72% | 0.60% | ||||
Portfolio turnover rate
(g)
|
46% | 41% | 69% | 65% | 68% |
(a) | On September 8, 2015, the SPDR S&P Pharmaceuticals ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | If the Adviser had not made a voluntary contribution during the year ended June 30, 2015, the total return would have been 26.88%. |
(g) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Retail ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 40.72 | $ 41.97 | $ 49.33 | $ 43.38 | $ 38.28 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.73 | 0.61 | 0.53 | 0.54 | 0.28 | ||||
Net realized and unrealized gain (loss)
(c)
|
7.85 | (1.17) | (7.36) | 5.85 | 5.12 | ||||
Total from investment operations
|
8.58 | (0.56) | (6.83) | 6.39 | 5.40 | ||||
Net equalization credits and charges
(b)
|
(0.06) | (0.09) | 0.01 | 0.05 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.67) | (0.60) | (0.54) | (0.49) | (0.31) | ||||
Net asset value, end of period
|
$ 48.57 | $ 40.72 | $ 41.97 | $ 49.33 | $ 43.38 | ||||
Total return
(d)
|
21.07% | (1.59)% | (13.84)% | 14.87% | 14.13% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$369,128 | $443,807 | $491,027 | $1,173,933 | $628,931 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
1.66% | 1.40% | 1.16% | 1.15% | 0.67% | ||||
Portfolio turnover rate
(e)
|
43% | 33% | 41% | 45% | 40% |
(a) | On September 8, 2015, the SPDR S&P Retail ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Semiconductor ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 61.70 | $ 44.48 | $ 43.06 | $ 37.58 | $ 26.68 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.55 | 0.41 | 0.30 | 0.21 | 0.18 | ||||
Net realized and unrealized gain (loss)
(c)
|
10.59 | 17.21 | 1.41 | 5.47 | 10.87 | ||||
Total from investment operations
|
11.14 | 17.62 | 1.71 | 5.68 | 11.05 | ||||
Net equalization credits and charges
(b)
|
(0.01) | (0.01) | 0.01 | 0.01 | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.52) | (0.39) | (0.30) | (0.21) | (0.17) | ||||
Net asset value, end of period
|
$ 72.31 | $ 61.70 | $ 44.48 | $ 43.06 | $ 37.58 | ||||
Total return
(d)
|
18.04% | 39.67% | 4.03% | 15.18% | 41.59% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$318,166 | $311,598 | $195,692 | $219,604 | $165,348 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.79% | 0.72% | 0.72% | 0.53% | 0.55% | ||||
Portfolio turnover rate
(e)
|
29% | 37% | 50% | 42% | 30% |
(a) | On September 8, 2015, the SPDR S&P Semiconductor ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Software & Services ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 62.58 | $ 50.60 | $ 51.17 | $ 44.33 | $ 36.45 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.14 | 0.42 | 0.24 | 0.18 | 0.20 | ||||
Net realized and unrealized gain (loss)
(c)
|
18.48 | 11.98 | (0.49) | 6.90 | 8.65 | ||||
Total from investment operations
|
18.62 | 12.40 | (0.25) | 7.08 | 8.85 | ||||
Net equalization credits and charges
(b)
|
0.00(d) | 0.01 | (0.00)(d) | (0.01) | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.13) | (0.43) | (0.23) | (0.17) | (0.17) | ||||
Net realized gains
|
(0.18) | — | (0.09) | (0.06) | (0.82) | ||||
Total distributions
|
(0.31) | (0.43) | (0.32) | (0.23) | (0.99) | ||||
Net asset value, end of period
|
$ 80.89 | $ 62.58 | $ 50.60 | $ 51.17 | $ 44.33 | ||||
Total return
(e)
|
29.83% | 24.62% | (0.46)% | 16.00% | 24.31% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$88,979 | $59,450 | $45,542 | $51,168 | $31,030 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.19% | 0.74% | 0.49% | 0.37% | 0.46% | ||||
Portfolio turnover rate
(f)
|
29% | 29% | 62% | 36% | 41% |
(a) | On September 8, 2015, the SPDR S&P Software & Services ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Technology Hardware ETF | |||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
For
the
Period 6/28/16* - 6/30/16 |
|||
Net asset value, beginning of period
|
$72.03 | $53.23 | $50.00 | ||
Income (loss) from investment operations: | |||||
Net investment income (loss)
(a)
|
0.56 | 0.44 | 0.02 | ||
Net realized and unrealized gain (loss)
(b)
|
8.04 | 19.76 | 3.21 | ||
Total from investment operations
|
8.60 | 20.20 | 3.23 | ||
Net equalization credits and charges
(a)
|
(0.01) | 0.01 | — | ||
Distributions to shareholders from: | |||||
Net investment income
|
(0.57) | (0.43) | — | ||
Net realized gains
|
(5.62) | (0.98) | — | ||
Total distributions
|
(6.19) | (1.41) | — | ||
Net asset value, end of period
|
$74.43 | $72.03 | $53.23 | ||
Total return
(c)
|
12.14% | 38.27% | 6.47% | ||
Ratios and Supplemental Data: | |||||
Net assets, end of period (in 000s)
|
$3,721 | $3,601 | $5,323 | ||
Ratios to average net assets: | |||||
Total expenses
|
0.35% | 0.35% | 0.35%(d) | ||
Net investment income (loss)
|
0.75% | 0.71% | 5.13%(d) | ||
Portfolio turnover rate
(e)
|
29% | 45% | 0%(f)(g) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Annualized. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(f) | Amount is less than 0.5%. |
(g) | Not annualized. |
SPDR S&P Telecom ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 70.47 | $ 58.39 | $ 57.47 | $ 56.90 | $ 48.70 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.56 | 1.02 | 0.76 | 0.79 | 0.56 | ||||
Net realized and unrealized gain (loss)
(b)
|
1.75 | 11.92 | 1.05 | 0.43 | 8.01 | ||||
Total from investment operations
|
3.31 | 12.94 | 1.81 | 1.22 | 8.57 | ||||
Net equalization credits and charges
(a)
|
0.12 | 0.04 | (0.10) | 0.03 | 0.15 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.70) | (0.90) | (0.79) | (0.68) | (0.52) | ||||
Total distributions
|
— | — | — | — | — | ||||
Net asset value, end of period
|
$ 72.20 | $ 70.47 | $ 58.39 | $ 57.47 | $ 56.90 | ||||
Total return
(c)
|
4.97% | 22.25% | 3.04% | 2.21% | 17.92% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$162,460 | $77,517 | $23,355 | $71,843 | $25,604 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
2.21% | 1.47% | 1.37% | 1.34% | 1.03% | ||||
Portfolio turnover rate
(d)
|
33% | 46% | 33% | 47% | 46% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P Transportation ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 55.40 | $ 43.63 | $ 48.48 | $ 46.85 | $ 33.15 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.49 | 0.37 | 0.30 | 0.23 | 0.20 | ||||
Net realized and unrealized gain (loss)
(c)
|
7.68 | 11.76 | (4.63) | 1.64 | 13.67 | ||||
Total from investment operations
|
8.17 | 12.13 | (4.33) | 1.87 | 13.87 | ||||
Net equalization credits and charges
(b)
|
(0.00)(d) | 0.01 | (0.01) | 0.00(d) | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.48) | (0.37) | (0.31) | (0.22) | (0.19) | ||||
Net realized gains
|
— | — | (0.20) | (0.02) | — | ||||
Total distributions
|
(0.48) | (0.37) | (0.51) | (0.24) | (0.19) | ||||
Net asset value, end of period
|
$ 63.09 | $ 55.40 | $ 43.63 | $ 48.48 | $ 46.85 | ||||
Total return
(e)
|
14.74% | 27.87% | (8.92)% | 3.94% | 41.97% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$233,429 | $182,818 | $170,163 | $368,395 | $224,865 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.79% | 0.71% | 0.66% | 0.45% | 0.49% | ||||
Portfolio turnover rate
(f)
|
27% | 29% | 32% | 26% | 33% |
(a) | On September 8, 2015, the SPDR S&P Transportation ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 1500 Value Tilt ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 92.28 | $78.89 | $83.36 | $ 84.11 | $70.33 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
2.11 | 1.89 | 1.88 | 1.74 | 1.45 | ||||
Net realized and unrealized gain (loss)
(b)
|
9.18 | 13.40 | (1.28) | 2.19 | 15.16 | ||||
Total from investment operations
|
11.29 | 15.29 | 0.60 | 3.93 | 16.61 | ||||
Net equalization credits and charges
(a)
|
0.08 | (0.01) | (0.05) | 0.10 | — | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(2.11) | (1.89) | (1.92) | (1.71) | (1.45) | ||||
Net realized gains
|
— | — | (3.10) | (3.07) | (1.38) | ||||
Total distributions
|
(2.11) | (1.89) | (5.02) | (4.78) | (2.83) | ||||
Net asset value, end of period
|
$101.54 | $92.28 | $78.89 | $ 83.36 | $84.11 | ||||
Total return
(c)
|
12.38% | 19.51% | 0.87% | 4.76% | 23.91% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$15,231 | $9,228 | $3,944 | $12,504 | $8,411 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.13% | 0.12% | 0.13% | 0.24% | 0.35% | ||||
Net investment income (loss)
|
2.11% | 2.14% | 2.37% | 2.06% | 1.87% | ||||
Portfolio turnover rate
(d)
|
14% | 18% | 12% | 12% | 12% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR S&P 1500 Momentum Tilt ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$101.56 | $ 90.70 | $ 88.05 | $ 83.39 | $ 67.80 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.68 | 1.85 | 1.58 | 1.39 | 1.06 | ||||
Net realized and unrealized gain (loss)
(b)
|
17.44 | 10.81 | 2.72 | 4.85 | 15.94 | ||||
Total from investment operations
|
19.12 | 12.66 | 4.30 | 6.24 | 17.00 | ||||
Net equalization credits and charges
(a)
|
(0.01) | 0.10 | (0.04) | (0.03) | (0.01) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.72) | (1.90) | (1.61) | (1.27) | (1.00) | ||||
Net realized gains
|
— | — | — | (0.28) | (0.40) | ||||
Total distributions
|
(1.72) | (1.90) | (1.61) | (1.55) | (1.40) | ||||
Net asset value, end of period
|
$118.95 | $101.56 | $ 90.70 | $ 88.05 | $ 83.39 | ||||
Total return
(c)
|
18.91% | 14.20% | 4.93% | 7.47% | 25.21% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$29,737 | $20,311 | $18,139 | $17,611 | $12,508 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.12% | 0.12% | 0.12% | 0.25% | 0.35% | ||||
Net investment income (loss)
|
1.48% | 1.95% | 1.82% | 1.61% | 1.38% | ||||
Portfolio turnover rate
(d)
|
55% | 75% | 62% | 70% | 55% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR MSCI USA StrategicFactors ETF | |||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
For
the
Period 4/15/15* - 6/30/15 |
||||
Net asset value, beginning of period
|
$ 69.73 | $ 61.57 | $58.58 | $60.00 | |||
Income (loss) from investment operations: | |||||||
Net investment income (loss)
(a)
|
1.44 | 1.38 | 1.27 | 0.26 | |||
Net realized and unrealized gain (loss)
(b)
|
7.82 | 7.93 | 3.00 | (1.44) | |||
Total from investment operations
|
9.26 | 9.31 | 4.27 | (1.18) | |||
Net equalization credits and charges
(a)
|
0.06 | 0.22 | 0.01 | — | |||
Distributions to shareholders from: | |||||||
Net investment income
|
(1.36) | (1.37) | (1.28) | (0.24) | |||
Net realized gains
|
(0.04) | — | (0.01) | — | |||
Total distributions
|
(1.40) | (1.37) | (1.29) | (0.24) | |||
Net asset value, end of period
|
$ 77.65 | $ 69.73 | $61.57 | $58.58 | |||
Total return
(c)
|
13.41% | 15.61% | 7.45% | (1.98)% | |||
Ratios and Supplemental Data: | |||||||
Net assets, end of period (in 000s)
|
$93,180 | $41,839 | $6,157 | $5,858 | |||
Ratios to average net assets: | |||||||
Total expenses
|
0.15% | 0.15% | 0.15% | 0.15%(d) | |||
Net investment income (loss)
|
1.90% | 2.06% | 2.16% | 2.11%(d) | |||
Portfolio turnover rate
(e)
|
18% | 23% | 17% | 10%(f) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Annualized. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(f) | Not annualized. |
SPDR Wells Fargo ® Preferred Stock ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 45.00 | $ 45.98 | $ 43.32 | $ 43.57 | $ 43.57 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
2.46 | 2.41 | 2.51 | 2.42 | 2.55 | ||||
Net realized and unrealized gain (loss)
(b)
|
(1.93) | (0.93) | 2.48 | (0.23) | 0.39 | ||||
Total from investment operations
|
0.53 | 1.48 | 4.99 | 2.19 | 2.94 | ||||
Net equalization credits and charges
(a)
|
0.04 | (0.01) | 0.12 | 0.01 | (0.10) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(2.28) | (2.45) | (2.45) | (2.45) | (2.84) | ||||
Net asset value, end of period
|
$ 43.29 | $ 45.00 | $ 45.98 | $ 43.32 | $ 43.57 | ||||
Total return
(c)
|
1.34% | 3.45% | 12.11% | 5.11% | 7.07% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$588,791 | $537,704 | $565,508 | $292,431 | $259,219 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.45% | 0.45% | 0.45% | 0.45% | 0.45% | ||||
Net investment income (loss)
|
5.60% | 5.41% | 5.61% | 5.48% | 6.08% | ||||
Portfolio turnover rate
(d)
|
52% | 31% | 31% | 48% | 23% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR FactSet Innovative Technology ETF | |||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
For
the
Period 1/14/16* - 6/30/16 |
|||
Net asset value, beginning of period
|
$ 69.83 | $54.83 | $50.00 | ||
Income (loss) from investment operations: | |||||
Net investment income (loss)
(a)
|
0.20 | (0.04) | (0.03) | ||
Net realized and unrealized gain (loss)
(b)
|
27.36 | 15.99 | 4.86 | ||
Total from investment operations
|
27.56 | 15.95 | 4.83 | ||
Net equalization credits and charges
(a)
|
(0.74) | 0.15 | — | ||
Distributions to shareholders from: | |||||
Net investment income
|
(0.26) | (0.29) | — | ||
Net realized gains
|
(1.10) | (0.81) | — | ||
Total distributions
|
(1.36) | (1.10) | — | ||
Net asset value, end of period
|
$ 95.29 | $69.83 | $54.83 | ||
Total return
(c)
|
38.83% | 29.69% | 9.67% | ||
Ratios and Supplemental Data: | |||||
Net assets, end of period (in 000s)
|
$38,114 | $6,983 | $5,483 | ||
Ratios to average net assets: | |||||
Total expenses
|
0.45% | 0.45% | 0.46%(d) | ||
Net investment income (loss)
|
0.24% | (0.06)% | (0.12)%(d) | ||
Portfolio turnover rate
(e)
|
34% | 78% | 11%(f) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Annualized. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(f) | Not annualized. |
SPDRSERTREQ | The Trust's Investment Company Act Number is 811-08839. |
Investment Objective |
The SPDR Portfolio Total Stock Market 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 1 | 0.03% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.03% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$3 | $10 | $17 | $39 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 10.53%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 21.15% | 15.54% | 8.61% |
Return After Taxes on Distributions | 20.57% | 14.97% | 8.16% |
Return After Taxes on Distributions and Sale of Fund Shares | 12.27% | 12.40% | 6.92% |
SSGA Total Stock Market Index (reflects no deduction for fees, expenses or taxes) | 21.25% | 15.60% | 8.61% |
Russell 3000 Index (reflects no deduction for fees, expenses or taxes) | 21.13% | 15.58% | 8.60% |
Investment Objective |
The SPDR Portfolio Large 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 large capitalization exchange traded U.S. equity securities. |
Management fees 1 | 0.03% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.03% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$3 | $10 | $17 | $39 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 10.54%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 21.61% | 15.59% | 8.47% |
Return After Taxes on Distributions | 20.91% | 14.96% | 7.95% |
Return After Taxes on Distributions and Sale of Fund Shares | 12.47% | 12.38% | 6.73% |
SSGA Large Cap Index (reflects no deduction for fees, expenses or taxes) | 21.73% | 15.72% | 8.60% |
Russell 1000 Index (reflects no deduction for fees, expenses or taxes) | 21.69% | 15.71% | 8.59% |
Investment Objective |
The SPDR Portfolio 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 | 0.05% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.05% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$5 | $16 | $28 | $64 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 11.24%. |
One
Year |
Since
Inception
(7/8/13) |
|
Return Before Taxes | 15.38% | 11.54% |
Return After Taxes on Distributions | 14.76% | 10.82% |
Return After Taxes on Distributions and Sale of Fund Shares | 8.84% | 8.82% |
SSGA Small Cap Index (reflects no deduction for fees, expenses or taxes) | 15.39% | 11.49% |
Russell 2000 Index (reflects no deduction for fees, expenses or taxes) | 14.65% | 11.33% |
Investment Objective |
The SPDR SSGA US Large Cap Low Volatility Index 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 | 0.12% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.12% |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 8.77%. |
One
Year |
Since
Inception
(2/20/13) |
|
Return Before Taxes | 17.85% | 13.35% |
Return After Taxes on Distributions | 16.03% | 11.82% |
Return After Taxes on Distributions and Sale of Fund Shares | 10.47% | 10.06% |
SSGA US Large Cap Low Volatility Index (1) (reflects no deduction for fees, expenses or taxes) | 18.09% | N/A |
Russell 1000 Index (2) (reflects no deduction for fees, expenses or taxes) | 21.69% | 14.69% |
(1) | The SSGA US Large Cap Low Volatility Index inception date is November 23, 2016. |
(2) | The Fund's index prior to December 13, 2016 was the Russell 1000 Low Volatility Index. The Russell 1000 Low Volatility Index was discontinued on December 16, 2016, and the Russell 1000 Index returns are shown instead for each time period. The Fund has never sought to track the performance of the Russell 1000 Index. |
Investment Objective |
The SPDR SSGA US Small Cap Low Volatility Index 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 | 0.12% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.12% |
Year 1 | Year 3 | Year 5 | Year 10 |
$12 | $39 | $68 | $154 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 8.26%. |
One
Year |
Since
Inception
2/20/13 |
|
Return Before Taxes | 5.24% | 13.61% |
Return After Taxes on Distributions | 2.38% | 11.93% |
Return After Taxes on Distributions and Sale of Fund Shares | 3.50% | 10.17% |
SSGA US Small Cap Low Volatility Index (1) (reflects no deduction for fees, expenses or taxes) | 4.72% | N/A |
Russell 2000 Index (2) (reflects no deduction for fees, expenses or taxes) | 14.65% | 12.83% |
1 | The SSGA US Small Cap Low Volatility Index inception date is November 23, 2016. |
2 | The Fund's index prior to December 13, 2016 was the Russell 2000 Low Volatility Index. The Russell 2000 Low Volatility Index was discontinued on December 16, 2016, and the Russell 2000 Index returns are shown instead for each time period. The Fund has never sought to track the performance of the Russell 2000 Index. |
Investment Objective |
The SPDR SSGA Gender Diversity Index 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 U.S. companies that are leaders in advancing women through gender diversity on their boards of directors and in management. |
Management fees | 0.20% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.20% |
Year 1 | Year 3 | Year 5 | Year 10 |
$20 | $64 | $113 | $255 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 10.33%. |
One
Year |
Since
Inception
(03/07/16) |
|
Return Before Taxes | 19.67% | 16.63% |
Return After Taxes on Distributions | 18.04% | 14.27% |
Return After Taxes on Distributions and Sale of Fund Shares | 12.19% | 12.09% |
SSGA Gender Diversity Index (reflects no deduction for fees, expenses or taxes) | 20.02% | 16.97% |
Russell 1000 Index (reflects no deduction for fees, expenses or taxes) | 21.69% | 19.78% |
Fund Name | SPDR Portfolio Total Stock Market ETF | SPDR Portfolio Large Cap ETF | SPDR Portfolio Small Cap ETF | SPDR SSGA US Large Cap Low Volatility Index ETF | SPDR SSGA US Small Cap Low Volatility Index ETF | SPDR SSGA Gender Diversity Index ETF |
Counterparty Risk | x | x | x | x | ||
Derivatives Risk | x | x | x | x | ||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | x | x | x | x | ||
Equity Investing Risk | x | x | x | x | x | x |
Financial Sector Risk | x | x | x | |||
Gender Diversity Risk | x | |||||
Health Care Sector Risk | x | |||||
Indexing Strategy/Index Tracking Risk | x | x | x | x | x | x |
Industrial Sector Risk | x | |||||
Large Shareholder Risk | x | |||||
Large-Capitalization Securities Risk | x | x | x | |||
Leveraging Risk | x | x | x | x | ||
Liquidity Risk | x | x | x | x | x |
Fund Name | SPDR Portfolio Total Stock Market ETF | SPDR Portfolio Large Cap ETF | SPDR Portfolio Small Cap ETF | SPDR SSGA US Large Cap Low Volatility Index ETF | SPDR SSGA US Small Cap Low Volatility Index ETF | SPDR SSGA Gender Diversity Index ETF |
Low Volatility Risk | x | x | ||||
Market Risk | x | x | x | x | x | x |
Non-Diversification Risk | x | x | x | x | x | x |
Real Estate Sector Risk | x | |||||
Small-Capitalization Securities Risk | x | x | ||||
Technology Sector Risk | x | x | x | x | x | |
Unconstrained Sector Risk | x | x | x | x | x | x |
Valuation Risk | x | x |
SPDR Portfolio Total Stock Market
ETF
|
0.04% (1) |
SPDR Portfolio Large Cap
ETF
|
0.03% (1) |
SPDR Portfolio Small Cap
ETF
|
0.06% (2) |
SPDR SSGA US Large Cap Low Volatility Index
ETF
|
0.12% |
SPDR SSGA US Small Cap Low Volatility Index
ETF
|
0.12% |
SPDR SSGA Gender Diversity Index
ETF
|
0.20% |
(1) | Effective October 16, 2017, the management fee of the Fund was reduced from 0.10% to 0.03% of the Fund's average daily net assets. |
(2) | Effective October 16, 2017, the management fee of the Fund was reduced from 0.10% to 0.05% of the Fund's average daily net assets. |
SPDR Portfolio Total Stock Market ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 30.06 | $ 25.88 | $ 25.83 | $ 24.62 | $ 20.05 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.64 | 0.54 | 0.51 | 0.45 | 0.42 | ||||
Net realized and unrealized gain (loss)
(c)
|
3.72 | 4.19 | 0.07 | 1.43 | 4.57 | ||||
Total from investment operations
|
4.36 | 4.73 | 0.58 | 1.88 | 4.99 | ||||
Net equalization credits and charges
(b)
|
0.10 | (0.01) | (0.01) | (0.13) | (0.00)(d) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.54) | (0.54) | (0.52) | (0.54) | (0.42) | ||||
Total distributions
|
— | — | — | — | — | ||||
Net asset value, end of period
|
$ 33.98 | $ 30.06 | $ 25.88 | $ 25.83 | $ 24.62 | ||||
Total return
(e)
|
14.90% | 18.37% | 2.34% | 7.17% | 25.02% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$2,198,379 | $414,853 | $341,640 | $247,978 | $612,924 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.04% | 0.10% | 0.10% | 0.11% | 0.10% | ||||
Net investment income (loss)
|
1.92% | 1.90% | 2.04% | 1.79% | 1.87% | ||||
Portfolio turnover rate
(f)
|
8% | 3% | 4% | 3% | 19% |
(a) | On October 16, 2017, the SPDR Portfolio Total Stock Market ETF underwent a 6-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. See Note 11. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Portfolio Large Cap ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 28.36 | $ 24.53 | $ 24.35 | $ 23.12 | $ 18.82 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.61 | 0.52 | 0.50 | 0.46 | 0.41 | ||||
Net realized and unrealized gain (loss)
(c)
|
3.38 | 3.83 | 0.17 | 1.20 | 4.30 | ||||
Total from investment operations
|
3.99 | 4.35 | 0.67 | 1.66 | 4.71 | ||||
Net equalization credits and charges
(b)
|
0.11 | 0.01 | 0.01 | 0.02 | (0.00)(d) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.59) | (0.53) | (0.50) | (0.45) | (0.41) | ||||
Net asset value, end of period
|
$ 31.87 | $ 28.36 | $ 24.53 | $ 24.35 | $ 23.12 | ||||
Total return
(e)
|
14.50% | 17.94% | 2.90% | 7.31% | 25.14% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$1,362,496 | $147,491 | $93,191 | $73,036 | $46,230 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.04% | 0.10% | 0.10% | 0.11% | 0.11% | ||||
Net investment income (loss)
|
1.94% | 1.94% | 2.08% | 1.89% | 1.92% | ||||
Portfolio turnover rate
(f)
|
7% | 4% | 5% | 3% | 8% |
(a) | On October 16, 2017, the SPDR Portfolio Large Cap ETF underwent a 4-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. See Note 11. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Portfolio Small Cap ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
For
the
Period 7/8/13* - 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 27.69 | $ 22.56 | $ 24.66 | $ 23.64 | $ 20.00 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.50 | 0.38 | 0.37 | 0.34 | 0.32 | ||||
Net realized and unrealized gain (loss)
(c)
|
4.49 | 5.12 | (2.00) | 1.12 | 3.59 | ||||
Total from investment operations
|
4.99 | 5.50 | (1.63) | 1.46 | 3.91 | ||||
Net equalization credits and charges
(b)
|
0.04 | 0.03 | 0.03 | 0.04 | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.46) | (0.40) | (0.38) | (0.38) | (0.28) | ||||
Net realized gains
|
— | — | (0.12) | (0.10) | (0.01) | ||||
Total distributions
|
(0.46) | (0.40) | (0.50) | (0.48) | (0.29) | ||||
Net asset value, end of period
|
$ 32.26 | $ 27.69 | $ 22.56 | $ 24.66 | $ 23.64 | ||||
Total return
(d)
|
18.27% | 24.59% | (6.45)% | 6.43% | 19.69% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$1,188,787 | $224,263 | $87,992 | $73,986 | $53,198 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.06% | 0.10% | 0.12% | 0.12% | 0.12%(e) | ||||
Net investment income (loss)
|
1.63% | 1.47% | 1.68% | 1.44% | 1.42%(e) | ||||
Portfolio turnover rate
(f)
|
28% | 20% | 18% | 17% | 19%(g) |
* | Commencement of operations. |
(a) | On October 16, 2017, the SPDR Portfolio Small Cap ETF underwent a 3-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. See Note 11. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Annualized. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(g) | Not annualized. |
SPDR SSGA US Large Cap Low Volatility Index ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 86.29 | $ 79.85 | $ 72.41 | $ 72.96 | $ 62.81 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.83 | 1.75 | 1.97 | 1.79 | 1.63 | ||||
Net realized and unrealized gain (loss)
(b)
|
6.01 | 6.61 | 7.50 | 2.93 | 10.80 | ||||
Total from investment operations
|
7.84 | 8.36 | 9.47 | 4.72 | 12.43 | ||||
Net equalization credits and charges
(a)
|
0.02 | (0.02) | 0.26 | 0.11 | — | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.85) | (1.82) | (1.94) | (1.71) | (1.55) | ||||
Net realized gains
|
(2.17) | (0.08) | (0.35) | (3.67) | (0.73) | ||||
Total distributions
|
(4.02) | (1.90) | (2.29) | (5.38) | (2.28) | ||||
Net asset value, end of period
|
$ 90.13 | $ 86.29 | $ 79.85 | $ 72.41 | $ 72.96 | ||||
Total return
(c)
|
9.16% | 10.59% | 13.72% | 6.50% | 20.06% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$103,653 | $77,661 | $67,869 | $28,962 | $10,944 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.12% | 0.12% | 0.12% | 0.15% | 0.20% | ||||
Net investment income (loss)
|
2.04% | 2.14% | 2.64% | 2.41% | 2.40% | ||||
Portfolio turnover rate
(d)
|
20% | 108% | 68% | 75% | 59% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR SSGA US Small Cap Low Volatility Index ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 92.05 | $ 77.70 | $ 77.00 | $ 73.85 | $ 62.28 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
2.35 | 1.94 | 2.23 | 1.97 | 1.84 | ||||
Net realized and unrealized gain (loss)
(b)
|
8.23 | 14.83 | 0.49 | 3.40 | 12.33 | ||||
Total from investment operations
|
10.58 | 16.77 | 2.72 | 5.37 | 14.17 | ||||
Net equalization credits and charges
(a)
|
(0.09) | 0.33 | 0.23 | (0.18) | 0.20 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(2.48) | (2.45) | (2.15) | (1.65) | (1.90) | ||||
Net realized gains
|
(4.95) | (0.30) | (0.10) | (0.39) | (0.90) | ||||
Total distributions
|
(7.43) | (2.75) | (2.25) | (2.04) | (2.80) | ||||
Net asset value, end of period
|
$ 95.11 | $ 92.05 | $ 77.70 | $ 77.00 | $ 73.85 | ||||
Total return
(c)
|
11.80% | 22.11% | 4.00% | 7.06% | 23.32% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$199,739 | $211,717 | $66,045 | $34,649 | $14,770 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.12% | 0.12% | 0.12% | 0.18% | 0.25% | ||||
Net investment income (loss)
|
2.54% | 2.17% | 2.97% | 2.59% | 2.65% | ||||
Portfolio turnover rate
(d)
|
41% | 158% | 62% | 38% | 54% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR SSGA Gender Diversity Index ETF | |||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
For
the
Period 3/8/16* - 6/30/16 |
|||
Net asset value, beginning of period
|
$ 66.97 | $ 62.82 | $ 60.00 | ||
Income (loss) from investment operations: | |||||
Net investment income (loss)
(a)
|
1.38 | 1.25 | 0.35 | ||
Net realized and unrealized gain (loss)
(b)
|
7.73 | 7.12 | 2.78 | ||
Total from investment operations
|
9.11 | 8.37 | 3.13 | ||
Net equalization credits and charges
(a)
|
0.01 | 0.01 | 0.04 | ||
Distributions to shareholders from: | |||||
Net investment income
|
(1.38) | (1.26) | (0.35) | ||
Net realized gains
|
(2.51) | (2.97) | — | ||
Total distributions
|
(3.89) | (4.23) | (0.35) | ||
Net asset value, end of period
|
$ 72.20 | $ 66.97 | $ 62.82 | ||
Total return
(c)
|
13.80% | 13.79% | 5.31% | ||
Ratios and Supplemental Data: | |||||
Net assets, end of period (in 000s)
|
$332,138 | $321,478 | $270,109 | ||
Ratios to average net assets: | |||||
Total expenses
|
0.20% | 0.20% | 0.20%(d) | ||
Net investment income (loss)
|
1.95% | 1.93% | 1.79%(d) | ||
Portfolio turnover rate
(e)
|
46% | 49% | 1%(f) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Annualized. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(f) | Not annualized. |
SPDRSELFSTATPRO | The Trust's Investment Company Act Number is 811-08839. |
Investment Objective |
The SPDR Kensho Intelligent Structures ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Kensho Intelligent Infrastructure Index. |
Management fees | 0.45% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.01% |
Total annual Fund operating expenses | 0.46% |
Year 1 | Year 3 | Year 5 | Year 10 |
$47 | $148 | $258 | $579 |
Investment Objective |
The SPDR Kensho Smart Mobility ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Kensho Smart Transportation Index. |
Management fees | 0.45% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.01% |
Total annual Fund operating expenses | 0.46% |
Year 1 | Year 3 | Year 5 | Year 10 |
$47 | $148 | $258 | $579 |
Investment Objective |
The SPDR Kensho Future Security ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Kensho Future Security Index. |
Management fees | 0.45% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.01% |
Total annual Fund operating expenses | 0.46% |
Year 1 | Year 3 | Year 5 | Year 10 |
$47 | $148 | $258 | $579 |
SPDR Kensho Intelligent Structures
ETF
|
0.45% |
SPDR Kensho Smart Mobility
ETF
|
0.45% |
SPDR Kensho Future Security
ETF
|
0.45% |
Portfolio Management Team | Fund |
Michael Feehily, Mark Krivitsky and Kala
O'Donnell
|
SPDR Kensho Intelligent Structures ETF |
Michael Feehily, Mark Krivitsky and Kathleen
Morgan
|
SPDR Kensho Smart Mobility ETF |
Michael Feehily, Kathleen Morgan and Kala
O'Donnell
|
SPDR Kensho Future Security ETF |
SPDR Kensho Intelligent Structures ETF | |
For
the
Period 12/27/17* - 6/30/18 |
|
Net asset value, beginning of period
|
$ 30.00 |
Income (loss) from investment operations: | |
Net investment income (loss)
(a)
|
0.11 |
Net realized and unrealized gain (loss)
(b)
|
(1.03) |
Total from investment operations
|
(0.92) |
Net equalization credits and charges
(a)
|
0.00(c) |
Distributions to shareholders from: | |
Net investment income
|
(0.09) |
Net asset value, end of period
|
$ 28.99 |
Total return
(d)
|
(3.07)% |
Ratios and Supplemental Data: | |
Net assets, end of period (in 000s)
|
$ 4,349 |
Ratios to average net assets: | |
Total expenses
|
0.46%(e) |
Net investment income (loss)
|
0.67%(e) |
Portfolio turnover rate
(f)
|
45%(g) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Annualized. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(g) | Not annualized. |
SPDR Kensho Smart Mobility ETF | |
For
the
Period 12/27/17* - 6/30/18 |
|
Net asset value, beginning of period
|
$30.00 |
Income (loss) from investment operations: | |
Net investment income (loss)
(a)
|
0.06 |
Net realized and unrealized gain (loss)
(b)
|
(0.24) |
Total from investment operations
|
(0.18) |
Net equalization credits and charges
(a)
|
0.01 |
Distributions to shareholders from: | |
Net investment income
|
(0.06) |
Net asset value, end of period
|
$29.77 |
Total return
(c)
|
(0.58)% |
Ratios and Supplemental Data: | |
Net assets, end of period (in 000s)
|
$5,954 |
Ratios to average net assets: | |
Total expenses
|
0.46%(d) |
Net investment income (loss)
|
0.39%(d) |
Portfolio turnover rate
(e)
|
63%(f) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Annualized. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(f) | Not annualized. |
SPDR Kensho Future Security ETF | |
For
the
Period 12/27/17* - 6/30/18 |
|
Net asset value, beginning of period
|
$ 30.00 |
Income (loss) from investment operations: | |
Net investment income (loss)
(a)
|
0.03 |
Net realized and unrealized gain (loss)
(b)
|
2.84 |
Total from investment operations
|
2.87 |
Net equalization credits and charges
(a)
|
0.00(c) |
Distributions to shareholders from: | |
Net investment income
|
(0.04) |
Net asset value, end of period
|
$ 32.83 |
Total return
(d)
|
9.56% |
Ratios and Supplemental Data: | |
Net assets, end of period (in 000s)
|
$ 8,207 |
Ratios to average net assets: | |
Total expenses
|
0.46%(e) |
Net investment income (loss)
|
0.20%(e) |
Portfolio turnover rate
(f)
|
32%(g) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Annualized. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(g) | Not annualized. |
SPDRKENSHOPRO | The Trust's Investment Company Act Number is 811-08839. |
Investment Objective |
The SPDR Bloomberg 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 | None |
Other expenses | 0.0014% |
Total annual Fund operating expenses | 0.1359% |
Year 1 | Year 3 | Year 5 | Year 10 |
$14 | $44 | $77 | $174 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 1.16%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 0.69% | 0.11% | 0.23% |
Return After Taxes on Distributions | 0.39% | 0.04% | 0.14% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.39% | 0.05% | 0.14% |
Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index (reflects no deduction for fees, expenses or taxes) | 0.82% | 0.24% | 0.34% |
Investment Objective |
The SPDR Bloomberg 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 | 0.15% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -1.09%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 3.14% | 0.01% | 3.46% |
Return After Taxes on Distributions | 1.81% | -0.65% | 2.54% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.77% | -0.30% | 2.32% |
Bloomberg Barclays U.S. Government Inflation-Linked Bond Index (reflects no deduction for fees, expenses or taxes) | 3.30% | 0.17% | 3.60% |
Investment Objective |
The SPDR Bloomberg 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -0.33%. |
One
Year |
Since
Inception
(5/29/13) |
|
Return Before Taxes | 1.77% | 0.44% |
Return After Taxes on Distributions | 0.54% | -0.10% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.00% | 0.09% |
Bloomberg Barclays 1-10 Year U.S. Government Inflation-Linked Bond Index (reflects no deduction for fees, expenses or taxes) | 1.93% | 0.58% |
Investment Objective |
The SPDR Portfolio 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 | 0.06% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.06% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$6 | $19 | $34 | $77 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -0.23%. |
One
Year |
Five
Years |
Since
Inception
(11/30/11) |
|
Return Before Taxes | 0.59% | 0.63% | 0.67% |
Return After Taxes on Distributions | 0.07% | 0.28% | 0.36% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.34% | 0.32% | 0.37% |
Bloomberg Barclays 1-3 Year U.S. Treasury Index (reflects no deduction for fees, expenses or taxes) | 0.42% | 0.57% | 0.55% |
Bloomberg Barclays 1-5 Year U.S. Treasury Index (reflects no deduction for fees, expenses or taxes) | 0.68% | 0.73% | 0.77% |
Investment Objective |
The SPDR Bloomberg 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 intermediate-term sector of the United States Treasury market. |
Management fees | 0.10% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.10% |
Year 1 | Year 3 | Year 5 | Year 10 |
$10 | $32 | $56 | $128 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -0.93%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 1.05% | 0.81% | 2.67% |
Return After Taxes on Distributions | 0.41% | 0.26% | 1.98% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.59% | 0.37% | 1.81% |
Bloomberg Barclays 3-10 Year U.S. Treasury Index (reflects no deduction for fees, expenses or taxes) | 1.58% | 1.21% | 3.69% |
Bloomberg Barclays Intermediate U.S. Treasury Index (reflects no deduction for fees, expenses or taxes) | 1.14% | 0.91% | 2.75% |
Investment Objective |
The SPDR Portfolio 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 | 0.06% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.06% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$6 | $19 | $34 | $77 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -5.82%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 8.42% | 3.37% | 6.47% |
Return After Taxes on Distributions | 7.21% | 2.20% | 5.19% |
Return After Taxes on Distributions and Sale of Fund Shares | 4.74% | 2.03% | 4.56% |
Bloomberg Barclays Long U.S. Treasury Index (reflects no deduction for fees, expenses or taxes) | 8.53% | 3.48% | 6.55% |
Investment Objective |
The SPDR Portfolio 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 | 0.07% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.07% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$7 | $23 | $40 | $90 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 0.72%. |
One
Year |
Five
Years |
Since
Inception
(12/16/09) |
|
Return Before Taxes | 1.70% | 1.37% | 1.83% |
Return After Taxes on Distributions | 0.85% | 0.71% | 1.17% |
Return After Taxes on Distributions and Sale of Fund Shares | 0.96% | 0.75% | 1.14% |
Bloomberg Barclays U.S. 1-3 Year Corporate Bond Index (reflects no deduction for fees, expenses or taxes) | 1.85% | 1.62% | 2.30% |
Investment Objective |
The SPDR Portfolio 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 | 0.07% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.07% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$7 | $23 | $40 | $90 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -0.87%. |
One
Year |
Five
Years |
Since
Inception
(2/10/09) |
|
Return Before Taxes | 3.82% | 2.53% | 4.88% |
Return After Taxes on Distributions | 2.57% | 1.32% | 3.57% |
Return After Taxes on Distributions and Sale of Fund Shares | 2.15% | 1.38% | 3.27% |
Bloomberg Barclays U.S. Intermediate Corporate Bond Index (reflects no deduction for fees, expenses or taxes) | 3.92% | 2.68% | 5.87% |
Investment Objective |
The SPDR Portfolio 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 | 0.07% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.07% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$7 | $23 | $40 | $90 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -5.67%. |
One
Year |
Five
Years |
Since
Inception
(3/10/09) |
|
Return Before Taxes | 12.21% | 5.29% | 9.64% |
Return After Taxes on Distributions | 10.18% | 3.29% | 7.47% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.85% | 3.09% | 6.71% |
Bloomberg Barclays U.S. Long Term Corporate Bond Index (reflects no deduction for fees, expenses or taxes) | 12.09% | 5.31% | 10.55% |
Investment Objective |
The SPDR Bloomberg 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 U.S. corporate bond market. |
Management fees 1 | 0.06% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.06% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$6 | $19 | $34 | $77 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -2.17%. |
One
Year |
Five
Years |
Since
Inception
(4/6/11) |
|
Return Before Taxes | 5.80% | 3.13% | 4.54% |
Return After Taxes on Distributions | 4.35% | 1.70% | 3.13% |
Return After Taxes on Distributions and Sale of Fund Shares | 3.26% | 1.73% | 2.89% |
Bloomberg Barclays U.S. Corporate Bond Index (reflects no deduction for fees, expenses or taxes) | 6.42% | 3.48% | 5.12% |
Bloomberg Barclays Issuer Scored Corporate Index (reflects no deduction for fees, expenses or taxes) | 6.04% | 3.38% | 4.92% |
Investment Objective |
The SPDR Bloomberg 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. |
Management fees | 0.40% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.40% |
Year 1 | Year 3 | Year 5 | Year 10 |
$41 | $128 | $224 | $505 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 8.12%. |
One
Year |
Five
Years |
Since
Inception
(4/14/09) |
|
Return Before Taxes | 16.24% | 10.68% | 11.82% |
Return After Taxes on Distributions | 14.47% | 8.57% | 9.90% |
Return After Taxes on Distributions and Sale of Fund Shares | 9.52% | 7.56% | 8.83% |
Bloomberg Barclays U.S. Convertible Liquid Bond Index (reflects no deduction for fees, expenses or taxes) | 17.32% | 11.42% | 12.94% |
Investment Objective |
The SPDR Bloomberg 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. |
Management fees 1 | 0.06% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Acquired fund fees and expenses 2 | 0.01% |
Total annual Fund operating expenses 1 | 0.07% |
Less contractual fee waiver 3 | (0.01)% |
Net annual Fund operating expenses 1 | 0.06% |
1 | The Fund's “Management fees,”“Total annual Fund operating expenses” and “Net annual Fund operating expenses” have been restated to reflect current fees. |
2 | “Acquired fund fees and expenses” are not included in the Fund's financial statements, which provide a clearer picture of the Fund's actual operating costs. |
3 | SSGA Funds Management, Inc. (the “Adviser”) has contractually agreed to waive a portion of 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) until October 31, 2019. This waiver and/or reimbursement does not provide for the recoupment by the Adviser of any amounts waived or reimbursed. The Adviser may continue the waiver and/or reimbursement from year to year, but there is no guarantee that the Adviser will do so and the waiver and/or reimbursement may be cancelled or modified at any time after October 31, 2019. This waiver and/or reimbursement may not be terminated prior to October 31, 2019 except with the approval of the Fund's Board of Trustees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$7 | $23 | $40 | $90 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -1.15%. |
One
Year |
Five
Years |
Since
Inception
(1/15/09) |
|
Return Before Taxes | 2.21% | 1.78% | 3.10% |
Return After Taxes on Distributions | 0.84% | 0.61% | 1.88% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.24% | 0.82% | 1.89% |
Bloomberg Barclays U.S. MBS Index (reflects no deduction for fees, expenses or taxes) | 2.47% | 2.04% | 3.26% |
Investment Objective |
The SPDR Portfolio 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. |
Management fees 1 | 0.04% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses 1 | 0.04% |
1 | The Fund's “Management fees” and “Total annual Fund operating expenses” have been restated to reflect current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$4 | $13 | $23 | $51 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -1.69%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 3.51% | 2.03% | 4.00% |
Return After Taxes on Distributions | 2.31% | 0.96% | 2.75% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.98% | 1.06% | 2.60% |
Bloomberg Barclays U.S. Aggregate Bond Index (reflects no deduction for fees, expenses or taxes) | 3.54% | 2.10% | 4.01% |
Investment Objective |
The SPDR Nuveen Bloomberg 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. |
Management fees | 0.30% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.30% |
Less contractual fee waiver 1 | (0.07)% |
Net annual Fund operating expenses | 0.23% |
1 | SSGA Funds Management, Inc. (the “Adviser”) has contractually agreed to waive a portion of its management fee and reimburse certain expenses, until October 31, 2019, so that the net annual Fund operating expenses, before application of any fees and expenses not paid by the Adviser pursuant to the Investment Advisory Agreement, if any, are limited to 0.23% of the Fund's average daily net assets. 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 and/or reimbursement from year to year, but there is no guarantee that the Adviser will do so and the waiver and/or reimbursement may be cancelled or modified at any time after October 31, 2019. This waiver and/or reimbursement may not be terminated prior to October 31, 2019 except with the approval of the Fund's Board of Trustees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$24 | $89 | $162 | $374 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -1.41%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 5.59% | 2.78% | 4.31% |
Return After Taxes on Distributions | 5.58% | 2.73% | 4.25% |
Return After Taxes on Distributions and Sale of Fund Shares | 4.14% | 2.67% | 4.04% |
Bloomberg Barclays Municipal Managed Money Index (reflects no deduction for fees, expenses or taxes) | 5.88% | 3.07% | 4.63% |
Investment Objective |
The SPDR Nuveen Bloomberg 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.20% |
Year 1 | Year 3 | Year 5 | Year 10 |
$20 | $64 | $113 | $255 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 0.25%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 1.26% | 0.74% | 1.95% |
Return After Taxes on Distributions | 1.26% | 0.74% | 1.95% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.18% | 0.80% | 1.84% |
Bloomberg Barclays Managed Money Municipal Short Term Index (reflects no deduction for fees, expenses or taxes) | 1.57% | 1.00% | 2.31% |
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. |
Management fees 1 | 0.35% |
Distribution and service (12b-1) fees | None |
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 current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 3.51%. |
One
Year |
Five
Years |
Since
Inception
(4/13/11) |
|
Return Before Taxes | 3.85% | 3.57% | 6.51% |
Return After Taxes on Distributions | 3.81% | 3.55% | 6.47% |
Return After Taxes on Distributions and Sale of Fund Shares | 3.80% | 3.72% | 6.17% |
S&P Municipal Yield Index (reflects no deduction for fees, expenses or taxes) | 7.02% | 4.53% | 7.29% |
Investment Objective |
The SPDR FTSE 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.50% |
Year 1 | Year 3 | Year 5 | Year 10 |
$51 | $160 | $280 | $628 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -5.93%. |
One
Year |
Five
Years |
Since
Inception
(3/13/08) |
|
Return Before Taxes | 11.61% | -0.06% | 1.73% |
Return After Taxes on Distributions | 10.88% | -0.69% | 0.87% |
Return After Taxes on Distributions and Sale of Fund Shares | 6.75% | -0.26% | 1.02% |
FTSE International Inflation-Linked Securities Select Index (1) (reflects no deduction for fees, expenses or taxes) | 12.19% | N/A | N/A |
Bloomberg Barclays Global Treasury ex-US Capped Index (2) (reflects no deduction for fees, expenses or taxes) | 10.82% | -0.01% | 1.92% |
(1) | The FTSE International Inflation-Linked Securities Select Index inception date is January 15, 2016. Prior to May 31, 2018, the Index was named Citi International Inflation-Linked Securities Select Index. |
(2) | The Fund's index prior to February 12, 2016 was the DB Global Government ex-U.S. Inflation-Linked Bond Capped Index. The DB Global Government ex-U.S. Inflation-Linked Bond Capped Index was discontinued on February 15, 2016, and the Bloomberg Barclays Global Treasury ex-US Capped Index returns are shown instead for each time period. The Fund has never sought to track the performance of the Bloomberg Barclays Global Treasury ex-US Capped Index. |
Investment Objective |
The SPDR Bloomberg 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.35% |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -2.90%. |
One
Year |
Five
Years |
Since
Inception
(1/15/09) |
|
Return Before Taxes | 9.95% | -2.44% | 0.34% |
Return After Taxes on Distributions | 9.77% | -2.50% | 0.11% |
Return After Taxes on Distributions and Sale of Fund Shares | 5.64% | -1.85% | 0.19% |
Bloomberg Barclays 1-3 Year Global Treasury ex-US Capped Index (reflects no deduction for fees, expenses or taxes) | 10.45% | -2.07% | 0.78% |
Investment Objective |
The SPDR Bloomberg 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 1 | 0.35% |
Distribution and service (12b-1) fees | None |
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 current fees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$36 | $113 | $197 | $443 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -3.15%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 10.14% | -0.56% | 2.14% |
Return After Taxes on Distributions | 9.93% | -0.88% | 1.61% |
Return After Taxes on Distributions and Sale of Fund Shares | 5.75% | -0.56% | 1.46% |
Bloomberg Barclays Global Treasury ex-US Capped Index (reflects no deduction for fees, expenses or taxes) | 10.82% | -0.01% | 2.76% |
Investment Objective |
The SPDR Bloomberg 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 | 0.50% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.50% |
Year 1 | Year 3 | Year 5 | Year 10 |
$51 | $160 | $280 | $628 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -4.30%. |
One
Year |
Five
Years |
Since
Inception
(5/19/10) |
|
Return Before Taxes | 14.77% | 0.66% | 3.32% |
Return After Taxes on Distributions | 14.59% | 0.38% | 2.87% |
Return After Taxes on Distributions and Sale of Fund Shares | 8.36% | 0.38% | 2.41% |
Bloomberg Barclays Global Aggregate ex-USD >$1B: Corporate Bond Index (reflects no deduction for fees, expenses or taxes) | 15.40% | 1.12% | 3.81% |
Investment Objective |
The SPDR Bloomberg 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 | 0.40% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.40% |
Year 1 | Year 3 | Year 5 | Year 10 |
$41 | $128 | $224 | $505 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -8.56%. |
One
Year |
Five
Years |
Since
Inception
(2/23/11) |
|
Return Before Taxes | 13.60% | -0.66% | 1.51% |
Return After Taxes on Distributions | 12.66% | -1.00% | 0.89% |
Return After Taxes on Distributions and Sale of Fund Shares | 7.74% | -0.63% | 0.95% |
Bloomberg Barclays EM Local Currency Government Diversified Index (reflects no deduction for fees, expenses or taxes) | 14.44% | 0.13% | 2.41% |
Investment Objective |
The SPDR Bloomberg 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.40% |
Year 1 | Year 3 | Year 5 | Year 10 |
$41 | $128 | $224 | $505 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 1.82%. |
One
Year |
Five
Years |
Ten
Years |
|
Return Before Taxes | 6.49% | 3.96% | 5.70% |
Return After Taxes on Distributions | 3.95% | 1.33% | 2.54% |
Return After Taxes on Distributions and Sale of Fund Shares | 3.64% | 1.78% | 2.98% |
Bloomberg Barclays High Yield Very Liquid Index (reflects no deduction for fees, expenses or taxes) | 6.81% | 5.14% | 7.80% |
Investment Objective |
The SPDR Bloomberg 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.40% |
Year 1 | Year 3 | Year 5 | Year 10 |
$41 | $128 | $224 | $505 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 3.75%. |
One
Year |
Five
Years |
Since
Inception
(3/14/12) |
|
Return Before Taxes | 5.32% | 3.58% | 4.18% |
Return After Taxes on Distributions | 2.80% | 1.16% | 1.76% |
Return After Taxes on Distributions and Sale of Fund Shares | 2.99% | 1.60% | 2.10% |
Bloomberg Barclays US High Yield 350mn Cash Pay 0-5 Yr 2% Capped Index (reflects no deduction for fees, expenses or taxes) | 5.84% | 4.63% | 5.37% |
Investment Objective |
The SPDR Bloomberg 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 | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.15% |
Year 1 | Year 3 | Year 5 | Year 10 |
$15 | $48 | $85 | $192 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was 1.81%. |
One
Year |
Five
Years |
Since
Inception
(11/30/11) |
|
Return Before Taxes | 1.98% | 1.05% | 1.40% |
Return After Taxes on Distributions | 1.26% | 0.65% | 0.97% |
Return After Taxes on Distributions and Sale of Fund Shares | 1.12% | 0.62% | 0.89% |
Bloomberg Barclays U.S. Dollar Floating Rate Note < 5 Years Index (reflects no deduction for fees, expenses or taxes) | 2.16% | 1.20% | 1.61% |
Investment Objective |
The SPDR ICE BofAML 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. |
Management fees | 0.40% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.40% |
Less contractual fee waiver 1 | (0.10)% |
Net annual Fund operating expenses | 0.30% |
1 | SSGA Funds Management, Inc. (the “Adviser”) has contractually agreed to waive a portion of its management fee and/or reimburse certain expenses, until October 31, 2019, so that the net annual Fund operating expenses, before application of any fees and expenses not paid by the Adviser pursuant to the Investment Advisory Agreement, if any, will be limited to 0.30% of the Fund's average daily net assets. 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 and/or reimbursement from year to year, but there is no guarantee that the Adviser will do so and the waiver and/or reimbursement may be cancelled or modified at any time after October 31, 2019. This waiver and/or reimbursement may not be terminated prior to October 31, 2019 except with the approval of the Fund's Board of Trustees. |
Year 1 | Year 3 | Year 5 | Year 10 |
$31 | $118 | $214 | $495 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -0.91%. |
One
Year |
Five
Years |
Since
Inception
(6/18/12) |
|
Return Before Taxes | 6.56% | 4.34% | 5.29% |
Return After Taxes on Distributions | 4.52% | 2.45% | 3.43% |
Return After Taxes on Distributions and Sale of Fund Shares | 3.69% | 2.43% | 3.22% |
ICE BofAML US Diversified Crossover Corporate Index (reflects no deduction for fees, expenses or taxes) | 6.86% | 4.78% | 5.59% |
Fund Name | SPDR Bloomberg Barclays 1-3 Month T-Bill ETF | SPDR Bloomberg Barclays TIPS ETF | SPDR Bloomberg Barclays 1-10 Year TIPS ETF | SPDR Portfolio Short Term Treasury ETF | SPDR Bloomberg Barclays Intermediate Term Treasury ETF | SPDR Portfolio Long Term Treasury ETF | SPDR Portfolio Short Term Corporate Bond ETF | SPDR Portfolio Intermediate Term Corporate Bond ETF | |
Below Investment-Grade Securities Risk | |||||||||
Call/Prepayment Risk | x | x | x | x | x | x | x | x | |
Consumer Staples Sector Risk | |||||||||
Convertible Securities Risk | |||||||||
Counterparty Risk | x | x | |||||||
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 | x | x | |||||||
Forward Currency Contracts Risk | |||||||||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | |||||||||
Swaps Risk | x | x | |||||||
Emerging Markets Risk | |||||||||
Extension Risk | x | x | x | x | x | x | x | x | |
Financial Sector Risk | x | x | |||||||
Geographic Focus Risk | |||||||||
Europe | |||||||||
Japan | |||||||||
United Kingdom | |||||||||
Health Care Sector Risk | |||||||||
Income Risk | x | x | x | x | x | x | x | x | |
Indexing Strategy/Index Tracking Risk | x | x | x | x | x | x | x | x | |
Industrial Sector Risk | x | x | |||||||
Inflation-Indexed Securities Risk | x | x | |||||||
Interest Rate Risk | x | x | x | x | x | x | x | x | |
Leveraging Risk | x | x |
Fund Name | SPDR Bloomberg Barclays 1-3 Month T-Bill ETF | SPDR Bloomberg Barclays TIPS ETF | SPDR Bloomberg Barclays 1-10 Year TIPS ETF | SPDR Portfolio Short Term Treasury ETF | SPDR Bloomberg Barclays Intermediate Term Treasury ETF | SPDR Portfolio Long Term Treasury ETF | SPDR Portfolio Short Term Corporate Bond ETF | SPDR Portfolio Intermediate Term Corporate Bond ETF | |
Liquidity Risk | x | x | x | x | x | x | x | x | |
Market Risk | x | x | x | x | x | x | x | x | |
Money Market Risk | |||||||||
Mortgage-Related and Other Asset-Backed Securities Risk | |||||||||
Municipal Obligations Risk | |||||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x | |
Non-U.S. Securities Risk | x | x | |||||||
Political Risk | |||||||||
Portfolio Turnover Risk | x | ||||||||
Preferred Securities Risk | |||||||||
Private Activity Bonds Risk | |||||||||
Reinvestment Risk | x | x | x | x | x | x | x | x | |
Restricted Securities Risk | x | ||||||||
Settlement Risk | x | 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 | |||
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 Portfolio Long Term Corporate Bond ETF | SPDR Bloomberg Barclays Corporate Bond ETF | SPDR Bloomberg Barclays Convertible Securities ETF | SPDR Bloomberg Barclays Mortgage Backed Bond ETF | SPDR Portfolio Aggregate Bond ETF | SPDR Nuveen Bloomberg Barclays Municipal Bond ETF | SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF | SPDR Nuveen S&P High Yield Municipal Bond ETF | |
Below Investment-Grade Securities Risk | x | x | |||||||
Call/Prepayment Risk | x | x | x | x | x | x | x | x | |
Consumer Staples Sector Risk | x | ||||||||
Convertible Securities Risk | x | ||||||||
Counterparty Risk | x | x | |||||||
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 | x | x | |||||||
Forward Currency Contracts Risk | |||||||||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | |||||||||
Swaps Risk | x | x | |||||||
Emerging Markets Risk | |||||||||
Extension Risk | x | x | x | x | x | x | x | x | |
Financial Sector Risk | x | x | |||||||
Geographic Focus Risk | |||||||||
Europe | |||||||||
Japan | |||||||||
United Kingdom | |||||||||
Health Care Sector Risk | |||||||||
Income Risk | x | x | x | x | x | x | x | x | |
Indexing Strategy/Index Tracking Risk | x | x | x | x | x | x | x | x | |
Industrial Sector Risk | x | x | |||||||
Inflation-Indexed Securities Risk | |||||||||
Interest Rate Risk | x | x | x | x | x | x | x | x |
Fund Name | SPDR Portfolio Long Term Corporate Bond ETF | SPDR Bloomberg Barclays Corporate Bond ETF | SPDR Bloomberg Barclays Convertible Securities ETF | SPDR Bloomberg Barclays Mortgage Backed Bond ETF | SPDR Portfolio Aggregate Bond ETF | SPDR Nuveen Bloomberg Barclays Municipal Bond ETF | SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF | SPDR Nuveen S&P High Yield Municipal Bond ETF | |
Leveraging Risk | x | x | |||||||
Liquidity Risk | x | x | x | x | x | x | x | x | |
Market Risk | x | x | x | x | x | x | x | x | |
Money Market Risk | x | ||||||||
Mortgage-Related and Other Asset-Backed Securities Risk | x | x | |||||||
Municipal Obligations Risk | x | x | x | ||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x | |
Non-U.S. Securities Risk | x | x | x | ||||||
Political Risk | x | x | x | ||||||
Portfolio Turnover Risk | x | ||||||||
Preferred Securities Risk | x | ||||||||
Private Activity Bonds Risk | x | ||||||||
Reinvestment Risk | x | x | x | x | x | x | x | x | |
Restricted Securities Risk | x | x | x | ||||||
Settlement Risk | x | x | x | ||||||
Sovereign Debt Obligations Risk | |||||||||
Tax Exemption Risk | x | x | x | ||||||
Technology Sector Risk | x | ||||||||
Unconstrained Sector Risk | x | ||||||||
U.S. Government Securities Risk | x | x | |||||||
U.S. Treasury Obligations 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 | x | x |
Fund Name | SPDR FTSE International Government Inflation-Protected Bond ETF | SPDR Bloomberg Barclays Short Term International Treasury Bond ETF | SPDR Bloomberg Barclays International Treasury Bond ETF | SPDR Bloomberg Barclays International Corporate Bond ETF | SPDR Bloomberg Barclays Emerging Markets Local Bond ETF | SPDR Bloomberg Barclays High Yield Bond ETF | SPDR Bloomberg Barclays Short Term High Yield Bond ETF | SPDR Bloomberg Barclays Investment Grade Floating Rate ETF | |
Below Investment-Grade Securities Risk | x | x | x | ||||||
Call/Prepayment Risk | x | x | x | x | x | x | x | x | |
Consumer Staples Sector Risk | |||||||||
Convertible Securities Risk | |||||||||
Counterparty Risk | x | x | x | x | x | x | x | ||
Credit Risk | x | x | x | x | x | x | x | x | |
Currency Risk | x | x | x | x | x | ||||
Debt Securities Risk | x | x | x | x | x | x | x | x | |
Derivatives Risk | x | x | x | x | x | x | x | ||
Forward Currency Contracts Risk | x | x | x | x | |||||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | x | x | x | x | x | ||||
Swaps Risk | x | x | x | x | x | ||||
Emerging Markets Risk | x | x | x | x | |||||
Extension Risk | x | x | x | x | x | x | x | x | |
Financial Sector Risk | x | x | |||||||
Geographic Focus Risk | x | x | x | x | |||||
Europe | x | x | x | x | |||||
Japan | x | x | |||||||
United Kingdom | x | ||||||||
Health Care Sector Risk | |||||||||
Income Risk | x | x | x | x | x | x | x | x | |
Indexing Strategy/Index Tracking Risk | x | x | x | x | x | x | x | x | |
Industrial Sector Risk | x | x | x | x | |||||
Inflation-Indexed Securities Risk | x | ||||||||
Interest Rate Risk | x | x | x | x | x | x | x | x |
Fund Name | SPDR FTSE International Government Inflation-Protected Bond ETF | SPDR Bloomberg Barclays Short Term International Treasury Bond ETF | SPDR Bloomberg Barclays International Treasury Bond ETF | SPDR Bloomberg Barclays International Corporate Bond ETF | SPDR Bloomberg Barclays Emerging Markets Local Bond ETF | SPDR Bloomberg Barclays High Yield Bond ETF | SPDR Bloomberg Barclays Short Term High Yield Bond ETF | SPDR Bloomberg Barclays Investment Grade Floating Rate ETF | |
Leveraging Risk | x | x | x | x | x | x | x | ||
Liquidity Risk | x | x | x | x | x | x | x | x | |
Market Risk | x | x | x | x | x | x | x | x | |
Money Market Risk | |||||||||
Mortgage-Related and Other Asset-Backed Securities Risk | |||||||||
Municipal Obligations Risk | |||||||||
Non-Diversification Risk | x | x | x | x | x | x | x | x | |
Non-U.S. Securities Risk | x | x | x | x | x | x | |||
Political Risk | |||||||||
Portfolio Turnover Risk | |||||||||
Preferred Securities Risk | |||||||||
Private Activity Bonds Risk | |||||||||
Reinvestment Risk | x | x | x | x | x | x | x | x | |
Restricted Securities Risk | x | ||||||||
Settlement Risk | x | x | x | x | x | x | |||
Sovereign Debt Obligations Risk | x | x | x | x | |||||
Tax Exemption Risk | |||||||||
Technology Sector Risk | |||||||||
Unconstrained Sector Risk | x | x | |||||||
U.S. Government Securities Risk | |||||||||
U.S. Treasury Obligations Risk | |||||||||
Valuation Risk | x | x | x | x | x | x | x | x | |
Variable and Floating Rate Securities Risk | x | ||||||||
When-Issued, TBA and Delayed Delivery Securities Risk |
Fund Name | SPDR ICE BofAML Crossover Corporate Bond ETF |
Below Investment-Grade Securities Risk | x |
Call/Prepayment Risk | x |
Consumer Staples Sector Risk | |
Convertible Securities Risk | |
Counterparty Risk | x |
Credit Risk | x |
Currency Risk | |
Debt Securities Risk | x |
Derivatives Risk | x |
Forward Currency Contracts Risk | |
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | |
Swaps Risk | x |
Emerging Markets Risk | |
Extension Risk | x |
Financial Sector Risk | x |
Geographic Focus Risk | |
Europe | x |
Japan | |
United Kingdom | |
Health Care Sector Risk | |
Income Risk | x |
Indexing Strategy/Index Tracking Risk | x |
Industrial Sector Risk | x |
Inflation-Indexed Securities Risk | |
Interest Rate Risk | x |
Leveraging Risk | x |
Liquidity Risk | x |
Market Risk | x |
Money Market Risk |
Fund Name | SPDR ICE BofAML Crossover Corporate Bond ETF |
Mortgage-Related and Other Asset-Backed Securities Risk | |
Municipal Obligations Risk | |
Non-Diversification Risk | x |
Non-U.S. Securities Risk | x |
Political Risk | |
Portfolio Turnover Risk | |
Preferred Securities Risk | |
Private Activity Bonds Risk | |
Reinvestment Risk | x |
Restricted Securities Risk | x |
Settlement Risk | x |
Sovereign Debt Obligations Risk | |
Tax Exemption Risk | |
Technology Sector Risk | |
Unconstrained Sector Risk | x |
U.S. Government Securities Risk | |
U.S. Treasury Obligations Risk | |
Valuation Risk | x |
Variable and Floating Rate Securities Risk | |
When-Issued, TBA and Delayed Delivery Securities Risk |
SPDR Bloomberg Barclays 1-3 Month T-Bill
ETF
|
0.1345% |
SPDR Bloomberg Barclays TIPS
ETF
|
0.15% |
SPDR Bloomberg Barclays 1-10 Year TIPS
ETF
|
0.15% |
SPDR Portfolio Short Term Treasury
ETF
|
0.07% (1) |
SPDR Bloomberg Barclays Intermediate Term Treasury
ETF
|
0.10% |
SPDR Portfolio Long Term Treasury
ETF
|
0.07% (1) |
SPDR Portfolio Short Term Corporate Bond
ETF
|
0.08% (2) |
SPDR Portfolio Intermediate Term Corporate Bond
ETF
|
0.08% (2) |
SPDR Portfolio Long Term Corporate Bond
ETF
|
0.08% (2) |
SPDR Bloomberg Barclays Corporate Bond
ETF
|
0.16% (3) |
SPDR Bloomberg Barclays Convertible Securities
ETF
|
0.40% |
SPDR Bloomberg Barclays Mortgage Backed Bond
ETF
|
0.18% (4) |
SPDR Portfolio Aggregate Bond
ETF
|
0.05% (5) |
SPDR Nuveen Bloomberg Barclays Municipal Bond
ETF
|
0.23% (6) |
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond
ETF
|
0.20% |
SPDR Nuveen S&P High Yield Municipal Bond
ETF
|
0.45% (7) |
SPDR FTSE International Government Inflation-Protected Bond
ETF
|
0.50% |
SPDR Bloomberg Barclays Short Term International Treasury Bond
ETF
|
0.35% |
SPDR Bloomberg Barclays International Treasury Bond
ETF
|
0.50% (7) |
SPDR Bloomberg Barclays International Corporate Bond
ETF
|
0.50% |
SPDR Bloomberg Barclays Emerging Markets Local Bond
ETF
|
0.40% |
SPDR Bloomberg Barclays High Yield Bond
ETF
|
0.40% |
SPDR Bloomberg Barclays Short Term High Yield Bond
ETF
|
0.40% |
SPDR Bloomberg Barclays Investment Grade Floating Rate
ETF
|
0.15% |
SPDR ICE BofAML Crossover Corporate Bond
ETF
|
0.30% (6) |
(1) | Effective October 16, 2017, the management fee of the Fund was reduced from 0.10% to 0.06% of the Fund's average daily net assets. |
(2) | Effective October 16, 2017, the management fee of the Fund was reduced from 0.12% to 0.07% of the Fund's average daily net assets. |
(3) | Effective July 31, 2018, the management fee of the Fund was reduced from 0.16% to 0.06% of the Fund's average daily net assets. |
(4) | Effective May 30, 2018, the management fee of the Fund was reduced from 0.20% to 0.06% of the Fund's average daily net assets. |
(5) | Effective October 16, 2017, the management fee of the Fund was reduced from 0.08% to 0.04% of the Fund's average daily net assets. |
(6) | The Adviser has contractually agreed to waive a portion of its management fee and reimburse certain expenses, until October 31, 2019, so that the net annual Fund operating expenses, before application of any fees and expenses not paid by the Adviser pursuant to the Investment Advisory Agreement, if any, of the SPDR Nuveen Bloomberg Barclays Municipal Bond ETF and SPDR ICE BofAML Crossover Corporate Bond ETF are limited to 0.23% and 0.30%, respectively, of the applicable 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 each waiver from year to year, but there is no guarantee that the Adviser will do so and after October 31, 2019, any or all waivers may be cancelled or modified at any time. This waiver and/or reimbursement may not be terminated prior to October 31, 2019 except with the approval of the Fund's Board of Trustees. |
(7) | Effective September 4, 2018, the management fee of the Fund was reduced from 0.50% to 0.35% of the Fund's average daily net assets. Prior to the management fee reduction, the Adviser contractually agreed to waive a portion of its management fee and reimburse certain expenses |
so that the net annual Fund operating expenses, before application of any fees and expenses not paid by the Adviser pursuant to the Investment Advisory Agreement, if any, were 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 did not provide for the recoupment by the Adviser of any fees the Adviser previously waived. On September 4, 2018, in connection with the management fee reduction, the contractual waiver was discontinued. |
Portfolio Managers | Fund |
Todd Bean and Sean
Lussier
|
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF |
James Kramer, Cynthia Moy and Orhan
Imer
|
SPDR Bloomberg Barclays TIPS ETF, SPDR Bloomberg Barclays 1-10 Year TIPS ETF, SPDR FTSE International Government Inflation-Protected Bond ETF |
Kyle Kelly, Frank Miethe and Christopher
DiStefano
|
SPDR Portfolio Short Term Corporate Bond ETF, SPDR Portfolio Intermediate Term Corporate Bond ETF, SPDR Portfolio Long Term Corporate Bond ETF, SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
Michael Brunell, Kyle Kelly and Christopher
DiStefano
|
SPDR Bloomberg Barclays Corporate Bond ETF |
Joanna Madden, Cynthia Moy and Orhan
Imer
|
SPDR Portfolio Short Term Treasury ETF, SPDR Bloomberg Barclays Intermediate Term Treasury ETF, SPDR Portfolio Long Term Treasury ETF |
James Kramer, Joanna Madden and Orhan
Imer
|
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF, SPDR Bloomberg Barclays International Treasury Bond ETF |
Marc DiCosimo, Nicholas Fischer and Michael
Przygoda
|
SPDR Bloomberg Barclays Mortgage Backed Bond ETF, SPDR Portfolio Aggregate Bond ETF |
Timothy Ryan and Steven
Hlavin
|
Municipal Bond ETFs |
Richard Darby-Dowman, Paul Brown and Peter
Spano
|
SPDR Bloomberg Barclays International Corporate Bond ETF |
Abhishek Kumar, Peter Spano and Richard
Jenkins
|
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF |
Michael Brunell and Christopher
DiStefano
|
SPDR Bloomberg Barclays Convertible Securities ETF |
Bradley J. Sullivan, Michael Brunell and Kyle
Kelly
|
SPDR Bloomberg Barclays High Yield Bond ETF, SPDR Bloomberg Barclays Short Term High Yield Bond ETF, SPDR ICE BofAML Crossover Corporate Bond ETF |
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 91.48 | $ 91.42 | $ 91.42 | $ 91.52 | $ 91.60 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
1.15 | 0.28 | 0.00(c) | (0.10) | (0.08) | ||||
Net realized and unrealized gain (loss)
(d)
|
(0.10) | (0.00)(c) | 0.08 | 0.08 | (0.08) | ||||
Total from investment operations
|
1.05 | 0.28 | 0.08 | (0.02) | (0.16) | ||||
Net equalization credits and charges
(b)
|
— | (0.00)(c) | (0.08) | (0.08) | 0.08 | ||||
Contribution from Adviser (Note 3)
|
0.00(c) | — | — | — | — | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.96) | (0.22) | — | — | — | ||||
Net asset value, end of period
|
$ 91.57 | $ 91.48 | $ 91.42 | $ 91.42 | $ 91.52 | ||||
Total return
(e)
|
1.16% | 0.31% | 0.01% | (0.11)% | (0.09)% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$3,364,553 | $1,651,104 | $1,883,265 | $1,403,188 | $979,258 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.14% | 0.14% | 0.14% | 0.14% | 0.14% | ||||
Net investment income (loss)
|
1.26% | 0.30% | 0.01% | (0.12)% | (0.09)% | ||||
Portfolio turnover rate
(f)
|
625% | 620% | 685% | 620% | 577% |
(a) | On November 29, 2017, the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF underwent a 1-for-2 reverse share split. The capital share activity presented here has been retroactively adjusted to reflect this split. See Note 11. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | Amount is less than $0.005 per share. |
(d) | 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. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays TIPS ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 56.18 | $ 58.09 | $ 55.87 | $ 57.38 | $ 55.65 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.50 | 1.27 | 0.68 | (0.07) | 1.00 | ||||
Net realized and unrealized gain (loss)
(b)
|
(0.23) | (1.73) | 1.80 | (0.94) | 1.51 | ||||
Total from investment operations
|
1.27 | (0.46) | 2.48 | (1.01) | 2.51 | ||||
Net equalization credits and charges
(a)
|
(0.11) | (0.00)(c) | (0.02) | (0.04) | (0.01) | ||||
Other capital
(a)
|
— | (0.00)(c) | — | — | — | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.82) | (1.45) | (0.24) | (0.46) | (0.77) | ||||
Net asset value, end of period
|
$ 55.52 | $ 56.18 | $ 58.09 | $ 55.87 | $ 57.38 | ||||
Total return
(d)
|
2.10% | (0.82)% | 4.42% | (1.84)% | 4.52% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$1,243,695 | $921,344 | $691,343 | $653,662 | $596,730 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.15% | 0.15% | 0.15% | 0.17% | 0.19% | ||||
Net investment income (loss)
|
2.69% | 2.22% | 1.21% | (0.12)% | 1.79% | ||||
Portfolio turnover rate
(e)
|
15% | 18% | 17% | 18% | 20% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays 1-10 Year TIPS ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 19.46 | $ 19.89 | $ 19.29 | $ 19.93 | $19.39 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.53 | 0.38 | 0.19 | (0.06) | 0.21 | ||||
Net realized and unrealized gain (loss)
(b)
|
(0.21) | (0.47) | 0.47 | (0.11) | 0.45 | ||||
Total from investment operations
|
0.32 | (0.09) | 0.66 | (0.17) | 0.66 | ||||
Net equalization credits and charges
(a)
|
(0.07) | 0.01 | (0.05) | (0.25) | (0.00)(c) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.44) | (0.35) | (0.01) | (0.22) | (0.12) | ||||
Net asset value, end of period
|
$ 19.27 | $ 19.46 | $ 19.89 | $ 19.29 | $19.93 | ||||
Total return
(d)
|
1.31% | (0.41)% | 3.16% | (2.10)% | 3.42% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$258,195 | $114,802 | $23,867 | $19,293 | $9,963 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.15% | 0.15% | 0.15% | 0.15% | 0.15% | ||||
Net investment income (loss)
|
2.73% | 1.94% | 0.96% | (0.32)% | 1.06% | ||||
Portfolio turnover rate
(e)
|
21% | 22% | 23% | 28% | 24% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Portfolio Short Term Treasury ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 30.15 | $ 30.65 | $ 30.23 | $ 30.08 | $ 29.95 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.50 | 0.30 | 0.28 | 0.23 | 0.17 | ||||
Net realized and unrealized gain (loss)
(b)
|
(0.69) | (0.50) | 0.42 | 0.12 | 0.13 | ||||
Total from investment operations
|
(0.19) | (0.20) | 0.70 | 0.35 | 0.30 | ||||
Net equalization credits and charges
(a)
|
0.02 | 0.00(c) | 0.00(c) | 0.02 | 0.00(c) | ||||
Other capital
(a)
|
0.00(c) | 0.00(c) | — | 0.00(c) | — | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.43) | (0.30) | (0.28) | (0.22) | (0.17) | ||||
Net realized gains
|
— | — | (0.00)(c) | (0.00)(c) | (0.00)(c) | ||||
Total distributions
|
(0.43) | (0.30) | (0.28) | (0.22) | (0.17) | ||||
Net asset value, end of period
|
$ 29.55 | $ 30.15 | $ 30.65 | $ 30.23 | $ 30.08 | ||||
Total return
(d)
|
(0.57)% | (0.67)% | 2.33% | 1.23% | 1.00% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$487,514 | $138,690 | $91,957 | $54,413 | $12,033 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.07% | 0.10% | 0.10% | 0.11% | 0.12% | ||||
Net investment income (loss)
|
1.67% | 1.00% | 0.93% | 0.76% | 0.57% | ||||
Portfolio turnover rate
(e)
|
96% | 33% | 40% | 35% | 40% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays Intermediate Term Treasury ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 60.04 | $ 61.66 | $ 60.06 | $ 59.72 | $ 59.66 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.98 | 0.76 | 0.75 | 0.68 | 0.69 | ||||
Net realized and unrealized gain (loss)
(b)
|
(1.40) | (1.63) | 1.58 | 0.31 | 0.14 | ||||
Total from investment operations
|
(0.42) | (0.87) | 2.33 | 0.99 | 0.83 | ||||
Net equalization credits and charges
(a)
|
0.02 | 0.00(c) | 0.01 | 0.02 | (0.01) | ||||
Other capital
(a)
|
0.00(c) | 0.00(c) | 0.00(c) | 0.00(c) | 0.00(c) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.94) | (0.75) | (0.74) | (0.67) | (0.71) | ||||
Net realized gains
|
— | — | — | — | (0.05) | ||||
Total distributions
|
(0.94) | (0.75) | (0.74) | (0.67) | (0.76) | ||||
Net asset value, end of period
|
$ 58.70 | $ 60.04 | $ 61.66 | $ 60.06 | $ 59.72 | ||||
Total return
(d)
|
(0.67)% | (1.42)% | 3.92% | 1.69% | 1.39% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$581,140 | $444,299 | $437,789 | $294,311 | $167,232 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.10% | 0.10% | 0.10% | 0.12% | 0.14% | ||||
Net investment income (loss)
|
1.65% | 1.26% | 1.24% | 1.13% | 1.16% | ||||
Portfolio turnover rate
(e)
|
61% | 25% | 33% | 27% | 32% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Portfolio Long Term Treasury ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16 |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 36.05 | $ 39.83 | $ 34.28 | $ 33.16 | $ 32.17 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.94 | 0.88 | 0.90 | 0.94 | 0.93 | ||||
Net realized and unrealized gain (loss)
(c)
|
(1.03) | (3.80) | 5.52 | 1.11 | 0.96 | ||||
Total from investment operations
|
(0.09) | (2.92) | 6.42 | 2.05 | 1.89 | ||||
Net equalization credits and charges
(b)
|
0.02 | 0.02 | 0.04 | 0.02 | 0.02 | ||||
Other capital
(b)
|
0.00(d) | 0.00(d) | — | 0.00(d) | — | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.93) | (0.88) | (0.91) | (0.95) | (0.92) | ||||
Total distributions
|
— | — | — | — | — | ||||
Net asset value, end of period
|
$ 35.05 | $ 36.05 | $ 39.83 | $ 34.28 | $ 33.16 | ||||
Total return
(e)
|
(0.18)% | (7.31)% | 19.14% | 6.21% | 6.16% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$977,789 | $555,074 | $446,122 | $164,531 | $86,209 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.07% | 0.10% | 0.10% | 0.11% | 0.14% | ||||
Net investment income (loss)
|
2.66% | 2.39% | 2.46% | 2.60% | 2.95% | ||||
Portfolio turnover rate
(f)
|
9% | 10% | 22% | 18% | 24% |
(a) | On October 16, 2017, the SPDR Portfolio Long Term Treasury ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. See Note 11. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Portfolio Short Term Corporate Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 30.62 | $ 30.76 | $ 30.58 | $ 30.76 | $ 30.53 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.63 | 0.53 | 0.48 | 0.39 | 0.36 | ||||
Net realized and unrealized gain (loss)
(b)
|
(0.49) | (0.14) | 0.17 | (0.16) | 0.29 | ||||
Total from investment operations
|
0.14 | 0.39 | 0.65 | 0.23 | 0.65 | ||||
Net equalization credits and charges
(a)
|
0.01 | (0.01) | 0.00(c) | 0.00(c) | 0.00(c) | ||||
Other capital
(a)
|
0.00(c) | 0.00(c) | — | 0.00(c) | 0.00(c) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.61) | (0.52) | (0.47) | (0.38) | (0.36) | ||||
Net realized gains
|
— | — | — | (0.03) | (0.06) | ||||
Total distributions
|
(0.61) | (0.52) | (0.47) | (0.41) | (0.42) | ||||
Net asset value, end of period
|
$ 30.16 | $ 30.62 | $ 30.76 | $ 30.58 | $ 30.76 | ||||
Total return
(d)
|
0.50% | 1.25% | 2.17% | 0.74% | 2.14% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$4,295,414 | $2,982,413 | $3,965,398 | $3,962,876 | $3,448,186 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.08% | 0.12% | 0.12% | 0.12% | 0.13% | ||||
Net investment income (loss)
|
2.08% | 1.72% | 1.56% | 1.27% | 1.18% | ||||
Portfolio turnover rate
(e)
|
56% | 67% | 56% | 46% | 43% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Portfolio Intermediate Term Corporate Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 34.38 | $ 34.73 | $ 33.90 | $ 34.34 | $ 33.53 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.96 | 0.91 | 0.91 | 0.89 | 0.92 | ||||
Net realized and unrealized gain (loss)
(b)
|
(1.14) | (0.37) | 0.81 | (0.45) | 0.89 | ||||
Total from investment operations
|
(0.18) | 0.54 | 1.72 | 0.44 | 1.81 | ||||
Net equalization credits and charges
(a)
|
0.01 | 0.02 | 0.02 | 0.02 | 0.00(c) | ||||
Other capital
(a)
|
0.00(c) | 0.00(c) | 0.00(c) | 0.00(c) | 0.00(c) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.95) | (0.91) | (0.91) | (0.90) | (0.92) | ||||
Net realized gains
|
— | — | 0.00(c) | — | (0.08) | ||||
Total distributions
|
(0.95) | (0.91) | (0.91) | (0.90) | (1.00) | ||||
Net asset value, end of period
|
$ 33.26 | $ 34.38 | $ 34.73 | $ 33.90 | $ 34.34 | ||||
Total return
(d)
|
(0.51)% | 1.65% | 5.23% | 1.34% | 5.47% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$3,306,326 | $2,090,046 | $1,343,962 | $752,581 | $456,714 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.08% | 0.12% | 0.12% | 0.14% | 0.15% | ||||
Net investment income (loss)
|
2.85% | 2.65% | 2.70% | 2.61% | 2.72% | ||||
Portfolio turnover rate
(e)
|
30% | 33% | 26% | 13% | 13% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Portfolio Long Term Corporate Bond ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 27.73 | $ 27.95 | $ 25.59 | $ 26.97 | $ 24.94 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
1.15 | 1.15 | 1.18 | 1.17 | 1.19 | ||||
Net realized and unrealized gain (loss)
(c)
|
(1.58) | (0.23) | 2.40 | (1.46) | 1.98 | ||||
Total from investment operations
|
(0.43) | 0.92 | 3.58 | (0.29) | 3.17 | ||||
Net equalization credits and charges
(b)
|
(0.00) | 0.01 | (0.05) | 0.03 | 0.03 | ||||
Other capital
(b)
|
0.00(d) | 0.00(d) | 0.01 | 0.05 | 0.03 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.15) | (1.15) | (1.18) | (1.17) | (1.20) | ||||
Total distributions
|
(1.15) | (1.15) | (1.18) | (1.17) | (1.20) | ||||
Net asset value, end of period
|
$ 26.15 | $ 27.73 | $ 27.95 | $ 25.59 | $ 26.97 | ||||
Total return
(e)
|
(1.67)% | 3.50% | 14.31% | (0.96)% | 13.44% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$330,826 | $232,916 | $150,896 | $337,777 | $161,829 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.08% | 0.12% | 0.12% | 0.14% | 0.15% | ||||
Net investment income (loss)
|
4.19% | 4.22% | 4.58% | 4.29% | 4.69% | ||||
Portfolio turnover rate
(f)
|
21% | 20% | 14% | 10% | 8% |
(a) | On October 16, 2017, the SPDR Portfolio Long Term Corporate Bond ETF underwent a 3-for-2 share split. The per share data presented here have been retroactively adjusted to reflect this split. See Note 12. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays Corporate Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 32.25 | $ 32.57 | $ 31.53 | $ 32.28 | $ 31.22 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.03 | 0.99 | 0.97 | 0.96 | 1.08 | ||||
Net realized and unrealized gain (loss)
(b)
|
(1.25) | (0.33) | 1.04 | (0.88) | 1.11 | ||||
Total from investment operations
|
(0.22) | 0.66 | 2.01 | 0.08 | 2.19 | ||||
Net equalization credits and charges
(a)
|
(0.01) | 0.01 | 0.00(c) | 0.01 | 0.00(c) | ||||
Other capital
(a)
|
— | 0.00(c) | 0.00(c) | 0.14 | 0.03 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.03) | (0.99) | (0.97) | (0.98) | (1.08) | ||||
Net realized gains
|
— | — | — | — | (0.08) | ||||
Total distributions
|
(1.03) | (0.99) | (0.97) | (0.98) | (1.16) | ||||
Net asset value, end of period
|
$ 30.99 | $ 32.25 | $ 32.57 | $ 31.53 | $ 32.28 | ||||
Total return
(d)
|
(0.76)% | 2.11% | 6.56% | 0.67% | 7.28% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$15,496 | $29,029 | $26,060 | $25,220 | $32,285 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.16% | 0.16% | 0.16% | 0.16% | 0.16% | ||||
Net investment income (loss)
|
3.23% | 3.09% | 3.09% | 2.98% | 3.42% | ||||
Portfolio turnover rate
(e)
|
41% | 36% | 20% | 8% | 22% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays Convertible Securities ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 49.53 | $ 43.78 | $ 47.44 | $ 50.30 | $ 42.54 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.23 | 0.98 | 0.82 | 0.37 | (0.00) | ||||
Net realized and unrealized gain (loss)
(b)
|
5.40 | 7.17 | (1.38) | 0.22 | 9.20 | ||||
Total from investment operations
|
5.63 | 8.15 | (0.56) | 0.59 | 9.20 | ||||
Net equalization credits and charges
(a)
|
0.01 | (0.33) | 0.34 | (0.05) | 0.14 | ||||
Other capital
(a)
|
0.00(c) | 0.02 | 0.00(c) | 0.01 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(2.08) | (2.09) | (2.32) | (2.12) | (1.59) | ||||
Net realized gains
|
— | — | (1.12) | (1.29) | — | ||||
Total distributions
|
(2.08) | (2.09) | (3.44) | (3.41) | (1.59) | ||||
Net asset value, end of period
|
$ 53.09 | $ 49.53 | $ 43.78 | $ 47.44 | $ 50.30 | ||||
Total return
(d)
|
11.62% | 18.34% | (0.13)% | 1.27% | 22.35% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$4,475,889 | $3,873,400 | $2,197,606 | $3,045,439 | $2,862,353 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.40% | 0.40% | 0.40% | 0.40% | 0.40% | ||||
Net investment income (loss)
|
0.44% | 2.12% | 1.84% | 0.75% | 0.00% | ||||
Portfolio turnover rate
(e)
|
40% | 32% | 30% | 38% | 40% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays Mortgage Backed Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 26.27 | $ 27.18 | $ 26.93 | $ 27.41 | $ 26.61 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.64 | 0.54 | 0.82 | 0.79 | 0.53 | ||||
Net realized and unrealized gain (loss)
(b)
|
(0.67) | (0.68) | 0.23 | (0.22) | 0.69 | ||||
Total from investment operations
|
(0.03) | (0.14) | 1.05 | 0.57 | 1.22 | ||||
Net equalization credits and charges
(a)
|
(0.00)(c) | 0.01 | 0.02 | (0.01) | 0.01 | ||||
Other capital
(a)
|
0.01 | 0.01 | 0.01 | 0.00(c) | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.82) | (0.79) | (0.79) | (0.77) | (0.44) | ||||
Net realized gains
|
— | — | — | (0.27) | (0.01) | ||||
Return of Capital
|
— | — | (0.04) | — | — | ||||
Total distributions
|
(0.82) | (0.79) | (0.83) | (1.04) | (0.45) | ||||
Net asset value, end of period
|
$ 25.43 | $ 26.27 | $ 27.18 | $ 26.93 | $ 27.41 | ||||
Total return
(d)
|
(0.07)% | (0.44)% | 4.08% | 2.03% | 4.75% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$228,860 | $225,933 | $225,585 | $150,787 | $126,085 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.19% | 0.20% | 0.20% | 0.20% | 0.20% | ||||
Net expenses
|
0.18% | 0.18% | 0.16% | 0.20% | 0.20% | ||||
Net investment income (loss)
|
2.47% | 2.03% | 3.05% | 2.88% | 1.96% | ||||
Portfolio turnover rate
(e)
|
175% | 323% | 356% | 221% | 379% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Portfolio Aggregate Bond ETF | |||||||||
Year
Ended 6/30/18(a) |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 28.80 | $ 29.69 | $ 28.75 | $ 28.95 | $ 28.38 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.76 | 0.67 | 0.75 | 0.72 | 0.67 | ||||
Net realized and unrealized gain (loss)
(c)
|
(0.95) | (0.80) | 0.92 | (0.22) | 0.54 | ||||
Total from investment operations
|
(0.19) | (0.13) | 1.67 | 0.50 | 1.21 | ||||
Net equalization credits and charges
(b)
|
0.04 | (0.01) | 0.01 | 0.01 | 0.01 | ||||
Other capital
(b)
|
0.01 | 0.01 | 0.01 | 0.01 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.78) | (0.76) | (0.75) | (0.72) | (0.66) | ||||
Total distributions
|
(0.78) | (0.76) | (0.75) | (0.72) | (0.66) | ||||
Net asset value, end of period
|
$ 27.88 | $ 28.80 | $ 29.69 | $ 28.75 | $ 28.95 | ||||
Total return
(d)
|
(0.52)% | (0.40)% | 5.97% | 1.77% | 4.38% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$2,994,010 | $1,077,191 | $1,377,335 | $988,792 | $735,309 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.05% | 0.08% | 0.08% | 0.14% | 0.19% | ||||
Net expenses
|
0.05% | 0.08% | 0.07% | 0.11% | 0.13% | ||||
Net investment income (loss)
|
2.67% | 2.31% | 2.58% | 2.48% | 2.35% | ||||
Portfolio turnover rate
(e)
|
150% | 46% | 105% | 69% | 91% |
(a) | On October 16, 2017, the SPDR Portfolio Aggregate Bond ETF underwent a 2-for-1 share split. The per share data presented here has been retroactively adjusted to reflect this split. See Note 12. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 48.77 | $ 50.59 | $ 47.52 | $ 47.44 | $ 46.04 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
1.06 | 1.05 | 1.09 | 1.14 | 1.18 | ||||
Net realized and unrealized gain (loss)
(c)
|
(0.67) | (1.75) | 3.11 | 0.06 | 1.68 | ||||
Total from investment operations
|
0.39 | (0.70) | 4.20 | 1.20 | 2.86 | ||||
Net equalization credits and charges
(b)
|
0.01 | 0.01 | 0.02 | 0.02 | (0.00)(d) | ||||
Other capital
(b)
|
0.00(d) | 0.00(d) | 0.00(d) | 0.00(d) | 0.00(d) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.06) | (1.04) | (1.10) | (1.14) | (1.18) | ||||
Net realized gains
|
— | (0.09) | (0.05) | — | (0.28) | ||||
Total distributions
|
(1.06) | (1.13) | (1.15) | (1.14) | (1.46) | ||||
Net asset value, end of period
|
$ 48.11 | $ 48.77 | $ 50.59 | $ 47.52 | $ 47.44 | ||||
Total return
(e)
|
0.81% | (1.34)% | 9.02% | 2.56% | 6.41% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$2,696,593 | $2,411,847 | $1,950,478 | $1,304,277 | $1,034,219 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.30% | 0.30% | 0.30% | 0.30% | 0.30% | ||||
Net expenses
|
0.23% | 0.23% | 0.23% | 0.23% | 0.23% | ||||
Net investment income (loss)
|
2.19% | 2.15% | 2.23% | 2.37% | 2.58% | ||||
Portfolio turnover rate
(f)
|
20% | 23% | 21% | 20% | 28% |
(a) | On March 15, 2016, the SPDR Nuveen Bloomberg Barclays Municipal Bond ETF underwent a 1-for-2 reverse share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 48.54 | $ 49.07 | $ 48.50 | $ 48.72 | $ 48.06 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.54 | 0.49 | 0.46 | 0.44 | 0.46 | ||||
Net realized and unrealized gain (loss)
(c)
|
(0.57) | (0.52) | 0.57 | (0.22) | 0.66 | ||||
Total from investment operations
|
(0.03) | (0.03) | 1.03 | 0.22 | 1.12 | ||||
Net equalization credits and charges
(b)
|
0.00(d) | 0.00(d) | 0.00(d) | 0.00(d) | 0.00(d) | ||||
Other capital
(b)
|
0.00(d) | 0.00(d) | 0.00(d) | 0.00(d) | 0.00(d) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.53) | (0.48) | (0.46) | (0.44) | (0.46) | ||||
Net realized gains
|
— | (0.02) | — | (0.00)(d) | — | ||||
Total distributions
|
(0.53) | (0.50) | (0.46) | (0.44) | (0.46) | ||||
Net asset value, end of period
|
$ 47.98 | $ 48.54 | $ 49.07 | $ 48.50 | $ 48.72 | ||||
Total return
(e)
|
(0.06)% | (0.04)% | 2.13% | 0.46% | 2.31% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$3,654,095 | $3,458,648 | $2,966,297 | $2,609,387 | $2,219,335 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.20% | 0.20% | 0.20% | 0.20% | 0.20% | ||||
Net investment income (loss)
|
1.11% | 1.01% | 0.94% | 0.91% | 0.93% | ||||
Portfolio turnover rate
(f)
|
27% | 32% | 23% | 23% | 17% |
(a) | On March 15, 2016, the SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF underwent a 1-for-2 reverse share split. The per share data presented here have been retroactively adjusted to reflect this split. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | Amount is less than $0.005 per share. |
(e) | 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 distribution. Broker commission charges are not included in this calculation. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Nuveen S&P High Yield Municipal Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 57.25 | $ 59.80 | $ 56.21 | $ 56.28 | $ 54.67 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
2.29 | 2.20 | 2.56 | 2.62 | 2.72 | ||||
Net realized and unrealized gain (loss)
(b)
|
(0.87) | (2.62) | 3.53 | (0.17) | 1.47 | ||||
Total from investment operations
|
1.42 | (0.42) | 6.09 | 2.45 | 4.19 | ||||
Net equalization credits and charges
(a)
|
(0.01) | 0.01 | 0.04 | 0.03 | 0.05 | ||||
Other capital
(a)
|
0.00(c) | 0.03 | 0.01 | 0.01 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(2.11) | (2.17) | (2.55) | (2.56) | (2.64) | ||||
Total distributions
|
(2.11) | (2.17) | (2.55) | (2.56) | (2.64) | ||||
Net asset value, end of period
|
$ 56.55 | $ 57.25 | $ 59.80 | $ 56.21 | $ 56.28 | ||||
Total return
(d)
|
2.53% | (0.60)% | 11.23% | 4.47% | 8.16% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$531,542 | $606,878 | $490,343 | $382,259 | $275,752 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | ||||
Net expenses
|
0.45% | 0.45% | 0.45% | 0.45% | 0.45% | ||||
Net investment income (loss)
|
4.06% | 3.82% | 4.48% | 4.58% | 5.08% | ||||
Portfolio turnover rate
(e)
|
19% | 11% | 23% | 38% | 21% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes in-kind security transactions. |
SPDR FTSE International Government Inflation-Protected Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 55.75 | $ 55.13 | $ 54.61 | $ 62.28 | $ 57.56 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.73 | 1.86 | 1.39 | 1.36 | 1.99 | ||||
Net realized and unrealized gain (loss)
(b)
|
(1.11) | (0.65) | (0.37) | (8.43) | 4.20 | ||||
Total from investment operations
|
0.62 | 1.21 | 1.02 | (7.07) | 6.19 | ||||
Other capital
(a)
|
0.11 | 0.07 | 0.08 | 0.10 | 0.05 | ||||
Contribution from Affiliate (Note 3)
|
0.00(c) | — | — | — | — | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.18) | — | (0.05) | (0.43) | (1.49) | ||||
Net realized gains
|
(0.47) | (0.66) | (0.53) | (0.27) | (0.03) | ||||
Return of Capital
|
(0.20) | — | — | — | — | ||||
Total distributions
|
(1.85) | (0.66) | (0.58) | (0.70) | (1.52) | ||||
Net asset value, end of period
|
$ 54.63 | $ 55.75 | $ 55.13 | $ 54.61 | $ 62.28 | ||||
Total return
(d)
|
1.21% | 2.39% | 2.12% | (11.25)% | 10.97% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$568,158 | $496,236 | $617,443 | $769,996 | $959,208 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | ||||
Net investment income (loss)
|
3.02% | 3.39% | 2.63% | 2.35% | 3.35% | ||||
Portfolio turnover rate
(e)
|
32% | 42% | 52% | 36% | 19% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 31.23 | $ 31.48 | $ 30.71 | $ 36.48 | $ 34.67 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.00(b) | 0.03 | 0.17 | 0.19 | 0.30 | ||||
Net realized and unrealized gain (loss)
(c)
|
0.28 | (0.42) | 0.59 | (5.91) | 1.53 | ||||
Total from investment operations
|
0.28 | (0.39) | 0.76 | (5.72) | 1.83 | ||||
Voluntary contribution from
Adviser
|
— | 0.18 | — | — | — | ||||
Net equalization credits and charges
(a)
|
— | — | — | (0.01) | — | ||||
Other capital
(a)
|
0.01 | 0.00(b) | 0.03 | 0.02 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.14) | — | — | (0.01) | 0.00(b) | ||||
Net realized gains
|
— | (0.04) | (0.02) | (0.05) | (0.03) | ||||
Total distributions
|
(0.14) | (0.04) | (0.02) | (0.06) | (0.03) | ||||
Net asset value, end of period
|
$ 31.38 | $ 31.23 | $ 31.48 | $ 30.71 | $ 36.48 | ||||
Total return
(d)
|
0.90% | (0.66)%(e) | 2.56% | (15.67)% | 5.32% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$332,582 | $196,749 | $182,560 | $199,591 | $273,606 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.35% | 0.35% | 0.35% | 0.35% | 0.35% | ||||
Net investment income (loss)
|
0.01% | 0.11% | 0.55% | 0.59% | 0.84% | ||||
Portfolio turnover rate
(f)
|
63% | 74% | 85% | 83% | 83% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | Amount is less than $0.005 per share. |
(c) | 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. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | If the Adviser had not made a one—time voluntary contribution during the period ended June 30, 2017, the total return would have been (1.24)%. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays International Treasury Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17(a) |
Year
Ended 6/30/16(a) |
Year
Ended 6/30/15(a) |
Year
Ended 6/30/14(a) |
|||||
Net asset value, beginning of period
|
$ 27.56 | $ 28.60 | $ 26.08 | $ 30.34 | $ 28.15 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(b)
|
0.31 | 0.46 | 0.50 | 0.46 | 0.60 | ||||
Net realized and unrealized gain (loss)
(c)
|
0.24 | (1.51) | 2.01 | (4.37) | 2.05 | ||||
Total from investment operations
|
0.55 | (1.05) | 2.51 | (3.91) | 2.65 | ||||
Net equalization credits and charges
(b)
|
— | — | — | (0.02) | — | ||||
Other capital
(b)
|
0.01 | 0.01 | 0.01 | 0.01 | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.24) | — | — | (0.18) | (0.46) | ||||
Net realized gains
|
— | — | — | (0.16) | (0.01) | ||||
Total distributions
|
(0.24) | — | — | (0.34) | (0.47) | ||||
Net asset value, end of period
|
$ 27.88 | $ 27.56 | $ 28.60 | $ 26.08 | $ 30.34 | ||||
Total return
(d)
|
2.02% | (3.61)% | 9.67% | (13.01)% | 9.52% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$1,519,631 | $1,568,418 | $1,675,762 | $1,449,792 | $2,426,951 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | ||||
Net investment income (loss)
|
1.09% | 1.46% | 1.86% | 1.62% | 2.05% | ||||
Portfolio turnover rate
(e)
|
29% | 25% | 24% | 19% | 40% |
(a) | On September 29, 2016, the SPDR Bloomberg Barclays International Treasury Bond ETF underwent a 2-for-1 share split. The per share data presented here have been retroactively adjusted to reflect this split. See Note 11. |
(b) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(c) | 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. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays International Corporate Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 33.17 | $ 32.44 | $ 31.34 | $ 37.68 | $ 34.17 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.25 | 0.42 | 0.57 | 0.49 | 0.64 | ||||
Net realized and unrealized gain (loss)
(b)
|
0.63 | 0.30 | 0.53 | (6.50) | 3.44 | ||||
Total from investment operations
|
0.88 | 0.72 | 1.10 | (6.01) | 4.08 | ||||
Other capital
(a)
|
0.04 | 0.01 | (0.00)(c) | 0.01 | 0.05 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.22) | — | (0.00)(c) | (0.33) | (0.60) | ||||
Net realized gains
|
— | (0.00)(c) | — | (0.01) | (0.02) | ||||
Total distributions
|
(0.22) | (0.00)(c) | (0.00)(c) | (0.34) | (0.62) | ||||
Net asset value, end of period
|
$ 33.87 | $ 33.17 | $ 32.44 | $ 31.34 | $ 37.68 | ||||
Total return
(d)
|
2.71% | 2.26% | 3.54% | (16.02)% | 12.32% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$230,286 | $149,286 | $139,508 | $191,155 | $316,502 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.50% | 0.50% | 0.50% | 0.54% | 0.55% | ||||
Net investment income (loss)
|
0.72% | 1.30% | 1.80% | 1.43% | 1.77% | ||||
Portfolio turnover rate
(e)
|
23% | 14% | 19% | 28% | 23% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 28.99 | $ 27.74 | $ 27.08 | $ 31.25 | $ 29.74 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.41 | 1.38 | 1.47 | 1.43 | 1.51 | ||||
Net realized and unrealized gain (loss)
(b)
|
(2.28) | (0.18) | (0.90) | (5.64) | 0.47 | ||||
Total from investment operations
|
(0.87) | 1.20 | 0.57 | (4.21) | 1.98 | ||||
Other capital
(a)
|
0.06 | 0.05 | 0.09 | 0.04 | 0.09 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.67) | — | — | — | (0.56) | ||||
Return of Capital
|
(0.43) | — | — | — | — | ||||
Total distributions
|
(1.10) | — | — | — | (0.56) | ||||
Net asset value, end of period
|
$ 27.08 | $ 28.99 | $ 27.74 | $ 27.08 | $ 31.25 | ||||
Total return
(c)
|
(3.03)% | 4.49% | 2.44% | (13.35)% | 6.77% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$519,933 | $130,438 | $205,272 | $97,487 | $100,014 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.41% | 0.47% | 0.50% | 0.500% | 0.50% | ||||
Net expenses
|
0.41% | 0.46% | 0.50% | 0.50% | 0.50% | ||||
Net investment income (loss)
|
4.81% | 4.95% | 5.67% | 4.94% | 5.06% | ||||
Portfolio turnover rate
(d)
|
83% | 42% | 44% | 35% | 69% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays High Yield Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 37.10 | $ 35.28 | $ 38.34 | $ 41.63 | $ 39.53 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.95 | 2.18 | 2.22 | 2.26 | 2.38 | ||||
Net realized and unrealized gain (loss)
(b)
|
(1.51) | 1.83 | (3.10) | (3.31) | 2.11 | ||||
Total from investment operations
|
0.44 | 4.01 | (0.88) | (1.05) | 4.49 | ||||
Net equalization credits and charges
(a)
|
0.00(c) | 0.00(c) | 0.03 | 0.01 | 0.00(c) | ||||
Other capital
(a)
|
0.01 | 0.01 | 0.01 | 0.01 | 0.00(c) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.95) | (2.20) | (2.22) | (2.26) | (2.39) | ||||
Net realized gains
|
— | — | — | — | (0.00)(c) | ||||
Total distributions
|
(1.95) | (2.20) | (2.22) | (2.26) | (2.39) | ||||
Net asset value, end of period
|
$ 35.60 | $ 37.10 | $ 35.28 | $ 38.34 | $ 41.63 | ||||
Total return
(d)
|
1.23% | 11.65% | (1.99)% | (2.50)% | 11.72% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$9,506,526 | $11,613,180 | $11,238,281 | $9,797,126 | $9,762,390 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.40% | 0.40% | 0.40% | 0.40% | 0.40% | ||||
Net investment income (loss)
|
5.34% | 5.97% | 6.32% | 5.71% | 5.86% | ||||
Portfolio turnover rate
(e)
|
38% | 46% | 59% | 34% | 30% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays Short Term High Yield Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 27.92 | $ 26.80 | $ 28.82 | $ 30.86 | $ 30.05 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.48 | 1.62 | 1.51 | 1.51 | 1.59 | ||||
Net realized and unrealized gain (loss)
(b)
|
(0.58) | 1.10 | (2.02) | (2.04) | 0.75 | ||||
Total from investment operations
|
0.90 | 2.72 | (0.51) | (0.53) | 2.34 | ||||
Net equalization credits and charges
(a)
|
(0.01) | 0.02 | (0.01) | 0.00(c) | 0.07 | ||||
Other capital
(a)
|
0.00(c) | 0.00(c) | 0.00(c) | 0.00(c) | 0.00(c) | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.48) | (1.62) | (1.50) | (1.51) | (1.58) | ||||
Net realized gains
|
— | — | — | — | (0.02) | ||||
Total distributions
|
(1.48) | (1.62) | (1.50) | (1.51) | (1.60) | ||||
Net asset value, end of period
|
$ 27.33 | $ 27.92 | $ 26.80 | $ 28.82 | $ 30.86 | ||||
Total return
(d)
|
3.30% | 10.43% | (1.61)% | (1.72)% | 8.21% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$3,544,787 | $4,022,599 | $3,138,527 | $4,237,219 | $4,341,352 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.40% | 0.40% | 0.40% | 0.40% | 0.40% | ||||
Net investment income (loss)
|
5.37% | 5.85% | 5.66% | 5.13% | 5.17% | ||||
Portfolio turnover rate
(e)
|
53% | 57% | 39% | 39% | 44% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 30.69 | $ 30.48 | $ 30.55 | $ 30.63 | $ 30.47 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
0.63 | 0.41 | 0.25 | 0.17 | 0.16 | ||||
Net realized and unrealized gain (loss)
(b)
|
(0.04) | 0.16 | (0.10) | (0.08) | 0.14 | ||||
Total from investment operations
|
0.59 | 0.57 | 0.15 | 0.09 | 0.30 | ||||
Net equalization credits and charges
(a)
|
0.02 | 0.01 | 0.00(c) | 0.00(c) | 0.01 | ||||
Other capital
(a)
|
0.01 | 0.01 | 0.02 | 0.00(c) | 0.01 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(0.57) | (0.38) | (0.24) | (0.17) | (0.16) | ||||
Net realized gains
|
— | — | — | (0.00)(c) | (0.00)(c) | ||||
Total distributions
|
(0.57) | (0.38) | (0.24) | (0.17) | (0.16) | ||||
Net asset value, end of period
|
$ 30.74 | $ 30.69 | $ 30.48 | $ 30.55 | $ 30.63 | ||||
Total return
(d)
|
2.01% | 1.98% | 0.55% | 0.29% | 1.06% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$3,430,056 | $1,230,813 | $563,854 | $387,936 | $385,915 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.15% | 0.15% | 0.15% | 0.15% | 0.15% | ||||
Net investment income (loss)
|
2.06% | 1.33% | 0.83% | 0.56% | 0.51% | ||||
Portfolio turnover rate
(e)
|
16% | 23% | 28% | 21% | 12% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDR ICE BofAML Crossover Corporate Bond ETF | |||||||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
Year
Ended 6/30/16 |
Year
Ended 6/30/15 |
Year
Ended 6/30/14 |
|||||
Net asset value, beginning of period
|
$ 26.45 | $ 25.93 | $ 25.68 | $ 26.58 | $ 25.30 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income (loss)
(a)
|
1.08 | 1.11 | 1.07 | 1.02 | 1.03 | ||||
Net realized and unrealized gain (loss)
(b)
|
(1.09) | 0.52 | 0.28 | (0.97) | 1.35 | ||||
Total from investment operations
|
(0.01) | 1.63 | 1.35 | 0.05 | 2.38 | ||||
Net equalization credits and charges
(a)
|
(0.03) | 0.00(c) | (0.01) | (0.02) | — | ||||
Other capital
(a)
|
0.00(c) | 0.00(c) | 0.00(c) | 0.07 | 0.02 | ||||
Distributions to shareholders from: | |||||||||
Net investment income
|
(1.08) | (1.11) | (1.09) | (0.98) | (1.03) | ||||
Net realized gains
|
— | — | — | (0.02) | (0.09) | ||||
Total distributions
|
(1.08) | (1.11) | (1.09) | (1.00) | (1.12) | ||||
Net asset value, end of period
|
$ 25.33 | $ 26.45 | $ 25.93 | $ 25.68 | $ 26.58 | ||||
Total return
(d)
|
(0.19)% | 6.42% | 5.39% | 0.42% | 9.76% | ||||
Ratios and Supplemental Data: | |||||||||
Net assets, end of period (in 000s)
|
$65,869 | $44,964 | $36,296 | $43,664 | $29,235 | ||||
Ratios to average net assets: | |||||||||
Total expenses
|
0.40% | 0.40% | 0.40% | 0.40% | 0.40% | ||||
Net expenses
|
0.30% | 0.30% | 0.30% | 0.30% | 0.30% | ||||
Net investment income (loss)
|
4.15% | 4.25% | 4.27% | 3.88% | 4.00% | ||||
Portfolio turnover rate
(e)
|
29% | 24% | 36% | 16% | 18% |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | Amount is less than $0.005 per share. |
(d) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(e) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
SPDRSERTRFI | The Trust's Investment Company Act Number is 811-08839. |
Investment Objective |
The SPDR Dorsey Wright Fixed Income Allocation ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Dorsey Wright Fixed Income Allocation Index. |
Management fees | 0.60% |
Distribution and service (12b-1) fees | None |
Other expenses | 0.00% |
Total annual Fund operating expenses | 0.60% |
Year 1 | Year 3 | Year 5 | Year 10 |
$61 | $192 | $335 | $750 |
* | As of 9/30/2018, the Fund's Calendar Year-To-Date return was -4.97%. |
One
Year |
Since
Inception
(06/01/16) |
|
Return Before Taxes | 8.92% | 5.12% |
Return After Taxes on Distributions | 6.94% | 3.35% |
Return After Taxes on Distributions and Sale of Fund Shares | 5.27% | 3.21% |
Dorsey Wright Fixed Income Allocation Index (reflects no deduction for fees, expenses or taxes) | 8.75% | 5.13% |
Bloomberg Barclays U.S. Aggregate Bond Index (reflects no deduction for fees, expenses or taxes) | 3.54% | 1.75% |
SPDR ETF Name | SPDR Bloomberg Barclays 1-3 Month T-Bill ETF | SPDR Portfolio Aggregate Bond ETF | SPDR Bloomberg Barclays Convertible Securities ETF | SPDR Bloomberg Barclays Emerging Markets Local Bond ETF | SPDR Bloomberg Barclays High Yield Bond ETF | SPDR Portfolio Intermediate Term Corporate Bond ETF | SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
Below Investment-Grade Securities Risk | X | X | |||||
Call/Prepayment Risk | X | X | X | X | X | X | X |
Consumer Staples Sector Risk | X | ||||||
Convertible Securities Risk | X | ||||||
Counterparty Risk | X | X | X | X | |||
Credit Risk | X | X | X | X | X | X | X |
Currency Risk | X | ||||||
Debt Securities Risk | X | X | X | X | X | X | X |
Depositary Receipts Risk | |||||||
Derivatives Risk | X | X | X | X | |||
Forward Currency Contracts Risk | X | ||||||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | X | X | |||||
Swaps Risk | X | X | X | X | |||
Emerging Markets Risk | X | ||||||
Equity Investing Risk | |||||||
Extension Risk | X | X | X | X | X | X | X |
Financial Sector Risk | X | ||||||
Geographic Focus Risk | |||||||
Europe | |||||||
Japan | |||||||
United Kingdom | |||||||
Income Risk | X | X | X | X | X | X | X |
Indexing Strategy/Index Tracking Risk | X | X | X | X | X | X | X |
SPDR ETF Name | SPDR Bloomberg Barclays 1-3 Month T-Bill ETF | SPDR Portfolio Aggregate Bond ETF | SPDR Bloomberg Barclays Convertible Securities ETF | SPDR Bloomberg Barclays Emerging Markets Local Bond ETF | SPDR Bloomberg Barclays High Yield Bond ETF | SPDR Portfolio Intermediate Term Corporate Bond ETF | SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
Industrial Sector Risk | X | X | |||||
Inflation-Indexed Securities Risk | |||||||
Interest Rate Risk | X | X | X | X | X | X | X |
Leveraging Risk | X | X | X | X | |||
Lender Liability Risk | |||||||
Liquidity Risk | X | X | X | X | X | X | X |
Management Risk | |||||||
Market Risk | X | X | X | X | X | X | X |
Money Market Risk | X | ||||||
Mortgage-Related and Other Asset-Backed Securities Risk | X | ||||||
Municipal Obligations Risk | |||||||
Non-Diversification Risk | X | X | X | X | X | X | X |
Non-Senior Loans and Other Debt Securities Risk | |||||||
Non-U.S. Securities Risk | X | X | X | ||||
Political Risk | |||||||
Portfolio Turnover Risk | X | ||||||
Preferred Securities Risk | X | ||||||
Reinvestment Risk | X | X | X | X | X | X | X |
Restricted Securities Risk | X | X | X | ||||
Senior Loan Risk | |||||||
Settlement Risk | X | X | X | ||||
Sovereign Debt Obligations Risk | X | ||||||
Tax Exemption Risk | |||||||
Technology Sector Risk | X | ||||||
Unconstrained Sector Risk | X | ||||||
U.S. Government Securities Risk | X | ||||||
U.S. Treasury Obligations Risk | X | X |
SPDR ETF Name | SPDR Bloomberg Barclays 1-3 Month T-Bill ETF | SPDR Portfolio Aggregate Bond ETF | SPDR Bloomberg Barclays Convertible Securities ETF | SPDR Bloomberg Barclays Emerging Markets Local Bond ETF | SPDR Bloomberg Barclays High Yield Bond ETF | SPDR Portfolio Intermediate Term Corporate Bond ETF | SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
Valuation Risk | X | X | X | X | X | X | X |
Variable and Floating Rate Securities Risk | |||||||
When-Issued, TBA and Delayed Delivery Securities Risk | X |
SPDR ETF Name | SPDR Bloomberg Barclays International Corporate Bond ETF | SPDR Bloomberg Barclays International Treasury Bond ETF | SPDR Bloomberg Barclays Investment Grade Floating Rate ETF | SPDR Portfolio Long Term Corporate Bond ETF | SPDR Portfolio Long Term Treasury ETF | SPDR Bloomberg Barclays Mortgage Backed Bond ETF | SPDR Portfolio Short Term Corporate Bond ETF |
Below Investment-Grade Securities Risk | |||||||
Call/Prepayment Risk | X | X | X | X | X | X | X |
Consumer Staples Sector Risk | |||||||
Convertible Securities Risk | |||||||
Counterparty Risk | X | X | X | ||||
Credit Risk | X | X | X | X | X | X | X |
Currency Risk | X | X | |||||
Debt Securities Risk | X | X | X | X | X | X | X |
Depositary Receipts Risk | |||||||
Derivatives Risk | X | X | X | ||||
Forward Currency Contracts Risk | X | X | |||||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | X | X | |||||
Swaps Risk | X | X | |||||
Emerging Markets Risk | X | ||||||
Equity Investing Risk | |||||||
Extension Risk | X | X | X | X | X | X | X |
Financial Sector Risk | X | X | X | X | |||
Geographic Focus Risk | X | X | |||||
Europe | X | X | |||||
Japan | X | ||||||
United Kingdom | |||||||
Income Risk | X | X | X | X | X | X | X |
Indexing Strategy/Index Tracking Risk | X | X | X | X | X | X | X |
Industrial Sector Risk | X | X | X | X | |||
Inflation-Indexed Securities Risk | |||||||
Interest Rate Risk | X | X | X | X | X | X | X |
SPDR ETF Name | SPDR Bloomberg Barclays International Corporate Bond ETF | SPDR Bloomberg Barclays International Treasury Bond ETF | SPDR Bloomberg Barclays Investment Grade Floating Rate ETF | SPDR Portfolio Long Term Corporate Bond ETF | SPDR Portfolio Long Term Treasury ETF | SPDR Bloomberg Barclays Mortgage Backed Bond ETF | SPDR Portfolio Short Term Corporate Bond ETF |
Lender Liability Risk | |||||||
Leveraging Risk | X | X | X | ||||
Liquidity Risk | X | X | X | X | X | X | X |
Management Risk | |||||||
Market Risk | X | X | X | X | X | X | X |
Money Market Risk | |||||||
Mortgage-Related and Other Asset-Backed Securities Risk | X | ||||||
Municipal Obligations Risk | |||||||
Non-Diversification Risk | X | X | X | X | X | X | X |
Non-Senior Loans and Other Debt Securities Risk | |||||||
Non-U.S. Securities Risk | X | X | X | X | X | ||
Political Risk | |||||||
Portfolio Turnover Risk | X | ||||||
Preferred Securities Risk | |||||||
Reinvestment Risk | X | X | X | X | X | X | X |
Restricted Securities Risk | X | ||||||
Senior Loan Risk | |||||||
Settlement Risk | X | X | X | X | X | ||
Sovereign Debt Obligations Risk | X | ||||||
Tax Exemption Risk | |||||||
Technology Sector Risk | |||||||
Unconstrained Sector Risk | X | X | |||||
U.S. Government Securities Risk | X | ||||||
U.S. Treasury Obligations Risk | 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 | X |
SPDR ETF Name | SPDR Bloomberg Barclays Short Term International Treasury Bond ETF | SPDR Bloomberg Barclays TIPS ETF | SPDR Blackstone / GSO Senior Loan ETF | SPDR Nuveen Bloomberg Barclays Municipal Bond ETF | SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF | SPDR FTSE International Government Inflation-Protected Bond ETF | SPDR Wells Fargo Preferred Stock ETF |
Below Investment-Grade Securities Risk | X | ||||||
Call/Prepayment Risk | X | X | X | X | X | X | |
Consumer Staples Sector Risk | |||||||
Convertible Securities Risk | |||||||
Counterparty Risk | X | X | |||||
Credit Risk | X | X | X | X | X | X | |
Currency Risk | X | X | |||||
Debt Securities Risk | X | X | X | X | X | X | |
Depositary Receipts Risk | X | ||||||
Derivatives Risk | X | X | |||||
Forward Currency Contracts Risk | X | ||||||
Futures Contract Risk; Other Exchange-Traded Derivatives Risk | X | ||||||
Swaps Risk | X | ||||||
Emerging Markets Risk | X | X | |||||
Equity Investing Risk | X | ||||||
Extension Risk | X | X | X | X | X | X | |
Financial Sector Risk | X | ||||||
Geographic Focus Risk | X | X | |||||
Europe | X | X | |||||
Japan | X | ||||||
United Kingdom | X | ||||||
Income Risk | X | X | X | X | X | X | |
Indexing Strategy/Index Tracking Risk | X | X | X | X | X | X | |
Industrial Sector Risk | |||||||
Inflation-Indexed Securities Risk | X | X |
SPDR ETF Name | SPDR Bloomberg Barclays Short Term International Treasury Bond ETF | SPDR Bloomberg Barclays TIPS ETF | SPDR Blackstone / GSO Senior Loan ETF | SPDR Nuveen Bloomberg Barclays Municipal Bond ETF | SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF | SPDR FTSE International Government Inflation-Protected Bond ETF | SPDR Wells Fargo Preferred Stock ETF |
Interest Rate Risk | X | X | X | X | X | X | |
Lender Liability Risk | X | ||||||
Leveraging Risk | X | X | |||||
Liquidity Risk | X | X | X | X | X | X | |
Management Risk | X | ||||||
Market Risk | X | X | X | X | X | X | X |
Money Market Risk | |||||||
Mortgage-Related and Other Asset-Backed Securities Risk | |||||||
Municipal Obligations Risk | X | X | |||||
Non-Diversification Risk | X | X | X | X | X | X | |
Non-Senior Loans and Other Debt Securities Risk | X | ||||||
Non-U.S. Securities Risk | X | X | X | X | |||
Political Risk | X | X | |||||
Portfolio Turnover Risk | |||||||
Preferred Securities Risk | X | ||||||
Reinvestment Risk | X | X | X | X | X | X | |
Restricted Securities Risk | X | ||||||
Senior Loan Risk | X | ||||||
Settlement Risk | X | X | X | X | |||
Sovereign Debt Obligations Risk | X | X | |||||
Tax Exemption Risk | X | X | |||||
Technology Sector Risk | |||||||
Unconstrained Sector Risk | X | ||||||
U.S. Government Securities Risk | |||||||
U.S. Treasury Obligations Risk | X |
SPDR Dorsey Wright Fixed Income Allocation ETF | |||||
Year
Ended 6/30/18 |
Year
Ended 6/30/17 |
For
the
Period 6/2/16* - 6/30/16 |
|||
Net asset value, beginning of period
|
$ 25.55 | $ 25.71 | $ 25.00 | ||
Income (loss) from investment operations: | |||||
Net investment income (loss)
(a)
|
0.92 | 0.90 | 0.05 | ||
Net realized and unrealized gain (loss)
(b)
|
(1.68) | (0.35) | 0.56 | ||
Total from investment operations
|
(0.76) | 0.55 | 0.61 | ||
Net equalization credits and charges
(a)
|
(0.02) | 0.07 | 0.10 | ||
Voluntary contribution from
Adviser
|
— | 0.11 | — | ||
Distributions to shareholders from: | |||||
Net investment income
|
(1.07) | (0.89) | — | ||
Net asset value, end of period
|
$ 23.70 | $ 25.55 | $ 25.71 | ||
Total return
(c)
|
(3.26)% | 2.98%(d) | 2.85% | ||
Ratios and Supplemental Data: | |||||
Net assets, end of period (in 000s)
|
$148,690 | $57,488 | $15,428 | ||
Ratios to average net assets: | |||||
Net expenses
|
0.15% | 0.25% | 0.21%(e) | ||
Net investment income (loss)
|
3.66% | 3.55% | 2.23%(e) | ||
Portfolio turnover rate
(f)
|
189% | 71% | 3%(g) |
* | Commencement of operations. |
(a) | Per share numbers have been calculated using average shares outstanding, which more appropriately presents the per share data for the year. |
(b) | 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. |
(c) | 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 distribution. Total returns for periods of less than one year are not annualized. Broker commission charges are not included in this calculation. |
(d) | If the Adviser had not made a one—time voluntary contribution during the period ended June 30, 2017, the total return would have been 2.54%. |
(e) | Annualized. |
(f) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(g) | Not annualized. |
DWFISTATPRO | The Trust's Investment Company Act Number is 811-08839. |
SPDR ® SERIES TRUST (THE TRUST)
STATEMENT OF ADDITIONAL INFORMATION
Dated October 31, 2018
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, 2018, 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 1000 YIELD FOCUS ETF | ONEY |
SPDR BLOOMBERG BARCLAYS 1-3 MONTH T-BILL ETF |
BIL | |||
SPDR RUSSELL 1000 MOMENTUM FOCUS ETF | ONEO | SPDR BLOOMBERG BARCLAYS TIPS ETF | IPE | |||
SPDR RUSSELL 1000 LOW VOLATILITY FOCUS ETF | ONEV | SPDR BLOOMBERG BARCLAYS 1-10 YEAR TIPS ETF | TIPX | |||
SPDR S&P ® 500 BUYBACK ETF | SPYB | SPDR PORTFOLIO SHORT TERM TREASURY ETF | SPTS | |||
SPDR PORTFOLIO S&P 500 GROWTH ETF | SPYG | SPDR BLOOMBERG BARCLAYS INTERMEDIATE TERM TREASURY ETF | ITE | |||
SPDR PORTFOLIO S&P 500 VALUE ETF | SPYV | SPDR PORTFOLIO LONG TERM TREASURY ETF | SPTL | |||
SPDR PORTFOLIO S&P 500 HIGH DIVIDEND ETF | SPYD | SPDR PORTFOLIO SHORT TERM CORPORATE BOND ETF | SPSB | |||
SPDR S&P 500 FOSSIL FUEL RESERVES FREE ETF | SPYX | SPDR PORTFOLIO INTERMEDIATE TERM CORPORATE BOND ETF | SPIB | |||
SPDR PORTFOLIO MID CAP ETF | SPMD | SPDR PORTFOLIO LONG TERM CORPORATE BOND ETF | SPLB | |||
SPDR S&P 400 MID CAP GROWTH ETF | MDYG | SPDR BLOOMBERG BARCLAYS CORPORATE BOND ETF (formerly, SPDR BLOOMBERG BARCLAYS ISSUER SCORED CORPORATE BOND ETF) | CBND | |||
SPDR S&P 400 MID CAP VALUE ETF | MDYV | SPDR BLOOMBERG BARCLAYS CONVERTIBLE SECURITIES ETF | CWB | |||
SPDR S&P 600 SMALL CAP ETF | SLY | SPDR BLOOMBERG BARCLAYS MORTGAGE BACKED BOND ETF | MBG | |||
SPDR S&P 600 SMALL CAP GROWTH ETF | SLYG | SPDR PORTFOLIO AGGREGATE BOND ETF | SPAB | |||
SPDR S&P 600 SMALL CAP VALUE ETF | SLYV | SPDR NUVEEN BLOOMBERG BARCLAYS MUNICIPAL BOND ETF | TFI | |||
SPDR GLOBAL DOW ETF | DGT | SPDR NUVEEN BLOOMBERG BARCLAYS SHORT TERM MUNICIPAL BOND ETF | SHM | |||
SPDR DOW JONES REIT ETF | RWR | SPDR NUVEEN S&P HIGH YIELD MUNICIPAL BOND ETF | HYMB | |||
SPDR S&P BANK ETF | KBE | SPDR FTSE INTERNATIONAL GOVERNMENT INFLATION-PROTECTED BOND ETF (formerly, SPDR CITI INTERNATIONAL GOVERNMENT INFLATION-PROTECTED BOND ETF) | WIP | |||
SPDR S&P CAPITAL MARKETS ETF | KCE | SPDR BLOOMBERG BARCLAYS SHORT TERM INTERNATIONAL TREASURY BOND ETF | BWZ |
EQUITY ETFs | TICKER | FIXED INCOME ETFs | TICKER | |||
SPDR S&P INSURANCE ETF | KIE | SPDR BLOOMBERG BARCLAYS INTERNATIONAL TREASURY BOND ETF | BWX | |||
SPDR S&P REGIONAL BANKING ETF | KRE | SPDR BLOOMBERG BARCLAYS INTERNATIONAL CORPORATE BOND ETF | IBND | |||
SPDR NYSE TECHNOLOGY ETF | XNTK | SPDR BLOOMBERG BARCLAYS EMERGING MARKETS LOCAL BOND ETF | EBND | |||
SPDR S&P DIVIDEND ETF | SDY | SPDR BLOOMBERG BARCLAYS HIGH YIELD BOND ETF | JNK | |||
SPDR S&P AEROSPACE & DEFENSE ETF | XAR | SPDR BLOOMBERG BARCLAYS SHORT TERM HIGH YIELD BOND ETF | SJNK | |||
SPDR S&P BIOTECH ETF | XBI | SPDR BLOOMBERG BARCLAYS INVESTMENT GRADE FLOATING RATE ETF | FLRN | |||
SPDR S&P HEALTH CARE EQUIPMENT ETF | XHE | SPDR ICE BOFAML CROSSOVER CORPORATE BOND ETF | CJNK | |||
SPDR S&P HEALTH CARE SERVICES ETF | XHS | |||||
SPDR S&P HOMEBUILDERS ETF | XHB | |||||
SPDR S&P INTERNET ETF | XWEB | |||||
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 TECHNOLOGY HARDWARE ETF | XTH | |||||
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 MSCI USA STRATEGICFACTORS SM ETF | QUS | |||||
SPDR WELLS FARGO ® PREFERRED STOCK ETF | PSK | |||||
SPDR FACTSET INNOVATIVE TECHNOLOGY ETF | XITK |
2
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, 2018 may be obtained without charge by writing to State Street Global Advisors Funds Distributors, LLC, the Trusts principal underwriter (referred to herein as Distributor or Principal Underwriter), One Iron Street, Boston, Massachusetts 02210, by visiting the Trusts website at https://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, 2018 are incorporated by reference into this SAI.
3
5 | ||||
5 | ||||
22 | ||||
26 | ||||
28 | ||||
28 | ||||
37 | ||||
56 | ||||
59 | ||||
60 | ||||
96 | ||||
103 | ||||
104 | ||||
105 | ||||
113 | ||||
113 | ||||
113 | ||||
126 | ||||
A-1 | ||||
Appendix BNuveen Asset Managements Proxy Voting Policies and Procedures |
B-1 | |||
C-1 |
4
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 (SSGA FM or 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, except that a Creation Unit of the SPDR NYSE Technology ETF consists of 25,000 Shares. A Creation Unit of each Fixed Income ETF consists of 100,000 Shares, except that a Creation Unit of the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF consists of 50,000 Shares, the SPDR Bloomberg Barclays Short Term High Yield Bond ETF consists of 300,000 Shares and SPDR Bloomberg Barclays High Yield Bond ETF consists of 500,000 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.
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 (RIC) for purposes of the Internal Revenue Code of 1986, as amended (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 objective.
5
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.
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.
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.
COMMON STOCK
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 stock is susceptible to general stock market fluctuation 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.
6
CONCENTRATION
Each Fund will concentrate its investments in securities of issuers in the same industry as may be necessary to approximate the composition of the Funds underlying Index. 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.
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, and since then total Gross National Product (GNP) has fallen more than 14%. As of August 2018, the islands unemployment rate was 9.1%, 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. High unemployment and weak job growth have contributed to historic outmigration of Puerto Rican residents, with more than 300,000 Puerto Ricans leaving for the mainland U.S. during the last decade. The Puerto Rican government estimates that an additional 14% of the population will leave by 2023, 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 became structurally unbalanced during the recession and, as a result, the government began relying on deficit financing for annual operations. This borrowing led to a tremendous debt burden, which is very high in comparison to that of most states. Further, Puerto Rico issues debt under many different securities, but many of the security pledges are ultimately dependent on the islands general fund, creating interdependency between credits.
In 2014, Puerto Ricos Governor, Alejandro Garcĺa Padilla, declared that Puerto Ricos debt is not payable and Puerto Rico would no longer borrow to address annual budget deficits. 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, which was struck down in federal court and ultimately by the Supreme Court on June 13, 2016.
On June 30, 2016, the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) was signed into law, aimed at helping Puerto Rico restructure its debt. Among other things, PROMESA established the Financial and Oversight Management Board (FOMB) to oversee Puerto Ricos financial operations and provide a legal framework for debt restructuring. In May 2017, the FOMB commenced a formal restructuring proceeding for Puerto Ricos general obligation debt, as well as for Puerto Rico Sales Tax Financing Corporation (COFINA) bonds secured by a dedicated portion of sales and use taxes. On July 2, 2017, the Puerto Rico Electric Power Authority (PREPA) filed for bankruptcy protections under PROMESA for its $9 billion in bond debt and on July 31, 2018 a partial settlement with a portion of the PREPA bondholders was announced outlining a possible restructuring of such debt.
As required by PROMESA, in March 2017 Puerto Rico submitted its first fiscal plan to the FOMB, and has continued to submit numerous updates for the FOMBs review. The fiscal plans are required to provide estimates of revenues and expenditures, ensure funding for essential public services, provide
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adequate funding pensions, eliminate any structural deficits, provide for a sustainable debt burden, and improve fiscal governance, accountability and internal controls. The fiscal plans also must include a debt sustainability analysis and provide for capital investments necessary to promote economic growth. The numerous revisions to the fiscal plans may demonstrate uncertainty with respect to investments in Puerto Rican bonds. In addition, audited financial statements for the 2016 fiscal year have yet to be released, which leads to difficulty in fully understanding the extent of Puerto Ricos financial distress.
As of August 2018, Puerto Rico had over $120 billion in outstanding debt and unfunded pension obligations. Securities issued by Puerto Rico and its agencies have been the subject of multiple credit downgrades and each rating agency has continued to maintain a negative outlook on certain Puerto Rico issuers.
In September 2017, Puerto Rico suffered an estimated $80 billion in damage from Hurricane Maria. This damage is predicted to cause a real decline to GNP of 7.4% in fiscal year 2018, which could further increase outmigration, cause potentially unsustainable operating conditions for the territorys manufacturers and lead to additional defaults on debt. In February 2018, the U.S. Congress approved a $16 billion aid package as part of a larger budget deal intended to promote Puerto Ricos recovery, and the latest fiscal plan projects that approximately $86.8 billion of disaster relief funding from public and private sources will be disbursed for the reconstruction effort. The extent to which these expectations are met and the timing for receipt of such assistance will greatly impact Puerto Ricos projected economic recovery.
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.
Such events could possibly lead to 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. 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.
During its government debt crisis in 2015, Greeces ability to repay its sovereign debt was in question and the possibility of default was not unlikely. As part of a bailout program implemented by the International Monetary Fund and EU member countries, Greece was required to satisfy certain conditions, including imposition of austerity measures on its population. In August 2018, Greece exited its bailout program and is now on track to finance itself on the international markets, although the austerity measures remain.
Although less likely since Greeces departure from the bailout program, it is still possible 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 impact of these actions, especially if they occur in a disorderly fashion, is not clear but could be significant and far-reaching.
CONVERTIBLE SECURITIES
Convertible securities are bonds, debentures, notes, preferred stock 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.
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Convertible securities generally have less potential for gain or loss than common stock. Convertible securities generally provide yields higher than the underlying common stock, 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 stock and interest rates. When the underlying common stock declines 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 stock rises 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 stock. 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.
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 Funds 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. While foreign currency transactions on a spot and forward basis are exempt from the definition of swap under the Commodity Exchange Act (CEA), NDFs are not, and, thus, are subject to the jurisdiction of the Commodity Futures Trading Commission (CFTC). 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. In the event that the parties to a forward contract agree to offset or terminate the contract before its maturity, the contract is no longer exempt from the definition of swap under the CEA and shall be treated as a swap. 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.
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 transactions (including NDFs, 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 CFTC regulation or interpretation.
Recent legislation calls for new regulation of the derivatives markets. The extent and impact of the regulation is not yet fully known and may not be for some time. New regulations could adversely affect the value, availability and performance of certain derivative instruments, may make them more costly, and may limit or restrict their use by the Funds.
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. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract originally was written. Although the value of an index might be a function of the value of certain specified securities, physical delivery of these securities is not always made. A public market exists in futures contracts covering a number of indexes, as well as financial instruments, including, without limitation: U.S. Treasury bonds; U.S. Treasury notes; GNMA Certificates; three-month U.S. Treasury bills; 90-day commercial paper; bank certificates of deposit; Eurodollar certificates of deposit; the Australian Dollar; the Canadian Dollar; the British Pound; the Japanese Yen; the Swiss Franc; the Mexican Peso; and certain multinational currencies, such as the Euro. It is expected that other futures contracts will be developed and traded in the future. Futures contracts are standardized as to maturity date and underlying instrument and are traded on futures exchanges.
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The Funds may purchase and write (sell) call and put options on futures. Options on futures give the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price upon expiration of, or at any time during the period of, the option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true.
A Fund is required to make a good faith margin deposit in cash or U.S. government securities (or other eligible collateral) 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 price changes, additional payments 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. Although some futures contracts call for making or taking delivery of the underlying commodity, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (involving the same exchange, underlying security or index and delivery month). If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs also must be included in these calculations.
Regulation Under the Commodity Exchange Act. Each Fund intends to use commodity interests, such as futures, swaps and options on futures in accordance with Rule 4.5 of the CEA. A Fund may use exchange-traded futures and options on futures, together with positions in cash and money market instruments, to simulate full investment in its underlying Index. Exchange-traded futures and options on futures 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 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 it is not subject to registration or regulation as a commodity pool operator under the CEA.
Restrictions on Trading in Commodity Interests. With respect to the Funds, the Trust has claimed an exclusion from registration as a commodity pool operator under the CEA pursuant to CFTC Rule 4.5 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, options thereon and swaps 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 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). 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).
Options. 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.
Short Sales Against the Box. The Funds may engage in short sales against the box. In a short sale against the box, a Fund agrees to sell at a future date a security that it either contemporaneously owns or has the right to acquire at no extra cost. If the price of the security has declined at the time the Fund is required to deliver the security, the Fund will benefit from the difference in the price. If the price of the security has increased, the Fund will be required to pay the difference.
Swap Transactions. Each Fund may enter into swap transactions, including interest rate swap, credit default swap, NDF, and total return swap transactions. Swap transactions 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
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payments to the first party based on the return of a different specified rate, index or asset. Swap transactions 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. Swaps may be used in conjunction with other instruments to offset interest rate, currency or other underlying risks. For example, interest rate swaps may be offset with caps, floors or collars. A cap is essentially a call option which places a limit on the amount of floating rate interest that must be paid on a certain principal amount. A floor is essentially a put option which places a limit on the minimum amount that would be paid on a certain principal amount. A collar is essentially a combination of a long cap and a short floor where the limits are set at different levels.
The use of swap transactions by a Fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. Swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with stocks, bonds, and other traditional investments. 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 the possible market conditions. Because some swap transactions have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain swaps have the potential for unlimited loss, regardless of the size of the initial investment.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) that was signed into law on July 21, 2010 created a new statutory framework that comprehensively regulated the over-the-counter (OTC) derivatives markets for the first time. Key Dodd-Frank Act provisions relating to OTC derivatives require rulemaking by the SEC and the CFTC, not all of which has been proposed or finalized as at the date of this SAI. Prior to the Dodd-Frank Act, the OTC derivatives markets were traditionally traded on a bilateral basis (so-called bilateral OTC transactions). Under the Dodd-Frank Act, certain OTC derivatives transactions are now required to be centrally cleared and traded on exchanges or electronic trading platforms called swap execution facilities (SEFs).
Bilateral OTC transactions differ from exchange-traded or cleared derivatives transactions in several respects. Bilateral OTC transactions are transacted directly with dealers and not with a clearing corporation. Without the availability of a clearing corporation, bilateral OTC transaction pricing is normally done by reference to information from market makers and/or available index data, which information is carefully monitored by the Adviser and verified in appropriate cases. As bilateral OTC transactions are entered into directly with a dealer, there is a risk of nonperformance by the dealer as a result of its insolvency or otherwise. Under recently-adopted regulations by the CFTC and federal banking regulators (Margin Rules), a Fund is required to post collateral (known as variation margin) to cover the mark-to-market exposure in respect of its uncleared swaps. The Margin Rules also mandate that collateral in the form of initial margin be posted to cover potential future exposure attributable to uncleared swap transactions. However, due to the compliance timeline within the Margin Rules, it is unlikely that the Funds will be required to comply with such initial margin requirements until March 1, 2020. In the event a Fund is required to post collateral in the form of initial margin or variation margin in respect of its uncleared swap transactions, all such collateral will be posted with a third party custodian pursuant to a triparty custody agreement between the Fund, its dealer counterparty and an unaffiliated custodian.
The requirement to execute certain OTC derivatives contracts on SEFs may offer certain advantages over traditional bilateral OTC trading, such as ease of execution, price transparency, increased liquidity and/or favorable pricing. However, SEF trading may make it more difficult and costly for a Fund to enter into highly tailored or customized transactions and may result in additional costs and risks. Market participants such as the Funds that execute derivatives contracts through a SEF, whether directly or through a broker intermediary, are required to submit to the jurisdiction of the SEF and comply with SEF and CFTC rules and regulations which impose, among other things disclosure and recordkeeping obligations. In addition, a Fund will generally incur SEF or broker intermediary fees when it trades on a SEF. A Fund may also be required to indemnify the SEF or broker intermediary for any losses or costs that may result from the Funds transactions on the SEF.
Total Return Swaps. A Fund may enter into total return swap transactions for investment purposes. Total return swaps are transactions in which one party agrees to make periodic payments based on the change in market value of the underlying assets, which may include a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swaps may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market, including in cases in which there may be disadvantages associated with direct ownership of a particular security. In a typical total return equity swap, payments made by a Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. By entering into an equity index swap, for example, the index receiver can gain exposure to stocks making up the index of securities without actually purchasing those stocks. Total return swaps involve not only the risk associated with the investment in the underlying securities, but also the risk of the counterparty not fulfilling its obligations under the agreement.
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Credit Default Swaps. A Fund may enter into credit default swap transactions for investment purposes. A credit default swap transaction may have as reference obligations one or more securities that are not currently held by the Fund. A Fund may be either the protection buyer or protection seller in the transaction. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors. As a protection seller, a Fund would generally receive an upfront payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the protection seller must pay the protection buyer the full face amount of the reference obligations that may have little or no value. The notional value of the credit default swap will be used to segregate liquid assets for selling protection on credit default swaps. If a Fund were a protection buyer and no credit event occurred during the term of the swap, the Fund would recover nothing if the swap were held through its termination date. However, if a credit event occurred, the protection buyer may elect to receive the full notional value of the swap in exchange for an equal face amount of the reference obligation that may have little or no value. Where a Fund is the protection buyer, credit default swaps involve the risk that the seller may fail to satisfy its payment obligations to the Fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce a Funds return. When a Fund buys credit default swaps it will segregate an amount at least equal to the amount of any accrued premium payment obligations including amounts for early terminations.
Currency Swaps. A Fund may enter into currency swap transactions for investment purposes. Currency swaps are similar to interest rate swaps, except that they involve multiple currencies. A Fund may enter into a currency swap when it has exposure to one currency and desires exposure to a different currency. Typically, the interest rates that determine the currency swap payments are fixed, although occasionally one or both parties may pay a floating rate of interest. Unlike an interest rate swap, however, the principal amounts are exchanged at the beginning of the contract and returned at the end of the contract. In addition to paying and receiving amounts at the beginning and end of the transaction, both sides will have to pay in full on a periodic basis based upon the currency they have borrowed. Change in foreign exchange rates and changes in interest rates, as described above, may negatively affect currency swaps.
Interest Rate Swaps. A Fund may enter into an interest rate swap in an effort to protect against declines in the value of fixed income securities held by the Fund. In such an instance, the Fund may agree to pay a fixed rate (multiplied by a notional amount) while a counterparty agrees to pay a floating rate (multiplied by the same notional amount). If interest rates rise, resulting in a diminution in the value of the Funds portfolio, the Fund would receive payments under the swap that would offset, in whole or in part, such diminution in value.
Options on Swaps. An option on a swap agreement, or a swaption, is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. In return, the purchaser pays a premium to the seller of the contract. The seller of the contract receives the premium and bears the risk of unfavorable changes on the underlying swap. A Fund may write (sell) and purchase put and call swaptions. A Fund may also enter into swaptions on either an asset-based or liability-based basis, depending on whether the Fund is hedging its assets or its liabilities. A Fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. A Fund may enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its holdings, as a duration management technique, to protect against an increase in the price of securities the Fund anticipates purchasing at a later date, or for any other purposes, such as for speculation to increase returns. Swaptions are generally subject to the same risks involved in a Funds use of options.
Depending on the terms of the particular option agreement, a Fund will generally incur a greater degree of risk when it writes a swaption than it will incur when it purchases a swaption. When a Fund purchases a swaption, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when a Fund writes a swaption, upon exercise of the option the Fund will become obligated according to the terms of the underlying agreement.
Certain additional risk factors related to derivatives are discussed below:
Derivatives Risk. Under recently adopted rules by the CFTC, transactions in some types of interest rate swaps and index credit default swaps on North American and European indices are required to be cleared. In addition, the CFTC may promulgate additional regulations that require clearing of other classes of swaps. In a cleared derivatives transaction (which includes commodities futures and cleared swaps transactions), a Funds counterparty is a clearing house (such as CME, ICE Clear Credit or LCH.Clearnet), rather than a bank or broker. Since each Fund is not a member of a clearing house and only members of a clearing house can participate directly in the clearing house, a Fund holds cleared derivatives through accounts at clearing members, who are futures commission merchants that are members of the clearing houses and who have the appropriate regulatory approvals to engage in cleared swap
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transactions. A Fund makes and receives payments owed under cleared derivatives transactions (including margin payments) through its accounts at clearing members. Clearing members guarantee performance of their clients obligations to the clearing house. In contrast to bilateral OTC transactions, clearing members generally can require termination of existing cleared derivatives transactions at any time and increases in margin above the margin that it required at the beginning of a transaction. Clearing houses also have broad rights to increase margin requirements for existing transactions and to terminate transactions. Any such increase or termination could interfere with the ability of a Fund to pursue its investment strategy. Also, a Fund is subject to execution risk if it enters into a derivatives transaction that is required to be cleared (or that the Advisor expects to be cleared), and no clearing member is willing or able to clear the transaction on the Funds behalf. While the documentation in place between a Fund and their clearing members generally provides that the clearing members will accept for clearing all transactions submitted for clearing that are within credit limits specified by the clearing members in advance, the Fund could be subject to this execution risk if the Fund submits for clearing transactions that exceed such credit limits, if the clearing house does not accept the transactions for clearing, or if the clearing members do not comply with their agreement to clear such transactions. In that case, the transaction might have to be terminated, and the Fund could lose some or all of the benefit of any increase in the value of the transaction after the time of the transaction. In addition, new 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 or increasing margin or capital requirements. If a Fund is not able to enter into a particular derivatives transaction, the Funds investment performance and risk profile could be adversely affected as a result.
Counterparty Risk. Counterparty risk with respect to OTC derivatives may be affected by new regulations promulgated by the CFTC and SEC affecting the derivatives market. As described under Derivatives Risk above, some derivatives transactions are required to be cleared, and a party to a cleared derivatives transaction is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared derivatives position, rather than the credit risk of its original counterparty to the derivative transaction. Clearing members are required to segregate all funds received from customers with respect to cleared derivatives transactions from the clearing members proprietary assets. However, all funds and other property received by a clearing broker from its customers are generally held by the clearing broker on a commingled basis in an omnibus account, which may also invest those funds in certain instruments permitted under the applicable regulations. Also, the clearing member transfers to the clearing house the amount of margin required by the clearing house for cleared derivatives transactions, which amounts are generally held in the relevant omnibus account at the clearing house for all customers of the clearing member.
For commodities futures positions, the clearing house may use all of the collateral held in the clearing members omnibus account to meet a loss in that account, without regard to which customer in fact supplied that collateral. Accordingly, in addition to bearing the credit risk of its clearing member, each customer to a futures transaction also bears fellow customer risk from other customers of the clearing member. However, with respect to cleared swaps positions, recent regulations promulgated by the CFTC require that the clearing member notify the clearing house of the amount of initial margin provided by the clearing member to the clearing house that is attributable to each customer. Because margin in respect of cleared swaps must be earmarked for specific clearing member customers, the clearing house may not use the collateral of one customer to cover the obligations of another customer. However, if the clearing member does not provide accurate reporting, a Fund is subject to the risk that a clearing house will use the Funds assets held in an omnibus account at the clearing house to satisfy payment obligations of a defaulting customer of the clearing member to the clearing house. In addition, clearing members may generally choose to provide to the clearing house the net amount of variation margin required for cleared swaps for all of its customers in the aggregate, rather than the gross amount for each customer.
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.
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.
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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.
INFLATION-PROTECTED OBLIGATIONS
Each Fund may invest in inflation-protected public obligations, commonly known as TIPS, of the U.S. Treasury, as well as TIPS of major governments and emerging market countries, excluding the United States. 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.
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.
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 40% of the value of its net assets. The borrowers provide collateral that is marked to market daily in an amount at least equal to the
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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, 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.
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.
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For the foregoing and other reasons, the SPDR Portfolio Aggregate Bond ETF and SPDR Bloomberg Barclays 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 SPDR Portfolio Aggregate Bond ETF and SPDR Bloomberg Barclays 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.
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 SPDR Nuveen Bloomberg Barclays Municipal Bond ETF, SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF and SPDR Nuveen S&P High Yield Municipal Bond ETF (the Municipal Bond ETFs), may have greater exposure to liquidity risk than a fund that
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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.
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
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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.
OTHER SHORT-TERM INSTRUMENTS
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 present minimal credit risk; 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. 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. Money market instruments also include shares of money market funds. The SEC and other government agencies continue to review the regulation of money market funds. The SEC has adopted changes to the rules that govern money market funds, and compliance with many of these amendments was required in October 2016. Legislative developments may also affect money market funds. These changes and developments may affect the investment strategies, performance, yield, operating expenses and continued viability of a money market fund.
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 the Fund would be unable to acquire securities paying comparable rates with the redemption proceeds.
RATINGS
An investment grade rating means the security or issuer is rated investment grade by Moodys, S&P, Fitch, Inc. (Fitch), 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 or Fitch 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
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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, or Appendix C for more information on the ratings of debt instruments.
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) to the extent they invest 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.
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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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).
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 percentage limit on 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.
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.
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), 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
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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. It is believed that the amendment puts Fannie Mae and Freddie Mac in a better position to service their debt because the companies no longer have to borrow from the U.S. Treasury to make fixed dividend payments. As part of the terms, Fannie Mae and Freddie Mac also will be required to reduce their investment portfolios at an annual rate of 15% instead of the previous 10%, which puts each of them on track to cut their portfolios to a targeted $250 billion in 2018.
Fannie Mae and Freddie Mac are the subject of several continuing class action lawsuits and investigations by federal regulators over certain accounting, disclosure or corporate governance matters, which (along with any resulting financial restatements) may adversely affect the guaranteeing entities. Importantly, the future of the entities is in serious question as the U.S. government reportedly is considering multiple options, ranging from nationalization, privatization, consolidation, or abolishment of the entities.
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.
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 markets, 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. A 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.
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) states, municipalities and other political subdivisions, agencies, authorities and instrumentalities or states and multi-state agencies or authorities (3) corporations, (4) financial institutions, (5) insurance companies or (6) 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
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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.
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.
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 stock incur more risk than holders of preferred stock 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 stock 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 stock which typically has a liquidation preference and which may have stated optional or mandatory redemption provisions, common stock has 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.
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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(a)(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.
COUNTERPARTY RISK
Counterparty risk with respect to derivatives has been and may continue to be affected by new rules and regulations affecting the derivatives market. Some derivatives transactions are required to be centrally cleared, and a party to a cleared derivatives transaction is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared position, rather than the credit risk of its original counterparty to the derivatives transaction. Credit risk of market participants with respect to derivatives that are centrally cleared is concentrated in a few clearing houses, and it is not clear how an insolvency proceeding of a clearing house would be conducted, what effect the insolvency proceeding would have on any recovery by a Fund, and what impact an insolvency of a clearing house would have on the financial system more generally.
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
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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 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 FM 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
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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 Shares.
ADDITIONAL STRATEGY INFORMATION
For purposes of the SPDR Portfolio Mid Cap ETF, the Adviser considers mid-capitalization securities to be those issued by companies with market capitalizations within the mid-cap range as determined by Morningstar Category Classifications, which currently generally ranges from $1 billion to $8 billion.
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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 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 Municipal Bond ETFs, invest, under normal circumstances, less than 80% of its assets, plus the amount of borrowings for investment purposes, in investments the income of which is exempt from federal 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. |
4. |
With respect to the SPDR Bloomberg Barclays High Yield Bond ETF and SPDR Bloomberg Barclays Short Term 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. |
5. |
With respect to the SPDR Portfolio Aggregate Bond ETF, SPDR Portfolio Short Term Corporate Bond ETF, SPDR Portfolio Intermediate Term Corporate Bond ETF, SPDR Portfolio Long Term Corporate Bond ETF, SPDR Bloomberg Barclays Corporate Bond ETF, SPDR ICE BofAML Crossover Corporate Bond ETF, SPDR FTSE International Government Inflation-Protected Bond ETF, SPDR Bloomberg 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. |
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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6. |
With respect to the SPDR Bloomberg 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 Portfolio Short Term Treasury ETF, SPDR Bloomberg Barclays Intermediate Term Treasury ETF and SPDR Portfolio 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 the SPDR Bloomberg Barclays International Treasury Bond ETF and SPDR Bloomberg Barclays Short Term 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 SPDR Bloomberg Barclays TIPS ETF and SPDR Bloomberg Barclays 1-10 Year TIPS ETF, 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 SPDR Bloomberg Barclays 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 SPDR Bloomberg Barclays 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 SPDR Bloomberg 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. |
13. |
With respect to the SPDR Bloomberg Barclays International Corporate Bond ETF, SPDR Portfolio Short Term Corporate Bond ETF, SPDR Portfolio Intermediate Term Corporate Bond ETF, SPDR Portfolio Long Term Corporate Bond ETF, SPDR Bloomberg Barclays Corporate Bond ETF and SPDR ICE BofAML Crossover 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. |
14. |
With respect to SPDR Global Dow ETF and SPDR Portfolio Short Term 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. |
15. |
With respect to the SPDR S&P 500 Fossil Fuel Reserves Free ETF, under normal circumstances invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in securities of companies that do not own fossil fuel reserves. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
16. |
With respect to the SPDR S&P Technology Hardware ETF, under normal circumstances invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in securities of technology hardware companies. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
17. |
With respect to the SPDR S&P Internet ETF, under normal circumstances invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in securities of internet companies. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice. |
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.
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The 1940 Act currently permits each Fund to loan up to 33 1/3% of its total assets. With respect to borrowing, the 1940 Act presently allows each Fund to: (1) borrow from any bank (including pledging, mortgaging or hypothecating assets) in an amount up to 33 1/3% of its total assets, (2) borrow money for temporary purposes in an amount not exceeding 5% of the value of the Funds total assets at the time of the loan, and (3) enter into reverse repurchase agreements. However, under normal circumstances any borrowings by a Fund will not exceed 10% of the Funds total assets. The 1940 Act generally prohibits funds from issuing senior securities, although it does not 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 CEA 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 Funds will not purchase or sell real estate, except that a 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.
Shares are approved for listing and trading on the Exchange, subject to notice of issuance. 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 consider the suspension of trading in, and may initiate delisting proceedings of, the Shares of a Fund under any of the following circumstances: (i) if any of the continued listing requirements set forth in the Exchange rules are not continuously maintained; (ii) if the Exchange files separate proposals under Section 19(b) of the Securities Exchange Act of 1934, as amended, and any of the statements or representations regarding (a) the description of the Index, portfolio, or reference asset; (b) limitations on the Index or the Funds portfolio holdings or reference assets; or (c) the applicability of the Exchange listing rules specified in such proposals are not continuously maintained; (iii) if following the initial 12-month period beginning at the commencement of trading of the Fund, there are fewer than 50 record or beneficial owners of the Shares of the Fund; (iv) if the value of the Funds underlying index or portfolio of securities on which the Fund is based is no longer calculated or available; or (v) such other event shall occur or condition shall exist that, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. If the Intraday Indicative Value of a Fund is not being disseminated as required by Exchange rules, the Exchange may halt trading during the day in which such interruption occurs. If the interruption persists past the trading day in which it occurred, the Exchange will halt trading in the Fund Shares. The Exchange will remove the Shares from listing and trading upon termination of a Fund. The Trust reserves the right to adjust the Fund 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 a 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.
The following information supplements and should be read in conjunction with the section in the Prospectus entitled MANAGEMENT.
28
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 Investment 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 Funds, 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 a Funds Adviser, Sub-
29
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 seven members of the Board of Trustees, six 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 One Iron Street Boston, MA 02210 1943 |
Independent Trustee, Chairman, Trustee Committee Chair | Term: Unlimited Served: since September 2000 | Retired. | 125 | None. | |||||||
BONNY EUGENIA BOATMAN c/o SPDR Series Trust One Iron Street Boston, MA 02210 1950 |
Independent Trustee | Term: Unlimited Served: since April 2010 | Retired. | 125 | None. | |||||||
DWIGHT D. CHURCHILL c/o SPDR Series Trust One Iron Street Boston, MA 02210 1953 |
Independent Trustee | Term: Unlimited Served: since April 2010 | Self-employed consultant since 2010; CEO and President, CFA Institute (June 2014 - January 2015). | 125 | Affiliated Managers Group, Inc. (Director). | |||||||
CARL G. VERBONCOEUR c/o SPDR Series Trust One Iron Street Boston, MA 02210 1952 |
Independent Trustee, Audit Committee Chair |
Term: Unlimited Served: since April 2010 | Self-employed consultant since 2009. | 125 | The Motley Fool Funds Trust (Trustee). |
30
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 |
|||||
CLARE S. RICHER c/o SPDR Series Trust One Iron Street Boston, MA 02210 1958 |
Independent Trustee | Term: Unlimited Served: since July 2018 | Chief Financial Officer, Putnam Investments LLC (December 2008 May 2017). | 125 | Putnam Acquisition Financing Inc. (Director); Putnam Acquisition Financing LLC (Director); Putnam GP Inc. (Director); Putnam Investor Services, Inc. (Director); Putnam Investments Limited (Director); University of Notre Dame (Trustee). | |||||
SANDRA G. SPONEM c/o SPDR Series Trust One Iron Street Boston, MA 02210 1958 |
Independent Trustee | Term: Unlimited Served: since July 2018 | Chief Financial Officer, M.A. Mortenson Companies, Inc. (February 2007 April 2017). | 125 | Guggenheim / Rydex Funds (Trustee). | |||||
INTERESTED TRUSTEE | ||||||||||
JAMES E. ROSS* SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1965 |
Interested Trustee | Term: Unlimited Served as Trustee: since April 2010 | Chairman and Director, SSGA Funds Management, Inc. (2005-present); Executive Vice President, State Street Global Advisors (2012-present); Chief Executive Officer and Director, State Street Global Advisors Funds Distributors, LLC (May 2017 present); Director, State Street Global Markets, LLC (2013 - April 2017); President, SSGA Funds Management, Inc. (2005 - 2012); Principal, State Street Global Advisors (2000 - 2005). | 196 | SSGA SPDR ETFs Europe I plc (Director) (November 2016 - present); SSGA SPDR ETFs Europe II plc (Director) (November 2016 - present). |
|
For the purpose of determining the number of portfolios overseen by the Trustees, Fund Complex comprises registered investment companies for which SSGA Funds Management, Inc. serves as investment adviser. |
* |
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. One Iron Street Boston, MA 02210 1967 |
President | Term: Unlimited Served: since October 2012 | President and Director, SSGA Funds Management, Inc. (2001 - present)*; Senior Managing Director, State Street Global Advisors (1992 - present)*; Director, State Street Global Advisors Funds Distributors, LLC (May 2017 - present). | |||
BRUCE S. ROSENBERG SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1961 |
Treasurer | Term: Unlimited Served: since February 2016 | Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (July 2015 - present); Director, Credit Suisse (April 2008 - July 2015). | |||
ANN M. CARPENTER SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1966 |
Vice President;
Deputy Treasurer |
Term: Unlimited Served: since August 2012 (with respect to Vice President); Unlimited Served: since February 2016 (with respect to Deputy Treasurer) | Chief Operating Officer, SSGA Funds Management, Inc. (2005 - Present)*; Managing Director, State Street Global Advisors (2005 - present).* | |||
MICHAEL P. RILEY SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1969 |
Vice President | Term: Unlimited Served: since February 2005 | Managing Director, State Street Global Advisors (2005 - present).* | |||
JOSHUA A. WEINBERG SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1978 |
Chief Legal
Officer |
Term: Unlimited Served: since February 2015 | Managing Director and Managing Counsel, State Street Global Advisors (2011 - present); Clerk, SSGA Funds Management, Inc. (2013 - present); Associate, Financial Services Group, Dechert LLP (2006 - 2011). | |||
JESSE D. HALLEE State Street Bank and Trust Company 100 Summer Street, SUM0703 Boston, MA 02111 1976 |
Secretary | Term: Unlimited Served: since August 2017 | Vice President and Senior Counsel, State Street Bank and Trust Company (2013 - present); Vice President and Counsel, Brown Brothers Harriman & Co. (2007 - 2013).** | |||
ESTEFANIA SALOMON State Street Bank and Trust Company 100 Summer Street, SUM0703 Boston, MA 02111 1983 |
Assistant
Secretary |
Term: Unlimited Served: since May 2018 | Assistant Vice President and Associate Counsel, State Street Bank and Trust Company (2018 present); Senior Compliance Consultant, AdvisorAssist, LLC (2017); Attorney, Commonwealth of Massachusetts, Securities Division (2014-2017). |
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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 |
|||
CHAD C. HALLETT SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1969 |
Deputy Treasurer | Term: Unlimited Served: since February 2016 | 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).* | |||
DARLENE ANDERSON-VASQUEZ SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1968 |
Deputy Treasurer | Term: Unlimited Served: since November 2016 | Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (May 2016 - present); Senior Vice President, John Hancock Investments (September 2007 - May 2016). | |||
ARTHUR A. JENSEN SSGA Funds Management, Inc. 1600 Summer Street Stamford, CT 06905 1966 |
Deputy Treasurer | Term: Unlimited Served: since August 2017 | Vice President at State Street Global Advisors (July 2016 present); Deputy Treasurer of Elfun Funds (July 2016 present); Treasurer of State Street Institutional Funds, State Street Variable Insurance Series Funds, Inc. and GE Retirement Savings Plan Funds (June 2011 present); Treasurer of Elfun Funds (June 2011 - July 2016); Mutual Funds Controller of GE Asset Management Incorporated (April 2011 - July 2016); Senior Vice President at Citigroup (2008 2010); Vice President at JPMorgan (2005 2008). | |||
DANIEL FOLEY SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1972 |
Assistant Treasurer | Term: Unlimited Served: since February 2016 | Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (April 2007 - present).* | |||
DANIEL G. PLOURDE SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1980 |
Assistant Treasurer | Term: Unlimited Served: since May 2017 | Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (May 2015 - present); Officer, State Street Bank and Trust Company (March 2009 - May 2015). | |||
SUJATA UPRETI SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1974 |
Assistant Treasurer | Term: Unlimited Served: since February 2016 | Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (May 2015 - present); Assistant Director, Cambridge Associates, LLC (July 2014 - January 2015); Vice President, Bank of New York Mellon (July 2012 - August 2013); Manager, PricewaterhouseCoopers, LLP (September 2003 - July 2012). |
33
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. One Iron Street Boston, MA 02210 1973 |
Chief Compliance
Officer; Anti- Money Laundering Officer; Code of Ethics Compliance Officer |
Term: Unlimited Served: since November 2013 | Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (June 2013 - present)*; Senior Vice President and Global Head of Investment Compliance, BofA Global Capital Management (2010 - 2013). |
* |
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 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 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 Ms. Richer should serve as Trustee because of the experience she gained serving as the Chief Financial Officer of a large financial services and investment management company, her knowledge of the financial services industry and her experience serving on the board of a major educational institution. Ms. Richer was appointed to serve as Trustee of the Trust in July 2018.
The Board has concluded that Ms. Sponem should serve as Trustee because of the experience she gained serving as the Chief Financial Officer of a large financial services company, her knowledge of the financial services industry and her experience serving on the board of another investment company. Ms. Sponem was appointed to serve as Trustee of the Trust in July 2018.
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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).
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 $245,000 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 $60,000 and the Chairman of the Audit Committee receives an additional annual fee of $30,000. Prior to July 1, 2018, each Independent Trustee received an annual fee of $230,000 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, 2018.
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 |
$ | 253,195 | N/A | N/A | $ | 345,000 | ||||||||||
Bonny Boatman |
$ | 216,478 | N/A | N/A | $ | 295,000 | ||||||||||
Dwight Churchill |
$ | 216,478 | N/A | N/A | $ | 295,000 | ||||||||||
David Kelly (2) |
$ | 190,763 | N/A | N/A | $ | 260,000 | ||||||||||
Clare Richer (3) |
$ | N/A | N/A | N/A | $ | N/A | ||||||||||
Sandra Sponem (3) |
$ | N/A | N/A | N/A | $ | N/A | ||||||||||
Carl Verboncoeur |
$ | 231,165 | N/A | N/A | $ | 315,000 |
(1) |
The Fund Complex includes the Trust. |
(2) |
Effective August 22, 2018, Mr. Kelly resigned from his position as Trustee and no longer serves as a trustee to the Trust. |
(3) |
Trustee was appointed to the Board as of July 1, 2018, and therefore did not receive any compensation from the Fund Complex for the fiscal year ended June 30, 2018. |
STANDING COMMITTEES
Audit Committee. The Board has an Audit Committee consisting of all Independent Trustees. Mr. Verboncoeur 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, 2018.
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) select any independent counsel of the independent trustees as well as make determinations as to that counsels independence; 5) review matters that are referred to the Committee by the Chief Legal Officer or other counsel to the Trust; and 6) 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, 2018.
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OWNERSHIP OF FUND SHARES
As of December 31, 2017, 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 directly or indirectly controlling, controlled by, or under common control with the Adviser, Sub-Adviser or Principal Underwriter, except as noted below:
Name of Trustee |
Relationship |
Company |
Title of Class | Value of Securities | Percent of Class | |||||||||
Clare S. Richer |
Self | State Street Corporation, parent company of the Adviser and Distributor | Common | $ | 38,134 | <1 | % |
The following table shows, as of December 31, 2017, 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 | |||
Bonny Eugenia Boatman |
None | None | None | |||
Dwight D. Churchill |
SPDR Nuveen S&P High Yield Municipal Bond ETF | Over $100,000 | Over $100,000 | |||
Clare Richer |
None | None | None | |||
Sandra Sponem |
SPDR Bloomberg Barclays High Yield Bond ETF | $50,001-$100,000 | $50,000-$100,000 | |||
Carl G. Verboncoeur |
SPDR S&P Dividend ETF | $10,001 - $50,000 | $10,001 - $50,000 | |||
SPDR S&P 600 Small Cap Value ETF | $10,001 - $50,000 | |||||
Interested Trustee: |
||||||
James E. Ross |
SPDR Portfolio Large Cap | Over $100,000 | Over $100,000 | |||
SPDR S&P Biotech ETF | $10,001 - $50,000 | |||||
SPDR S&P Dividend ETF | $10,001 - $50,000 | |||||
SPDR Portfolio Small Cap ETF | $10,001 - $50,000 | |||||
SPDR Portfolio Mid Cap ETF | $10,001 - $50,000 | |||||
SPDR Dow Jones REIT ETF | $10,001 - $50,000 | |||||
SPDR S&P 400 Mid Cap Growth ETF | $10,001 - $50,000 | |||||
SPDR Nuveen S&P High Yield Municipal Bond ETF | 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 under Rule 17j-1 of the 1940 Act, 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 https://www.sec.gov.
36
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 Bond ETFs, which are sub-advised by Nuveen Asset Management, LLC (Nuveen Asset Management), and the SPDR Bloomberg Barclays International Corporate Bond ETF and SPDR Bloomberg 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 https://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, 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 seek to maximize the value of the existing holdings, prevent the credit deterioration or facilitate the liquidation or other workout of the distressed issuers credit problem. In the course of these activities, 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, as amended.
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 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 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 information may be made available prior to its public availability: (i) to a party for a legitimate business purpose related to the day-to-day operations of the Funds including (a) a service provider, (b) the stock exchanges upon which an ETF is listed, (c) the NSCC, (d) the Depository Trust Company, and (e) financial data/research companies such as Morningstar, Bloomberg L.P., and Reuters, or (ii) to any other party for a legitimate business or regulatory purpose, upon waiver or exception, with the consent of an applicable Trust officer.
THE INVESTMENT ADVISER
SSGA FM acts as investment adviser to the Trust and, subject to the oversight of the Board, is responsible for the investment management of each Fund. As of June 30, 2018, the Adviser managed approximately $500.45 billion in assets. The Advisers principal address is One Iron Street, Boston, Massachusetts 02210. The Adviser, a Massachusetts corporation, is a wholly-owned subsidiary of State Street Global Advisors, Inc., which is itself a wholly-owned subsidiary of State Street Corporation, a publicly held financial 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
37
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 oversight 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, 2018.
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. The Adviser pays all expenses of each Fund other than the management fee, 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 |
FISCAL YEAR
ENDED JUNE 30, 2018 |
FISCAL YEAR
ENDED JUNE 30, 2017 |
FISCAL YEAR
ENDED JUNE 30, 2016 |
|||||||||
SPDR Russell 1000 Yield Focus ETF (1) |
$ | 804,344 | $ | 770,325 | $ | 387,938 | ||||||
SPDR Russell 1000 Momentum Focus ETF (1) |
$ | 1,083,435 | $ | 812,777 | $ | 379,864 | ||||||
SPDR Russell 1000 Low Volatility Focus ETF (1) |
$ | 906,702 | $ | 826,631 | $ | 399,430 | ||||||
SPDR S&P 500 Buyback ETF |
$ | 43,531 | $ | 27,773 | $ | 36,967 | ||||||
SPDR Portfolio S&P 500 Growth ETF |
$ | 885,816 | $ | 1,091,853 | $ | 918,162 | ||||||
SPDR Portfolio S&P 500 Value ETF |
$ | 430,277 | $ | 464,797 | $ | 336,824 | ||||||
SPDR Portfolio S&P 500 High Dividend ETF (2) |
$ | 260,990 | $ | 112,198 | $ | 9,918 | ||||||
SPDR S&P 500 Fossil Fuel Reserves Free ETF (3) |
$ | 550,795 | $ | 296,860 | $ | 94,787 | ||||||
SPDR Portfolio Mid Cap ETF |
$ | 236,621 | $ | 145,378 | $ | 73,727 | ||||||
SPDR S&P 400 Mid Cap Growth ETF |
$ | 1,550,163 | $ | 719,585 | $ | 438,591 | ||||||
SPDR S&P 400 Mid Cap Value ETF |
$ | 1,067,022 | $ | 472,479 | $ | 231,428 | ||||||
SPDR S&P 600 Small Cap ETF |
$ | 1,292,443 | $ | 940,692 | $ | 607,910 | ||||||
SPDR S&P 600 Small Cap Growth ETF |
$ | 2,063,671 | $ | 1,540,725 | $ | 906,528 | ||||||
SPDR S&P 600 Small Cap Value ETF |
$ | 1,705,859 | $ | 1,222,769 | $ | 620,796 | ||||||
SPDR Global Dow ETF (4) |
$ | 467,945 | $ | 422,673 | $ | 474,970 | ||||||
SPDR Dow Jones REIT ETF |
$ | 6,684,794 | $ | 8,482,929 | $ | 7,995,955 | ||||||
SPDR S&P Bank ETF |
$ | 13,391,452 | $ | 10,030,790 | $ | 9,102,570 | ||||||
SPDR S&P Capital Markets ETF |
$ | 479,096 | $ | 298,223 | $ | 387,768 | ||||||
SPDR S&P Insurance ETF |
$ | 2,957,259 | $ | 2,853,108 | $ | 1,809,367 | ||||||
SPDR S&P Regional Banking ETF |
$ | 15,218,198 | $ | 10,411,394 | $ | 7,832,663 | ||||||
SPDR NYSE Technology ETF |
$ | 3,029,645 | $ | 2,099,497 | $ | 1,589,193 |
38
FUND |
FISCAL YEAR
ENDED JUNE 30, 2018 |
FISCAL YEAR
ENDED JUNE 30, 2017 |
FISCAL YEAR
ENDED JUNE 30, 2016 |
|||||||||
SPDR S&P Dividend ETF |
$ | 55,156,768 | $ | 52,345,043 | $ | 44,739,155 | ||||||
SPDR S&P Aerospace & Defense ETF |
$ | 3,785,360 | $ | 1,403,409 | $ | 529,236 | ||||||
SPDR S&P Biotech ETF |
$ | 15,597,612 | $ | 9,526,978 | $ | 7,379,944 | ||||||
SPDR S&P Health Care Equipment ETF |
$ | 749,676 | $ | 306,270 | $ | 169,322 | ||||||
SPDR S&P Health Care Services ETF |
$ | 334,694 | $ | 464,904 | $ | 758,485 | ||||||
SPDR S&P Homebuilders ETF |
$ | 3,494,977 | $ | 3,862,148 | $ | 5,874,314 | ||||||
SPDR S&P Internet ETF (5) |
$ | 21,602 | $ | 16,322 | $ | 146 | ||||||
SPDR S&P Metals & Mining ETF |
$ | 2,983,848 | $ | 2,840,227 | $ | 1,219,209 | ||||||
SPDR S&P Oil & Gas Equipment & Services ETF |
$ | 1,180,987 | $ | 984,138 | $ | 682,411 | ||||||
SPDR S&P Oil & Gas Exploration & Production ETF |
$ | 8,537,605 | $ | 7,186,916 | $ | 5,874,988 | ||||||
SPDR S&P Pharmaceuticals ETF |
$ | 1,377,399 | $ | 1,685,345 | $ | 2,462,210 | ||||||
SPDR S&P Retail ETF |
$ | 1,482,838 | $ | 1,782,342 | $ | 2,643,005 | ||||||
SPDR S&P Semiconductor ETF |
$ | 1,158,100 | $ | 967,737 | $ | 615,094 | ||||||
SPDR S&P Software Services ETF |
$ | 218,016 | $ | 184,704 | $ | 171,468 | ||||||
SPDR S&P Technology Hardware ETF (5) |
$ | 13,353 | $ | 17,199 | $ | 146 | ||||||
SPDR S&P Telecom ETF |
$ | 313,851 | $ | 187,465 | $ | 99,614 | ||||||
SPDR S&P Transportation ETF |
$ | 736,013 | $ | 758,218 | $ | 822,905 | ||||||
SPDR S&P 1500 Value Tilt ETF |
$ | 15,864 | $ | 7,994 | $ | 7,150 | ||||||
SPDR S&P 1500 Momentum Tilt ETF |
$ | 29,166 | $ | 20,478 | $ | 18,823 | ||||||
SPDR Wells Fargo Preferred Stock ETF |
$ | 2,464,879 | $ | 2,401,089 | $ | 1,727,583 | ||||||
SPDR MSCI USA StrategicFactors ETF |
$ | 119,136 | $ | 27,571 | $ | 7,622 | ||||||
SPDR FactSet Innovative Technology ETF (6) |
$ | 50,105 | $ | 43,108 | $ | 10,742 | ||||||
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF |
$ | 3,139,830 | $ | 2,240,899 | $ | 3,125,392 | ||||||
SPDR Bloomberg Barclays TIPS ETF |
$ | 1,621,686 | $ | 1,227,190 | $ | 974,668 | ||||||
SPDR Bloomberg Barclays 1-10 Year TIPS ETF |
$ | 268,895 | $ | 112,545 | $ | 31,479 | ||||||
SPDR Portfolio Short Term Treasury ETF |
$ | 159,596 | $ | 145,799 | $ | 72,429 | ||||||
SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
$ | 649,184 | $ | 480,602 | $ | 459,205 | ||||||
SPDR Portfolio Long Term Treasury ETF |
$ | 492,616 | $ | 485,764 | $ | 354,576 | ||||||
SPDR Portfolio Short Term Corporate Bond ETF (7) |
$ | 2,927,734 | $ | 4,097,554 | $ | 5,082,528 | ||||||
SPDR Portfolio Intermediate Term Corporate Bond ETF |
$ | 2,255,514 | $ | 2,015,670 | $ | 1,234,736 | ||||||
SPDR Portfolio Long Term Corporate Bond ETF |
$ | 232,530 | $ | 243,942 | $ | 218,898 | ||||||
SPDR Bloomberg Barclays Corporate Bond ETF |
$ | 34,131 | $ | 46,543 | $ | 40,984 | ||||||
SPDR Bloomberg Barclays Convertible Securities ETF |
$ | 16,698,852 | $ | 12,378,236 | $ | 10,103,078 | ||||||
SPDR Bloomberg Barclays Mortgage Backed
Bond
|
$ | 410,364 | $ | 606,746 | $ | 352,666 | ||||||
SPDR Portfolio Aggregate Bond ETF (9) |
$ | 840,724 | $ | 970,399 | $ | 903,168 | ||||||
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF (10) |
$ | 7,662,297 | $ | 6,227,896 | $ | 4,865,442 | ||||||
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
$ | 7,182,123 | $ | 6,499,090 | $ | 5,534,905 | ||||||
SPDR Nuveen S&P High Yield Municipal Bond ETF (11) |
$ | 2,738,754 | $ | 2,682,871 | $ | 2,004,859 | ||||||
SPDR FTSE International Government Inflation-Protected Bond ETF |
$ | 2,752,446 | $ | 2,745,232 | $ | 3,228,104 | ||||||
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF |
$ | 853,292 | $ | 635,441 | $ | 702,226 | ||||||
SPDR Bloomberg Barclays International Treasury Bond ETF |
$ | 8,071,734 | $ | 7,434,721 | $ | 7,592,536 | ||||||
SPDR Bloomberg Barclays International Corporate Bond ETF |
$ | 1,171,655 | $ | 748,510 | $ | 781,381 | ||||||
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF (12) |
$ | 1,736,088 | $ | 721,657 | $ | 417,532 | ||||||
SPDR Bloomberg Barclays High Yield Bond ETF |
$ | 44,673,717 | $ | 47,185,386 | $ | 42,736,212 | ||||||
SPDR Bloomberg Barclays Short Term High Yield Bond ETF |
$ | 16,635,585 | $ | 14,254,376 | $ | 12,607,243 | ||||||
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
$ | 2,862,199 | $ | 1,231,142 | $ | 642,378 | ||||||
SPDR ICE BofAML Crossover Corporate Bond ETF (13) |
$ | 226,429 | $ | 156,153 | $ | 144,312 |
(1) |
The Fund commenced operations on December 3, 2015. |
39
(2) |
The Fund commenced operations on October 22, 2015. |
(3) |
The Fund commenced operations on December 1, 2015. For the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016, the Adviser reimbursed the Fund in the amounts of $110, 159, $59,372 and $18,957, respectively. |
(4) |
For the fiscal year ended June 30, 2016 the Adviser reimbursed the Fund in the amount of $116. |
(5) |
The Fund commenced operations on June 28, 2016. |
(6) |
The Fund commenced operations on January 14, 2016. |
(7) |
For the fiscal years ended June 30, 2017 and June 30, 2016 the Adviser reimbursed the Fund in the amounts of $9,118 and $27,634, respectively. |
(8) |
For the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016, the Adviser reimbursed the Fund in the amounts of $21,891, $60,848 and $70,534, respectively. |
(9) |
For the fiscal years ended June 30, 2017 and June 30, 2016 the Adviser reimbursed the Fund in the amounts of $333 and $112,898, respectively. |
(10) |
For the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016, the Adviser reimbursed the Fund in the amounts of $1,842,027, $1,485,747 and $1,167,823, respectively. |
(11) |
For the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016, the Adviser reimbursed the Fund in the amounts of $287,823, $276,519 and $208,784, respectively. |
(12) |
For the fiscal year ended June 30, 2017 the Adviser reimbursed the Fund in the amount of $19,675. |
(13) |
For the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016, the Adviser reimbursed the Fund in the amounts of $59,334, $39,482 and $37,025, respectively. |
From time to time, the Adviser may waive all or a portion of its fee. The Adviser has contractually agreed to waive a portion of 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) for each Fund until October 31, 2019. Additionally, for certain Funds the Adviser has contractually agreed to waive a portion of its management fee and/or reimburse certain expenses, until October 31, 2019, so that the net annual Fund operating expenses, before application of any fees and expenses not paid by the Adviser pursuant to the Investment Advisory Agreement, if any, are limited to a percentage of a Funds average daily net assets, as indicated in the table below. Each contractual fee waiver and/or reimbursement does not provide for the recoupment by the Adviser of any fees the Adviser previously waived. The Adviser may continue each waiver and/or reimbursement from year to year, but there is no guarantee that the Adviser will do so and each waiver and/or reimbursement may be cancelled or modified at any time after October 31, 2019. Each waiver and/or reimbursement may not be terminated prior to October 31, 2018 except with the approval of the Funds Board of Trustees.
Fund |
Expense Limitation
(as a % of average daily net assets) |
|||
SPDR S&P Fossil Fuel Reserves Free ETF |
0.20 | % | ||
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF |
0.23 | % | ||
SPDR ICE BofAML Crossover Corporate Bond ETF |
0.30 | % |
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
40
investment management services to a broad range of mutual fund clients and has extensive experience in managing municipal securities. As of June 30, 2018, Nuveen Asset Management managed approximately $179 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, LLC (Nuveen).
Nuveen is the asset management division of Teachers Insurance and Annuity Association of America (TIAA). TIAA is a leading financial services provider that provides a wide range of financial solutions, including investing, banking, advice and education, and retirement services. TIAA was originally founded in 1918 by the Carnegie Foundation for the Advancement of Teaching.
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 |
2018 | 2017 | 2016 | |||||||||
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF |
$ | 2,010,608 | $ | 1,562,945 | $ | 1,664,541 | ||||||
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
$ | 2,535,230 | $ | 2,094,043 | $ | 1,141,838 | ||||||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
$ | 950,780 | $ | 933,901 | $ | 669,513 |
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, 2018.
INVESTMENT SUB-ADVISERSPDR Bloomberg Barclays International Corporate Bond ETF and SPDR Bloomberg 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 SPDR Bloomberg Barclays International Corporate Bond ETF and SPDR Bloomberg 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 SPDR Bloomberg Barclays International Corporate Bond ETF and SPDR Bloomberg 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, 2018, SSGA LTD managed approximately $362.10 billion in assets. SSGA LTDs principal business address is 20 Churchill Place, Canary Wharf, London E14 5HJ, United Kingdom.
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 SPDR Bloomberg Barclays International Corporate Bond ETF and SPDR Bloomberg 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* |
2018 | 2017 | 2016 | |||||||||
SPDR Bloomberg Barclays International Corporate Bond ETF |
$ | 288,147 | $ | 192,157 | $ | 212,686 | ||||||
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF |
$ | 495,173 | $ | 128,354 | $ | 74,415 |
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, 2018.
41
PORTFOLIO MANAGERS
The Adviser manages the Funds, Nuveen Asset Management manages the Municipal Bond ETFs, and SSGA LTD manages the SPDR Bloomberg Barclays International Corporate Bond ETF and SPDR Bloomberg 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:
Portfolio Management Team |
Fund |
|
Michael Feehily, Karl Schneider and Amy Cheng | SPDR S&P Technology Hardware ETF | |
Michael Feehily, Karl Schneider and David Chin |
SPDR S&P 600 Small Cap Growth ETF SPDR S&P 600 Small Cap Value ETF |
|
Michael Feehily, Karl Schneider and John Law |
SPDR Russell 1000 Yield Focus ETF SPDR S&P 1500 Momentum Tilt ETF SPDR S&P 1500 Value Tilt ETF SPDR Portfolio S&P 500 High Dividend ETF SPDR MSCI USA StrategicFactors ETF |
|
Michael Feehily, Karl Schneider and Raymond Donofrio |
SPDR S&P Homebuilders ETF SPDR S&P Biotech ETF SPDR S&P Metals & Mining ETF SPDR S&P Insurance ETF SPDR S&P Internet ETF SPDR S&P Health Care Services ETF |
|
Michael Feehily, Karl Schneider and Michael Finocchi |
SPDR S&P Telecom ETF SPDR S&P Transportation ETF SPDR FactSet Innovative Technology ETF |
|
Michael Feehily, Karl Schneider and Payal Gupta | SPDR S&P Regional Banking ETF | |
Michael Feehily, Karl Schneider and Ted Janowsky | SPDR S&P Retail ETF | |
Michael Feehily, Karl Schneider and Melissa Kapitulik |
SPDR S&P Software & Services ETF SPDR S&P Oil & Gas Equipment & Services ETF SPDR S&P Bank ETF |
|
Michael Feehily, Karl Schneider and Mark Krivitsky |
SPDR Portfolio S&P 500 Value ETF SPDR Portfolio S&P 500 Growth ETF SPDR Portfolio Mid Cap ETF SPDR S&P 600 Small Cap ETF |
|
Michael Feehily, Karl Schneider and Kathleen Morgan |
SPDR NYSE Technology ETF SPDR Global Dow ETF |
|
Michael Feehily, Karl Schneider and Kala ODonnell |
SPDR S&P Semiconductor ETF SPDR S&P Health Care Equipment ETF SPDR S&P Capital Markets ETF |
|
Michael Feehily, Karl Schneider and Emiliano Rabinovich |
SPDR Russell 1000 Momentum Focus ETF SPDR Russell 1000 Low Volatility Focus ETF SPDR S&P Dividend ETF |
|
Michael Feehily, Karl Schneider and Keith Richardson |
SPDR S&P Aerospace & Defense ETF SPDR S&P Pharmaceuticals ETF |
|
Michael Feehily, Karl Schneider and Amy Scofield | SPDR Wells Fargo Preferred Stock ETF | |
Michael Feehily, Karl Schneider and David Swallow |
SPDR S&P 400 Mid Cap Value ETF SPDR S&P 400 Mid Cap Growth ETF |
|
Michael Feehily, Karl Schneider and Daniel TenPas | SPDR Dow Jones REIT ETF | |
Michael Feehily, Karl Schneider and Eric Viliott |
SPDR S&P 500 Fossil Fuel Reserves Free ETF SPDR S&P 500 Buyback ETF |
|
Michael Feehily, Karl Schneider and Olga Winner | SPDR S&P Oil & Gas Exploration & Production ETF | |
Todd Bean and Sean Lussier | SPDR Bloomberg Barclays 1-3 Month T-Bill ETF |
42
Cynthia Moy, James Kramer and Orhan Imer | SPDR Bloomberg Barclays 1-10 Year TIPS ETF | |
SPDR Bloomberg Barclays TIPS ETF | ||
SPDR FTSE International Government Inflation-Protected Bond ETF | ||
Joanna Madden, Cynthia Moy and Orhan Imer | SPDR Portfolio Short Term Treasury ETF | |
SPDR Bloomberg Barclays Intermediate Term Treasury ETF | ||
SPDR Portfolio Long Term Treasury ETF | ||
Joanna Madden, James Kramer and Orhan Imer | SPDR Bloomberg Barclays International Treasury Bond ETF | |
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF | ||
Marc DiCosimo, Michael Przygoda and Nicholas Fischer | SPDR Bloomberg Barclays Mortgage Backed Bond ETF | |
SPDR Portfolio Aggregate Bond ETF | ||
Michael Brunell and Christopher DiStefano | SPDR Bloomberg Barclays Convertible Securities ETF | |
Michael Brunell, Kyle Kelly and Christopher DiStefano | SPDR Bloomberg Barclays Corporate Bond ETF | |
Michael Brunell, Kyle Kelly and Bradley Sullivan | SPDR Bloomberg Barclays High Yield Bond ETF | |
SPDR Bloomberg Barclays Short Term High Yield Bond ETF | ||
SPDR ICE BofAML Crossover Corporate Bond ETF | ||
Timothy T. Ryan and Steven M. Hlavin | Municipal Bond ETFs | |
Kyle Kelly, Christopher DiStefano and Frank Miethe | SPDR Portfolio Short Term Corporate Bond ETF | |
SPDR Portfolio Intermediate Term Corporate Bond ETF | ||
SPDR Portfolio Long Term Corporate Bond ETF | ||
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF | ||
Richard Darby-Dowman, Paul Brown and Peter Spano | SPDR Bloomberg Barclays International Corporate Bond ETF | |
Abhishek Kumar, Peter Spano and Richard Jenkins | SPDR Bloomberg Barclays Emerging Markets Local Bond ETF |
All ETFs except Municipal Bond ETFs, SPDR Bloomberg Barclays International Corporate Bond ETF and SPDR Bloomberg 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, 2018
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions)* |
Other
Pooled Investment Vehicle Accounts |
Assets
Managed (billions)* |
Other
Accounts |
Assets
Managed (billions)* |
Total
Assets Managed (billions) |
|||||||||||||||
Michael Feehily |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Karl Schneider |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Amy Cheng |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
David Chin |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Raymond Donofrio |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Michael Finocchi |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Payal Gupta |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Ted Janowsky |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Melissa Kapitulik |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Mark Krivitsky |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
John Law |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Kathleen Morgan |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Kala ODonnell |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Emiliano Rabinovich |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 |
43
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions)* |
Other
Pooled Investment Vehicle Accounts |
Assets
Managed (billions)* |
Other
Accounts |
Assets
Managed (billions)* |
Total
Assets Managed (billions) |
|||||||||||||||
Keith Richardson |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Amy Scofield |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
David Swallow |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Daniel TenPas |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Eric Viliott |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Olga Winner |
100 | $ | 492.33 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,095.18 | |||||||||||
Todd Bean |
12 | $ | 99.61 | 19 | $ | 91.21 | 71 | $ | 105.60 | $ | 296.42 | |||||||||||
Sean Lussier |
12 | $ | 99.61 | 19 | $ | 91.21 | 71 | $ | 105.60 | $ | 296.42 | |||||||||||
Michael Brunell |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
Marc DiCosimo |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
Christopher DiStefano |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
Nicholas Fischer |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
Orhan Imer |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
Kyle Kelly |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
James Kramer |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
Joanna Madden |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
Frank Miethe |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
Cynthia Moy |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
Michael Przygoda |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 | |||||||||||
Bradley Sullivan |
13 | $ | 23.14 | 109 | $ | 71.33 | 144 | $ | 74.29 | $ | 168.76 |
* |
There are no performance-based fees associated with these accounts. |
None of the portfolio managers listed above beneficially owned Shares as of June 30, 2018, except as noted in the table below:
Portfolio Manager |
Fund |
Dollar Range of Trust Shares Beneficially Owned |
||
Michael Feehily |
SSPDR SSGA US Large Cap Low Volatility Index ETF | $50,001-$100,000 | ||
SPDR Dow Jones REIT ETF | $50,001-$100,000 | |||
SPDR S&P Dividend ETF | $50,001-$100,000 | |||
SPDR S&P 1500 Value Tilt ETF | $50,001-$100,000 | |||
Eric Villiott |
SPDR Portfolio Large Cap ETF | $1-$10,000 | ||
Olga Winner |
SPDR S&P Oil & Gas Exploration & Production ETF | $1-$10,000 |
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.
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.
44
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.
SSGAs culture is complemented and reinforced by a total rewards strategy that is based on a pay for performance philosophy which seeks to offer a competitive pay mix of base salary, benefits, cash incentives and deferred compensation.
Salary is based on a number of factors, including external benchmarking data and market trends, State Street performance, SSGA performance, and individual overall performance. SSGAs Global Human Resources department regularly participates in compensation surveys in order to provide SSGA with market-based compensation information that helps support individual pay decisions.
Additionally, subject to State Street and SSGA business results, State Street allocates an incentive pool to SSGA to reward its employees. The size of the incentive pool for most business units is based on the firms overall profitability and other factors, including performance against risk-related goals. For most SSGA investment teams, SSGA recognizes and rewards performance by linking annual incentive decisions for investment teams to the firms or business units profitability and business unit investment performance over a multi-year period.
Incentive pool funding for most active investment teams is driven in part by the post-tax investment performance of fund(s) managed by the team versus the return levels of the benchmark index(es) of the fund(s) on a one-, three- and, in some cases, five-year basis. For most active investment teams, a material portion of incentive compensation for senior staff is deferred over a four-year period into the SSGA Long-Term Incentive (SSGA LTI) program. For these teams, The SSGA LTI program indexes the performance of these deferred awards against the post-tax investment performance of fund(s) managed by the team. This is intended to align our investment teams compensation with client interests, both through annual incentive compensation awards and through the long-term value of deferred awards in the SSGA LTI program.
For the passive equity investment team, incentive pool funding is driven in part by the post-tax 1 and 3-year tracking error of the funds managed by the team against the benchmark indexes of the funds.
The discretionary allocation of the incentive pool to the business units within SSGA is influenced by market-based compensation data, as well as the overall performance of each business unit. Individual compensation decisions are made by the employees manager, in conjunction with the senior management of the employees business unit. These decisions are based on the overall performance of the employee and, as mentioned above, on the performance of the firm and business unit. Depending on the job level, a portion of the annual incentive may be awarded in deferred compensation, which may include cash and/or Deferred Stock Awards (State Street stock), which typically vest over a four-year period. This helps to retain staff and further aligns SSGA employees interests with SSGA clients and shareholders long-term interests.
SSGA recognizes and rewards outstanding performance by:
|
Promoting employee ownership to connect employees directly to the companys success. |
|
Using rewards to reinforce mission, vision, values and business strategy. |
|
Seeking to recognize and preserve the firms unique culture and team orientation. |
|
Providing all employees the opportunity to share in the success of SSGA. |
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.
45
Other Accounts Managed as of June 30, 2018:
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions)* |
Other
Pooled Investment Vehicle Accounts |
Assets
Managed (billions)* |
Other
Accounts |
Assets
Managed (billions)* |
Total
Assets Managed (billions) |
|||||||||||||||
Timothy T. Ryan |
7 | $ | 16.06 | 0 | $ | 0 | 6 | $ | 0.72 | $ | 16.78 | |||||||||||
Steven M. Hlavin |
10 | $ | 13.03 | 0 | $ | 0 | 1 | $ | 0.01 | $ | 13.04 |
* |
There are no performance-based fees associated with these accounts. |
The portfolio managers listed above did not beneficially own any interests of any Fund as of June 30, 2018.
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 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 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.
46
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.
SPDR Bloomberg Barclays International Corporate Bond ETF and SPDR Bloomberg Barclays Emerging Markets Local Bond ETF . 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 the SPDR Bloomberg Barclays International Corporate Bond ETF and SPDR Bloomberg Barclays Emerging Markets Local 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.
Other Accounts Managed as of June 30, 2018:
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions) * |
Other
Pooled Investment Vehicle Accounts |
Assets
Managed (billions) * |
Other
Accounts |
Assets
Managed (billions) * |
Total
Assets Managed (billions) |
|||||||||||||||
Paul Brown |
4 | $ | 2.08 | 4 | $ | 2.92 | 5 | $ | 5.08 | $ | 10.08 | |||||||||||
Richard Darby-Dowman |
5 | $ | 1.37 | 6 | $ | 1.00 | 5 | $ | 1.21 | $ | 3.58 | |||||||||||
Abhishek Kumar |
2 | $ | 2.78 | 0 | $ | 0.00 | 4 | $ | 8.81 | $ | 11.59 | |||||||||||
Peter Spano |
0 | $ | 0.00 | 3 | $ | 3.20 | 12 | $ | 6.81 | $ | 10.01 | |||||||||||
Richard Jenkins |
5 | $ | 1.54 | 1 | $ | 0.18 | 27 | $ | 5.53 | $ | 7.25 |
* |
There are no performance-based fees associated with these accounts. |
The portfolio managers listed above did not beneficially own any interests of any Fund as of June 30, 2018.
SSGAs culture is complemented and reinforced by a total rewards strategy that is based on a pay for performance philosophy which seeks to offer a competitive pay mix of base salary, benefits, cash incentives and deferred compensation.
Salary is based on a number of factors, including external benchmarking data and market trends, State Street performance, SSGA performance, and individual overall performance. SSGAs Global Human Resources department regularly participates in compensation surveys in order to provide SSGA with market-based compensation information that helps support individual pay decisions.
Additionally, subject to State Street and SSGA business results, State Street allocates an incentive pool to SSGA to reward its employees. The size of the incentive pool for most business units is based on the firms overall profitability and other factors, including performance against risk-related goals. For most SSGA investment teams, SSGA recognizes and rewards performance by linking annual incentive decisions for investment teams to the firms or business units profitability and business unit investment performance over a multi-year period.
Incentive pool funding for most active investment teams is driven in part by the post-tax investment performance of fund(s) managed by the team versus the return levels of the benchmark index(es) of the fund(s) on a one-, three- and, in some cases, five-year basis. For most active investment teams, a material portion of incentive compensation for senior staff is deferred over a four-year period into the SSGA Long-Term Incentive (SSGA LTI) program. For these teams, The SSGA LTI program indexes the performance of these deferred awards against the post-tax investment performance of fund(s) managed by the team. This is intended to align our investment teams compensation with client interests, both through annual incentive compensation awards and through the long-term value of deferred awards in the SSGA LTI program.
47
For the passive equity investment team, incentive pool funding is driven in part by the post-tax 1 and 3-year tracking error of the funds managed by the team against the benchmark indexes of the funds.
The discretionary allocation of the incentive pool to the business units within SSGA is influenced by market-based compensation data, as well as the overall performance of each business unit. Individual compensation decisions are made by the employees manager, in conjunction with the senior management of the employees business unit. These decisions are based on the overall performance of the employee and, as mentioned above, on the performance of the firm and business unit. Depending on the job level, a portion of the annual incentive may be awarded in deferred compensation, which may include cash and/or Deferred Stock Awards (State Street stock), which typically vest over a four-year period. This helps to retain staff and further aligns SSGA employees interests with SSGA clients and shareholders long-term interests.
SSGA recognizes and rewards outstanding performance by:
|
Promoting employee ownership to connect employees directly to the companys success. |
|
Using rewards to reinforce mission, vision, values and business strategy. |
|
Seeking to recognize and preserve the firms unique culture and team orientation. |
|
Providing all employees the opportunity to share in the success of SSGA. |
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.
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.
48
Sub-Administrator, Custodian and Transfer Agent . Prior to June 1, 2015, 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), which were accrued daily and paid monthly by the Adviser out of its management fee.
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 financial holding company, and is affiliated with the Adviser. State Streets mailing address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
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 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 its services provided under the SSGA Administration agreement, SSGA FM, shall receive fees for the services, calculated based on the average aggregate net assets of the Trust and SIS, which are accrued daily and paid monthly out of its management fee.
As compensation for its services under the Sub-Administration Agreement, Custodian Agreement and Transfer Agency Agreement, State Street shall receive a fee for the services, calculated based on the average aggregate net assets of the Trust and SIS, which are accrued daily and paid monthly by the Adviser from its management fee. For each series of the Trust and SIS, an annual minimum fee applies. 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 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.
SECURITIES LENDING ACTIVITIES
The Trusts Board has approved each Funds participation in a securities lending program. Under the securities lending program, each Fund has retained State Street to serve as the securities lending agent.
49
For the fiscal year ended June 30, 2018, the income earned by each Fund as well as the fees and/or compensation paid by each Fund (in dollars) pursuant to the Master Amended and Restated Securities Lending Authorization Agreement among SPDR Series Trust, SPDR Index Shares Funds, SSGA Active Trust and SSGA Master Trust, each on behalf of its respective series, and State Street (the Securities Lending Authorization Agreement) were as follows:
Fees and/or compensation paid by the Fund for securities lending activities
and
related services |
||||||||||||||||||||||||||||||||||||
Gross
income earned by the Fund from securities lending activities |
Fees paid
to State Street from a revenue split |
Fees paid for
any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in a revenue split |
Administrative
fees not included in a revenue split |
Indemnification
fees not included in a revenue split |
Rebate
(paid to borrower) |
Other fees
not included in a revenue split |
Aggregate
fees and/or compensation paid by the Fund for securities lending activities and related services |
Net income
from securities lending activities |
||||||||||||||||||||||||||||
SPDR Russell 1000 Yield Focus ETF |
$ | 86,049.75 | $ | 10,665.44 | $ | 456.46 | $ | 0.00 | $ | 0.00 | $ | 14,499.46 | $ | 0.00 | $ | 25,621.36 | $ | 60,428.39 | ||||||||||||||||||
SPDR Russell 1000 Momentum Focus ETF |
$ | 73,018.91 | $ | 8,116.63 | $ | 591.548 | $ | 0.00 | $ | 0.00 | $ | 18,283.87 | $ | 0.00 | $ | 26,992.05 | $ | 46,026.86 | ||||||||||||||||||
SPDR Russell 1000 Low Volatility Focus ETF |
$ | 53,998.31 | $ | 7,228.00 | $ | 173.87 | $ | 0.00 | $ | 0.00 | $ | 5,646.82 | $ | 0.00 | $ | 13,048.69 | $ | 40,949.62 | ||||||||||||||||||
SPDR S&P 500 Buyback ETF |
$ | 939.55 | $ | 90.89 | $ | 10.61 | $ | 0.00 | $ | 0.00 | $ | 322.33 | $ | 0.00 | $ | 423.83 | $ | 515.72 | ||||||||||||||||||
SPDR Portfolio S&P 500 Growth ETF |
$ | 26,869.33 | $ | 3,425.19 | $ | 102.74 | $ | 0.00 | $ | 0.00 | $ | 3,924.98 | $ | 0.00 | $ | 7,452.91 | $ | 19,416.42 | ||||||||||||||||||
SPDR Portfolio S&P 500 Value ETF |
$ | 24,713.96 | $ | 2,500.17 | $ | 258.84 | $ | 0.00 | $ | 0.00 | $ | 7,771.82 | $ | 0.00 | $ | 10,530.83 | $ | 14,183.13 | ||||||||||||||||||
SPDR Portfolio S&P 500 High Dividend ETF |
$ | 14,902.87 | $ | 1,788.93 | $ | 172.96 | $ | 0.00 | $ | 0.00 | $ | 2,805.31 | $ | 0.00 | $ | 4,767.20 | $ | 10,135.67 | ||||||||||||||||||
SPDR S&P 500 Fossil Fuel Reserves Free ETF |
$ | 3,974.14 | $ | 446.00 | $ | 34.64 | $ | 0.00 | $ | 0.00 | $ | 944.56 | $ | 0.00 | $ | 1,425.20 | $ | 2,548.94 | ||||||||||||||||||
SPDR Portfolio Mid Cap ETF |
$ | 303,654.52 | $ | 35,886.52 | $ | 2,359.55 | $ | 0.00 | $ | 0.00 | $ | 61,936.71 | $ | 0.00 | $ | 100,182.78 | $ | 203,471.74 | ||||||||||||||||||
SPDR S&P 400 Mid Cap Growth ETF |
$ | 257,241.73 | $ | 29,240.77 | $ | 1,967.54 | $ | 0.00 | $ | 0.00 | $ | 60,365.32 | $ | 0.00 | $ | 91,573.63 | $ | 165,668.10 | ||||||||||||||||||
SPDR S&P 400 Mid Cap Value ETF |
$ | 487,833.29 | $ | 56,183.78 | $ | 40,10.17 | $ | 0.00 | $ | 0.00 | $ | 109,276.93 | $ | 0.00 | $ | 169,470.88 | $ | 318,362.41 | ||||||||||||||||||
SPDR S&P 600 Small Cap ETF |
$ | 1,116,736.42 | $ | 148,465.47 | $ | 5,055.79 | $ | 0.00 | $ | 0.00 | $ | 121,952.56 | $ | 0.00 | $ | 275,473.82 | $ | 841,262.60 | ||||||||||||||||||
SPDR S&P 600 Small Cap Growth ETF |
$ | 1,499,868.59 | $ | 184,613.70 | $ | 8,693.56 | $ | 0.00 | $ | 0.00 | $ | 260,482.64 | $ | 0.00 | $ | 453,789.905 | $ | 1,046,078.69 | ||||||||||||||||||
SPDR S&P 600 Small Cap Value ETF |
$ | 1,712,307.74 | $ | 232,616.13 | $ | 7,033.10 | $ | 0.00 | $ | 0.00 | $ | 154,562.13 | $ | 0.00 | $ | 394,211.36 | $ | 1,318,096.38 | ||||||||||||||||||
SPDR Global Dow ETF |
$ | 20,937.80 | $ | 2,401.72 | $ | 132.04 | $ | 0.00 | $ | 0.00 | $ | 4,795.52 | $ | 0.00 | $ | 7,329.28 | $ | 13,608.52 | ||||||||||||||||||
SPDR Dow Jones REIT ETF |
$ | 204,685.12 | $ | 26,042.77 | $ | 1,380.57 | $ | 0.00 | $ | 0.00 | $ | 29,697.57 | $ | 0.00 | $ | 57,120.91 | $ | 147,564.21 |
50
Fees and/or compensation paid by the Fund for securities lending activities
and
related services |
||||||||||||||||||||||||||||||||||||
Gross
income earned by the Fund from securities lending activities |
Fees paid
to State Street from a revenue split |
Fees paid for
any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in a revenue split |
Administrative
fees not included in a revenue split |
Indemnification
fees not included in a revenue split |
Rebate
(paid to borrower) |
Other fees
not included in a revenue split |
Aggregate
fees and/or compensation paid by the Fund for securities lending activities and related services |
Net income
from securities lending activities |
||||||||||||||||||||||||||||
SPDR S&P Bank ETF |
$ | 397,140.61 | $ | 19,462.11 | $ | 6,404.68 | $ | 0.00 | $ | 0.00 | $ | 260,995.22 | $ | 0.00 | $ | 286,862.01 | $ | 110,278.60 | ||||||||||||||||||
SPDR S&P Capital Markets ETF |
$ | 49,068.10 | $ | 6,362.37 | $ | 345.96 | $ | 0.00 | $ | 0.00 | $ | 6,314.33 | $ | 0.00 | $ | 13,022.66 | $ | 36,045.44 | ||||||||||||||||||
SPDR S&P Insurance ETF |
$ | 14,783.68 | $ | 2,052.67 | $ | 6.81 | $ | 0.00 | $ | 0.00 | $ | 1,094.69 | $ | 0.00 | $ | 3,154.17 | $ | 11,629.51 | ||||||||||||||||||
SPDR S&P Regional Banking ETF |
$ | 5,61,863.32 | $ | 43,233.72 | $ | 7,051.37 | $ | 0.00 | $ | 0.00 | $ | 2,66,589.39 | $ | 0.00 | $ | 3,16,874.48 | $ | 2,44,988.84 | ||||||||||||||||||
SPDR NYSE Technology ETF |
$ | 317,460.85 | $ | 34,290.91 | $ | 2,211.69 | $ | 0.00 | $ | 0.00 | $ | 86,644.46 | $ | 0.00 | $ | 123,147.06 | $ | 194,313.79 | ||||||||||||||||||
SPDR S&P Dividend ETF |
$ | 3,064,006.56 | $ | 2,49171.62 | $ | 37,065.02 | $ | 0.00 | $ | 0.00 | $ | 1,365,837.69 | $ | 0.00 | $ | 1,652,074.33 | $ | 1,411,932.23 | ||||||||||||||||||
SPDR S&P Aerospace & Defense ETF |
$ | 214,175.29 | $ | 25,786.29 | $ | 1,619.67 | $ | 0.00 | $ | 0.00 | $ | 40,657.81 | $ | 0.00 | $ | 68,063.77 | $ | 146,111.52 | ||||||||||||||||||
SPDR S&P Biotech ETF |
$ | 24,706,220.98 | $ | 3,385,796.69 | $ | 124,639.30 | $ | 0.00 | $ | 0.00 | $ | 2,009,864.21 | $ | 0.00 | $ | 5,520,300.20 | $ | 19,185,920.78 | ||||||||||||||||||
SPDR S&P Health Care Equipment ETF |
$ | 142,606.89 | $ | 19,788.58 | $ | 261.93 | $ | 0.00 | $ | 0.00 | $ | 10,440.34 | $ | 0.00 | $ | 30,490.85 | $ | 112,116.04 | ||||||||||||||||||
SPDR S&P Health Care Services ETF |
$ | 45,299.34 | $ | 5,687.43 | $ | 298.43 | $ | 0.00 | $ | 0.00 | $ | 7,091.62 | $ | 0.00 | $ | 13,077.48 | $ | 32,221.86 | ||||||||||||||||||
SPDR S&P Homebuilders ETF |
$ | 553,197.441 | $ | 34,433.78 | $ | 8,064.10 | $ | 0.00 | $ | 0.00 | $ | 315,583.30 | $ | 0.00 | $ | 358,081.18 | $ | 195,116.26 | ||||||||||||||||||
SPDR S&P Internet ETF |
$ | 11,029.167 | $ | 1,340.03 | $ | 90.07 | $ | 0.00 | $ | 0.00 | $ | 2,007.96 | $ | 0.00 | $ | 3,438.057 | $ | 7,591.11 | ||||||||||||||||||
SPDR S&P Metals & Mining ETF |
$ | 743,125.01 | $ | 6,8433.20 | $ | 7,987.59 | $ | 0.00 | $ | 0.00 | $ | 278,943.54 | $ | 0.00 | $ | 355,364.33 | $ | 387,760.68 | ||||||||||||||||||
SPDR S&P Oil & Gas Equipment & Services ETF |
$ | 1,423,804.32 | $ | 189,235.94 | $ | 7,556.14 | $ | 0.00 | $ | 0.00 | $ | 154,700.75 | $ | 0.00 | $ | 351,492.83 | $ | 1,072,311.49 | ||||||||||||||||||
SPDR S&P Oil & Gas Exploration & Production ETF |
$ | 214,175.29 | $ | 25,786.29 | $ | 1,619.67 | $ | 0.00 | $ | 0.00 | $ | 40,657.81 | $ | 0.00 | $ | 68,063.77 | $ | 146,111.52 | ||||||||||||||||||
SPDR S&P Pharmaceuticals ETF |
$ | 869,676.67 | $ | 118,223.21 | $ | 4,221.53 | $ | 0.00 | $ | 0.00 | $ | 77,320.85 | $ | 0.00 | $ | 199,765.59 | $ | 669,911.08 |
51
Fees and/or compensation paid by the Fund for securities lending activities
and
related services |
||||||||||||||||||||||||||||||||||||
Gross
income earned by the Fund from securities lending activities |
Fees paid
to State Street from a revenue split |
Fees paid for
any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in a revenue split |
Administrative
fees not included in a revenue split |
Indemnification
fees not included in a revenue split |
Rebate
(paid to borrower) |
Other fees
not included in a revenue split |
Aggregate
fees and/or compensation paid by the Fund for securities lending activities and related services |
Net income
from securities lending activities |
||||||||||||||||||||||||||||
SPDR S&P Retail ETF |
$ | 1,322,290.48 | $ | 187,629.27 | $ | 4,743.29 | $ | 0.00 | $ | 0.00 | $ | 66,711.67 | $ | 0.00 | $ | 259,084.23 | $ | 1,063,206.25 | ||||||||||||||||||
SPDR S&P Semiconductor ETF |
$ | 1,334,374.40 | $ | 189,586.86 | $ | 3,853.52 | $ | 0.00 | $ | 0.00 | 66,625.49 | $ | 0.00 | $ | 260,065.87 | $ | 1,074,308.53 | |||||||||||||||||||
SPDR S&P Software Services ETF |
$ | 24,833.80 | $ | 2,565.67 | $ | 226.90 | $ | 0.00 | $ | 0.00 | $ | 7,505.19 | $ | 0.00 | $ | 10,297.76 | $ | 14,536.04 | ||||||||||||||||||
SPDR S&P Technology Hardware ETF |
$ | 8,959.28 | $ | 1,286.05 | $ | 21.62 | $ | 0.00 | $ | 0.00 | $ | 367.52 | $ | 0.00 | $ | 1,675.19 | $ | 7,284.09 | ||||||||||||||||||
SPDR S&P Telecom ETF |
$ | 1,301,979.84 | $ | 190,717.26 | $ | 2,032.49 | $ | 0.00 | $ | 0.00 | $ | 28,517.36 | $ | 0.00 | $ | 221,267.11 | $ | 108,0712.73 | ||||||||||||||||||
SPDR S&P Transportation ETF |
$ | 52,067.28 | $ | 6,387.89 | $ | 295.57 | $ | 0.00 | $ | 0.00 | $ | 9,190.02 | $ | 0.00 | $ | 15,873.48 | $ | 36,193.80 | ||||||||||||||||||
SPDR S&P 1500 Value Tilt ETF |
$ | 1,950.76 | $ | 208.00 | $ | 10.59 | $ | 0.00 | $ | 0.00 | $ | 286.35 | $ | 0.00 | $ | 504.94 | $ | 1,445.82 | ||||||||||||||||||
SPDR S&P 1500 Momentum Tilt ETF |
$ | 1,510.65 | $ | 162.46 | $ | 6.95 | $ | 0.00 | $ | 0.00 | $ | 216.23 | $ | 0.00 | $ | 385.64 | $ | 1,125.01 | ||||||||||||||||||
SPDR Wells Fargo Preferred Stock ETF |
$ | 1,404,540.58 | $ | 206,365.55 | $ | 6,218.75 | $ | 0.00 | $ | 0.00 | $ | 22,645.19 | $ | 0.00 | $ | 235,229.49 | $ | 1,169,311.09 | ||||||||||||||||||
SPDR MSCI USA StrategicFactors ETF |
$ | 1,816.71 | $ | 194.53 | $ | 16.30 | $ | 0.00 | $ | 0.00 | $ | 465.86 | $ | 0.00 | $ | 676.69 | $ | 1,140.02 | ||||||||||||||||||
SPDR FactSet Innovative Technology ETF |
$ | 46,890.03 | $ | 6,218.05 | $ | 210.14 | $ | 0.00 | $ | 0.00 | $ | 5,227.22 | $ | 0.00 | $ | 11,655.41 | $ | 35,234.62 | ||||||||||||||||||
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||||||||
SPDR Bloomberg Barclays TIPS ETF |
$ | 27,477.12 | $ | 1,232.05 | $ | 195.44 | $ | 0.00 | $ | 0.00 | $ | 19,068.94 | $ | 0.00 | $ | 20,496.43 | $ | 6,980.69 | ||||||||||||||||||
SPDR Bloomberg Barclays 1-10 Year TIPS ETF |
$ | 3,381.54 | $ | 155.85 | $ | 26.30 | $ | 0.00 | $ | 0.00 | $ | 2316.40 | $ | 0.00 | $ | 2,498.55 | $ | 882.99 |
52
Fees and/or compensation paid by the Fund for securities lending activities
and
related services |
||||||||||||||||||||||||||||||||||||
Gross
income earned by the Fund from securities lending activities |
Fees paid
to State Street from a revenue split |
Fees paid for
any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in a revenue split |
Administrative
fees not included in a revenue split |
Indemnification
fees not included in a revenue split |
Rebate
(paid to borrower) |
Other fees
not included in a revenue split |
Aggregate
fees and/or compensation paid by the Fund for securities lending activities and related services |
Net income
from securities lending activities |
||||||||||||||||||||||||||||
SPDR Portfolio Short Term Treasury ETF |
$ | 15,819.45 | $ | 951.26 | $ | 276.50 | $ | 0.00 | $ | 0.00 | $ | 9,202.07 | $ | 0.00 | $ | 10,429.83 | $ | 5,389.62 | ||||||||||||||||||
SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
$ | 59,504.64 | $ | 3,880.23 | $ | 970.01 | $ | 0.00 | $ | 0.00 | $ | 32,640.88 | $ | 0.00 | $ | 37,491.11 | $ | 22,013.53 | ||||||||||||||||||
SPDR Portfolio Long Term Treasury ETF |
$ | 89,305.69 | $ | 1,895.51 | $ | 1,618.27 | $ | 0.00 | $ | 0.00 | $ | 74,556.00 | $ | 0.00 | $ | 78,069.78 | $ | 11,235.91 | ||||||||||||||||||
SPDR Portfolio Short Term Corporate Bond ETF |
$ | 246,699.80 | $ | 14,688.00 | $ | 3,264.74 | $ | 0.00 | $ | 0.00 | $ | 145,524.58 | $ | 0.00 | $ | 163,477.32 | $ | 83,222.48 | ||||||||||||||||||
SPDR Portfolio Intermediate Term Corporate Bond ETF |
$ | 300,486.10 | $ | 28,424.19 | $ | 3,011.01 | $ | 0.00 | $ | 0.00 | $ | 108,028.68 | $ | 0.00 | $ | 139,463.88 | $ | 161,022.22 | ||||||||||||||||||
SPDR Portfolio Long Term Corporate Bond ETF |
$ | 16,791.78 | $ | 1,575.23 | $ | 198.90 | $ | 0.00 | $ | 0.00 | $ | 6,099.24 | $ | 0.00 | $ | 7,873.37 | $ | 8,918.41 | ||||||||||||||||||
SPDR Bloomberg Barclays Corporate Bond ETF |
$ | 9,867.70 | $ | 1,327.09 | $ | 40.738 | $ | 0.00 | $ | 0.00 | $ | 987.00 | $ | 0.00 | $ | 2,354.83 | $ | 7,512.87 | ||||||||||||||||||
SPDR Bloomberg Barclays Convertible Securities ETF |
$ | 4,175,540.20 | $ | 510,698.32 | $ | 30,106.95 | $ | 0.00 | $ | 0.00 | $ | 740,819.53 | $ | 0.00 | $ | 1,281,624.80 | $ | 2,893,915.40 | ||||||||||||||||||
SPDR Bloomberg Barclays Mortgage Backed Bond ETF |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||||||||
SPDR Portfolio Aggregate Bond ETF |
$ | 301,948.62 | $ | 17,385.36 | $ | 5,258.59 | $ | 0.00 | $ | 0.00 | $ | 180,786.38 | $ | 0.00 | $ | 203,430.33 | $ | 98,518.29 | ||||||||||||||||||
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 |
53
Fees and/or compensation paid by the Fund for securities lending activities
and
related services |
||||||||||||||||||||||||||||||||||||
Gross
income earned by the Fund from securities lending activities |
Fees paid
to State Street from a revenue split |
Fees paid for
any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in a revenue split |
Administrative
fees not included in a revenue split |
Indemnification
fees not included in a revenue split |
Rebate
(paid to borrower) |
Other fees
not included in a revenue split |
Aggregate
fees and/or compensation paid by the Fund for securities lending activities and related services |
Net income
from securities lending activities |
||||||||||||||||||||||||||||
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||||||||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||||||||
SPDR FTSE International Government Inflation-Protected Bond ETF |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||||||||
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||||||||
SPDR Bloomberg Barclays International Treasury Bond ETF |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||||||||
SPDR Bloomberg Barclays International Corporate Bond ETF |
$ | 356.58 | $ | 12.39 | $ | 5.67 | $ | 0.00 | $ | 0.00 | $ | 268.42 | $ | 0.00 | $ | 286.48 | $ | 70.1 | ||||||||||||||||||
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||||||||
SPDR Bloomberg Barclays High Yield Bond ETF |
$ | 13,731,837.64 | $ | 1,51,7073.50 | $ | 138,793.80 | $ | 0.00 | $ | 0.00 | $ | 3,479,587.08 | $ | 0.00 | $ | 5,135,454.38 | $ | 8,596,383.26 |
54
Fees and/or compensation paid by the Fund for securities lending activities
and
related services |
||||||||||||||||||||||||||||||||||||
Gross
income earned by the Fund from securities lending activities |
Fees paid
to State Street from a revenue split |
Fees paid for
any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in a revenue split |
Administrative
fees not included in a revenue split |
Indemnification
fees not included in a revenue split |
Rebate
(paid to borrower) |
Other fees
not included in a revenue split |
Aggregate
fees and/or compensation paid by the Fund for securities lending activities and related services |
Net income
from securities lending activities |
||||||||||||||||||||||||||||
SPDR Bloomberg Barclays Short Term High Yield Bond ETF |
$ | 5,998,628.53 | $ | 6,87,173.83 | $ | 61,069.61 | $ | 0.00 | $ | 0.00 | $ | 1,356,571.32 | $ | 0.00 | $ | 2,104,814.76 | $ | 3,89,3813.77 | ||||||||||||||||||
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
$ | 139,386.79 | $ | 9,162.22 | $ | 1,845.85 | $ | 0.00 | $ | 0.00 | $ | 76,470.31 | $ | 0.00 | $ | 87,478.38 | $ | 51,908.41 | ||||||||||||||||||
SPDR ICE BofAML Crossover Corporate Bond ETF |
$ | 11,003.11 | $ | 1,004.42 | $ | 142.69 | $ | 0.00 | $ | 0.00 | $ | 4,172.28 | $ | 0.00 | $ | 5,319.39 | $ | 5,683.72 |
For the fiscal year ended June 30, 2018, State Street, acting as agent of the Funds, provided the following services to the Funds in connection with the Funds securities lending activities: (i) locating borrowers among an approved list of prospective borrowers; (ii) monitoring the value of loaned securities, the value of collateral received, and other lending parameters; (iii) seeking additional collateral, as necessary, from borrowers; (iv) receiving and holding collateral from borrowers, and facilitating the investment and reinvestment of all or substantially all cash collateral in an investment vehicle designated by the Funds; (v) returning collateral to borrowers; (vi) facilitating substitute dividend, interest, and other distribution payments to the Funds from borrowers; (vii) negotiating the terms of each loan of securities, including but not limited to the amount of any loan premium, and monitoring the terms of securities loan agreements with prospective borrowers for consistency with the requirements of the Funds Securities Lending Authorization Agreement; (viii) selecting securities, including amounts (percentages), to be loaned; (ix) recordkeeping and accounting servicing; and (x) arranging for return of loaned securities to the Funds in accordance with the terms of the Securities Lending Authorization Agreement.
THE DISTRIBUTOR
State Street Global Advisors Funds Distributors, LLC is the principal underwriter and Distributor of Shares. Its principal address is One Iron Street, Boston, Massachusetts 02210. 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, as amended (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. An affiliate of 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. An affiliate of the Distributor also receives compensation from State Street for providing on-line creation and redemption functionality to Authorized Participants through its Fund Connect application.
55
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 SPDR 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 the date of this SAI, 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), Pershing LLC (Pershing), RBC Capital Markets, LLC (RBC) and TD Ameritrade, Inc. (TD Ameritrade). Pursuant to these arrangements, Schwab, Pershing, RBC and TD Ameritrade have agreed to promote certain SPDR funds to their customers and not to charge certain of their 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 Fund assets. 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.
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 continuation of the Distribution Agreement and any other related agreements is subject to annual approval of the Board, including by a majority of the Independent Trustees, as described above.
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 Shares. Such Soliciting Dealers may also be Participating Parties (as defined in the Book Entry Only System section below) and/or DTC Participants (as defined below).
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.
INDEX PROVIDER AND OTHER PERSONS
An unaffiliated index provider may make payments from its own assets to other persons in consideration for services provided or other activities that may facilitate investment in SPDR funds.
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 (commonly referred to as best execution). 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 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.
56
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 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, market share, execution-related costs, and prompt and reliable execution. 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. The Adviser uses the same negotiated equity commission schedule with each broker-dealer per market/region, and applies these for each account it trades for. The Advisers negotiated equity commission rates are execution service rates and take into account considerations such as liquidity, market conditions or trading expertise needed to achieve execution. They do not take into account the value of any research received. The Adviser may aggregate trades with other 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 and seeking best execution.
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 and SPDR Bloomberg Barclays Convertible Securities ETF for the past three fiscal years ended June 30. None of the brokerage commissions paid were paid to affiliated brokers and the Fixed Income ETFs (except SPDR Bloomberg 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.
57
FUND(1) |
FISCAL YEAR
ENDED JUNE 30, 2018 |
FISCAL YEAR
ENDED JUNE 30, 2017 |
FISCAL YEAR
ENDED JUNE 30, 2016 |
|||||||||
SPDR Russell 1000 Yield Focus ETF(1) |
$ | 14,524 | $ | 15,122 | $ | 13,350 | ||||||
SPDR Russell 1000 Momentum Focus ETF(1) |
$ | 49,494 | $ | 28,101 | $ | 18,935 | ||||||
SPDR Russell 1000 Low Volatility Focus ETF(1) |
$ | 8,217 | $ | 8,661 | $ | 8,747 | ||||||
SPDR S&P 500 Buyback ETF(2) |
$ | 848 | $ | 1,487 | $ | 1,144 | ||||||
SPDR Portfolio S&P 500 Growth ETF |
$ | 14,936 | $ | 11,484 | $ | 14,486 | ||||||
SPDR Portfolio S&P 500 Value ETF |
$ | 12,527 | $ | 6,475 | $ | 6,915 | ||||||
SPDR Portfolio S&P 500 High Dividend ETF(3) |
$ | 15,764 | $ | 10,505 | $ | 456 | ||||||
SPDR S&P 500 Fossil Fuel Reserves Free ETF(4) |
$ | 1,016 | $ | 631 | $ | 334 | ||||||
SPDR Portfolio Mid Cap ETF |
$ | 9,075 | $ | 8,648 | $ | 3,125 | ||||||
SPDR S&P 400 Mid Cap Growth ETF |
$ | 55,137 | $ | 31,050 | $ | 22,509 | ||||||
SPDR S&P 400 Mid Cap Value ETF |
$ | 53,317 | $ | 27,227 | $ | 13,175 | ||||||
SPDR S&P 600 Small Cap ETF |
$ | 33,247 | $ | 27,736 | $ | 20,738 | ||||||
SPDR S&P 600 Small Cap Growth ETF |
$ | 92,597 | $ | 95,323 | $ | 64,269 | ||||||
SPDR S&P 600 Small Cap Value ETF |
$ | 112,287 | $ | 87,657 | $ | 47,394 | ||||||
SPDR Global Dow ETF |
$ | 2,617 | $ | 2,958 | $ | 5,021 | ||||||
SPDR Dow Jones REIT ETF |
$ | 29,035 | $ | 52,317 | $ | 51,751 | ||||||
SPDR S&P Bank ETF |
$ | 152,585 | $ | 164,226 | $ | 332,739 | ||||||
SPDR S&P Capital Markets ETF |
$ | 4,125 | $ | 5,036 | $ | 7,312 | ||||||
SPDR S&P Insurance ETF |
$ | 29,429 | $ | 27,161 | $ | 30,113 | ||||||
SPDR S&P Regional Banking ETF |
$ | 220,069 | $ | 256,718 | $ | 554,782 | ||||||
SPDR NYSE Technology ETF |
$ | 21,055 | $ | 7,620 | $ | 21,022 | ||||||
SPDR S&P Dividend ETF |
$ | 368,763 | $ | 457,150 | $ | 490,752 | ||||||
SPDR S&P Aerospace & Defense ETF |
$ | 40,478 | $ | 20,474 | $ | 5,318 | ||||||
SPDR S&P Biotech ETF |
$ | 680,872 | $ | 423,515 | $ | 612,010 | ||||||
SPDR S&P Health Care Equipment ETF |
$ | 16,672 | $ | 5,624 | $ | 4,182 | ||||||
SPDR S&P Health Care Services ETF |
$ | 5,759 | $ | 8,426 | $ | 12,407 | ||||||
SPDR S&P Homebuilders ETF |
$ | 34,117 | $ | 31,531 | $ | 121,170 | ||||||
SPDR S&P Internet ETF(5) |
$ | 1,068 | $ | 563 | $ | 61 | ||||||
SPDR S&P Metals & Mining ETF |
$ | 96,061 | $ | 172,243 | $ | 118,865 | ||||||
SPDR S&P Oil & Gas Equipment & Services ETF |
$ | 65,787 | $ | 43,005 | $ | 45,538 | ||||||
SPDR S&P Oil & Gas Exploration & Production ETF |
$ | 322,146 | $ | 223,839 | $ | 537,494 | ||||||
SPDR S&P Pharmaceuticals ETF |
$ | 39,310 | $ | 41,350 | $ | 115,157 | ||||||
SPDR S&P Retail ETF |
$ | 53,853 | $ | 45,004 | $ | 73,703 | ||||||
SPDR S&P Semiconductor ETF |
$ | 15,650 | $ | 20,230 | $ | 26,965 | ||||||
SPDR S&P Software & Services ETF |
$ | 3,769 | $ | 2,681 | $ | 7,061 | ||||||
SPDR S&P Technology Hardware ETF(5) |
$ | 228 | $ | 397 | $ | 75 | ||||||
SPDR S&P Telecom ETF |
$ | 10,572 | $ | 13,105 | $ | 4,683 | ||||||
SPDR S&P Transportation ETF |
$ | 8,260 | $ | 9,394 | $ | 13,291 | ||||||
SPDR S&P 1500 Value Tilt ETF |
$ | 255 | $ | 165 | $ | 120 | ||||||
SPDR S&P 1500 Momentum Tilt ETF |
$ | 1,045 | $ | 1,131 | $ | 2,421 | ||||||
SPDR Wells Fargo Preferred Stock ETF |
$ | 59,135 | $ | 33,203 | $ | 31,319 | ||||||
SPDR MSCI USA StrategicFactors ETF(6) |
$ | 2,276 | $ | 722 | $ | 270 | ||||||
SPDR FactSet Innovative Technology ETF(7) |
$ | 693 | $ | 1,304 | $ | 202 | ||||||
SPDR Bloomberg Barclays Convertible Securities ETF |
$ | 20,711 | $ | 3,525 | $ | 5,359 |
(1) |
The Fund commenced operations on December 3, 2015. |
(2) |
The Fund commenced operations on February 5, 2015. |
(3) |
The Fund commenced operations on October 22, 2015. |
(4) |
The Fund commenced operations on December 1, 2015 |
58
(5) |
The Fund commenced operations on June 28, 2016. |
(6) |
The Fund commenced operations on April 16, 2015. |
(7) |
The Fund commenced operations on January 14, 2016. |
Securities of Regular Broker-Dealers. 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, 2018.
JP Morgan Chase & Co |
$ | 567,944,032 | ||
Merrill Lynch & Co., Inc. |
$ | 549,957,803 | ||
Goldman Sachs & Co. |
$ | 346,108,972 | ||
Morgan Stanley & Co. |
$ | 327,478,685 | ||
Citigroup |
$ | 301,471,650 | ||
Deutsche Bank AG |
$ | 114,433,276 | ||
UBS Securities LLC |
$ | 82,884,978 | ||
Credit Suisse First Boston Corp |
$ | 30,988,579 | ||
Investment Technology Group, Inc. |
$ | 4,652,106 | ||
Virtue Americas LLC |
$ | 3,277,411 |
Portfolio Turnover. 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 Funds may 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 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
59
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
Although the Funds do not have information concerning their beneficial ownership held in the names of DTC Participants, as of October 5, 2018, 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 of Ownership |
||||
SPDR RUSSELL 1000 YIELD FOCUS ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
96.79 | % | |||
SPDR RUSSELL 1000 MOMENTUM FOCUS ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
67.34 | % | |||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
25.96 | % | ||||
SPDR RUSSELL 1000 LOW VOLATILITY FOCUS ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
93.27 | % |
60
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P 500 BUYBACK ETF |
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
46.42 | % | |||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
9.17 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
6.89 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.93 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
5.67 | % |
61
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR PORTFOLIO S&P 500 GROWTH ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
32.29 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
12.71 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.93 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
9.00 | % | ||||
SPDR PORTOFLIO S&P 500 VALUE ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
43.94 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.02 | % | ||||
Fifth Third Bank 34 Fountain Square Plaza Cincinnati, OH 45202 |
6.50 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.81 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
5.24 | % | ||||
SPDR PORTFOLIO S&P 500 HIGH DIVIDEND ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
34.49 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
25.51 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
9.05 | % | ||||
American Enterprise Investment Services Inc. 702 2 nd Avenue South Minneapolis, MN 55402 |
5.35 | % |
62
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P 500 FOSSIL FUEL RESERVES FREE ETF |
Goldman, Sachs & Co. 180 Maiden Lane New York, NY 10038 |
22.25 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
17.31 | % | ||||
The Northern Trust Company 50 South LaSalle Street Chicago, IL 60675 |
11.68 | % | ||||
SEI Private Trust Company 1 Freedom Valley Drive Oaks, PA 19456 |
11.29 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
7.75 | % |
63
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR PORTFOLIO MID CAP ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
52.89 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
13.80 | % | ||||
American Enterprise Investment Services Inc. 702 2 nd Avenue South Minneapolis, MN 55402 |
6.14 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.29 | % | ||||
SPDR S&P 400 MID CAP GROWTH ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
59.05 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
13.80 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.84 | % | ||||
SPDR S&P 400 MID CAP VALUE ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
69.21 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
15.92 | % | ||||
SPDR S&P 600 SMALL CAP ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
15.94 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
13.90 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
12.69 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
5.99 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.69 | % | ||||
American Enterprise Investment Services Inc. 702 2 nd Avenue South Minneapolis, MN 55402 |
5.47 | % |
64
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P 600 SMALL CAP GROWTH ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
41.42 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.61 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
17.05 | % | ||||
U.S. Bank National Association 425 Walnut Street Cincinnati, OH 45202 |
8.12 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
7.33 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
5.75 | % |
65
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P 600 SMALL CAP VALUE ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
50.58 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
17.02 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
6.45 | % | ||||
SPDR GLOBAL DOW ETF |
SEI Private Trust Company 1 Freedom Valley Drive Oaks, PA 19456 |
14.84 | % | |||
CDS Clearing and Depository Services Inc. 85 Richmond Street West Toronto, ON M5H 2C9 CANADA |
9.97 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
9.82 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.56 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.56 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
6.97 | % | ||||
SPDR DOW JONES REIT ETF |
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
23.09 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
11.13 | % | ||||
The Northern Trust Company 50 South LaSalle Street Chicago, IL 60675 |
10.68 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
9.26 | % | ||||
Wells Fargo Bank, National Association 733 Marquette Avenue South Minneapolis, MN 55479 |
9.03 | % |
66
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P BANK ETF |
Goldman, Sachs & Co. 180 Maiden Lane New York, NY 10038 |
19.46 | % | |||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
8.74 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
7.85 | % | ||||
JPMorgan Chase Bank, National Association 14201 Dallas Parkway Chase International Plaza Dallas, TX 75254 |
6.69 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
6.30 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.74 | % | ||||
SPDR S&P CAPITAL MARKETS ETF |
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
20.70 | % | |||
Robert W. Baird & Co. Inc. 777 East Wisconsin Avenue Milwaukee, WI 53202 |
17.55 | % | ||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
11.40 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
7.59 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
6.52 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
5.10 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
5.0 | % |
67
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P INSURANCE ETF |
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
51.52 | % | |||
JPMorgan Chase Bank, National Association 14201 Dallas Parkway Chase International Plaza Dallas, TX 75254 |
11.78 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.63 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
5.36 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.02 | % | ||||
SPDR S&P REGIONAL BANKING ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
9.07 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.70 | % | ||||
TD Waterhouse Canada Inc./CDS** 2105 Boul Daniel-Johnson Laval QC H7T 1H8 |
6.70 | % | ||||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
6.67 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
6.42 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
5.58 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
5.47 | % | ||||
SPDR NYSE TECHNOLOGY ETF |
The Northern Trust Company 50 South LaSalle Street Chicago, IL 60675 |
19.74 | % | |||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
14.73 | % |
68
Fund | Name and Address |
Percentage of Ownership |
||||
Robert W. Baird & Co. Inc. 777 East Wisconsin Avenue Milwaukee, WI 53202 |
13.22 | % | ||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
9.30 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
8.27 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.33 | % | ||||
SPDR S&P DIVIDEND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
17.51 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
13.93 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
7.16 | % | ||||
Edward D. Jones & CO. 12555 Manchester Road St. Louis, MO 63131 |
6.53 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
6.44 | % | ||||
SPDR S&P AEROSPACE & DEFENSE ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
13.69 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
9.48 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
9.13 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
7.00 | % |
69
Fund | Name and Address |
Percentage of Ownership |
||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
6.86 | % | ||||
American Enterprise Investment Services Inc. 702 2 nd Avenue South Minneapolis, MN 55402 |
6.48 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
5.35 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.30 | % | ||||
SPDR S&P BIOTECH ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
15.86 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.14 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
8.35 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
6.12 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
5.38 | % | ||||
Wells Fargo Clearing Services, LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
5.19 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.14 | % |
70
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P HEALTH CARE EQUIPMENT ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
22.75 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
15.39 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
9.51 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.29 | % | ||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
6.10 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
5.84 | % | ||||
SPDR S&P HEALTH CARE SERVICES ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
16.00 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
11.67 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
10.22 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
8.31 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
6.03 | % | ||||
Brown Brothers Harriman & CO. 525 Washington Blvd. Jersey City, NJ 07310 |
5.90 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
5.63 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.33 | % |
71
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P HOMEBUILDERS ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.97 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.60 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
5.26 | % | ||||
SPDR S&P INTERNET ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
25.53 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
22.20 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
13.80 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
10.89 | % |
72
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P METALS & MINING ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.89 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
9.42 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
9.23 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
8.06 | % | ||||
Brown Brothers Harriman & CO. 525 Washington Blvd. Jersey City, NJ 07310 |
5.01 | % | ||||
SPDR S&P OIL & GAS EQUIPMENT & SERVICES ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
18.37 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.67 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
9.13 | % | ||||
JPMorgan Chase Bank, National Association 14201 Dallas Parkway Chase International Plaza Dallas, TX 75254 |
7.95 | % | ||||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
5.29 | % | ||||
SPDR S&P OIL & GAS EXPLORATION & PRODUCTION ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
14.37 | % | |||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
11.68 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
7.58 | % |
73
Fund | Name and Address |
Percentage of Ownership |
||||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
7.20 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
5.96 | % | ||||
JPMorgan Chase Bank, National Association 14201 Dallas Parkway Chase International Plaza Dallas, TX 75254 |
5.54 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.16 | % | ||||
SPDR S&P PHARMACEUTICALS ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
11.29 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.11 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
8.23 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
7.36 | % | ||||
Wells Fargo Clearing Services, LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
5.54 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
5.40 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.26 | % | ||||
SPDR S&P RETAIL ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
11.78 | % |
74
Fund | Name and Address |
Percentage of Ownership |
||||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
11.74 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
11.01 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
9.55 | % | ||||
SPDR S&P SEMICONDUCTOR ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
14.10 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
9.50 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
8.90 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
8.17 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
7.84 | % | ||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
7.33 | % | ||||
Wells Fargo Clearing Services, LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
6.06 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
5.95 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.13 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
5.10 | % |
75
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P SOFTWARE & SERVICES ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
17.26 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
14.59 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.36 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
10.81 | % |
76
Fund | Name and Address |
Percentage of Ownership |
||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
9.20 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
6.57 | % | ||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
5.33 | % | ||||
SPDR S&P TECHNOLOGY HARDWARE ETF |
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
48.69 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
11.87 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
11.82 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
6.30 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.23 | % | ||||
SPDR S&P TELECOM ETF |
The Northern Trust Company 50 South LaSalle Street Chicago, IL 60675 |
23.40 | % | |||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
16.20 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
9.30 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.04 | % | ||||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
7.05 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
6.58 | % |
77
Fund | Name and Address |
Percentage of Ownership |
||||
RBC Capital Markets, LLC 3 World Financial Center 200 Vesey Street New York, NY |
5.46 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.14 | % | ||||
SPDR S&P TRANSPORTATION ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
12.45 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
11.43 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.92 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
8.78 | % | ||||
UBS Securities LLC 1285 Avenue of the Americas New York, NY 10019 |
7.02 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
6.83 | % | ||||
Wells Fargo Clearing Services, LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
5.76 | % | ||||
The Northern Trust Company 50 South LaSalle Street Chicago, IL 60675 |
5.17 | % | ||||
SPDR S&P 1500 VALUE TILT ETF |
Fifth Third Bank 34 Fountain Square Plaza Cincinnati, OH 45202 |
32.17 | % |
78
Fund | Name and Address |
Percentage of Ownership |
||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
13.38 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
12.02 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
9.58 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
7.06 | % | ||||
SPDR S&P 1500 MOMENTUM TILT ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
31.76 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
12.42 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
9.12 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.65 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
8.09 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
6.55 | % | ||||
SPDR MSCI USA STRATEGICFACTORS ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
28.81 | % | |||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
26.67 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.28 | % |
79
Fund | Name and Address |
Percentage of Ownership |
||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
8.02 | % | ||||
Fifth Third Bank 34 Fountain Square Plaza Cincinnati, OH 45202 |
5.85 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
5.67 | % | ||||
SPDR WELLS FARGO PREFERRED STOCK ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
22.01 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
15.42 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
9.34 | % | ||||
Wells Fargo Clearing Services, LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
6.42 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
6.11 | % | ||||
The Bank of New York Mellon/ Mellon Trust of New England, National Association Three Mellon Bank Center Pittsburgh, PA 15259 |
5.78 | % | ||||
SPDR FACTSET INNOVATIVE TECHNOLOGY ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
48.20 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.73 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
6.76 | % |
80
Fund | Name and Address |
Percentage of Ownership |
||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
6.70 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
5.31 | % | ||||
SPDR BLOOMBERG BARCLAYS 1-3 MONTH T-BILL ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
15.23 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
14.84 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
11.12 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
6.55 | % |
81
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR BLOOMBERG BARCLAYS TIPS ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
32.23 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
19.92 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.31 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
8.51 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
7.03 | % | ||||
SPDR BLOOMBERG BARCLAYS 1-10 YEAR TIPS ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
75.27 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
16.37 | % | ||||
SPDR PORTFOLIO SHORT TERM TREASURY ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
31.18 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
26.50 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
13.53 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
6.25 | % | ||||
SPDR BLOOMBERG BARCLAYS INTERMEDIATE TERM TREASURY ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
30.70 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
10.21 | % |
82
Fund | Name and Address |
Percentage of Ownership |
||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
5.64 | % | ||||
Stephens Inc. 175 Federal Street #900 Boston, MA 02110 |
5.62 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 1028 |
5.54 | % | ||||
SPDR PORTFOLIO LONG TERM TREASURY ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
44.38 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
13.31 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
8.67 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.67 | % | ||||
SPDR PORTFOLIO SHORT TERM CORPORATE BOND ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
15.91 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
15.44 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
12.14 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.86 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
6.51 | % |
83
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR PORTFOLIO INTERMEDIATE TERM CORPORATE BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
26.21 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
18.44 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
13.55 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
7.27 | % | ||||
SPDR PORTFOLIO LONG TERM CORPORATE BOND ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
21.10 | % | |||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
13.91 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 0217 |
10.33 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
6.46 | % | ||||
Fifth Third Bank 34 Fountain Square Plaza Cincinnati, OH 45202 |
5.56 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.29 | % | ||||
SPDR BLOOMBERG BARCLAYS CORPORATE BOND ETF |
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
23.91 | % | |||
Goldman, Sachs & Co. 180 Maiden Lane New York, NY 10038 |
21.47 | % | ||||
Citibank, N.A. 3800 Citigroup Center Tampa Tampa, FL 33610 |
21.43 | % |
84
Fund | Name and Address |
Percentage of Ownership |
||||
Charles Schwab & Co. Inc. 101 Montgomery Street San Francisco, CA 94104 |
11.93 | % | ||||
JPMorgan Chase Bank, National Association 14201 Dallas Parkway Chase International Plaza Dallas, TX 75254 |
6.29 | % | ||||
SPDR BLOOMBERG BARCLAYS CONVERTIBLE SECURITIES ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.83 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.10 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
8.01 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
6.55 | % |
85
Fund | Name and Address |
Percentage of Ownership |
||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
5.94 | % | ||||
Wells Fargo Clearing Services, LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
5.93 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
5.60 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.01 | % | ||||
SPDR BLOOMBERG BARCLAYS MORTGAGE BACKED BOND ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
49.54 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
9.20 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
5.88 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.81 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
5.28 | % | ||||
SPDR PORTFOLIO AGGREGATE BOND ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
55.69 | % | |||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
22.22 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
6.24 | % | ||||
SPDR NUVEEN BLOOMBERG BARCLAYS MUNICIPAL BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
18.00 | % |
86
Fund | Name and Address |
Percentage of Ownership |
||||
RBC Capital Markets, LLC 3 World Financial Center 200 Vesey Street New York, NY |
14.00 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
13.51 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
9.17 | % | ||||
APEX Clearing Corporation One Dallas Center 350 N. St. Paul, Suite 1300 Dallas, TX 75201 |
8.78 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
7.55 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
6.91 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
5.05 | % |
87
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR NUVEEN BLOOMBERG BARCLAYS SHORT TERM MUNICIPAL BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
15.71 | % | |||
Bank of America N.A./ GWIM TRUST OPERATIONS 414 N. Akard Street, 5th Floor Dallas, TX 75201 |
5.60 | % | ||||
SPDR NUVEEN S&P HIGH YIELD MUNICIPAL BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
19.00 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
18.76 | % | ||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
7.19 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
7.17 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
6.78 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.10 | % | ||||
SPDR FTSE INTERNATIONAL GOVERNMENT INFLATION-PROTECTED BOND ETF |
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
13.78 | % | |||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
12.17 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.68 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
9.38 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
7.05 | % | ||||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
6.61 | % |
88
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR BLOOMBERG BARCLAYS SHORT TERM INTERNATIONAL TREASURY BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
26.89 | % | |||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
21.08 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
13.89 | % | ||||
HSBC Bank USA, N.A. P.O. Box 2690 Buffalo, NY 14240 |
5.24 | % | ||||
SPDR BLOOMBERG BARCLAYS INTERNATIONAL TREASURY BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
13.77 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
10.26 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
9.03 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
7.81 | % | ||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
6.42 | % | ||||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
5.34 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.22 | % | ||||
SPDR BLOOMBERG BARCLAYS INTERNATIONAL CORPORATE BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
43.60 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
8.94 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.50 | % |
89
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR BLOOMBERG BARCLAYS EMERGING MARKETS LOCAL BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
70.10 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
6.20 | % | ||||
SPDR BLOOMBERG BARCLAYS HIGH YIELD BOND ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
9.47 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
7.25 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
6.97 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
6.07 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
5.41 | % | ||||
UBS Financial Services Inc. 1200 Harbor Boulevard Weehawken, NJ 07086 |
5.36 | % | ||||
State Street Bank & Trust / Total ETF 1776 Heritage Drive North Quincy, MA 02171 |
5.30 | % | ||||
Wells Fargo Clearing Services, LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
5.13 | % | ||||
SPDR BLOOMBERG BARCLAYS SHORT TERM HIGH YIELD BOND ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
18.60 | % | |||
American Enterprise Investment Services Inc. 2723 Ameriprise Financial Center Minneapolis, MN 55474 |
11.30 | % |
90
Fund | Name and Address |
Percentage of Ownership |
||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
10.59 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.41 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
8.37 | % | ||||
SPDR BLOOMBERG BARCLAYS INVESTMENT GRADE FLOATING RATE ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
26.63 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
11.22 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.45 | % |
91
Fund | Name and Address |
Percentage of Ownership |
||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
5.78 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
5.35 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.09 | % | ||||
SPDR ICE BOFAML CROSSOVER CORPORATE BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
26.63 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
11.22 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.45 | % | ||||
Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, FL 33733 |
5.78 | % | ||||
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
5.35 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.09 | % |
* |
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 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.
As of October 5, 2018, to the knowledge of the Trust, the following persons held of record or beneficially through one or more accounts 25% or more of the outstanding shares of the Funds.
92
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR RUSSELL 1000 YIELD FOCUS ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
96.79 | % | |||
SPDR RUSSELL 1000 MOMENTUM FOCUS ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
67.34 | % | |||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
25.96 | % | ||||
SPDR RUSSELL 1000 LOW VOLATILITY FOCUS ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
93.27 | % | |||
SPDR S&P 500 BUYBACK ETF |
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
46.42 | % | |||
SPDR PORTFOLIO S&P 500 GROWTH ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
32.29 | % | |||
SPDR PORTOFLIO S&P 500 VALUE ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
43.94 | % | |||
SPDR PORTFOLIO S&P 500 HIGH DIVIDEND ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
34.49 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
25.51 | % | ||||
SPDR PORTFOLIO MID CAP ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
52.89 | % | |||
SPDR S&P 400 MID CAP GROWTH ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
59.05 | % | |||
SPDR S&P 400 MID CAP VALUE ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
69.21 | % |
93
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR S&P 600 SMALL CAP GROWTH ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
41.42 | % | |||
SPDR S&P 600 SMALL CAP VALUE ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
50.58 | % | |||
SPDR S&P INSURANCE ETF |
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
51.52 | % | |||
SPDR S&P INTERNET ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
25.53 | % | |||
SPDR S&P TECHNOLOGY HARDWARE ETF |
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
48.69 | % | |||
SPDR S&P 1500 VALUE TILT ETF |
Fifth Third Bank 34 Fountain Square Plaza Cincinnati, OH 45202 |
32.17 | % | |||
SPDR S&P 1500 MOMENTUM TILT ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
31.76 | % | |||
SPDR MSCI USA STRATEGICFACTORS ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
28.81 | % | |||
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
26.67 | % | ||||
SPDR FACTSET INNOVATIVE TECHNOLOGY ETF |
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
48.20 | % | |||
SPDR BLOOMBERG BARCLAYS TIPS ETF |
The Bank of New York Mellon One Wall Street, 5th Floor New York, NY 10286 |
32.23 | % | |||
SPDR BLOOMBERG BARCLAYS 1-10 YEAR TIPS ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
75.27 | % | |||
SPDR PORTFOLIO SHORT TERM TREASURY ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
31.18 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
26.50 | % |
94
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR BLOOMBERG BARCLAYS INTERMEDIATE TERM TREASURY ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
30.70 | % | |||
SPDR PORTFOLIO LONG TERM TREASURY ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
44.38 | % | |||
SPDR PORTFOLIO INTERMEDIATE TERM CORPORATE BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
26.21 | % | |||
SPDR BLOOMBERG BARCLAYS MORTGAGE BACKED BOND ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
49.54 | % | |||
SPDR PORTFOLIO AGGREGATE BOND ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
55.69 | % | |||
SPDR BLOOMBERG BARCLAYS SHORT TERM INTERNATIONAL TREASURY BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
26.89 | % | |||
SPDR BLOOMBERG BARCLAYS INTERNATIONAL CORPORATE BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
43.60 | % | |||
SPDR BLOOMBERG BARCLAYS EMERGING MARKETS LOCAL BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
70.10 | % | |||
SPDR BLOOMBERG BARCLAYS INVESTMENT GRADE FLOATING RATE ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
26.63 | % | |||
SPDR ICE BOFAML CROSSOVER CORPORATE BOND ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
26.63 | % |
* |
Percentages referenced in this table for Merrill Lynch may also include Shares held at ML SFKPG. 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. |
95
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 each Fund is determined once each business day, except with respect to the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF, the value of which is determined twice 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 Bloomberg Barclays 1-3 Month T-Bill ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays TIPS ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays 1-10 Year TIPS ETF |
In-Kind | In-Kind | ||
SPDR Portfolio Short Term Treasury ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
In-Kind | In-Kind | ||
SPDR Portfolio Long Term Treasury ETF |
In-Kind | In-Kind | ||
SPDR Portfolio Short Term Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Portfolio Intermediate Term Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Portfolio Long Term Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays Convertible Securities ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays Mortgage Backed Bond ETF |
Cash | Cash | ||
SPDR Portfolio Aggregate Bond ETF |
In-Kind** | In-Kind** | ||
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF |
Cash | In-Kind | ||
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
Cash | In-Kind | ||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
Cash | In-Kind | ||
SPDR FTSE International Government Inflation-Protected Bond ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays International Treasury Bond ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays International Corporate Bond ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays High Yield Bond ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays Short Term High Yield Bond ETF |
In-Kind | In-Kind | ||
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
In-Kind | In-Kind | ||
SPDR ICE BofAML 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
96
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 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, 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 SPDR Bloomberg Barclays International Treasury Bond ETF and SPDR Bloomberg Barclays Short Term International Treasury Bond ETF), 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.
97
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 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. 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 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 second Business Day (T+2) after the Order Placement Date. The Settlement Date for the SPDR Global Dow ETF, SPDR Bloomberg Barclays Emerging Markets Local Bond ETF and SPDR FTSE International Government Inflation-Protected Bond ETF is the third Business Day (T+3) after the Order Placement Date. The Settlement Date for the SPDR Bloomberg Barclays TIPS ETF is the first Business Day (T+1) after the Order Placement Date. The Settlement Date for the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF is the same day (T+0) as the Order Placement Date for orders placed prior to 12:00 p.m. Eastern time; orders placed after 12:00 p.m. Eastern time will have a Settlement Date of the first Business Day (T+1) following 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 second Business Day following the day on which the purchase order is deemed received by the Distributor. Delivery of Creation Units will occur no later than the third Business Day following the day on which the purchase order is deemed received by the Distributor for the SPDR Global Dow ETF, SPDR Bloomberg Barclays Emerging Markets Local Bond ETF and SPDR FTSE International Government Inflation-Protected Bond ETF. Delivery of Creation Units for the SPDR Bloomberg Barclays TIPS ETF will occur no later than the first Business Day following the day on which the purchase order is deemed received by the Distributor. Delivery of Creation Units for the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF will occur on the same day for orders placed before 12:00 p.m. Eastern time, and the following Business Day for order placed after 12:00 p.m. Eastern time.
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
98
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 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 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.
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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 prior to the opening of business 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 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 two Business Days, or in the case of the SPDR Global Dow ETF, SPDR Bloomberg Barclays Emerging Markets Local Bond ETF and SPDR FTSE International Government Inflation-Protected Bond ETF 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 two or three Business Days, as applicable, 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, as of the close of the Business Day on which the redemption request was submitted, it (or its client) will own (within the meaning of Rule 200 of Regulation SHO) or has arranged to borrow for delivery to the Trust on or prior to the Settlement Date of the redemption request, the requisite number of Shares of the relevant Fund to be redeemed as a Creation Unit. In either case, the Authorized Participant is deemed to acknowledge that: (i) it (or its client) has full legal authority and legal right to tender for redemption the requisite number of Shares of the applicable Fund and to receive the entire proceeds of the redemption; and (ii) if such Shares submitted for redemption have been loaned or
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pledged to another party or are the subject of a repurchase agreement, securities lending agreement or any other arrangement affecting legal or beneficial ownership of such Shares being tendered, there are no restrictions precluding the tender and delivery of such Shares (including borrowed shares, if any) for redemption, free and clear of liens, on the redemption Settlement Date. 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/or the applicable order form, certain Funds may require orders to be placed 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. The cut-off time to receive the trade dates net asset value will not precede the calculation of the net asset value of a Funds shares on the prior Business Day. 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.
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 1000 Yield Focus ETF |
$ | 1,000 | $ | 4,000 | ||||
SPDR Russell 1000 Momentum Focus ETF |
$ | 2,000 | $ | 8,000 | ||||
SPDR Russell 1000 Low Volatility Focus ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR S&P 500 Buyback ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Portfolio S&P 500 Growth ETF |
$ | 350 | $ | 1,400 | ||||
SPDR Portfolio S&P 500 Value ETF |
$ | 500 | $ | 2,000 |
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FUND |
TRANSACTION
FEE*, ** |
MAXIMUM
TRANSACTION FEE*, ** |
||||||
SPDR Portfolio S&P 500 High Dividend ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P 500 Fossil Fuel Reserves Free ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Portfolio Mid Cap ETF |
$ | 500 | $ | 2,000 | ||||
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 Regional Banking ETF |
$ | 250 | $ | 1,000 | ||||
SPDR NYSE 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 Health Care Services ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Homebuilders ETF |
$ | 250 | $ | 1,000 | ||||
SPDR S&P Internet 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 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 Technology Hardware 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 MSCI USA StrategicFactors ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Wells Fargo Preferred Stock ETF |
$ | 750 | $ | 3,000 | ||||
SPDR FactSet Innovative Technology ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Bloomberg Barclays TIPS ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Bloomberg Barclays 1-10 Year TIPS ETF |
$ | 50 | $ | 200 | ||||
SPDR Portfolio Short Term Treasury ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Portfolio Long Term Treasury ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Portfolio Short Term Corporate Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Portfolio Intermediate Term Corporate Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Portfolio Long Term Corporate Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Bloomberg Barclays Corporate Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Bloomberg Barclays Convertible Securities ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Bloomberg Barclays Mortgage Backed Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Portfolio Aggregate Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF |
$ | 250 | $ | 1,000 |
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FUND |
TRANSACTION
FEE*, ** |
MAXIMUM
TRANSACTION FEE*, ** |
||||||
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
$ | 250 | $ | 1,000 | ||||
SPDR FTSE International Government Inflation-Protected Bond ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Bloomberg Barclays International Treasury Bond ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Bloomberg Barclays International Corporate Bond ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF |
$ | 1,500 | $ | 6,000 | ||||
SPDR Bloomberg Barclays High Yield Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Bloomberg Barclays Short Term High Yield Bond ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
$ | 200 | $ | 800 | ||||
SPDR ICE BofAML 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. |
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 each Fund other than the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF is calculated by State Street and determined once daily 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. With respect to the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF, the Funds net asset value is calculated and determined twice daily on each day the NYSE is open at the following times: (i) 12:00 p.m. Eastern time; and (ii) at the close of the regular trading session on the NYSE. 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
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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 (except SPDR MSCI USA StrategicFactors SM ETF and SPDR Wells Fargo Preferred Stock ETF), but may vary significantly from period to period. Income dividend distributions, if any, for the SPDR MSCI USA StrategicFactors SM ETF and SPDR Wells Fargo Preferred Stock ETF are generally distributed to shareholders semi-annually and monthly, respectively, 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 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.
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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 a 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 five 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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As discussed more fully below, each Fund intends to distribute substantially all of its net investment income and its capital gains for each taxable year.
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
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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 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 50% 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. 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.
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
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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 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 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.
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.
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).
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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. Under certain circumstances, if a Fund receives a refund of foreign taxes paid in respect of a prior year, the value of Shares could be reduced or any foreign tax credits or deductions passed through to shareholders in respect of the Funds foreign taxes for the current year could be reduced.
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.
Certain investments made by a Fund may be treated as equity in passive foreign investment companies or PFICs for federal income tax purposes. In general, a passive foreign investment company is a foreign corporation (i) that receives at least 75% of its annual gross income from passive sources (such as interest, dividends, certain rents and royalties, or capital gains) or (ii) where at least 50% of its assets (computed based on average fair market value) either produce or are held for the production of passive income. If a Fund acquires any equity interest (generally including, under Treasury regulations that may be promulgated in the future, not only stock but also an option to acquire stock such as is inherent in a convertible bond) in a PFIC, 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. Under proposed Treasury Regulations, certain income derived by a Fund for a taxable
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year from a PFIC with respect to which the Fund has made a qualified electing fund election would generally constitute qualifying income only to the extent the PFIC makes distributions in respect of that income to the Fund for that taxable year. The Funds may limit and/or manage their holdings in PFICs to limit their tax liability or maximize their returns from these investments.
If a sufficient portion of the interests in a foreign issuer are held or deemed held by a Fund, independently or together with certain other U.S. persons, that issuer may be treated as a controlled foreign corporation (a CFC) with respect to the Fund, in which case the Fund will be required to take into account each year, as ordinary income, its share of certain portions of that issuers income, whether or not such amounts are distributed. A Fund may have to dispose of its portfolio securities (potentially resulting in the recognition of taxable gain or loss, and potentially under disadvantageous circumstances) to generate cash, or may have to borrow the cash, to meet its distribution requirements and avoid Fund-level taxes. Under proposed Treasury Regulations, certain income derived by a Fund from a CFC for a taxable year would generally constitute qualifying income only to the extent the CFC makes distributions in respect of that income to the Fund for that taxable year. In addition, some Fund gains on the disposition of interests in such an issuer may be treated as ordinary income. A Fund may limit and/or manage its holdings in issuers that could be treated as CFCs in order to limit its tax liability or maximize its after-tax return 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. 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.
Noncorporate taxpayers are generally eligible for a deduction of up to 20% of qualified REIT dividends. A Fund will not be able to claim such a deduction in respect of any REIT dividends it receives, and shareholders will not be able to claim such a deduction in respect of Fund dividends attributable to any REIT dividends.
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
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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.
Certain tax-exempt educational institutions will be subject to a 1.4% tax on net investment income. For these purposes, certain dividends and capital gain distributions, and certain gains from the disposition of fund shares (among other categories of income), are generally taken into account in computing a shareholders net investment income.
FOREIGN SHAREHOLDERS. Dividends, other than capital gains dividends and exempt-interest dividends, short-term capital gain dividends and interest-related dividends (described below), 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 the 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.
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 and, after December 31, 2018, to redemptions and certain capital gain dividends payable to such entities. 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 21%, 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, Shares may qualify as USRPIs, which could result in 15% withholding on certain distributions and gross redemption proceeds paid 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 24%. 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
111
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 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.
112
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.
Shareholder inquiries may be made by writing to the Trust, c/o the Distributor, State Street Global Advisors Funds Distributors, LLC at One Iron Street, Boston, Massachusetts 02210.
COUNSEL AND INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Morgan, Lewis & Bockius LLP, 1111 Pennsylvania Avenue NW, Washington, DC 20004, serves as counsel to the Trust. Ernst & Young LLP, located at 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 two Business Days ( i.e. , days on which the NYSE is open), or in the case of the SPDR Global Dow ETF, SPDR Bloomberg Barclays Emerging Markets Local Bond ETF and SPDR FTSE International Government Inflation-Protected Bond ETF on a basis of T plus three Business Days, in the relevant foreign market of a Fund. The ability of the Trust to effect in-kind redemptions within two or three Business Days, as applicable, 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 two or three Business Days, as applicable.
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.
113
Listed below are the dates in calendar year 2018 (the only year for which holidays are known at the time of this SAI filing) in which the regular holidays in non-U.S. markets may impact Fund settlement. This list is based on information available to the Funds. The list may not be accurate or complete and is subject to change:
* |
Market closed every Friday |
114
Botswana |
Brazil |
Bulgaria |
Burkina Faso |
Canada |
||||
January 1-2 | January 1, 25 | January 1 | January 1 | January 1-2 | ||||
March 30 | February 12-14 | March 5 | April 2 | February 12, 19 | ||||
April 2 | March 30 | April 6, 9 | May 1, 10, 21 | March 30 | ||||
May 1, 10 | May 1, 31 | May 1, 7, 24 | June 11, 15 | May 21 | ||||
July 2, 16-17 | July 9 | September 6, 24 | August 7, 15, 22 | June 25 | ||||
October 1-2 | September 7 | December 24-26 | November 1, 15, 21 | July 2 | ||||
December 25-26 | October 12 | December 25 | August 6 | |||||
November 2, 15, 20 | September 3 | |||||||
December 24-25, 31 | October 8 | |||||||
November 12 | ||||||||
December 25-26 | ||||||||
Chile |
China |
Colombia |
Costa Rica |
Croatia |
||||
January 1 | January 1 | January 1-8 | January 1 | January 1 | ||||
March 30 | February 15-16, 19-21 | March 19, 29-30 | March 29-30 | March 30 | ||||
May 1, 21 | April 5-6, 30 | May 1, 14 | April 11 | April 2 | ||||
July 2, 16 | May 1 | June 4, 11 | May 1 | May 1, 31 | ||||
August 15 | June 18 | July 2, 20 | July 25 | June 22, 25 | ||||
September 17-19 | September 24 | August 7, 20 | August 2, 15 | August 15 | ||||
October 15 | October 1-5 | October 15 | October 15 | October 8 | ||||
November 1-2 | November 5, 12 | December 25 | November 1 | |||||
December 25, 31 | December 25 | December 24-26, 31 | ||||||
Cyprus |
The Czech Republic |
Denmark |
Egypt* |
Estonia |
||||
January 1 | January 1 | January 1 | January 1, 7, 25 | January 1 | ||||
February 19 | March 30 | March 29-30 | April 8-9, 25 | March 30 | ||||
March 30 | April 2 | April 2, 27 | May 1 | April 2 | ||||
April 2, 6, 9-10 | May 1, 8 | May 10-11, 21 | June 17 | May 1, 10 | ||||
May 1, 28 | July 5-6 | June 5 | July 1, 23 | August 20 | ||||
August 15 | September 28 | December 24-26, 31 | August 20-22 | December 24-26, 31 | ||||
October 1 | December 24-26, 31 | September 11 | ||||||
December 24-26 | November 20 | |||||||
* Market closed every Friday |
||||||||
Finland |
France |
Georgia |
Germany |
Ghana |
||||
January 1 | January 1 | January 1-2, 19 | January 1 | January 1 | ||||
March 30 | March 30 | March 8 | March 30 | March 6, 30 | ||||
April 2 | April 2 | April 6, 9 | April 2 | April 2 | ||||
May 1-10 | May 1 | May 9 | May 1, 21 | May 1, 25 | ||||
June 22 | December 24-26, 31 | August 28 | October 3 | June 15 | ||||
December 6, 24-26, 31 | November 23 | December 24-26, 31 | July 2 | |||||
August 22 | ||||||||
September 21 | ||||||||
December 7, 25-26 | ||||||||
Greece |
Guinea-Bissau |
Hong Kong |
Hungary |
Iceland |
||||
January 1 | January 1 | January 1, 27 | January 1 | January 1 | ||||
February 19 | April 2 | February 15-16, 19 | March 15-16, 30 | March 29-30 | ||||
March 30 | May 1, 10, 21 | March 30 | April 2, 30 | April 2, 19 | ||||
April 2, 6, 9 | June 11, 15 | April 2, 5 | May 1, 21 | May 1, 10, 21 | ||||
May 1, 28 | August 7, 15, 22 | May 1, 22 | August 20 | August 6 | ||||
August 15 | November 1, 15, 21 | June 18 | October 22-23 | December 24-26, 31 | ||||
December 24-26 | December 25 | July 2 | November 1-2 | |||||
September 25 | December 24-26, 31 | |||||||
October 1, 17 | ||||||||
December 24-26, 31 |
115
116
117
Sweden |
Switzerland |
Taiwan |
Tanzania |
Thailand |
||||
January 1, 5 | January 1-2 | January 1 | January 1, 12 | January 1-2 | ||||
March 29-30 | March 30 | February 13-16, 19-20, 28 | March 30 | March 1 | ||||
April 2 | April 2 | April 4-6 | April 2, 26 | April 6, 13, 16 | ||||
May 1, 9-10 | May 1, 10, 21 | May 1 | May 1 | May 1, 29 | ||||
June 6, 22 | August 1 | June 18 | June 15 | July 27, 30 | ||||
November 2 | December 25-26 | September 24 | August 8, 22 | August 13 | ||||
December 24-26, 31 | October 10 | November 21 | October 15, 23 | |||||
December 31 | December 20, 25-26 | December 5, 10, 31 | ||||||
Togo |
Tunisia |
Turkey |
Uganda |
Ukraine |
||||
January 1 | January 1 | January 1 | January 1, 26 | January 1, 8 | ||||
April 2 | March 20 | April 23 | February 16 | March 8 | ||||
May 1, 10, 21 | April 9 | May 1 | March 8, 30 | April 9 | ||||
June 11, 15 | May 1 | June 14-15 | April 2 | May 1-2, 9, 28 | ||||
August 7, 15, 22 | June 15 | August 20-24, 30 | May 1 | June 28 | ||||
November 1, 15, 21 | July 25 | October 29 | June 15 | August 24 | ||||
December 25 | August 13, 21 | August 21 | October 15 | |||||
September 12 | October 9 | December 25 | ||||||
October 15 | November 30 | |||||||
November 20 | December 25-26 | |||||||
The United Arab Emirates* |
The United Kingdom |
The United States Bond Market |
Uruguay |
Venezuela |
||||
January 1 | January 1 | January 1, 15 | January 1 | January 1 | ||||
June 14 | March 30 | February 19 | February 12-13 | February 12-13 | ||||
August 20-22 | April 2 | March 29*, 30 | March 29-30 | March 19, 29-30 | ||||
September 11 | May 7, 28 | May 25*, 28 | April 23 | April 19 | ||||
November 20 | August 27 | July 3*- 4 | May 1, 21 | May 1, 14 | ||||
December 2-3 | December 24-26, 31 | September 4 | June 19 | June 4 | ||||
October 8 | July 18 | July 2, 5, 24 | ||||||
November 22, 23*, 24* | October 15 | August 20 | ||||||
December 25, 31* | November 2 | September 10 | ||||||
December 25 | October 12 | |||||||
* Market closed every Friday |
* The U.S. bond market has recommended early close. |
November 5 December 24-25, 31 |
||||||
Vietnam |
Zambia |
Zimbabwe |
||||||
January 1 | January 1 | January 1 | ||||||
February 14-16, 19-20 | March 8, 12, 30 | February 21 | ||||||
April 25, 30 | April 2 | March 30 | ||||||
May 1 | May 1, 25 | April 2, 18 | ||||||
September 3 | July 2-3 | May 1, 25 | ||||||
August 6 | August 13-14 | |||||||
October 18, 24 | December 25-26 | |||||||
December 25 |
118
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 year 2018, the dates of regular holidays affecting the following securities markets present the worst-case redemption cycles* for a Fund as follows:
2018
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Argentina |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
03/28/18 | 04/05/18 | 8 | ||||
Australia |
03/27/18 | 04/04/18 | 8 | |||
03/28/18 | 04/05/18 | 8 | ||||
03/29/18 | 04/06/18 | 8 | ||||
12/19/18 | 12/27/18 | 8 | ||||
12/20/18 | 12/28/18 | 8 | ||||
12/21/18 | 01/02/19 | 12 | ||||
Bangladesh |
08/16/18 | 08/26/18 | 10 | |||
08/19/18 | 08/27/18 | 8 | ||||
08/20/18 | 08/28/18 | 8 | ||||
Bosnia and Herzegovina |
04/25/18 | 05/03/18 | 8 | |||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
Brazil |
02/07/18 | 02/15/18 | 8 | |||
02/08/18 | 02/16/18 | 8 | ||||
02/09/18 | 02/19/18 | 10 | ||||
China |
02/12/18 | 02/22/18 | 10 | |||
02/13/18 | 02/23/18 | 10 | ||||
02/14/18 | 02/26/18 | 12 | ||||
09/26/18 | 10/08/18 | 12 | ||||
09/27/18 | 10/09/18 | 12 | ||||
09/28/18 | 10/10/18 | 12 | ||||
Indonesia |
06/08/18 | 06/20/18 | 12 | |||
06/11/18 | 06/21/18 | 10 | ||||
06/12/18 | 06/22/18 | 10 | ||||
Israel |
03/28/18 | 04/08/18 | 11 | |||
03/29/18 | 04/09/18 | 11 | ||||
09/17/18 | 10/02/18 | 15 | ||||
09/20/18 | 10/03/18 | 13 |
119
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Japan |
04/27/18 | 05/07/18 | 10 | |||
Kuwait |
08/16/18 | 08/26/18 | 10 | |||
08/19/18 | 08/27/18 | 8 | ||||
Malawi |
01/08/18 | 01/16/18 | 8 | |||
01/09/18 | 01/17/18 | 8 | ||||
01/10/18 | 01/18/18 | 8 | ||||
01/11/18 | 01/19/18 | 8 | ||||
01/12/18 | 01/22/18 | 10 | ||||
02/26/18 | 03/06/18 | 8 | ||||
02/27/18 | 03/07/17 | 8 | ||||
02/28/18 | 03/08/18 | 8 | ||||
03/01/18 | 03/09/18 | 8 | ||||
03/02/18 | 03/12/18 | 10 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/07/18 | 05/15/18 | 8 | ||||
05/08/18 | 05/16/18 | 8 | ||||
05/09/18 | 05/17/18 | 8 | ||||
05/10/18 | 05/18/18 | 8 | ||||
05/11/18 | 05/21/18 | 10 | ||||
06/08/18 | 06/18/18 | 10 | ||||
06/11/18 | 06/19/18 | 8 | ||||
06/12/18 | 06/20/18 | 8 | ||||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/22/18 | 8 | ||||
06/29/18 | 07/09/18 | 10 | ||||
07/02/18 | 07/10/18 | 8 | ||||
07/03/18 | 07/11/18 | 8 | ||||
07/04/18 | 07/12/18 | 8 | ||||
07/05/18 | 07/13/18 | 8 | ||||
10/08/18 | 10/16/18 | 8 | ||||
10/09/18 | 10/17/18 | 8 | ||||
10/10/18 | 10/18/18 | 8 | ||||
10/11/18 | 10/19/18 | 8 | ||||
10/12/18 | 10/22/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 |
120
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Mexico |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
03/28/18 | 04/05/18 | 8 | ||||
Morocco |
08/15/18 | 08/23/18 | 8 | |||
08/16/18 | 08/24/18 | 8 | ||||
08/17/18 | 08/27/18 | 10 | ||||
Namibia |
03/14/18 | 03/22/18 | 8 | |||
03/15/18 | 03/23/18 | 8 | ||||
03/16/18 | 03/26/18 | 10 | ||||
03/19/18 | 03/27/18 | 8 | ||||
03/20/18 | 03/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/25/18 | 05/07/18 | 12 | ||||
04/26/18 | 05/08/18 | 12 | ||||
05/02/18 | 05/10/18 | 8 | ||||
05/03/18 | 05/11/18 | 8 | ||||
05/18/18 | 05/28/18 | 10 | ||||
05/21/18 | 05/29/18 | 8 | ||||
05/22/18 | 05/30/18 | 8 | ||||
05/23/18 | 05/31/18 | 8 | ||||
05/24/18 | 06/01/18 | 8 | ||||
08/02/18 | 08/10/18 | 8 | ||||
08/03/18 | 08/13/18 | 10 | ||||
08/06/18 | 08/14/18 | 8 | ||||
08/07/18 | 08/15/18 | 8 | ||||
08/08/18 | 08/16/18 | 8 | ||||
08/20/18 | 08/28/18 | 8 | ||||
08/21/18 | 08/29/18 | 8 | ||||
08/22/18 | 08/30/18 | 8 | ||||
08/23/18 | 08/31/18 | 8 | ||||
08/24/18 | 09/03/18 | 10 | ||||
09/17/18 | 09/25/18 | 8 | ||||
09/18/18 | 09/26/18 | 8 | ||||
09/19/18 | 09/27/18 | 8 | ||||
09/20/18 | 09/28/18 | 8 | ||||
09/21/18 | 10/01/18 | 10 | ||||
12/03/18 | 12/11/18 | 8 | ||||
12/04/18 | 12/12/18 | 8 | ||||
12/05/18 | 12/13/18 | 8 | ||||
12/06/18 | 12/14/18 | 8 | ||||
12/07/18 | 12/18/18 | 11 | ||||
12/11/18 | 12/19/18 | 8 | ||||
12/12/18 | 12/20/18 | 8 | ||||
12/13/18 | 12/21/18 | 8 | ||||
12/14/18 | 12/24/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Norway |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
Oman |
11/13/18 | 11/21/18 | 8 | |||
11/14/18 | 11/22/18 | 8 | ||||
11/15/18 | 11/25/18 | 10 | ||||
Qatar |
06/12/18 | 06/20/18 | 8 | |||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/24/18 | 10 | ||||
08/15/18 | 08/23/18 | 8 | ||||
08/16/18 | 08/26/18 | 10 | ||||
08/19/18 | 08/27/18 | 8 | ||||
Saudi Arabia |
06/13/18 | 06/24/18 | 11 | |||
06/14/18 | 06/25/18 | 11 | ||||
08/15/18 | 08/26/18 | 11 | ||||
08/16/18 | 08/27/18 | 11 |
121
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Serbia |
12/26/18 | 01/03/19 | 8 | |||
12/27/18 | 01/04/19 | 8 | ||||
12/28/18 | 01/07/19 | 10 | ||||
South Africa |
03/14/18 | 03/22/18 | 8 | |||
03/15/18 | 03/23/18 | 8 | ||||
03/16/18 | 03/26/18 | 10 | ||||
03/19/18 | 03/27/18 | 8 | ||||
03/20/18 | 03/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/25/18 | 05/04/18 | 9 | ||||
04/26/18 | 05/07/18 | 11 | ||||
04/30/18 | 05/08/18 | 8 | ||||
08/02/18 | 08/10/18 | 8 | ||||
08/03/18 | 08/13/18 | 10 | ||||
08/06/18 | 08/14/18 | 8 | ||||
08/07/18 | 08/15/18 | 8 | ||||
08/08/18 | 08/16/18 | 8 | ||||
09/17/18 | 09/25/18 | 8 | ||||
09/18/18 | 09/26/18 | 8 | ||||
09/19/18 | 09/27/18 | 8 | ||||
09/20/18 | 09/28/18 | 8 | ||||
09/21/18 | 10/01/18 | 10 | ||||
12/10/18 | 12/18/18 | 8 | ||||
12/11/18 | 12/19/18 | 8 | ||||
12/12/18 | 12/20/18 | 8 | ||||
12/13/18 | 12/21/18 | 8 | ||||
12/14/18 | 12/24/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Swaziland |
01/02/18 | 01/10/18 | 8 | |||
01/03/18 | 01/11/18 | 8 | ||||
01/04/18 | 1/12/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 |
122
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
03/29/18 | 04/09/18 | 11 | ||||
04/12/18 | 04/20/18 | 8 | ||||
04/13/18 | 04/23/18 | 10 | ||||
04/16/18 | 04/24/18 | 8 | ||||
04/17/18 | 04/26/18 | 9 | ||||
04/18/18 | 04/27/18 | 9 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/03/18 | 05/11/18 | 8 | ||||
05/04/18 | 05/14/18 | 10 | ||||
05/07/18 | 05/15/18 | 8 | ||||
05/08/18 | 05/16/18 | 8 | ||||
05/09/18 | 05/17/18 | 8 | ||||
07/16/18 | 07/24/18 | 8 | ||||
07/17/18 | 07/25/18 | 8 | ||||
07/18/18 | 07/26/18 | 8 | ||||
07/19/18 | 07/27/18 | 8 | ||||
07/20/18 | 07/30/18 | 10 | ||||
08/20/18 | 08/28/18 | 8 | ||||
08/21/18 | 08/29/18 | 8 | ||||
08/22/18 | 08/30/18 | 8 | ||||
08/23/18 | 08/31/18 | 8 | ||||
08/24/18 | 09/03/18 | 10 | ||||
08/30/18 | 09/07/18 | 8 | ||||
08/31/18 | 09/10/18 | 10 | ||||
09/03/18 | 09/11/18 | 8 | ||||
09/04/18 | 09/12/18 | 8 | ||||
09/05/18 | 09/13/18 | 8 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Taiwan |
02/09/18 | 02/21/18 | 12 | |||
02/12/18 | 02/22/18 | 10 | ||||
Tanzania |
12/19/18 | 12/27/18 | 8 | |||
Thailand |
12/26/18 | 01/03/19 | 8 | |||
12/27/18 | 01/04/19 | 8 | ||||
12/28/18 | 01/07/19 | 10 | ||||
Turkey |
08/16/18 | 08/27/18 | 11 | |||
08/17/18 | 08/28/18 | 11 |
123
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Uganda |
01/19/18 | 01/29/18 | 10 | |||
01/22/18 | 01/30/18 | 8 | ||||
01/23/18 | 01/31/18 | 8 | ||||
01/24/18 | 02/01/18 | 8 | ||||
01/25/18 | 02/02/18 | 8 | ||||
02/09/18 | 02/19/18 | 10 | ||||
02/12/18 | 02/20/18 | 8 | ||||
02/13/18 | 02/21/18 | 8 | ||||
02/14/18 | 02/22/18 | 8 | ||||
02/15/18 | 02/23/18 | 8 | ||||
03/01/18 | 03/09/18 | 8 | ||||
03/02/18 | 03/12/18 | 10 | ||||
03/05/18 | 03/13/18 | 8 | ||||
03/06/18 | 03/14/18 | 8 | ||||
03/07/18 | 03/15/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
06/08/18 | 06/18/18 | 10 | ||||
06/11/18 | 06/19/18 | 8 | ||||
06/12/18 | 06/20/18 | 8 | ||||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/22/18 | 8 | ||||
08/14/18 | 08/22/18 | 8 | ||||
08/15/18 | 08/23/18 | 8 | ||||
08/16/18 | 08/24/18 | 8 | ||||
08/17/18 | 08/27/18 | 10 | ||||
08/20/18 | 08/28/18 | 8 | ||||
10/02/18 | 10/10/18 | 8 | ||||
10/03/18 | 10/11/18 | 8 | ||||
10/04/18 | 10/12/18 | 8 | ||||
10/05/18 | 10/15/18 | 10 | ||||
10/08/18 | 10/16/18 | 8 | ||||
11/23/18 | 12/03/18 | 10 | ||||
11/26/18 | 12/04/18 | 8 | ||||
11/27/18 | 12/05/18 | 8 | ||||
11/28/18 | 12/06/18 | 8 | ||||
11/29/18 | 12/07/18 | 8 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 |
124
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Vietnam |
02/09/18 | 02/21/18 | 12 | |||
02/12/18 | 02/22/18 | 10 | ||||
02/13/18 | 02/23/18 | 10 | ||||
Zimbabwe |
02/14/18 | 02/22/18 | 8 | |||
02/15/18 | 02/23/18 | 8 | ||||
02/16/18 | 02/26/18 | 10 | ||||
02/19/18 | 02/27/18 | 8 | ||||
02/20/18 | 02/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/11/18 | 04/19/18 | 8 | ||||
04/12/18 | 04/20/18 | 8 | ||||
04/13/18 | 04/23/18 | 10 | ||||
04/16/18 | 04/24/18 | 8 | ||||
04/17/18 | 04/25/18 | 8 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/18/18 | 05/28/18 | 10 | ||||
05/21/18 | 05/29/18 | 8 | ||||
05/22/18 | 05/30/18 | 8 | ||||
05/23/18 | 05/31/18 | 8 | ||||
05/24/18 | 06/01/18 | 8 | ||||
08/06/18 | 08/15/18 | 9 | ||||
08/07/18 | 08/16/18 | 9 | ||||
08/08/18 | 08/17/18 | 9 | ||||
08/09/18 | 08/20/18 | 11 | ||||
08/10/18 | 08/21/18 | 11 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 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. |
125
The financial statements and financial highlights of the Funds that were operating during the year ended June 30, 2018, 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.
126
March 2018
Global Proxy Voting and Engagement Principles
State Street Global Advisors (SSGA), one of the industrys largest institutional asset managers, is the investment management arm of State Street Corporation, a leading provider of financial services to institutional investors. As an investment manager, SSGA has discretionary proxy voting authority over most of its client accounts, and SSGA 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 this document i .
A-1
Global Proxy Voting and Engagement Principles
State Street Global Advisors (SSGA) maintains Proxy Voting and Engagement Guidelines for select markets, including: Australia, the EU, Japan, New Zealand , North America (Canada and the US), the UK and emerging markets. International markets that do not have specific guidelines are reviewed and voted consistent with our Global Proxy Voting and Engagement Principles; however, SSGA also endeavors to show sensitivity to local market practices when voting in these various markets.
SSGAs Approach to Proxy Voting and Issuer Engagement
At SSGA, 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 guidelines, analyzing corporate governance issues on a case-by-case basis at the company level, and exercising our voting rightsall to maximize shareholder value.
SSGAs 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 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, depending on the product or strategy, the fiduciary responsibilities of share ownership and voting for which SSGA 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 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 also evaluates the various factors that play into the corporate governance framework of a country, including but not limited to, 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. SSGA understands that regulatory requirements and investor expectations relating to governance practices and engagement activities differ from country-to-country. As a result, SSGA engages with issuers, regulators, or both, depending on the market. SSGA 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.
To help mitigate company specific risk, the SSGA Asset Stewardship 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 conducts issuer specific engagements with companies covering various corporate governance and sustainability related topics.
The SSGA Asset Stewardship 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 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 believes issuer engagement can take many forms and be triggered under numerous circumstances. The following methods represent how SSGA defines engagement methods:
Active
SSGA 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 will actively seek direct dialogue with the board and management of companies we have identified through our
State Street Global Advisors | A-2 |
Global Proxy Voting and Engagement Principles
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.
Reactive
Reactive engagement is initiated by the issuers. SSGA 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 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 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 as requiring active engagement, such as shareholder conference calls.
Proxy Voting Procedure
Oversight
The SSGA Asset Stewardship 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 (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 (IC). The IC reviews and approves amendments to the Guidelines. The PRC reports to the IC, and may refer certain significant proxy items to that committee.
Proxy Voting Process
In order to facilitate SSGAs proxy voting process, SSGA retains Institutional Shareholder Services Inc. (ISS), a firm with expertise in proxy voting and corporate governance. SSGA utilizes ISSs services in three ways: (1) as SSGAs proxy voting agent (providing SSGA 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 Asset Stewardship 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 Asset Stewardship 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 Asset Stewardship Team may refer significant issues to the PRC for a determination of the proxy vote. In addition, in determining whether to refer a proxy vote to the PRC, the Asset Stewardship Team will consider whether a material conflict of interest exists between the interests of our client and those of SSGA or its affiliates (as explained in greater detail in our Conflict Mitigation Guidelines).
SSGA votes in all markets where it is feasible; however, SSGA 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 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 Conflict Mitigation Guidelines.
State Street Global Advisors | A-3 |
Global Proxy Voting and Engagement Principles
Proxy Voting and Engagement Principles
Directors and Boards
The election of directors is one of the most important fiduciary duties SSGA performs as a shareholder. SSGA believes that well-governed companies can protect and pursue shareholder interests better and withstand the challenges of an uncertain economic environment. As such, SSGA 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 SSGAs 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 SSGAs engagement process, SSGA routinely discusses the importance of these responsibilities with the boards of issuers.
SSGA believes the quality of a board is a measure of director independence, director succession planning, board diversity, evaluations and refreshment and company governance practices. In voting to elect nominees, SSGA considers many factors. SSGA 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 also believes the right mix of skills, independence, diversity 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 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 believes audit committees should have independent directors as members, and SSGA 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 believes the company should have a well explained business rationale that is consistent with corporate strategy and not overly dilutive to its shareholders.
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, liquidations, and other major changes to the corporation.
Proposals that are in the best interests of shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In evaluating mergers and acquisitions, SSGA considers the adequacy of the consideration and the impact of the corporate governance provisions to shareholders. In all cases, SSGA 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 does not support proposals that reduce shareholders rights, entrench management or reduce the likelihood of shareholders right to vote on reasonable offers.
Compensation
SSGA 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 SSGAs analysis of executive compensation; SSGA 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 considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer
State Street Global Advisors | A-4 |
Global Proxy Voting and Engagement Principles
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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA may also consider executive compensation practices when re-electing members of the remuneration committee.
SSGA 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.
Environmental and Social Issues
As a fiduciary, SSGA 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 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. SSGAs 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 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 does not seek involvement in the day-to-day operations of an organization, SSGA recognizes the need for conscientious oversight and input into management decisions that may affect a companys value. SSGA 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.
Fixed Income Stewardship
The two elements of SSGAs fixed income stewardship program are:
Proxy Voting:
While matters that come up for a vote at bondholder meetings vary by jurisdiction, examples of common proxy voting resolutions at bondholder meetings include:
| Approving amendments to debt covenants and/or terms of issuance; |
| Authorizing procedural matters such as filing of required documents/other formalities; |
| Approving debt restructuring plans; |
| Abstaining from challenging the bankruptcy trustees; |
| Authorizing repurchase of issued debt security; |
| Approving the placement of unissued debt securities under the control of directors; and, |
| Approve spin-off/absorption proposals. |
Given the nature of the items that come up for vote at bondholder meetings, SSGA takes a case-by-case approach to voting bondholder resolutions. Where necessary, SSGA will engage with issuers on voting matters prior to arriving at voting decisions. All voting decisions will be made in the best interest of our clients.
Issuer Engagement:
SSGA recognizes that debt holders have limited leverage with companies on a day-to-day basis. However, we believe that given the size of our holdings in corporate debt, SSGA can meaningfully influence ESG practices of companies through issuer engagement. Our guidelines for engagement with fixed income issuers broadly follow the engagement guidelines for our equity holdings as described above.
Securities on Loan
For funds where SSGA acts as trustee, SSGA may recall securities in instances where SSGA believes that a particular vote will have a material impact on the fund(s). Several factors shape this process. First, SSGA must receive notice of the vote in sufficient time to recall the shares on or before the record date. In many cases, SSGA does not receive timely
State Street Global Advisors | A-5 |
Global Proxy Voting and Engagement Principles
notice, and is unable to recall the shares on or before the record date. Second, SSGA, exercising its discretion may recall shares if it believes the benefit of voting shares will outweigh the foregone lending income. This determination requires SSGA, 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 relationship manager.
State Street Global Advisors | A-6 |
Global Proxy Voting and Engagement Principles
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For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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. 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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9001-INST-7541 0317 Exp. Date: 03/31/2018
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These Global Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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March 2018
Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
State Street Corporation has a comprehensive standalone Conflicts of Interest Policy and other policies that address a range of conflicts of interests identified. In addition, State Street Global Advisors (SSGA), the asset management business of State Street Corporation, maintains a conflicts register that identifies key conflicts and describes systems in place to mitigate the conflicts. This guidance i 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 and engagement activities.
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Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
Managing Conflicts of Interest Related to Proxy Voting
State Street Global Advisors (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), State Street Global Advisors, 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 Asset Stewardship team. Members of the Asset Stewardship 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 Asset Stewardship 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 our investment strategy; |
| Prohibiting members of SSGAs Asset Stewardship 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 Asset Stewardship team, Global Proxy Review Committee (PRC) and Investment Committee (IC) of any personal conflict of interest (e.g., familial relationship with company management, serves as a director on the board of a listed company) to the Head of the Asset Stewardship 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 Proxy Voting and Engagement Guidelines (Guidelines); and |
| Reporting of voting guideline 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 guidance is not in the best interests of its clients, the Head of the Asset Stewardship team will determine whether a Material Relationship exists. If so, the matter is referred to the PRC. The 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 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 IC for further evaluation or (iii) retain an independent fiduciary to determine the appropriate vote.
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Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA ), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9008-INST-7553 0317 Exp. Date: 03/31/2018
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These Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
North America (United States & Canada)
State Street Global Advisors (SSGA) North America Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in the US and Canada. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidance.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) North America 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 of companies listed on stock exchanges in the US and Canada (North America). 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 and 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 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 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 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 North America, SSGA 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. Further, as a founding member of the Investor Stewardship Group (ISG), SSGA proactively monitors companies adherence to the Corporate Governance Principles for US listed companies. Consistent with the comply or explain expectations established by the principles, SSGA encourages companies to proactively disclose their level of compliance with the principles. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active investment teams; collaborating on issuer engagements and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in North America.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the US Investor Stewardship Group Principles. 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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
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Proxy Voting and Engagement Guidelines
shareholder interests. Further, SSGA expects boards of Russell 3000 and TSX listed companies to have at least one female board member .
Director related proposals 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 considers numerous factors.
Director Elections
SSGAs director election guideline focuses on companies governance profile to identify if a company demonstrates appropriate governance practices or if it exhibits negative governance practices. Factors SSGA considers when evaluating governance practices include, but are not limited to the following:
| Shareholder rights; |
| Board independence; and |
| Board structure. |
If a company demonstrates appropriate governance practices, SSGA 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 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 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. |
In the U.S. market 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 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 may withhold votes from directors based on the following:
| When overall average board tenure is excessive. In assessing excessive tenure, SSGA 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 not been responsive to a shareholder proposal which received a majority shareholder support at the last annual or special meeting; consideration maybe given if 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 bylaws that negatively impact SSGAs shareholder rights (such as fee-shifting, forum selection and exclusion service bylaws) 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. |
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Proxy Voting and Engagement Guidelines
Director Related Proposals
SSGA 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 generally votes against the following director related proposals:
| Requirements that candidates for directorships own large amounts of stock before being eligible to be elected; |
| 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 will generally support a majority vote standard based on votes cast for the election of directors.
SSGA 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 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 does not support cumulative voting structures for the election of directors.
Separation Chair/CEO
SSGA 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
In general, SSGA believes that proxy access is a fundamental right and an accountability mechanism for all long-term shareholders. SSGA will consider proposals relating to Proxy Access on a case-by-case basis. SSGA will support shareholder proposals that set parameters to empower long-term shareholders while providing management the flexibility to design a process that is appropriate for the companys circumstances.
SSGA will review the terms of all other proposals and will support those proposals that have been introduced in the spirit of enhancing shareholder rights.
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 governance structure; |
| Shareholder rights; and |
| Board performance. |
Age/Term Limits
Generally, SSGA 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 will support directors compensation, provided the amounts are not excessive relative to other
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issuers in the market or industry. In making our determination, we review whether the compensation is overly dilutive to existing shareholders.
Indemnification
Generally, SSGA 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 generally supports annual elections for the board of directors.
Confidential Voting
SSGA will support confidential voting.
Board Size
SSGA 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 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 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 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 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 supports share increases for general corporate purposes up to 100% of current authorized stock.
SSGA supports increases for specific corporate purposes up to 100% of the specific need plus 50% of current authorized common stock for US and Canadian firms.
When applying the thresholds, SSGA will also consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Increase in Authorized Preferred Shares
SSGA votes on a case-by-case basis on proposals to increase the number of preferred shares.
Generally, SSGA 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 will support proposals to create declawed blank check preferred stock (stock that cannot be used as a takeover defense). However, SSGA 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 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 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.
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Proxy Voting and Engagement Guidelines
However, SSGA 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, 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 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 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 anti-takeover 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.
Shareholder Rights Plans
US: SSGA will support mandates requiring shareholder approval of a shareholder rights plans (poison pill) and repeals of various anti-takeover related provisions.
In general, SSGA will vote against the adoption or renewal of a US issuers shareholder rights plan (poison pill).
SSGA 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).
Canada: SSGA analyzes proposals for shareholder approval of a shareholder rights plans (poison pill) on a case-by-case basis taking into consideration numerous factors, including but not limited to, whether it conforms to new generation rights plans and the scope of the plan.
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Proxy Voting and Engagement Guidelines
Special Meetings
SSGA 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 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 will vote for management proposals related to special meetings.
Written Consent
SSGA 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 will vote management proposals on written consent on a case-by-case basis.
SuperMajority
SSGA will generally vote against amendments to bylaws requiring super-majority shareholder votes to pass or repeal certain provisions. SSGA 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.
Advisory Vote on Executive Compensation and Frequency
SSGA 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 supports management proposals on executive compensation where there is a strong relationship between executive pay and performance over a five-year period. SSGA 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.
In Canada , where advisory votes on executive compensation are not commonplace, SSGA will rely primarily on engagement to evaluate compensation plans.
Employee Equity Award Plans
SSGA considers numerous criteria when examining equity award proposals. Generally, SSGA 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 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 five to eight percent are generally not supported.
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Proxy Voting and Engagement Guidelines
Repricing SSGA 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 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 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 will support the proposal to amend the plan.
Employee Stock Option Plans
SSGA generally votes for stock purchase plans with an exercise price of not less than 85% of fair market value. However, SSGA takes market practice into consideration.
Compensation Related Items
SSGA 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 will generally vote against the following proposals:
| Retirement bonuses for non-executive directors and auditors. |
Miscellaneous/Routine Items
SSGA 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; |
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Proxy Voting and Engagement Guidelines
| 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 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 a 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. |
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 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 overall strategy, operations and business activities. SSGAs 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.
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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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Proxy Voting and Engagement Guidelines
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155. 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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9007-INST-7552 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
Australia and New Zealand
State Street Global Advisors (SSGA) Australia & New Zealand Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in Australia and New Zealand. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) Australia and New Zealand 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 and 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 considers market specific nuances in the manner that we believe will best protect and promote the long-term economic value of client investments. SSGA 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 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 Australia and New Zealand, SSGA expects all companies at a minimum to comply with the ASX Corporate Governance Principles and proactively monitors companies adherence to the principles. Consistent with the comply or explain expectations established by the principles, SSGA encourages companies to proactively disclose their level of compliance with the principles. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader. 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.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration and accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and Asia-Pacific (APAC) investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in the region.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI). 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA believes independent directors are crucial to good corporate governance and help management establish sound
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Proxy Voting and Engagement Guidelines
ESG policies and practices. A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests. SSGA expects boards of ASX-300 and New Zealand listed companies to be comprised of at least a majority of independent directors. Further, SSGA expects boards of ASX-300 listed companies to have at least one female board member . At all other Australian listed companies, SSGA expects boards to be comprised of at least one-third independent directors.
SSGAs broad criteria for director independence in Australia and New Zealand 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 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 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 supports the annual election of directors and encourages Australian and New Zealand companies to adopt this practice.
While SSGA is generally supportive of having the roles of chairman and CEO separated in the Australia and New Zealand markets, SSGA assesses the division of responsibilities between chairman and CEO on a case-by-case basis, giving consideration to factors such as company-specific circumstances, overall level of independence on the board and general corporate governance standards in the company. Similarly, SSGA will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA 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 and breach of fiduciary responsibilities).
SSGA 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. ASX Corporate Governance Principles requires 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 holds Australian and New Zealand 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 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 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 believes that executive pay should be determined by the board of directors and SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. ASX Corporate Governance Principles requires 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 vote in the event of a second strike, SSGA 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 voting guidelines accommodate local market practice.
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Proxy Voting and Engagement Guidelines
Indemnification and limitations on liability
Generally, SSGA 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 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 to re-appoint at the annual meeting. When appointing external auditors and approving audit fees, SSGA 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 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 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 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 without pre-emption rights, SSGA may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 generally supports a proposal to repurchase shares, unless the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, and the timeframe for the repurchase. SSGA may vote against share repurchase requests that allow share repurchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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, liquidations, and other major changes to the corporation. Proposals that are in the best interests of 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 will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
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Proxy Voting and Engagement Guidelines
| 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 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 opposes anti-takeover 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 SSGAs 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 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 may oppose remuneration reports where there seems to be a misalignment between pay and shareholders interests and where incentive policies and schemes have a re-test option or feature. SSGA 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 Incentive Plans
SSGA 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 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 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 will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 encourages companies to be transparent about the environmental and social risks and opportunities they face and
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Proxy Voting and Engagement Guidelines
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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
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Proxy Voting and Engagement Guidelines
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9002-INST-7542 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
Europe
State Street Global Advisors (SSGA) European Proxy Voting and Engagement Guidelines i cover different corporate governance frameworks and practices in European markets excluding the United Kingdom and Ireland. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) 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 and 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 European markets, SSGA 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 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 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 European companies, SSGA also considers guidance issued by the European Commission and country-specific governance codes and proactively monitors companies adherence to applicable guidance and requirements. Consistent with the diverse comply or explain expectations established by guidance and codes, SSGA encourages companies to proactively disclose their level of compliance with applicable guidance and requirements. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset
Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in European markets.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI). 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/reelection of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of STOXX Europe 600 listed companies to have at least one female board member.
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SSGAs 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. |
While, overall board independence requirements and board structures differ from market to market, SSGA considers voting against directors it deems nonindependent if overall board independence is below one third or overall independence is below fifty-percent after excluding employee-representatives and/or directors elected in accordance with local laws who are not elected by shareholders. SSGA 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 may 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 also considers the number of outside board directorships a non-executive can undertake, attendance at board meetings, and cross-directorships. In addition, SSGA 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 may vote against article/bylaw changes that seek to extend director terms. In addition, in certain markets, SSGA may vote against directors if their director terms extend beyond four years.
SSGA 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. SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA may vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA 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 may vote against the entire slate.
SSGA 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 and breach of fiduciary responsibilities).
Indemnification and Limitations on Liability
Generally, SSGA 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, with 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.
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Appointment of External Auditors
SSGA 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 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 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 may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA 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.
Shareholder Rights and Capital Related Issues
In some European markets, differential voting rights continue to exist. SSGA supports the one share one vote policy and favors a share structure where all shares have equal voting rights. SSGA 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 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 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 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 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 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 may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 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 timeframe for the repurchase. SSGA may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 expects
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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 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.
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 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 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 |
AntiTakeover Measures
European markets have diverse regulations concerning the use of share issuances as takeover defenses with legal
restrictions lacking in some markets. SSGA 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 opposes unlimited share issuance authorizations as they may be used as anti-takeover devices, and they have the potential for substantial voting and earnings dilution. SSGA 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 opposes anti-takeover 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 SSGAs 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 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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA 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 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 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.
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NonExecutive Director Pay
In European markets, authorities seeking shareholder approval for non-executive directors fees are generally not controversial. SSGA 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 will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9003-INST-7544 0317 Exp. Date: 03/31/2018
i |
These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Japan
State Street Global Advisors (SSGA) Japan Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in Japan. These guidelines complement and should be read in conjunction with SSGAs overarching Global Proxy Voting and Engagement Guidelines, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) 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 and 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 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 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 also considers guidance issued by the Corporate Law Subcommittee of the Legislative Council within the Ministry of Justice as well as private study groups.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, and environmental and social issues. SSGA 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 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 SSGAs active investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in Japan.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with Japans Stewardship Code and Corporate Governance 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of TOPIX 500 listed companies to have at least one female board member.
Japanese companies have the option of having a traditional board of directors with statutory auditors, a board with a committee structure, or a hybrid board with board level audit committee. SSGA will generally support companies that seek shareholder approval to adopt a committee or hybrid board 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
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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 will support the election of statutory auditors, unless the outside statutory auditor nominee is regarded as non-independent based on SSGA 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 wrongdoing and breach of fiduciary responsibilities).
For companies with a statutory auditor structure there is no legal requirement that boards have outside directors, however, SSGA believes there should be a transparent process of independent and external monitoring of management on behalf of shareholders.
| SSGA believes that boards of TOPIX 500 companies should have at least three independent directors or be at least one-third independent, whichever requires fewer independent directors, otherwise, SSGA may oppose the top executive who is responsible for the director nomination process; and |
| For controlled, non-TOPIX 500 companies with a statutory auditor structure or hybrid structure, SSGA may oppose the top executive, if the board does not have at least two independent directors. |
| For non-controlled, non-TOPIX 500 companies with a statutory auditor structure or hybrid structure, SSGA may oppose the top executive, if the board does not have at least two outside directors. |
For companies with a committee structure or a hybrid board structure, SSGA also takes into consideration the overall independence level of the committees. In determining director independence, SSGA 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 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 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 believes limitations and indemnification are necessary to attract and retain qualified directors.
Audit Related Items
SSGA 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 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 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 supports the one share one vote policy and favors a share structure where all shares have equal voting rights. SSGA supports proposals to abolish voting caps or multiple voting rights and will oppose measures to introduce these types of restrictions on shareholder rights.
SSGA 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 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 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 will support capitalization changes that eliminate other classes of stock and/or unequal voting rights.
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Increase in Authorized Capital
SSGA 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 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 will consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 will oppose an amendment to articles allowing the repurchase of shares at the boards discretion. SSGA 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 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 timeframe for the repurchase. SSGA 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 evaluates mergers and structural reorganizations on a case-by-case basis. SSGA 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 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 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.
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 the adoption or renewal of a Japanese issuers shareholder rights plans (poison pill), SSGA considers the following conditions: (i) release of proxy circular with details of the proposal with adequate notice in
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advance of meeting, (ii) minimum trigger, flip-in or flip-over of 20%, (iii) maximum term of three years, (iv) sufficient number of independent directors, (v) presence of an independent committee, (vi) annual election of directors, (vii) no other protective or entrenchment features. Additionally, SSGA considers the total duration a shareholder rights plan has been in effect.
In evaluating an amendment to a shareholder rights plan (poison pill), in addition to the conditions above, SSGA will also evaluate and consider supporting proposals where the terms of the new plans are more favorable to shareholders ability to accept unsolicited offers.
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, 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 will generally support proposed increases to the ceiling if the company discloses the rationale for the increase. SSGA 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 believes that existing shareholder approval of the bonus should be considered best practice. As a result, SSGA 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 supports these payments unless the recipient is an outsider or in instances where the amount is not disclosed.
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 cannot calculate the dilution level and, therefore, SSGA may oppose such plans for poor disclosure. SSGA 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 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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.
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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 views proposals to expand and diversify the companys business activities as routine and non-contentious. SSGA 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 relationship manager.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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
© 2017 State Street Corporation. All Rights Reserved.
ID9004-INST-7547 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
United Kingdom and Ireland
State Street Global Advisors (SSGA), United Kingdom and Ireland Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in the United Kingdom and Ireland. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) United Kingdom (UK) and Ireland 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 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 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 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 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 and proactively monitors companies adherence to the Code. Consistent with the comply or explain expectations established by the Code, SSGA encourages companies to proactively disclose their level of compliance with the Code. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law,
remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA 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 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices.SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of FTSE-350 listed companies to have at least one female board member.
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SSGAs 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; |
| Family ties with any of the companys advisers, directors or senior employees; and |
| If the company classifies the director as non-independent. |
When considering the election or re-election of a director, SSGA 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 monitors other factors that may influence the independence of a non-executive director, such as performance related pay, cross-directorships and significant shareholdings. SSGA supports the annual election of directors.
While SSGA is generally supportive of having the roles of chairman and CEO separated in the UK market, SSGA 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 will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA 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 and breach of fiduciary responsibilities).
SSGA 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. SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA will vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA 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 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 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, with 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 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 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 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 may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA 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 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 may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 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 timeframe for the repurchase. SSGA may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 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 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 opposes anti-takeover 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 SSGAs analysis of executive paythere should be a direct relationship between remuneration and company performance over the long term.
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Proxy Voting and Engagement Guidelines
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration policies and reports, SSGA 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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA 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 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 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 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 will evaluate on a company- by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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.
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SSGA 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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9006-INST-7551 0317 Exp. Date: 03/31/2018
i |
These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
State Street Global Advisors | A-48 |
March 2018
Proxy Voting and Engagement Guidelines
Rest of the World
State Street Global Advisors (SSGA) Rest of the World Proxy Voting and Engagement Guidelines i cover different corporate governance frameworks and practices in international markets not covered under specific country/regional guidelines. These guidelines complement and should be read in conjunction with SSGAs overarching Global Proxy Voting and Engagement Principles which provides a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
A-49 |
Proxy Voting and Engagement Guidelines
At State Street Global Advisors (SSGA), we recognize that countries in international markets not covered under specific country/regional guidelines are disparate in their corporate governance frameworks and practices. Concurrent with developing a company specific voting and engagement program, SSGA also evaluates the various factors that play into the corporate governance framework of a country. These factors include but are not limited to: (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 judiciary. 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, SSGAs proxy voting guidelines are designed to identify and address specific governance concerns in each market.
SSGAs Proxy Voting and Engagement Philosophy in Emerging Markets
SSGAs 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 SSGAs 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 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 SSGA Asset Stewardship 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 SSGAs proxy voting and engagement philosophy in emerging markets.
SSGAs 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
SSGA 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 performs in emerging market companies.
SSGA 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 expects companies to meet minimum overall board indepdence standards as defined in a corporate governance code or market practice. Therfore, in several countries, SSGA will vote against select non-independent directors if overall board indepdence levels do not meet market standards.
SSGAs 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. |
In some countries, market practice calls for the establishment of a board level audit committee. In such cases, SSGA believes companies should have an audit committee that is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence
State Street Global Advisors | A-50 |
Proxy Voting and Engagement Guidelines
as well as their effectiveness and resource levels. Based on our desire to enhance the quality of financial and accounting oversight provided by independent directors, SSGA expects that listed companies have an audit committee that is constituted of a majority of independent directors.
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 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 encourages boards to appoint an audit committee composed of a majority of independent auditors.
Appointment of External Auditors
SSGA 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-appointment at the annual meeting. SSGA believes that it is imperative for audit committees to select outside auditors who are independent from management.
Shareholder Rights and Capital Related Issues
SSGA 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 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 Transcations
Most companies in emerging markets have a controlled ownership structure that often include complex cross-shareholdings 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 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 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 expects companies to clearly state the business purpose for the program and a definitive number of shares to be repurchased.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, 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 evaluates mergers and structural reorganizations on a case-by-case basis. SSGA 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 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. |
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.
State Street Global Advisors | A-51 |
Proxy Voting and Engagement Guidelines
Remuneration
SSGA considers it to be the boards responsibility to set appropriate levels of executive remuneration. Despite the differences among the types of plans and the awards possible, there is a simple underlying philosophy that guides SSGAs analysis of executive remuneration; 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 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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 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, SSGAs guidelines consider several factors including historical dividend payouts, pending litigation, governmental investigations, charges of fraud or other indication of significant concerns.
State Street Global Advisors | A-52 |
Proxy Voting and Engagement Guidelines
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9005-INST-7548 0317 Exp. Date: 03/31/2018
i |
These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
State Street Global Advisors | A-53 |
Nuveen Asset Management, LLC
Proxy Voting Policies and Procedures
Effective Date: January 1, 2011, as last amended May 3, 2017
I. |
General Principles |
A. Nuveen Asset Management, LLC ( NAM ) 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. i 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. i ISS has separate polices for Taft Hartley plans and it is NAMs policy to apply the Taft Hartley polices to accounts that are Taft Hartley Plans. |
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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 affiliated adviser serves as investment adviser or sub-adviser (e.g., Nuveen Funds and TIAA Funds). |
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. |
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. |
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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. |
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. |
Where ISS and NAM are determined to face a conflict, 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 of TIAA or its subsidiaries 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, 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. |
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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 rejected and will revert to the original ISS recommendation or will be addressed pursuant to the procedures described above under Conflicts of Interest.
In addition, the PVC may determine from time to time that a particular policy recommendation of ISS should be overridden based on a determination that the policy is inappropriate and not in the best interests of shareholders. Any such determination shall be reflected in the minutes of a meeting of the PVC at which such decision is made.
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 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) NAMs proxy voting policies and procedures; (2) proxy statements received with respect to securities in client accounts; (3) records of proxy votes cast by NAM on behalf of clients accounts; (4) records of written requests from clients for proxy voting information relating to
B-4
such clients account, and written responses from NAM to either a written or oral request by clients; 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 certain records pertaining to Rule 204-2.
F. 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.
G. 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 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 accounts special request to vote a legacy security proxy, and would vote such proxy in accordance with NAMs guidelines.
H. 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 NAMs discretionary management or if a separately managed account (SMA) custodian failed to remove the accounts holdings from its aggregated voting list.
I. Non-votes. NGO shall be responsible for obtaining reasonable assurance that proxies are voted (or, in rare instances, for voting proxies) on behalf, and in cases where further instruction from NAM may be required in order to vote a given proxy or proxies, for ensuring that such instructions are 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 such proxies, 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 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
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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.
J. 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. |
K. 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. Responsible Parties
PVC
NGO
NAM Compliance
Legal Department
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Standard & Poors, a division of S&P Global (S&P), Corporate Long-Term Issue Ratings:
AAA An obligation rated AAA has the highest rating assigned by S&P. The obligors capacity to meet its financial commitment on the obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only to a small degree. The obligors capacity to meet its financial commitment on the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligors capacity to meet its financial commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB, B, CCC, CC, and C Obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligors capacity or willingness to meet its financial commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C A C rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the C rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instruments terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.
D An obligation rated D is in payment default. The D rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of similar action if payments on an obligation are jeopardized. An obligations rating is lowered to D upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.
Plus (+) or Minus (-) The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
NR This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy.
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Moodys Investors Service, Inc.s (Moodys) Long-Term Obligation Ratings:
Aaa Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.
Aa Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Baa Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.
Ba Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.
B Obligations rated B are considered speculative and are subject to high credit risk.
Caa Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.
Ca Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
Modifiers: Moodys appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
Fitch Ratings Ltd.s (Fitch) Corporate Finance Obligations Long-Term Ratings:
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A High credit quality. A ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB Speculative. BB ratings indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.
B Highly speculative. B ratings indicate that material credit risk is present. For performing obligations, default risk is commensurate with the issuer being rated with an Issuer Default Risk (IDR) in the ranges BB to C. For issuers with an IDR below B, the overall credit risk of this obligation is moderated by the expected level of recoveries should a default occur. For issuers with an IDR above B, the overall credit risk of this obligation is exacerbated by the expected low level of recoveries should a default occur. For non-performing obligations, the obligation or issuer is in default, or has deferred payment, but the rated obligation is expected to have extremely high recovery rates consistent with a Recovery Rating of RR1 (outstanding recovery prospects given default).
CCC Substantial credit risk. CCC ratings indicate that substantial credit risk is present. For performing obligations, default risk is commensurate with an IDR in the ranges B to C. For issuers with an IDR below CCC, the overall credit risk of this obligation is moderated by the expected level of recoveries should a default occur. For issuers with an IDR
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above CCC, the overall credit risk of this obligation is exacerbated by the expected low level of recoveries should a default occur. For non-performing obligations, the obligation or issuer is in default, or has deferred payment, but the rated obligation is expected to have a superior recovery rate consistent with a Recovery Rating of RR2 (superior recovery prospects given default).
CC Very high levels of credit risk. CC ratings indicate very high levels of credit risk. For performing obligations, default risk is commensurate with an IDR in the ranges B to C. For issuers with an IDR below CC, the overall credit risk of this obligation is moderated by the expected level of recoveries should a default occur. For issuers with an IDR above CC, the overall credit risk of this obligation is exacerbated by the expected low level of recoveries should a default occur. For non-performing obligations, the obligation or issuer is in default, or has deferred payment, but the rated obligation is expected to have a good recovery rate consistent with a Recovery Rating of RR3 (good recovery prospects given default).
C Exceptionally high levels of credit risk. C indicates exceptionally high levels of credit risk. For performing obligations, default risk is commensurate with an IDR in the ranges B to C. The overall credit risk of this obligation is exacerbated by the expected low level of recoveries should a default occur. For non-performing obligations, the obligation or issuer is in default, or has deferred payment, and the rated obligation is expected to have an average, below-average or poor recovery rate consistent with a Recovery Rating of RR4 (average recovery prospects given default), RR5 (below average recovery prospects given default) or RR6 (poor recovery prospects given default).
Defaulted obligations typically are not assigned D ratings, but are instead rated in the B to C rating categories, depending upon their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
Plus (+) or Minus (-) The modifiers + or - may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA obligation rating category, or to corporate finance obligation ratings in the categories below B.
emr The subscript emr is appended to a rating to denote embedded market risk which is beyond the scope of the rating. The designation is intended to make clear that the rating solely addresses the counterparty risk of the issuing bank. It is not meant to indicate any limitation in the analysis of the counterparty risk, which in all other respects follows published Fitch criteria for analyzing the issuing financial institution. Fitch does not rate these instruments where the principal is to any degree subject to market risk.
S&Ps Short-Term Issue Credit Ratings:
A-1 A short-term obligation rated A-1 is rated in the highest category by S&P. The obligors capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligors capacity to meet its financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligors capacity to meet its financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having significant speculative characteristics. Ratings of B-1, B-2, and B-3 may be assigned to indicate finer distinctions within the B category. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
B-1 A short-term obligation rated B-1 is regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
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B-2 A short-term obligation rated B-2 is regarded as having significant speculative characteristics, and the obligor has an average speculative-grade capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
B-3 A short-term obligation rated B-3 is regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
C A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation.
D A short-term obligation rated D is in payment default. The D rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
Dual Ratings S&P assigns dual ratings to all debt issues that have a put option or demand feature as part of their structure. The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term rating symbols are used for bonds to denote the long-term maturity and the short-term rating symbols for the put option (for example, AAA/A-1+). With U.S. municipal short-term demand debt, note rating symbols are used with the short-term issue credit rating symbols (for example, SP-1+/A-1+).
Moodys Short-Term Obligation Ratings:
P-1 Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2 Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3 Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
Note: Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced by the senior-most long-term rating of the issuer, its guarantor or support-provider.
Fitchs Short-Term Obligation Ratings:
F1 Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added + to denote any exceptionally strong credit feature.
F2 Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments.
F3 Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.
B Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
C High short-term default risk. Default is a real possibility.
RD Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only.
D Default. Indicates a broad-based default event for an entity, or the default of a specific short-term obligation.
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SPDR ® SERIES TRUST (THE TRUST)
STATEMENT OF ADDITIONAL INFORMATION
Dated October 31, 2018
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 prospectus dated October 31, 2018, as may be revised from time to time (Prospectus).
ETF |
TICKER | |||
SPDR Portfolio Total Stock Market ETF (formerly, SPDR Russell 3000 ® ETF) |
SPTM | |||
SPDR Portfolio Large Cap ETF (formerly, SPDR Russell 1000 ® ETF) |
SPLG | |||
SPDR Portfolio Small Cap ETF (formerly, SPDR Russell 2000 ® ETF) |
SPSM | |||
SPDR SSGA US Large Cap Low Volatility Index ETF (formerly, SPDR Russell 1000 Low Volatility ETF) |
LGLV | |||
SPDR SSGA US Small Cap Low Volatility Index ETF (formerly, SPDR Russell 2000 Low Volatility ETF) |
SMLV | |||
SPDR ® SSGA Gender Diversity Index ETF |
SHE |
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, 2018 may be obtained without charge by writing to State Street Global Advisors Funds Distributors, LLC, the Trusts principal underwriter (referred to herein as Distributor or Principal Underwriter), One Iron Street, Boston, Massachusetts 02210, by visiting the Trusts website at https://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, 2018 are incorporated by reference into this SAI.
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A-1 |
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 SPDR Portfolio Total Stock Market ETF, SPDR Portfolio Large Cap ETF, SPDR Portfolio Small Cap ETF, SPDR SSGA US Large Cap Low Volatility Index ETF, SPDR SSGA US Small Cap Low Volatility Index ETF and SPDR SSGA Gender Diversity Index ETF (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 of a specified market index (each, an Index). SSGA Funds Management, Inc. serves as the investment adviser for each Fund (the Adviser).
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 50,000 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.
Each Fund may invest in the following types of investments, consistent with its investment strategies and objective. Please see the 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 (RIC) for purposes of the Internal Revenue Code of 1986, as amended (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 objective.
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.
COMMON STOCK
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 stock is susceptible to general stock market fluctuation 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.
CONCENTRATION
Each Fund will concentrate its investments in securities of issuers in the same industry as may be necessary to approximate the composition of the Funds underlying Index. The securities of issuers in particular industries may dominate the benchmark Index of a Fund and consequently the 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.
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 stock. Convertible securities generally provide yields higher than the underlying common stock, 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 stock and interest rates. When the underlying common stock declines 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 stock rises 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 stock. 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.
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 transactions (including NDFs, 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 CFTC regulation or interpretation.
Recent legislation calls for new regulation of the derivatives markets. The extent and impact of the regulation is not yet fully known and may not be for some time. New regulations could adversely affect the value, availability and performance of certain derivative instruments, may make them more costly, and may limit or restrict their use by the Funds.
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. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the
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difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract originally was written. Although the value of an index might be a function of the value of certain specified securities, physical delivery of these securities is not always made. A public market exists in futures contracts covering a number of indexes, as well as financial instruments, including, without limitation: U.S. Treasury bonds; U.S. Treasury notes; GNMA Certificates; three-month U.S. Treasury bills; 90-day commercial paper; bank certificates of deposit; Eurodollar certificates of deposit; the Australian Dollar; the Canadian Dollar; the British Pound; the Japanese Yen; the Swiss Franc; the Mexican Peso; and certain multinational currencies, such as the Euro. It is expected that other futures contracts will be developed and traded in the future. Futures contracts are standardized as to maturity date and underlying instrument and are traded on futures exchanges.
The Funds may purchase and write (sell) call and put options on futures. Options on futures give the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price upon expiration of, or at any time during the period of, the option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true.
A Fund is required to make a good faith margin deposit in cash or U.S. government securities (or other eligible collateral) 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 price changes, additional payments 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. Although some futures contracts call for making or taking delivery of the underlying commodity, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (involving the same exchange, underlying security or index and delivery month). If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs also must be included in these calculations.
Regulation Under the Commodity Exchange Act. Each Fund intends to use commodity interests, such as futures, swaps and options on futures in accordance with Rule 4.5 of the Commodity Exchange Act (CEA). A Fund may use exchange-traded futures and options on futures, together with positions in cash and money market instruments, to simulate full investment in its underlying Index. Exchange-traded futures and options on futures 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 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 it is not subject to registration or regulation as a commodity pool operator under the CEA.
Restrictions on Trading in Commodity Interests. With respect to the Funds, the Trust has claimed an exclusion from registration as a commodity pool operator under the CEA pursuant to CFTC Rule 4.5 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, options thereon and swaps 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 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). 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).
Options. 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.
Short Sales Against the Box. The Funds may engage in short sales against the box. In a short sale against the box, a Fund agrees to sell at a future date a security that it either contemporaneously owns or has the right to acquire at no extra cost. If the price of the security has declined at the time the Fund is required to deliver the security, the Fund will benefit from the difference in the price. If the price of the security has increased, the Fund will be required to pay the difference.
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Swap Transactions. Each Fund may enter into swap transactions, including interest rate swap, credit default swap, NDF, and total return swap transactions. Swap transactions 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 transactions 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. Swaps may be used in conjunction with other instruments to offset interest rate, currency or other underlying risks. For example, interest rate swaps may be offset with caps, floors or collars. A cap is essentially a call option which places a limit on the amount of floating rate interest that must be paid on a certain principal amount. A floor is essentially a put option which places a limit on the minimum amount that would be paid on a certain principal amount. A collar is essentially a combination of a long cap and a short floor where the limits are set at different levels.
The use of swap transactions by a Fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. Swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with stocks, bonds, and other traditional investments. 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 the possible market conditions. Because some swap transactions have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain swaps have the potential for unlimited loss, regardless of the size of the initial investment.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) that was signed into law on July 21, 2010 created a new statutory framework that comprehensively regulated the over-the-counter (OTC) derivatives markets for the first time. Key Dodd-Frank Act provisions relating to OTC derivatives require rulemaking by the SEC and the CFTC, not all of which has been proposed or finalized as at the date of this SAI. Prior to the Dodd-Frank Act, the OTC derivatives markets were traditionally traded on a bilateral basis (so-called bilateral OTC transactions). Under the Dodd-Frank Act, certain OTC derivatives transactions are now required to be centrally cleared and traded on exchanges or electronic trading platforms called swap execution facilities (SEFs).
Bilateral OTC transactions differ from exchange-traded or cleared derivatives transactions in several respects. Bilateral OTC transactions are transacted directly with dealers and not with a clearing corporation. Without the availability of a clearing corporation, bilateral OTC transaction pricing is normally done by reference to information from market makers and/or available index data, which information is carefully monitored by the Adviser and verified in appropriate cases. As bilateral OTC transactions are entered into directly with a dealer, there is a risk of nonperformance by the dealer as a result of its insolvency or otherwise. Under recently-adopted regulations by the CFTC and federal banking regulators (Margin Rules), a Fund is required to post collateral (known as variation margin) to cover the mark-to-market exposure in respect of its uncleared swaps. The Margin Rules also mandate that collateral in the form of initial margin be posted to cover potential future exposure attributable to uncleared swap transactions. However, due to the compliance timeline within the Margin Rules, it is unlikely that the Funds will be required to comply with such initial margin requirements until March 1, 2020. In the event a Fund is required to post collateral in the form of initial margin or variation margin in respect of its uncleared swap transactions, all such collateral will be posted with a third party custodian pursuant to a triparty custody agreement between the Fund, its dealer counterparty and an unaffiliated custodian.
The requirement to execute certain OTC derivatives contracts on SEFs may offer certain advantages over traditional bilateral OTC trading, such as ease of execution, price transparency, increased liquidity and/or favorable pricing. However, SEF trading may make it more difficult and costly for a Fund to enter into highly tailored or customized transactions and may result in additional costs and risks. Market participants such as the Funds that execute derivatives contracts through a SEF, whether directly or through a broker intermediary, are required to submit to the jurisdiction of the SEF and comply with SEF and CFTC rules and regulations which impose, among other things disclosure and recordkeeping obligations. In addition, a Fund will generally incur SEF or broker intermediary fees when it trades on a SEF. A Fund may also be required to indemnify the SEF or broker intermediary for any losses or costs that may result from the Funds transactions on the SEF.
Total Return Swaps. A Fund may enter into total return swap transactions for investment purposes. Total return swaps are transactions in which one party agrees to make periodic payments based on the change in market value of the underlying assets, which may include a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swaps may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market, including in cases in which there may be disadvantages associated with direct ownership of a particular security. In a typical total return equity swap, payments made by a Fund
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or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. By entering into an equity index swap, for example, the index receiver can gain exposure to stocks making up the index of securities without actually purchasing those stocks. Total return swaps involve not only the risk associated with the investment in the underlying securities, but also the risk of the counterparty not fulfilling its obligations under the agreement.
Credit Default Swaps. A Fund may enter into credit default swap transactions for investment purposes. A credit default swap transaction may have as reference obligations one or more securities that are not currently held by the Fund. A Fund may be either the protection buyer or protection seller in the transaction. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors. As a protection seller, a Fund would generally receive an upfront payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the protection seller must pay the protection buyer the full face amount of the reference obligations that may have little or no value. The notional value of the credit default swap will be used to segregate liquid assets for selling protection on credit default swaps. If a Fund were a protection buyer and no credit event occurred during the term of the swap, the Fund would recover nothing if the swap were held through its termination date. However, if a credit event occurred, the protection buyer may elect to receive the full notional value of the swap in exchange for an equal face amount of the reference obligation that may have little or no value. Where a Fund is the protection buyer, credit default swaps involve the risk that the seller may fail to satisfy its payment obligations to the Fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce a Funds return. When a Fund buys credit default swaps it will segregate an amount at least equal to the amount of any accrued premium payment obligations including amounts for early terminations.
Currency Swaps. A Fund may enter into currency swap transactions for investment purposes. Currency swaps are similar to interest rate swaps, except that they involve multiple currencies. A Fund may enter into a currency swap when it has exposure to one currency and desires exposure to a different currency. Typically, the interest rates that determine the currency swap payments are fixed, although occasionally one or both parties may pay a floating rate of interest. Unlike an interest rate swap, however, the principal amounts are exchanged at the beginning of the contract and returned at the end of the contract. In addition to paying and receiving amounts at the beginning and end of the transaction, both sides will have to pay in full on a periodic basis based upon the currency they have borrowed. Change in foreign exchange rates and changes in interest rates, as described above, may negatively affect currency swaps.
Interest Rate Swaps. A Fund may enter into an interest rate swap in an effort to protect against declines in the value of fixed income securities held by the Fund. In such an instance, the Fund may agree to pay a fixed rate (multiplied by a notional amount) while a counterparty agrees to pay a floating rate (multiplied by the same notional amount). If interest rates rise, resulting in a diminution in the value of the Funds portfolio, the Fund would receive payments under the swap that would offset, in whole or in part, such diminution in value.
Options on Swaps. An option on a swap agreement, or a swaption, is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. In return, the purchaser pays a premium to the seller of the contract. The seller of the contract receives the premium and bears the risk of unfavorable changes on the underlying swap. A Fund may write (sell) and purchase put and call swaptions. A Fund may also enter into swaptions on either an asset-based or liability-based basis, depending on whether the Fund is hedging its assets or its liabilities. A Fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. A Fund may enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its holdings, as a duration management technique, to protect against an increase in the price of securities the Fund anticipates purchasing at a later date, or for any other purposes, such as for speculation to increase returns. Swaptions are generally subject to the same risks involved in a Funds use of options.
Depending on the terms of the particular option agreement, a Fund will generally incur a greater degree of risk when it writes a swaption than it will incur when it purchases a swaption. When a Fund purchases a swaption, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when a Fund writes a swaption, upon exercise of the option the Fund will become obligated according to the terms of the underlying agreement.
Certain additional risk factors related to derivatives are discussed below:
Derivatives Risk. Under recently adopted rules by the CFTC, transactions in some types of interest rate swaps and index credit default swaps on North American and European indices are required to be cleared. In addition, the CFTC may promulgate additional regulations that require clearing of other classes of swaps. In a cleared derivatives transaction (which includes commodities futures and cleared swaps transactions), a Funds counterparty is a clearing house (such as CME, ICE Clear Credit or LCH.Clearnet), rather than a bank or broker. Since each Fund is not a member of a clearing house and only members of a clearing house can participate
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directly in the clearing house, a Fund holds cleared derivatives through accounts at clearing members, who are futures commission merchants that are members of the clearing houses and who have the appropriate regulatory approvals to engage in cleared swap transactions. A Fund makes and receives payments owed under cleared derivatives transactions (including margin payments) through its accounts at clearing members. Clearing members guarantee performance of their clients obligations to the clearing house. In contrast to bilateral OTC transactions, clearing members generally can require termination of existing cleared derivatives transactions at any time and increases in margin above the margin that it required at the beginning of a transaction. Clearing houses also have broad rights to increase margin requirements for existing transactions and to terminate transactions. Any such increase or termination could interfere with the ability of a Fund to pursue its investment strategy. Also, a Fund is subject to execution risk if it enters into a derivatives transaction that is required to be cleared (or that the Advisor expects to be cleared), and no clearing member is willing or able to clear the transaction on the Funds behalf. While the documentation in place between a Fund and their clearing members generally provides that the clearing members will accept for clearing all transactions submitted for clearing that are within credit limits specified by the clearing members in advance, the Fund could be subject to this execution risk if the Fund submits for clearing transactions that exceed such credit limits, if the clearing house does not accept the transactions for clearing, or if the clearing members do not comply with their agreement to clear such transactions. In that case, the transaction might have to be terminated, and the Fund could lose some or all of the benefit of any increase in the value of the transaction after the time of the transaction. In addition, new 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 or increasing margin or capital requirements. If a Fund is not able to enter into a particular derivatives transaction, the Funds investment performance and risk profile could be adversely affected as a result.
Counterparty Risk. Counterparty risk with respect to OTC derivatives may be affected by new regulations promulgated by the CFTC and SEC affecting the derivatives market. As described under Derivatives Risk above, some derivatives transactions are required to be cleared, and a party to a cleared derivatives transaction is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared derivatives position, rather than the credit risk of its original counterparty to the derivative transaction. Clearing members are required to segregate all funds received from customers with respect to cleared derivatives transactions from the clearing members proprietary assets. However, all funds and other property received by a clearing broker from its customers are generally held by the clearing broker on a commingled basis in an omnibus account, which may also invest those funds in certain instruments permitted under the applicable regulations. Also, the clearing member transfers to the clearing house the amount of margin required by the clearing house for cleared derivatives transactions, which amounts are generally held in the relevant omnibus account at the clearing house for all customers of the clearing member.
For commodities futures positions, the clearing house may use all of the collateral held in the clearing members omnibus account to meet a loss in that account, without regard to which customer in fact supplied that collateral. Accordingly, in addition to bearing the credit risk of its clearing member, each customer to a futures transaction also bears fellow customer risk from other customers of the clearing member. However, with respect to cleared swaps positions, recent regulations promulgated by the CFTC require that the clearing member notify the clearing house of the amount of initial margin provided by the clearing member to the clearing house that is attributable to each customer. Because margin in respect of cleared swaps must be earmarked for specific clearing member customers, the clearing house may not use the collateral of one customer to cover the obligations of another customer. However, if the clearing member does not provide accurate reporting, a Fund is subject to the risk that a clearing house will use the Funds assets held in an omnibus account at the clearing house to satisfy payment obligations of a defaulting customer of the clearing member to the clearing house. In addition, clearing members may generally choose to provide to the clearing house the net amount of variation margin required for cleared swaps for all of its customers in the aggregate, rather than the gross amount for each customer.
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.
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.
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 40% of the value of its net 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 process especially 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 each 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 the 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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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 present minimal credit risks; 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. 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. Money market instruments also include shares of money market funds. The SEC and other government agencies continue to review the regulation of money market funds. The SEC has adopted changes to the rules that govern money market funds, and compliance with many of these amendments was required in October 2016. Legislative developments may also affect money market funds. These changes and developments may affect the investment strategies, performance, yield, operating expenses and continued viability of a money market fund.
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.
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) to the extent they invest 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,
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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.
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 Day as 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 percentage limit on 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.
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.
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
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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 markets, 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. A 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.
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 stock 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 stock has 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.
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.
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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(a)(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.
COUNTERPARTY RISK
Counterparty risk with respect to derivatives has been and may continue to be affected by new rules and regulations affecting the derivatives market. Some derivatives transactions are required to be centrally cleared, and a party to a cleared derivatives transaction is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared position, rather than the credit risk of its original counterparty to the derivatives transaction. Credit risk of market participants with respect to derivatives that are centrally cleared is concentrated in a few clearing houses, and it is not clear how an insolvency proceeding of a clearing house would be conducted, what effect the insolvency proceeding would have on any recovery by a Fund, and what impact an insolvency of a clearing house would have on the financial system more generally.
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 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
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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 Shares.
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 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.
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; and
3. Under normal circumstances, invest less than 80% of its total assets in securities that comprise its relevant Index.
4. With respect to the SPDR Portfolio Large Cap ETF, under normal circumstances invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in securities of large-capitalization companies. 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 SPDR Portfolio Small Cap ETF, under normal circumstances invest less than 80% of its net assets, plus the amount of borrowings for investment purposes, in securities of small-capitalization companies. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
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 each Fund to loan up to 33 1/3% of its total assets. With respect to borrowing, the 1940 Act presently allows each Fund to: (1) borrow from any bank (including pledging, mortgaging or hypothecating assets) in an amount up to 33 1/3% 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
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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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 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 CEA 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 Funds will not purchase or sell real estate, except that a 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 consider the suspension of trading in, and may initiate delisting proceedings of, the Shares of a Fund under any of the following circumstances: (i) if any of the continued listing requirements set forth in the Exchange rules are not continuously maintained; (ii) if the Exchange files separate proposals under Section 19(b) of the Securities Exchange Act of 1934, as amended, and any of the statements or representations regarding (a) the description of the Index, portfolio, or reference asset; (b) limitations on the Index or the Funds portfolio holdings or reference assets; or (c) the applicability of the Exchange listing rules specified in such proposals are not continuously maintained; (iii) if following the initial 12-month period beginning at the commencement of trading of the Fund, there are fewer than 50 record or beneficial owners of the Shares of the Fund; (iv) if the value of the Funds underlying index or portfolio of securities on which the Fund is based is no longer calculated or available; or (v) such other event shall occur or condition shall exist that, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. If the Intraday Indicative Value of a Fund is not being disseminated as required by Exchange rules, the Exchange may halt trading during the day in which such interruption occurs. If the interruption persists past the trading day in which it occurred, the Exchange will halt trading in the Fund Shares. The Exchange will remove the Shares from listing and trading upon termination of a Fund. The Trust reserves the right to adjust the Fund 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 a 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.
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, Distributor, Administrator and Sub-Administrator. The Trustees are responsible for overseeing the
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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. , the 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 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 provides the Board with an overview of, among other things, its 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 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 Investment Advisory Agreement with the Adviser, the Board meets with the Adviser to review such services. Among other things, the Board regularly considers the 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 Fund 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, 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 Funds, 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 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 seven members of the Board of Trustees, six 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.
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TRUSTEES
NAME, ADDRESS AND YEAR OF BIRTH |
POSITION(S)
WITH
|
TERM OF
|
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS |
NUMBER OF
|
OTHER DIRECTORSHIPS HELD BY TRUSTEE DURING THE PAST 5 YEARS |
|||||
INDEPENDENT TRUSTEES | ||||||||||
FRANK NESVET c/o SPDR Series Trust One Iron Street Boston, MA 02210 1943 |
Independent Trustee, Chairman, Trustee Committee Chair |
Term:
Served:
September 2000 |
Retired. | 125 | None. | |||||
BONNY EUGENIA BOATMAN c/o SPDR Series Trust One Iron Street Boston, MA 02210- 1950 |
Independent Trustee |
Term: Unlimited
Served:
April 2010 |
Retired. | 125 | None. | |||||
DWIGHT D. CHURCHILL c/o SPDR Series Trust One Iron Street Boston, MA 02210 1953 |
Independent Trustee |
Term:
Served:
April 2010 |
Self-employed consultant since 2010; CEO and President, CFA Institute (June 2014-January 2015). | 125 | Affiliated Managers Group, Inc. (Director). | |||||
CARL G. VERBONCOEUR c/o SPDR Series Trust One Iron Street Boston, MA 02210 1952 |
Independent Trustee, Audit Committee Chair |
Term: Unlimited
Served:
April 2010 |
Self-employed consultant since 2009. | 125 | The Motley Fool Funds Trust (Trustee). | |||||
CLARE S. RICHER c/o SPDR Series Trust One Iron Street Boston, MA 02210 1958 |
Independent Trustee |
Term: Unlimited Served: since July 2018 |
Chief Financial Officer, Putnam Investments LLC (December 2008 May 2017). | 125 | Putnam Acquisition Financing Inc. (Director); Putnam Acquisition Financing LLC (Director); Putnam GP Inc. (Director); Putnam Investor Services, Inc. (Director); Putnam Investments Limited (Director); University of Notre Dame (Trustee). | |||||
SANDRA G. SPONEM c/o SPDR Series Trust One Iron Street Boston, MA 02210 1958 |
Independent Trustee |
Term: Unlimited Served: since July 2018 |
Chief Financial Officer, M.A. Mortenson Companies, Inc. (February 2007 April 2017). | 125 | Guggenheim / Rydex Funds (Trustee). |
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INTERESTED TRUSTEE | ||||||||||
JAMES E. ROSS* SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1965 |
Interested Trustee |
Term:
Served as
Trustee:
April
|
Chairman and Director, SSGA Funds Management, Inc. (2005 - present); Executive Vice President, State Street Global Advisors (2012 - present); Chief Executive Officer and Director, State Street Global Advisors Funds Distributors, LLC (May 2017 present); Director, State Street Global Markets, LLC (2013 - April 2017); President, SSGA Funds Management, Inc. (2005 - 2012); Principal, State Street Global Advisors (2000 - 2005). | 196 | SSGA SPDR ETFs Europe I plc (Director) (November 2016 - present); SSGA SPDR ETFs Europe II plc (Director) (November 2016 - present). |
|
For the purpose of determining the number of portfolios overseen by the Trustees, Fund Complex comprises registered investment companies for which SSGA Funds Management, Inc. serves as investment adviser. |
* |
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. One Iron Street Boston, MA 02210 1967 |
President |
Term: Unlimited Served: since October 2012 |
President and Director, SSGA Funds Management, Inc. (2001 - present)*; Senior Managing Director, State Street Global Advisors (1992 - present)*; Director, State Street Global Advisors Funds Distributors, LLC (May 2017 - present). | |||
ANN M. CARPENTER SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1966 |
Vice President; Deputy Treasurer |
Term: Unlimited Served: since August 2012 (with respect to Vice President); Unlimited Served: since February 2016 (with respect to Deputy Treasurer) |
Chief Operating Officer, SSGA Funds Management, Inc. (2005 - Present)*; Managing Director, State Street Global Advisors (2005 - present).* | |||
MICHAEL P. RILEY SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1969 |
Vice President |
Term: Unlimited Served: since February 2005 |
Managing Director, State Street Global Advisors (2005 - present).* | |||
JOSHUA A. WEINBERG SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1978 |
Chief Legal Officer |
Term: Unlimited Served: since February 2015 |
Managing Director and Managing Counsel, State Street Global Advisors (2011 - present); Clerk, SSGA Funds Management, Inc. (2013 - present); Associate, Financial Services Group, Dechert LLP (2006 - 2011). | |||
JESSE D. HALLEE State Street Bank and Trust Company 100 Summer Street, SUM0703 Boston, MA 02111 1976 |
Secretary |
Term: Unlimited Served: since August 2017 |
Vice President and Senior Counsel, State Street Bank and Trust Company (2013 - present); Vice President and Counsel, Brown Brothers Harriman & Co. (2007 - 2013).** | |||
ESTEFANIA SALOMON State Street Bank and Trust Company 100 Summer Street, SUM0703 Boston, MA 02111 1983 |
Assistant Secretary |
Term: Unlimited Served: since May 2018 |
Assistant Vice President and Associate Counsel, State Street Bank and Trust Company (2018 present); Senior Compliance Consultant, AdvisorAssist, LLC (2017); Attorney, Commonwealth of Massachusetts, Securities Division (2014-2017). | |||
BRUCE S. ROSENBERG SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1961 |
Treasurer |
Term: Unlimited Served: since February 2016 |
Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (July 2015 - present); Director, Credit Suisse (April 2008 - July 2015). | |||
CHAD C. HALLETT SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1969 |
Deputy Treasurer |
Term: Unlimited Served: since February 2016 |
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 |
|||
DARLENE ANDERSON-VASQUEZ SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1968 |
Deputy Treasurer |
Term: Unlimited Served: since November 2016 |
Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (May 2016 - present); Senior Vice President, John Hancock Investments (September 2007 - May 2016). | |||
ARTHUR A. JENSEN SSGA Funds Management, Inc. 1600 Summer Street Stamford, CT 06905 1966 |
Deputy Treasurer |
Term: Unlimited Served: since August 2017 |
Vice President at State Street Global Advisors (July 2016 present); Deputy Treasurer of Elfun Funds (July 2016 present); Treasurer of State Street Institutional Funds, State Street Variable Insurance Series Funds, Inc. and GE Retirement Savings Plan Funds (June 2011 present); Treasurer of Elfun Funds (June 2011 - July 2016); Mutual Funds Controller of GE Asset Management Incorporated (April 2011 - July 2016); Senior Vice President at Citigroup (2008 2010); Vice President at JPMorgan (2005 2008). | |||
DANIEL FOLEY SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1972 |
Assistant Treasurer |
Term: Unlimited Served: since February 2016 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (April 2007 - present).* | |||
DANIEL G. PLOURDE SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1980 |
Assistant Treasurer |
Term: Unlimited Served: since May 2017 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (May 2015 - present); Officer, State Street Bank and Trust Company (March 2009 - May 2015). | |||
SUJATA UPRETI SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1974 |
Assistant Treasurer |
Term: Unlimited Served: since February 2016 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (May 2015 - present); Assistant Director, Cambridge Associates, LLC (July 2014-January 2015); Vice President, Bank of New York Mellon (July 2012 - August 2013); Manager, PricewaterhouseCoopers, LLP (September 2003 - July 2012). | |||
BRIAN HARRIS SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1973 |
Chief Compliance Officer; Anti-Money Laundering Officer; Code of Ethics Compliance Officer |
Term: Unlimited Served: since November 2013 |
Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (June 2013 - present)*; Senior Vice President and Global Head of Investment Compliance, BofA Global Capital Management (2010 - 2013). |
* |
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
22
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 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 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 Ms. Richer should serve as Trustee because of the experience she gained serving as the Chief Financial Officer of a large financial services and investment management company, her knowledge of the financial services industry and her experience serving on the board of a major educational institution. Ms. Richer was appointed to serve as Trustee of the Trust in July 2018.
The Board has concluded that Ms. Sponem should serve as Trustee because of the experience she gained serving as the Chief Financial Officer of a large financial services company, her knowledge of the financial services industry and her experience serving on the board of another investment company. Ms. Sponem was appointed to serve as Trustee of the Trust in July 2018.
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).
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 $245,000 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 $60,000 and the Chairman of the Audit Committee receives an additional annual fee of $30,000. Prior to July 1, 2018, each Independent Trustee received an annual fee of $230,000 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.
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The table below shows the compensation that the Independent Trustees received during the Trusts fiscal year ended June 30, 2018.
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 |
$ | 253,195 | N/A | N/A | $ | 345,000 | ||||||
Bonny Boatman |
$ | 216,479 | N/A | N/A | $ | 295,000 | ||||||
Dwight Churchill |
$ | 216,479 | N/A | N/A | $ | 295,000 | ||||||
David Kelly (2) |
$ | 190,764 | N/A | N/A | $ | 260,000 | ||||||
Clare Richer (3) |
$ | N/A | N/A | N/A | $ | N/A | ||||||
Sandra Sponem (3) |
$ | N/A | N/A | N/A | $ | N/A | ||||||
Carl Verboncoeur |
$ | 231,165 | N/A | N/A | $ | 315,000 |
(1) |
The Fund Complex includes the Trust. |
(2) |
Effective August 22, 2018, Mr. Kelly resigned from his position as Trustee and no longer serves as a trustee to the Trust. |
(3) |
Trustee was appointed to the Board as of July 1, 2018, and therefore did not receive any compensation from the Fund Complex for the fiscal year ended June 30, 2018. |
STANDING COMMITTEES
Audit Committee. The Board has an Audit Committee consisting of all Independent Trustees. Mr. Verboncoeur 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, 2018.
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) select any independent counsel of the independent trustees as well as make determinations as to that counsels independence; 5) review matters that are referred to the Committee by the Chief Legal Officer or other counsel to the Trust; and 6) 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, 2018.
OWNERSHIP OF FUND SHARES
As of December 31, 2017, neither the Independent Trustees nor their immediate family members owned beneficially or of record any securities in the Adviser, Principal Underwriter or any person directly or indirectly controlling, controlled by, or under common control with the Adviser or Principal Underwriter, except as noted below:
Name of Trustee |
Relationship |
Company |
Title of Class | Value of Securities | Percent of Class | |||||||||
Clare S. Richer |
Self | State Street Corporation, parent company of the Adviser and Distributor | Common | $ | 38,134 | <1 | % |
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The following table shows, as of December 31, 2017, 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 | |||||||
Bonny Eugenia Boatman |
None | None | None | |||||||
Dwight D. Churchill |
SPDR Nuveen S&P High Yield Municipal Bond ETF | Over $100,000 | Over $100,000 | |||||||
Clare Richer |
None | None | None | |||||||
Sandra Sponem |
SPDR Bloomberg Barclays High Yield Bond ETF | $50,001-$100,000 | $50,000-$100,000 | |||||||
Carl G. Verboncoeur |
SPDR S&P Dividend ETF | $10,001 - $50,000 | $10,001 - $50,000 | |||||||
SPDR S&P 600 Small Cap Value ETF | $10,001 - $50,000 | |||||||||
Interested Trustee: |
||||||||||
James Ross |
SPDR Portfolio Large Cap | Over $100,000 | Over $100,000 | |||||||
SPDR S&P Biotech ETF | $10,001 - $50,000 | |||||||||
SPDR S&P Dividend ETF | $10,001 - $50,000 | |||||||||
SPDR Portfolio Small Cap ETF | $10,001 - $50,000 | |||||||||
SPDR Portfolio Mid Cap ETF | $10,001 - $50,000 | |||||||||
SPDR Dow Jones REIT ETF | $10,001 - $50,000 | |||||||||
SPDR S&P 400 Mid Cap Growth ETF | $10,001 - $50,000 | |||||||||
SPDR Nuveen S&P High Yield Municipal Bond ETF | Over $100,000 |
CODES OF ETHICS
The Trust and the Adviser (which includes applicable reporting personnel of the Distributor) each have adopted a code of ethics under Rule 17j-1 of the 1940 Act, which is designed to prevent affiliated persons of the Trust, the 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 https://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. The Advisers proxy voting policy 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 https:// www.sec.gov.
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 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 or State Street will not disseminate non-public information concerning the Trust, except information may be made available prior to its public availability: (i) to a party for a legitimate business purpose related to the day-to-day operations of the Funds, including (a) a service provider, (b) the stock exchanges
25
upon which an ETF is listed, (c) the NSCC, (d) the Depository Trust Company, and (e) financial data/research companies such as Morningstar, Bloomberg L.P., and Reuters, or (ii) to any other party for a legitimate business or regulatory purpose, upon waiver or exception, with the consent of an applicable Trust officer.
THE INVESTMENT ADVISER
SSGA FM acts as investment adviser to the Trust and, subject to the oversight of the Board, is responsible for the investment management of each Fund. As of June 30, 2018, the Adviser managed approximately $500.45 billion in assets. The Advisers principal address is One Iron Street, Boston, Massachusetts 02210. The Adviser, a Massachusetts corporation, is a wholly-owned subsidiary of State Street Global Advisors Inc., which is itself a wholly-owned subsidiary of State Street Corporation, a publicly held financial 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.
On behalf of the SPDR SSGA Gender Diversity Index ETF (the Gender Diversity ETF), the Adviser and certain of its affiliates intend to make contributions to a charitable organization, which is tax-exempt under section 501(c)(3) of the Internal Revenue Code, developed to provide financial support to third party charitable organizations which seek to enhance gender equity through educational efforts. Charitable contributions from the Adviser and certain of its affiliates will be benchmarked to the assets under management of the Gender Diversity ETF. The charitable organization will seek to make donations to identified charitable organizations that support continuing educational efforts designed to mitigate gender inequality in corporate America, and will aim to engage with other organizations in an effort to increase the amount of philanthropic dollars available for such initiatives.
The charitable organization will not participate in, or have any influence on the day-to-day operations of, the Gender Diversity ETF or the Advisers management of the Gender Diversity ETF. These contributions are made annually, based on the Funds average assets during the calendar year, with the Adviser maintaining the option to increase the contribution in its sole discretion. The total amount of contributions made to such charitable organization for the most recently completed calendar year of operations was $50,000.
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 oversight 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 of the Investment Advisory Agreement regarding the Funds is available in the Trusts Annual Report to Shareholders for the period ended June 30, 2018.
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 has contractually agreed to waive a portion of 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) for each Fund until October 31, 2019. 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 prior to October 31, 2019 except with the approval of the Funds Board of Trustees. The Adviser pays all expenses of each Fund other than the management fee, 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.
26
For the past three fiscal years ended June 30, the Funds paid the following amounts to the Adviser:
FUND |
FISCAL YEAR
ENDED JUNE 30, 2018 |
FISCAL YEAR
ENDED JUNE 30, 2017 |
FISCAL YEAR
ENDED JUNE 30, 2016 |
|||||||||
SPDR Portfolio Total Stock Market ETF |
$ | 416,469 | $ | 377,039 | $ | 270,510 | ||||||
SPDR Portfolio Large Cap ETF |
$ | 230,975 | $ | 118,371 | $ | 80,727 | ||||||
SPDR Portfolio Small Cap ETF |
$ | 338,867 | $ | 160,694 | $ | 89,911 | ||||||
SPDR SSGA US Large Cap Low Volatility Index ETF |
$ | 111,530 | $ | 95,167 | $ | 45,289 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF |
$ | 257,769 | $ | 196,914 | $ | 50,913 | ||||||
SPDR SSGA Gender Diversity Index ETF |
$ | 668,494 | $ | 573,889 | $ | 166,389 | (1) |
(1) |
The Fund commenced operations on March 8, 2016. |
PORTFOLIO MANAGERS
The Adviser manages 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 Portfolio Total Stock Market ETF |
Michael Feehily, Karl Schneider and Kathleen Morgan | |
SPDR Portfolio Large Cap ETF |
Michael Feehily, Karl Schneider and Eric Viliott | |
SPDR Portfolio Small Cap ETF |
Michael Feehily, Karl Schneider and Teddy Wong | |
SPDR SSGA US Large Cap Low Volatility Index ETF |
Michael Feehily, Karl Schneider and Juan Acevedo | |
SPDR SSGA US Small Cap Low Volatility Index ETF |
Michael Feehily, Karl Schneider and John Law | |
SPDR SSGA Gender Diversity Index ETF |
Lynn Blake, Melissa Kapitulik and Amy Cheng |
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.
27
Other Accounts Managed as of June 30, 2018:
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions)* |
Other
Pooled Investment Vehicle Accounts |
Assets
Managed (billions)* |
Other
Accounts |
Assets
Managed (billions)* |
Total
Assets Managed (billions) |
|||||||||||||||||||||
Michael Feehily |
137 | $ | 544.01 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,146.86 | |||||||||||||||||
Karl Schneider |
137 | $ | 544.01 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,146.86 | |||||||||||||||||
Juan Acevedo |
137 | $ | 544.01 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,146.86 | |||||||||||||||||
Lynn Blake |
137 | $ | 544.01 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,146.86 | |||||||||||||||||
Amy Cheng |
137 | $ | 544.01 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,146.86 | |||||||||||||||||
Melissa Kapitulik |
137 | $ | 544.01 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,146.86 | |||||||||||||||||
John Law |
137 | $ | 544.01 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,146.86 | |||||||||||||||||
Kathleen Morgan |
137 | $ | 544.01 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,146.86 | |||||||||||||||||
Eric Viliott |
137 | $ | 544.01 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,146.86 | |||||||||||||||||
Teddy Wong |
137 | $ | 544.01 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,146.86 |
* |
There are no performance-based fees associated with these accounts. |
The following table lists the dollar range of Shares beneficially owned by the portfolio managers listed above as of June 30, 2018:
Portfolio Manager |
Fund |
Dollar Range of Trust Shares
Beneficially Owned |
||
Michael Feehily |
SPDR SSGA US Large Cap Low
Volatility Index ETF |
$50,001-$100,000 | ||
SPDR Dow Jones REIT ETF | $50,001-$100,000 | |||
SPDR S&P Dividend ETF | $50,001-$100,000 | |||
SPDR S&P 1500 Value Tilt ETF | $50,001-$100,000 | |||
Karl Schneider |
None | None | ||
Juan Acevedo |
None | None | ||
Lynn Blake |
SPDR SSGA Gender Diversity Index ETF | $1-$10,000 | ||
Amy Cheng |
None | None | ||
Melissa Kapitulik |
None | None | ||
John Law |
None | None | ||
Kathleen Morgan |
None | None | ||
Eric Viliott |
SPDR Portfolio Large Cap ETF | $1-$10,000 | ||
Teddy Wong |
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.
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
28
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.
SSGAs culture is complemented and reinforced by a total rewards strategy that is based on a pay for performance philosophy which seeks to offer a competitive pay mix of base salary, benefits, cash incentives and deferred compensation.
Salary is based on a number of factors, including external benchmarking data and market trends, State Street performance, SSGA performance, and individual overall performance. SSGAs Global Human Resources department regularly participates in compensation surveys in order to provide SSGA with market-based compensation information that helps support individual pay decisions.
Additionally, subject to State Street and SSGA business results, State Street allocates an incentive pool to SSGA to reward its employees. The size of the incentive pool for most business units is based on the firms overall profitability and other factors, including performance against risk-related goals. For most SSGA investment teams, SSGA recognizes and rewards performance by linking annual incentive decisions for investment teams to the firms or business units profitability and business unit investment performance over a multi-year period.
Incentive pool funding for most active investment teams is driven in part by the post-tax investment performance of fund(s) managed by the team versus the return levels of the benchmark index(es) of the fund(s) on a one-, three- and, in some cases, five-year basis. For most active investment teams, a material portion of incentive compensation for senior staff is deferred over a four-year period into the SSGA Long-Term Incentive (SSGA LTI) program. For these teams, The SSGA LTI program indexes the performance of these deferred awards against the post-tax investment performance of fund(s) managed by the team. This is intended to align our investment teams compensation with client interests, both through annual incentive compensation awards and through the long-term value of deferred awards in the SSGA LTI program.
For the passive equity investment team, incentive pool funding is driven in part by the post-tax 1 and 3-year tracking error of the funds managed by the team against the benchmark indexes of the funds.
The discretionary allocation of the incentive pool to the business units within SSGA is influenced by market-based compensation data, as well as the overall performance of each business unit. Individual compensation decisions are made by the employees manager, in conjunction with the senior management of the employees business unit. These decisions are based on the overall performance of the employee and, as mentioned above, on the performance of the firm and business unit. Depending on the job level, a portion of the annual incentive may be awarded in deferred compensation, which may include cash and/or Deferred Stock Awards (State Street stock), which typically vest over a four-year period. This helps to retain staff and further aligns SSGA employees interests with SSGA clients and shareholders long-term interests.
SSGA recognizes and rewards outstanding performance by:
|
Promoting employee ownership to connect employees directly to the companys success. |
|
Using rewards to reinforce mission, vision, values and business strategy. |
|
Seeking to recognize and preserve the firms unique culture and team orientation. |
|
Providing all employees the opportunity to share in the success of SSGA. |
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 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), which were accrued daily and paid monthly by the Adviser out of its management fee.
29
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 financial holding company, and is affiliated with the Adviser. State Streets mailing address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
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 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 its services provided under the SSGA Administration agreement, SSGA FM, shall receive fees for the services, calculated based on the average aggregate net assets of the Trust and SIS, which are accrued daily and paid monthly out of its management fee.
As compensation for its services under the Sub-Administration Agreement, Custodian Agreement and Transfer Agency Agreement, State Street shall receive a fee for the services, calculated based on the average aggregate net assets of the Trust and SIS, which are accrued daily and paid monthly by the Adviser from its management fee. For each series of the Trust and SIS, an annual minimum fee applies. 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 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.
30
SECURITIES LENDING ACTIVITIES
The Trusts Board has approved each Funds participation in a securities lending program. Under the securities lending program, each Fund has retained State Street to serve as the securities lending agent.
For the fiscal year ended June 30, 2018, the income earned by each Fund as well as the fees and/or compensation paid by each Fund (in dollars) pursuant to the Master Amended and Restated Securities Lending Authorization Agreement among SPDR Series Trust, SPDR Index Shares Funds, SSGA Active Trust and SSGA Master Trust, each on behalf of its respective series, and State Street (the Securities Lending Authorization Agreement) were as follows:
Fees and/or compensation paid by the Fund for securities lending activities
and
related services |
||||||||||||||||||||||||||||||||||||
Gross
income earned by the Fund from securities lending activities |
Fees paid
to State Street from a revenue split |
Fees paid for
any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in a revenue split |
Administrative
fees not included in a revenue split |
Indemnification
fees not included in a revenue split |
Rebate
(paid to borrower) |
Other fees
not included in a revenue split |
Aggregate
fees and/or compensation paid by the Fund for securities lending activities and related services |
Net income
from securities lending activities |
||||||||||||||||||||||||||||
SPDR Portfolio Total Stock Market ETF |
$ | 215,446.64 | $ | 26,168.14 | $ | 1,520.17 | $ | 0.00 | $ | 0.00 | $ | 38,705.88 | $ | 0.00 | $ | 66,394.19 | $ | 149,052.45 | ||||||||||||||||||
SPDR Portfolio Large Cap ETF |
$ | 44,097.95 | $ | 4,965.63 | $ | 373.31 | $ | 0.00 | $ | 0.00 | $ | 10,534.81 | $ | 0.00 | $ | 15,873.75 | $ | 28,224.20 | ||||||||||||||||||
SPDR Portfolio Small Cap ETF |
$ | 1,118,391.26 | $ | 151,554.32 | $ | 5,474.76 | $ | 0.00 | $ | 0.00 | $ | 102,466.53 | $ | 0.00 | $ | 259,495.61 | $ | 858,895.65 | ||||||||||||||||||
SPDR SSGA US Large Cap Low Volatility Index ETF |
$ | 2,789.22 | $ | 415.90 | $ | 0.08 | $ | 0.00 | $ | 0.00 | $ | 19.10 | $ | 0.00 | $ | 435.08 | $ | 2,354.14 | ||||||||||||||||||
SPDR SSGA US Small Cap Low Volatility Index ETF |
$ | 153,071.48 | $ | 20,463.66 | $ | 766.35 | $ | 0.00 | $ | 0.00 | $ | 15,893.04 | $ | 0.00 | $ | 37,123.05 | $ | 115,948.43 | ||||||||||||||||||
SPDR SSGA Gender Diversity Index ETF |
$ | 28,387.24 | $ | 3,342.96 | $ | 179.73 | $ | 0.00 | $ | 0.00 | $ | 5,971.17 | $ | 0.00 | $ | 9,439.86 | $ | 18,947.38 |
31
For the fiscal year ended June 30, 2018, State Street, acting as agent of the Funds, provided the following services to the Funds in connection with the Funds securities lending activities: (i) locating borrowers among an approved list of prospective borrowers; (ii) monitoring the value of loaned securities, the value of collateral received, and other lending parameters; (iii) seeking additional collateral, as necessary, from borrowers; (iv) receiving and holding collateral from borrowers, and facilitating the investment and reinvestment of all or substantially all cash collateral in an investment vehicle designated by the Funds; (v) returning collateral to borrowers; (vi) facilitating substitute dividend, interest, and other distribution payments to the Funds from borrowers; (vii) negotiating the terms of each loan of securities, including but not limited to the amount of any loan premium, and monitoring the terms of securities loan agreements with prospective borrowers for consistency with the requirements of the Funds Securities Lending Authorization Agreement; (viii) selecting securities, including amounts (percentages), to be loaned; (ix) recordkeeping and accounting servicing; and (x) arranging for return of loaned securities to the Funds in accordance with the terms of the Securities Lending Authorization Agreement.
THE DISTRIBUTOR
State Street Global Advisors Funds Distributors, LLC is the principal underwriter and Distributor of Shares. Its principal address is One Iron Street, Boston, Massachusetts 02210. 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. An affiliate of 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. An affiliate of 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 SPDR 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 the date of this SAI, 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), Pershing LLC (Pershing), RBC Capital Markets, LLC (RBC) and TD Ameritrade, Inc. (TD Ameritrade). Pursuant to these arrangements, Schwab, Pershing, RBC and TD Ameritrade have agreed to promote certain SPDR funds to their customers and not to charge certain of their 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 Fund assets. 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.
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 continuation of the Distribution Agreement and any other related agreements is subject to annual approval of the Board, including by a majority of the Independent Trustees, as described above.
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 Shares. Such Soliciting Dealers may also be Participating Parties (as defined in the Book Entry Only System section below) and/or DTC Participants (as defined below).
32
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.
INDEX PROVIDER AND OTHER PERSONS
An unaffiliated index provider may make payments from its own assets to other persons in consideration for services provided or other activities that may facilitate investment in SPDR funds.
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 (commonly referred to as best execution). 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 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 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, market share, execution-related costs, and prompt and reliable execution. 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. The Adviser uses the same negotiated equity commission schedule with each broker-dealer per market/region, and applies these for each account it trades for. The Advisers negotiated equity commission rates are execution service rates and take into account considerations such as liquidity, market conditions or trading expertise needed to achieve execution. They do not take into account the value of any research received. The Adviser may aggregate trades with other 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 and seeking best execution.
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 Funds for the past three fiscal years ended June 30. 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.
33
PORTFOLIO |
FISCAL YEAR
ENDED JUNE 30, 2018 |
FISCAL YEAR
ENDED JUNE 30, 2017 |
FISCAL YEAR
ENDED JUNE 30, 2016 |
|||||||||
SPDR Portfolio Total Stock Market ETF |
$ | 3,095 | $ | 2,224 | $ | 3,108 | ||||||
SPDR Portfolio Large Cap ETF |
$ | 5,329 | $ | 654 | $ | 481 | ||||||
SPDR Portfolio Small Cap ETF |
$ | 51,376 | $ | 7,521 | $ | 3166 | ||||||
SPDR SSGA US Large Cap Low Volatility Index ETF |
$ | 1,725 | $ | 7,814 | $ | 3,271 | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF |
$ | 20,656 | $ | 83,422 | $ | 6,348 | ||||||
SPDR SSGA Gender Diversity Index ETF |
$ | 12,929 | $ | 12,222 | $ | 347 | (1) |
(1) |
The Fund commenced operations on March 8, 2016 |
Securities of Regular Broker-Dealers. 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, 2018:
JPMorgan Chase & Co. |
$ | 567,944,032 | ||
Merrill Lynch & Co., Inc. |
$ | 549,957,803 | ||
Goldman Sachs & Co. |
$ | 346,108,972 | ||
Morgan Stanley |
$ | 327,478,685 | ||
Citigroup, Inc. |
$ | 301,471,650 | ||
Deutsche Bank |
$ | 114,433,276 | ||
UBS Securities LLC |
$ | 82,884,978 | ||
Credit Suisse |
$ | 30,988,579 | ||
Investment Technology Group, Inc. |
$ | 4,652,106 | ||
Virtu Americas LLC |
$ | 3,277,411 |
Portfolio Turnover. 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 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.
34
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 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.
35
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 5, 2018, 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 of Ownership |
||||
SPDR PORTFOLIO TOTAL STOCK MARKET ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
68.73 | % | |||
SPDR PORTFOLIO LARGE CAP ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
81.01 | % | |||
SPDR PORTFOLIO SMALL CAP ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
45.88 | % | |||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
12.12 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
11.37 | % | ||||
U.S. Bank National Association 425 Walnut Street Cincinnati, OH 45202 |
7.56 | % | ||||
SPDR SSGA US LARGE CAP LOW VOLATILITY INDEX ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
35.44 | % | |||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
23.69 | % | ||||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
7.99 | % | ||||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
5.76 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
5.35 | % | ||||
SPDR SSGA US SMALL CAP LOW VOLATILITY INDEX ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
25.08 | % |
36
Fund | Name and Address |
Percentage of Ownership |
||||
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
20.52 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
12.98 | % | ||||
American Enterprise Investment Services, Inc. 702 2 nd Avenue South Minneapolis, MN 55402 |
12.90 | % | ||||
SPDR SSGA GENDER DIVERSITY INDEX ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
71.37 | % |
* |
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 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.
As of October 5, 2018, to the knowledge of the Trust, the following persons held of record or beneficially through one or more accounts 25% or more of the outstanding shares of a Fund.
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR PORTFOLIO TOTAL STOCK MARKET ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
68.73 | % | |||
SPDR PORTFOLIO LARGE CAP ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
81.01 | % | |||
SPDR PORTFOLIO SMALL CAP ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
45.88 | % | |||
SPDR SSGA US LARGE CAP LOW VOLATILITY INDEX ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
35.44 | % | |||
SPDR SSGA US SMALL CAP LOW VOLATILITY INDEX ETF |
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
25.08 | % | |||
SPDR SSGA GENDER DIVERSITY INDEX ETF |
State Street Bank & Trust Company 1776 Heritage Drive North Quincy, MA 02171 |
71.37 | % |
37
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 value of each 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 Fund is set forth in the table below:
FUND |
CREATION* | REDEMPTION* | ||||||
SPDR Portfolio Total Stock Market ETF |
In-Kind | In-Kind | ||||||
SPDR Portfolio Large Cap ETF |
In-Kind | In-Kind | ||||||
SPDR Portfolio Small Cap ETF |
In-Kind | In-Kind | ||||||
SPDR SSGA US Large Cap Low Volatility Index ETF |
In-Kind | In-Kind | ||||||
SPDR SSGA US Small Cap Low Volatility Index ETF |
In-Kind | In-Kind | ||||||
SPDR SSGA Gender Diversity Index ETF |
In-Kind | In-Kind |
* |
May be revised at any time without notice. |
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 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 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).
38
The Custodian, through NSCC, makes available on each Business Day, 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 a 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.
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). 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 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. 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 foreign securities) and/or through such other arrangements allowed by the Trust or its agents. With respect to foreign Deposit Securities, the Custodian
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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 second Business Day (T+2) 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 second 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 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
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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 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 prior to the opening of business 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, 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 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 two 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 two 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.
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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 as of the close of the Business Day on which the redemption request was submitted, it (or its client) will own (within the meaning of Rule 200 of Regulation SHO) or has arranged to borrow for delivery to the Trust on or prior to the Settlement Date of the redemption request, the requisite number of Shares of the relevant Fund to be redeemed as a Creation Unit. In either case, the Authorized Participant is deemed to acknowledge that: (i) it (or its client) has full legal authority and legal right to tender for redemption the requisite number of Shares of the applicable Fund and to receive the entire proceeds of the redemption; and (ii) if such Shares submitted for redemption have been loaned or pledged to another party or are the subject of a repurchase agreement, securities lending agreement or any other arrangement affecting legal or beneficial ownership of such Shares being tendered, there are no restrictions precluding the tender and delivery of such Shares (including borrowed shares, if any) for redemption, free and clear of liens, on the redemption Settlement Date. 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/or applicable order form, certain series of the Trust may require orders to be placed 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. The cut-off time to receive the trade dates net asset value will not precede the calculation of the net asset value of a Funds shares on the prior Business Day. 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.
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.
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Creation and Redemption Transaction Fees:
FUND |
TRANSACTION
FEE*, ** |
MAXIMUM
TRANSACTION FEE*, ** |
||||||
SPDR Portfolio Total Stock Market ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Portfolio Large Cap ETF |
$ | 500 | $ | 2,000 | ||||
SPDR Portfolio Small Cap ETF |
$ | 500 | $ | 2,000 | ||||
SPDR SSGA US Large Cap Low Volatility Index ETF |
$ | 250 | $ | 1,000 | ||||
SPDR SSGA US Small Cap Low Volatility Index ETF |
$ | 300 | $ | 1,200 | ||||
SPDR SSGA Gender Diversity Index ETF |
$ | 750 | $ | 3,000 |
* |
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. |
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction with the sections in the 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 each Fund is calculated by State Street and determined once daily 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
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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 quarterly by each Fund, 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 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 Prospectus 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. A Fund therefore is considered to be a separate entity in determining its treatment under the rules for RICs described herein and in the Prospectus. 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 a 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 five 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.
As discussed more fully below, each Fund intends to distribute substantially all of its net investment income and its capital gains for each taxable year.
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.
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
45
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, each 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 from 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.
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 the 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 any 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 50% 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. 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%.
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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.
Distributions of ordinary income and capital gains may also be subject to foreign, state and local taxes depending on a shareholders circumstances.
TAXATION OF SHAREHOLDERS SALE 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 noncorporate 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 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. The Fund does not expect to satisfy the requirements for passing through to its shareholders any share of any foreign taxes paid by the Fund, with the result that shareholders will not include such taxes in their gross incomes and will not be entitled to a tax deduction or credit for such taxes on their own returns.
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
47
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.
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.
Noncorporate taxpayers are generally eligible for a deduction of up to 20% of qualified REIT dividends. A Fund will not be able to claim such a deduction in respect of any REIT dividends it receives, and shareholders will not be able to claim such a deduction in respect of Fund dividends attributable to any REIT dividends.
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 the Fund from holding investments in REITs that hold residual interests in REMICs, and a Fund may do so. The Internal Revenue Service (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.
Certain tax-exempt educational institutions will be subject to a 1.4% tax on net investment income. For these purposes, certain dividends and capital gain distributions, and certain gains from the disposition of Shares (among other categories of income), are generally taken into account in computing a shareholders net investment income.
FOREIGN SHAREHOLDERS. Dividends, other than capital gains dividends, short-term capital gain dividends and interest-related dividends (described below), 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 the 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.
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 payable to such entities and, after December 31, 2018, to redemptions and certain capital gain dividends payable to such entities. 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
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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 21%, 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, Shares may qualify as USRPIs, which could result in 15% withholding on certain distributions and gross redemption proceeds paid to certain non-U.S. investors.
BACKUP WITHHOLDING. A Fund will be required in certain cases to withhold (as backup withholding) on amounts 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 24%. 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 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 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.
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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.
Shareholder inquiries may be made by writing to the Trust, c/o the Distributor, State Street Global Advisors Funds Distributors, LLC at One Iron Street, Boston, Massachusetts 02210.
COUNSEL AND INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Morgan, Lewis & Bockius LLP, 1111 Pennsylvania Avenue, NW, Washington, DC 20004, serves as counsel to the Trust. Ernst & Young LLP, located at 200 Clarendon Street, Boston, MA 02116, serves as the independent registered public accounting firm of 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 two 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 two 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 two 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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Listed below are the dates in calendar year 2018 (the only year for which holidays are known at the time of this SAI filing) in which the regular holidays in non-U.S. markets may impact Fund settlement. This list is based on information available to the Funds. The list may not be accurate or complete and is subject to change:
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Botswana |
Brazil |
Bulgaria |
Burkina Faso |
Canada |
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January 1-2 | January 1, 25 | January 1 | January 1 | January 1-2 | ||||
March 30 | February 12-14 | March 5 | April 2 | February 12, 19 | ||||
April 2 | March 30 | April 6, 9 | May 1, 10, 21 | March 30 | ||||
May 1, 10 | May 1, 31 | May 1, 7, 24 | June 11, 15 | May 21 | ||||
July 2, 16-17 | July 9 | September 6, 24 | August 7, 15, 22 | June 25 | ||||
October 1-2 | September 7 | December 24-26 | November 1, 15, 21 | July 2 | ||||
December 25-26 | October 12 | December 25 | August 6 | |||||
November 2, 15, 20 | September 3 | |||||||
December 24-25, 31 | October 8 | |||||||
November 12 | ||||||||
December 25-26 | ||||||||
Chile |
China |
Colombia |
Costa Rica |
Croatia |
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January 1 | January 1 | January 1-8 | January 1 | January 1 | ||||
March 30 | February 15-16, 19-21 | March 19, 29-30 | March 29-30 | March 30 | ||||
May 1, 21 | April 5-6, 30 | May 1, 14 | April 11 | April 2 | ||||
July 2, 16 | May 1 | June 4, 11 | May 1 | May 1, 31 | ||||
August 15 | June 18 | July 2, 20 | July 25 | June 22, 25 | ||||
September 17-19 | September 24 | August 7, 20 | August 2, 15 | August 15 | ||||
October 15 | October 1-5 | October 15 | October 15 | October 8 | ||||
November 1-2 | November 5, 12 | December 25 | November 1 | |||||
December 25, 31 | December 25 | December 24-26, 31 | ||||||
Cyprus |
The Czech Republic |
Denmark |
Egypt* |
Estonia |
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January 1 | January 1 | January 1 | January 1, 7, 25 | January 1 | ||||
February 19 | March 30 | March 29-30 | April 8-9, 25 | March 30 | ||||
March 30 | April 2 | April 2, 27 | May 1 | April 2 | ||||
April 2, 6, 9-10 | May 1, 8 | May 10-11, 21 | June 17 | May 1, 10 | ||||
May 1, 28 | July 5-6 | June 5 | July 1, 23 | August 20 | ||||
August 15 | September 28 | December 24-26, 31 | August 20-22 | December 24-26, 31 | ||||
October 1 | December 24-26, 31 | September 11 | ||||||
December 24-26 | November 20 | |||||||
* Market closed every Friday |
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Finland |
France |
Georgia |
Germany |
Ghana |
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January 1 | January 1 | January 1-2, 19 | January 1 | January 1 | ||||
March 30 | March 30 | March 8 | March 30 | March 6, 30 | ||||
April 2 | April 2 | April 6, 9 | April 2 | April 2 | ||||
May 1-10 | May 1 | May 9 | May 1, 21 | May 1, 25 | ||||
June 22 | December 24-26, 31 | August 28 | October 3 | June 15 | ||||
December 6, 24-26, 31 | November 23 | December 24-26, 31 | July 2 | |||||
August 22 | ||||||||
September 21 | ||||||||
December 7, 25-26 | ||||||||
Greece |
Guinea-Bissau |
Hong Kong |
Hungary |
Iceland |
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January 1 | January 1 | January 1, 27 | January 1 | January 1 | ||||
February 19 | April 2 | February 15-16, 19 | March 15-16, 30 | March 29-30 | ||||
March 30 | May 1, 10, 21 | March 30 | April 2, 30 | April 2, 19 | ||||
April 2, 6, 9 | June 11, 15 | April 2, 5 | May 1, 21 | May 1, 10, 21 | ||||
May 1, 28 | August 7, 15, 22 | May 1, 22 | August 20 | August 6 | ||||
August 15 | November 1, 15, 21 | June 18 | October 22-23 | December 24-26, 31 | ||||
December 24-26 | December 25 | July 2 | November 1-2 | |||||
September 25 | December 24-26, 31 | |||||||
October 1, 17 | ||||||||
December 24-26, 31 |
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Sweden |
Switzerland |
Taiwan |
Tanzania |
Thailand |
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January 1, 5 | January 1-2 | January 1 | January 1, 12 | January 1-2 | ||||
March 29-30 | March 30 | February 13-16, 19-20, 28 | March 30 | March 1 | ||||
April 2 | April 2 | April 4-6 | April 2, 26 | April 6, 13, 16 | ||||
May 1, 9-10 | May 1, 10, 21 | May 1 | May 1 | May 1, 29 | ||||
June 6, 22 | August 1 | June 18 | June 15 | July 27, 30 | ||||
November 2 | December 25-26 | September 24 | August 8, 22 | August 13 | ||||
December 24-26, 31 | October 10 | November 21 | October 15, 23 | |||||
December 31 | December 20, 25-26 | December 5, 10, 31 | ||||||
Togo |
Tunisia |
Turkey |
Uganda |
Ukraine |
||||
January 1 | January 1 | January 1 | January 1, 26 | January 1, 8 | ||||
April 2 | March 20 | April 23 | February 16 | March 8 | ||||
May 1, 10, 21 | April 9 | May 1 | March 8, 30 | April 9 | ||||
June 11, 15 | May 1 | June 14-15 | April 2 | May 1-2, 9, 28 | ||||
August 7, 15, 22 | June 15 | August 20-24, 30 | May 1 | June 28 | ||||
November 1, 15, 21 | July 25 | October 29 | June 15 | August 24 | ||||
December 25 | August 13, 21 | August 21 | October 15 | |||||
September 12 | October 9 | December 25 | ||||||
October 15 | November 30 | |||||||
November 20 | December 25-26 | |||||||
The United Arab Emirates* |
The United Kingdom |
The United States Bond
|
Uruguay |
Venezuela |
||||
January 1 | January 1 | January 1, 15 | January 1 | January 1 | ||||
June 14 | March 30 | February 19 | February 12-13 | February 12-13 | ||||
August 20-22 | April 2 | March 29*, 30 | March 29-30 | March 19, 29-30 | ||||
September 11 | May 7, 28 | May 25*, 28 | April 23 | April 19 | ||||
November 20 | August 27 | July 3*- 4 | May 1, 21 | May 1, 14 | ||||
December 2-3 | December 24-26, 31 | September 4 | June 19 | June 4 | ||||
October 8 | July 18 | July 2, 5, 24 | ||||||
November 22, 23*, 24* | October 15 | August 20 | ||||||
December 25, 31* | November 2 | September 10 | ||||||
December 25 | October 12 | |||||||
* Market closed every Friday |
* The U.S. bond market has recommended early close. |
November 5 December 24-25, 31 |
||||||
Vietnam |
Zambia |
Zimbabwe |
||||||
January 1 | January 1 | January 1 | ||||||
February 14-16, 19-20 | March 8, 12, 30 | February 21 | ||||||
April 25, 30 | April 2 | March 30 | ||||||
May 1 | May 1, 25 | April 2, 18 | ||||||
September 3 | July 2-3 | May 1, 25 | ||||||
August 6 | August 13-14 | |||||||
October 18, 24 | December 25-26 | |||||||
December 25 |
55
Redemptions. The longest redemption cycle for a Fund is a function of the longest redemption cycle among the countries and regions whose securities comprise the Funds. In the calendar year 2018 (the only year for which holidays are known at the time of this SAI filing), the dates of regular holidays affecting the following securities markets present the worst-case redemption cycles* for a Fund as follows:
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Argentina | 03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
03/28/18 | 04/05/18 | 8 | ||||
Australia | 03/27/18 | 04/04/18 | 8 | |||
03/28/18 | 04/05/18 | 8 | ||||
03/29/18 | 04/06/18 | 8 | ||||
12/19/18 | 12/27/18 | 8 | ||||
12/20/18 | 12/28/18 | 8 | ||||
12/21/18 | 01/02/19 | 12 | ||||
Bangladesh | 08/16/18 | 08/26/18 | 10 | |||
08/19/18 | 08/27/18 | 8 | ||||
08/20/18 | 08/28/18 | 8 | ||||
Bosnia and Herzegovina | 04/25/18 | 05/03/18 | 8 | |||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
Brazil | 02/07/18 | 02/15/18 | 8 | |||
02/08/18 | 02/16/18 | 8 | ||||
02/09/18 | 02/19/18 | 10 | ||||
China | 02/12/18 | 02/22/18 | 10 | |||
02/13/18 | 02/23/18 | 10 | ||||
02/14/18 | 02/26/18 | 12 | ||||
09/26/18 | 10/08/18 | 12 | ||||
09/27/18 | 10/09/18 | 12 | ||||
09/28/18 | 10/10/18 | 12 | ||||
Indonesia | 06/08/18 | 06/20/18 | 12 | |||
06/11/18 | 06/21/18 | 10 | ||||
06/12/18 | 06/22/18 | 10 | ||||
Israel | 03/28/18 | 04/08/18 | 11 | |||
03/29/18 | 04/09/18 | 11 | ||||
09/17/18 | 10/02/18 | 15 | ||||
09/20/18 | 10/03/18 | 13 | ||||
Japan | 04/27/18 | 05/07/18 | 10 | |||
Kuwait | 08/16/18 | 08/26/18 | 10 | |||
08/19/18 | 08/27/18 | 8 |
56
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Malawi | 01/08/18 | 01/16/18 | 8 | |||
01/09/18 | 01/17/18 | 8 | ||||
01/10/18 | 01/18/18 | 8 | ||||
01/11/18 | 01/19/18 | 8 | ||||
01/12/18 | 01/22/18 | 10 | ||||
02/26/18 | 03/06/18 | 8 | ||||
02/27/18 | 03/07/17 | 8 | ||||
02/28/18 | 03/08/18 | 8 | ||||
03/01/18 | 03/09/18 | 8 | ||||
03/02/18 | 03/12/18 | 10 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/07/18 | 05/15/18 | 8 | ||||
05/08/18 | 05/16/18 | 8 | ||||
05/09/18 | 05/17/18 | 8 | ||||
05/10/18 | 05/18/18 | 8 | ||||
05/11/18 | 05/21/18 | 10 | ||||
06/08/18 | 06/18/18 | 10 | ||||
06/11/18 | 06/19/18 | 8 | ||||
06/12/18 | 06/20/18 | 8 | ||||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/22/18 | 8 | ||||
06/29/18 | 07/09/18 | 10 | ||||
07/02/18 | 07/10/18 | 8 | ||||
07/03/18 | 07/11/18 | 8 | ||||
07/04/18 | 07/12/18 | 8 | ||||
07/05/18 | 07/13/18 | 8 | ||||
10/08/18 | 10/16/18 | 8 | ||||
10/09/18 | 10/17/18 | 8 | ||||
10/10/18 | 10/18/18 | 8 | ||||
10/11/18 | 10/19/18 | 8 | ||||
10/12/18 | 10/22/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 |
57
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Mexico |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
03/28/18 | 04/05/18 | 8 | ||||
Morocco |
08/15/18 | 08/23/18 | 8 | |||
08/16/18 | 08/24/18 | 8 | ||||
08/17/18 | 08/27/18 | 10 | ||||
Namibia |
03/14/18 | 03/22/18 | 8 | |||
03/15/18 | 03/23/18 | 8 | ||||
03/16/18 | 03/26/18 | 10 | ||||
03/19/18 | 03/27/18 | 8 | ||||
03/20/18 | 03/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/25/18 | 05/07/18 | 12 | ||||
04/26/18 | 05/08/18 | 12 | ||||
05/02/18 | 05/10/18 | 8 | ||||
05/03/18 | 05/11/18 | 8 | ||||
05/18/18 | 05/28/18 | 10 | ||||
05/21/18 | 05/29/18 | 8 | ||||
05/22/18 | 05/30/18 | 8 | ||||
05/23/18 | 05/31/18 | 8 | ||||
05/24/18 | 06/01/18 | 8 | ||||
08/02/18 | 08/10/18 | 8 | ||||
08/03/18 | 08/13/18 | 10 | ||||
08/06/18 | 08/14/18 | 8 | ||||
08/07/18 | 08/15/18 | 8 | ||||
08/08/18 | 08/16/18 | 8 | ||||
08/20/18 | 08/28/18 | 8 | ||||
08/21/18 | 08/29/18 | 8 | ||||
08/22/18 | 08/30/18 | 8 | ||||
08/23/18 | 08/31/18 | 8 | ||||
08/24/18 | 09/03/18 | 10 | ||||
09/17/18 | 09/25/18 | 8 | ||||
09/18/18 | 09/26/18 | 8 | ||||
09/19/18 | 09/27/18 | 8 | ||||
09/20/18 | 09/28/18 | 8 |
58
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
09/21/18 | 10/01/18 | 10 | ||||
12/03/18 | 12/11/18 | 8 | ||||
12/04/18 | 12/12/18 | 8 | ||||
12/05/18 | 12/13/18 | 8 | ||||
12/06/18 | 12/14/18 | 8 | ||||
12/07/18 | 12/18/18 | 11 | ||||
12/11/18 | 12/19/18 | 8 | ||||
12/12/18 | 12/20/18 | 8 | ||||
12/13/18 | 12/21/18 | 8 | ||||
12/14/18 | 12/24/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Norway |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
Oman |
11/13/18 | 11/21/18 | 8 | |||
11/14/18 | 11/22/18 | 8 | ||||
11/15/18 | 11/25/18 | 10 | ||||
Qatar |
06/12/18 | 06/20/18 | 8 | |||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/24/18 | 10 | ||||
08/15/18 | 08/23/18 | 8 | ||||
08/16/18 | 08/26/18 | 10 | ||||
08/19/18 | 08/27/18 | 8 | ||||
Saudi Arabia |
06/13/18 | 06/24/18 | 11 | |||
06/14/18 | 06/25/18 | 11 | ||||
08/15/18 | 08/26/18 | 11 | ||||
08/16/18 | 08/27/18 | 11 |
59
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Serbia |
12/26/18 | 01/03/19 | 8 | |||
12/27/18 | 01/04/19 | 8 | ||||
12/28/18 | 01/07/19 | 10 | ||||
South Africa |
03/14/18 | 03/22/18 | 8 | |||
03/15/18 | 03/23/18 | 8 | ||||
03/16/18 | 03/26/18 | 10 | ||||
03/19/18 | 03/27/18 | 8 | ||||
03/20/18 | 03/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/25/18 | 05/04/18 | 9 | ||||
04/26/18 | 05/07/18 | 11 | ||||
04/30/18 | 05/08/18 | 8 | ||||
08/02/18 | 08/10/18 | 8 | ||||
08/03/18 | 08/13/18 | 10 | ||||
08/06/18 | 08/14/18 | 8 | ||||
08/07/18 | 08/15/18 | 8 | ||||
08/08/18 | 08/16/18 | 8 | ||||
09/17/18 | 09/25/18 | 8 | ||||
09/18/18 | 09/26/18 | 8 | ||||
09/19/18 | 09/27/18 | 8 | ||||
09/20/18 | 09/28/18 | 8 | ||||
09/21/18 | 10/01/18 | 10 | ||||
12/10/18 | 12/18/18 | 8 | ||||
12/11/18 | 12/19/18 | 8 | ||||
12/12/18 | 12/20/18 | 8 | ||||
12/13/18 | 12/21/18 | 8 | ||||
12/14/18 | 12/24/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Swaziland |
01/02/18 | 01/10/18 | 8 | |||
01/03/18 | 01/11/18 | 8 | ||||
01/04/18 | 1/12/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 |
60
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
03/29/18 | 04/09/18 | 11 | ||||
04/12/18 | 04/20/18 | 8 | ||||
04/13/18 | 04/23/18 | 10 | ||||
04/16/18 | 04/24/18 | 8 | ||||
04/17/18 | 04/26/18 | 9 | ||||
04/18/18 | 04/27/18 | 9 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/03/18 | 05/11/18 | 8 | ||||
05/04/18 | 05/14/18 | 10 | ||||
05/07/18 | 05/15/18 | 8 | ||||
05/08/18 | 05/16/18 | 8 | ||||
05/09/18 | 05/17/18 | 8 | ||||
07/16/18 | 07/24/18 | 8 | ||||
07/17/18 | 07/25/18 | 8 | ||||
07/18/18 | 07/26/18 | 8 | ||||
07/19/18 | 07/27/18 | 8 | ||||
07/20/18 | 07/30/18 | 10 | ||||
08/20/18 | 08/28/18 | 8 | ||||
08/21/18 | 08/29/18 | 8 | ||||
08/22/18 | 08/30/18 | 8 | ||||
08/23/18 | 08/31/18 | 8 | ||||
08/24/18 | 09/03/18 | 10 | ||||
08/30/18 | 09/07/18 | 8 | ||||
08/31/18 | 09/10/18 | 10 | ||||
09/03/18 | 09/11/18 | 8 | ||||
09/04/18 | 09/12/18 | 8 | ||||
09/05/18 | 09/13/18 | 8 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Taiwan |
02/09/18 | 02/21/18 | 12 | |||
02/12/18 | 02/22/18 | 10 | ||||
Tanzania |
12/19/18 | 12/27/18 | 8 | |||
Thailand |
12/26/18 | 01/03/19 | 8 | |||
12/27/18 | 01/04/19 | 8 | ||||
12/28/18 | 01/07/19 | 10 | ||||
Turkey |
08/16/18 | 08/27/18 | 11 | |||
08/17/18 | 08/28/18 | 11 |
61
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Uganda |
01/19/18 | 01/29/18 | 10 | |||
01/22/18 | 01/30/18 | 8 | ||||
01/23/18 | 01/31/18 | 8 | ||||
01/24/18 | 02/01/18 | 8 | ||||
01/25/18 | 02/02/18 | 8 | ||||
02/09/18 | 02/19/18 | 10 | ||||
02/12/18 | 02/20/18 | 8 | ||||
02/13/18 | 02/21/18 | 8 | ||||
02/14/18 | 02/22/18 | 8 | ||||
02/15/18 | 02/23/18 | 8 | ||||
03/01/18 | 03/09/18 | 8 | ||||
03/02/18 | 03/12/18 | 10 | ||||
03/05/18 | 03/13/18 | 8 | ||||
03/06/18 | 03/14/18 | 8 | ||||
03/07/18 | 03/15/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
06/08/18 | 06/18/18 | 10 | ||||
06/11/18 | 06/19/18 | 8 | ||||
06/12/18 | 06/20/18 | 8 | ||||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/22/18 | 8 | ||||
08/14/18 | 08/22/18 | 8 | ||||
08/15/18 | 08/23/18 | 8 | ||||
08/16/18 | 08/24/18 | 8 | ||||
08/17/18 | 08/27/18 | 10 | ||||
08/20/18 | 08/28/18 | 8 | ||||
10/02/18 | 10/10/18 | 8 | ||||
10/03/18 | 10/11/18 | 8 | ||||
10/04/18 | 10/12/18 | 8 | ||||
10/05/18 | 10/15/18 | 10 | ||||
10/08/18 | 10/16/18 | 8 | ||||
11/23/18 | 12/03/18 | 10 | ||||
11/26/18 | 12/04/18 | 8 | ||||
11/27/18 | 12/05/18 | 8 | ||||
11/28/18 | 12/06/18 | 8 | ||||
11/29/18 | 12/07/18 | 8 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 |
62
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Vietnam |
02/09/18 | 02/21/18 | 12 | |||
02/12/18 | 02/22/18 | 10 | ||||
02/13/18 | 02/23/18 | 10 | ||||
Zimbabwe |
02/14/18 | 02/22/18 | 8 | |||
02/15/18 | 02/23/18 | 8 | ||||
02/16/18 | 02/26/18 | 10 | ||||
02/19/18 | 02/27/18 | 8 | ||||
02/20/18 | 02/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/11/18 | 04/19/18 | 8 | ||||
04/12/18 | 04/20/18 | 8 | ||||
04/13/18 | 04/23/18 | 10 | ||||
04/16/18 | 04/24/18 | 8 | ||||
04/17/18 | 04/25/18 | 8 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/18/18 | 05/28/18 | 10 | ||||
05/21/18 | 05/29/18 | 8 | ||||
05/22/18 | 05/30/18 | 8 | ||||
05/23/18 | 05/31/18 | 8 | ||||
05/24/18 | 06/01/18 | 8 | ||||
08/06/18 | 08/15/18 | 9 | ||||
08/07/18 | 08/16/18 | 9 | ||||
08/08/18 | 08/17/18 | 9 | ||||
08/09/18 | 08/20/18 | 11 | ||||
08/10/18 | 08/21/18 | 11 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 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. |
63
The financial statements and financial highlights of the Funds for the fiscal year ended June 30, 2018, 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.
64
March 2018
Global Proxy Voting and Engagement Principles
State Street Global Advisors (SSGA), one of the industrys largest institutional asset managers, is the investment management arm of State Street Corporation, a leading provider of financial services to institutional investors. As an investment manager, SSGA has discretionary proxy voting authority over most of its client accounts, and SSGA 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 this document i .
A-1
Global Proxy Voting and Engagement Principles
State Street Global Advisors (SSGA) maintains Proxy Voting and Engagement Guidelines for select markets, including: Australia, the EU, Japan, New Zealand , North America (Canada and the US), the UK and emerging markets. International markets that do not have specific guidelines are reviewed and voted consistent with our Global Proxy Voting and Engagement Principles; however, SSGA also endeavors to show sensitivity to local market practices when voting in these various markets.
SSGAs Approach to Proxy Voting and Issuer Engagement
At SSGA, 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 guidelines, analyzing corporate governance issues on a case-by-case basis at the company level, and exercising our voting rightsall to maximize shareholder value.
SSGAs 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 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, depending on the product or strategy, the fiduciary responsibilities of share ownership and voting for which SSGA 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 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 also evaluates the various factors that play into the corporate governance framework of a country, including but not limited to, 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. SSGA understands that regulatory requirements and investor expectations relating to governance practices and engagement activities differ from country-to-country. As a result, SSGA engages with issuers, regulators, or both, depending on the market. SSGA 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.
To help mitigate company specific risk, the SSGA Asset Stewardship 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 conducts issuer specific engagements with companies covering various corporate governance and sustainability related topics.
The SSGA Asset Stewardship 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 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 believes issuer engagement can take many forms and be triggered under numerous circumstances. The following methods represent how SSGA defines engagement methods:
Active
SSGA 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 will actively seek direct dialogue with the board and management of companies we have identified through our
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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.
Reactive
Reactive engagement is initiated by the issuers. SSGA 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 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 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 as requiring active engagement, such as shareholder conference calls.
Proxy Voting Procedure
Oversight
The SSGA Asset Stewardship 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 (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 (IC). The IC reviews and approves amendments to the Guidelines. The PRC reports to the IC, and may refer certain significant proxy items to that committee.
Proxy Voting Process
In order to facilitate SSGAs proxy voting process, SSGA retains Institutional Shareholder Services Inc. (ISS), a firm with expertise in proxy voting and corporate governance. SSGA utilizes ISSs services in three ways: (1) as SSGAs proxy voting agent (providing SSGA 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 Asset Stewardship 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 Asset Stewardship 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 Asset Stewardship Team may refer significant issues to the PRC for a determination of the proxy vote. In addition, in determining whether to refer a proxy vote to the PRC, the Asset Stewardship Team will consider whether a material conflict of interest exists between the interests of our client and those of SSGA or its affiliates (as explained in greater detail in our Conflict Mitigation Guidelines).
SSGA votes in all markets where it is feasible; however, SSGA 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 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 Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Principles
Directors and Boards
The election of directors is one of the most important fiduciary duties SSGA performs as a shareholder. SSGA believes that well-governed companies can protect and pursue shareholder interests better and withstand the challenges of an uncertain economic environment. As such, SSGA 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 SSGAs 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 SSGAs engagement process, SSGA routinely discusses the importance of these responsibilities with the boards of issuers.
SSGA believes the quality of a board is a measure of director independence, director succession planning, board diversity, evaluations and refreshment and company governance practices. In voting to elect nominees, SSGA considers many factors. SSGA 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 also believes the right mix of skills, independence, diversity 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 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 believes audit committees should have independent directors as members, and SSGA 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 believes the company should have a well explained business rationale that is consistent with corporate strategy and not overly dilutive to its shareholders.
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, liquidations, and other major changes to the corporation.
Proposals that are in the best interests of shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In evaluating mergers and acquisitions, SSGA considers the adequacy of the consideration and the impact of the corporate governance provisions to shareholders. In all cases, SSGA 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 does not support proposals that reduce shareholders rights, entrench management or reduce the likelihood of shareholders right to vote on reasonable offers.
Compensation
SSGA 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 SSGAs analysis of executive compensation; SSGA 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 considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer
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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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA may also consider executive compensation practices when re-electing members of the remuneration committee.
SSGA 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.
Environmental and Social Issues
As a fiduciary, SSGA 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 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. SSGAs 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 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 does not seek involvement in the day-to-day operations of an organization, SSGA recognizes the need for conscientious oversight and input into management decisions that may affect a companys value. SSGA 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.
Fixed Income Stewardship
The two elements of SSGAs fixed income stewardship program are:
Proxy Voting:
While matters that come up for a vote at bondholder meetings vary by jurisdiction, examples of common proxy voting resolutions at bondholder meetings include:
| Approving amendments to debt covenants and/or terms of issuance; |
| Authorizing procedural matters such as filing of required documents/other formalities; |
| Approving debt restructuring plans; |
| Abstaining from challenging the bankruptcy trustees; |
| Authorizing repurchase of issued debt security; |
| Approving the placement of unissued debt securities under the control of directors; and, |
| Approve spin-off/absorption proposals. |
Given the nature of the items that come up for vote at bondholder meetings, SSGA takes a case-by-case approach to voting bondholder resolutions. Where necessary, SSGA will engage with issuers on voting matters prior to arriving at voting decisions. All voting decisions will be made in the best interest of our clients.
Issuer Engagement:
SSGA recognizes that debt holders have limited leverage with companies on a day-to-day basis. However, we believe that given the size of our holdings in corporate debt, SSGA can meaningfully influence ESG practices of companies through issuer engagement. Our guidelines for engagement with fixed income issuers broadly follow the engagement guidelines for our equity holdings as described above.
Securities on Loan
For funds where SSGA acts as trustee, SSGA may recall securities in instances where SSGA believes that a particular vote will have a material impact on the fund(s). Several factors shape this process. First, SSGA must receive notice of the vote in sufficient time to recall the shares on or before the record date. In many cases, SSGA does not receive timely
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notice, and is unable to recall the shares on or before the record date. Second, SSGA, exercising its discretion may recall shares if it believes the benefit of voting shares will outweigh the foregone lending income. This determination requires SSGA, 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 relationship manager.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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. 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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9001-INST-7541 0317 Exp. Date: 03/31/2018
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These Global Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
State Street Corporation has a comprehensive standalone Conflicts of Interest Policy and other policies that address a range of conflicts of interests identified. In addition, State Street Global Advisors (SSGA), the asset management business of State Street Corporation, maintains a conflicts register that identifies key conflicts and describes systems in place to mitigate the conflicts. This guidance i 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 and engagement activities.
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Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
Managing Conflicts of Interest Related to Proxy Voting
State Street Global Advisors (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), State Street Global Advisors, 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 Asset Stewardship team. Members of the Asset Stewardship 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 Asset Stewardship 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 our investment strategy; |
| Prohibiting members of SSGAs Asset Stewardship 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 Asset Stewardship team, Global Proxy Review Committee (PRC) and Investment Committee (IC) of any personal conflict of interest (e.g., familial relationship with company management, serves as a director on the board of a listed company) to the Head of the Asset Stewardship 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 Proxy Voting and Engagement Guidelines (Guidelines); and |
| Reporting of voting guideline 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 guidance is not in the best interests of its clients, the Head of the Asset Stewardship team will determine whether a Material Relationship exists. If so, the matter is referred to the PRC. The 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 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 IC for further evaluation or (iii) retain an independent fiduciary to determine the appropriate vote.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA ), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9008-INST-7553 0317 Exp. Date: 03/31/2018
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These Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
North America (United States & Canada)
State Street Global Advisors (SSGA) North America Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in the US and Canada. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidance.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) North America 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 of companies listed on stock exchanges in the US and Canada (North America). 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 and 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 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 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 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 North America, SSGA 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. Further, as a founding member of the Investor Stewardship Group (ISG), SSGA proactively monitors companies adherence to the Corporate Governance Principles for US listed companies. Consistent with the comply or explain expectations established by the principles, SSGA encourages companies to proactively disclose their level of compliance with the principles. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active investment teams; collaborating on issuer engagements and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in North America.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the US Investor Stewardship Group Principles. 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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
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shareholder interests. Further, SSGA expects boards of Russell 3000 and TSX listed companies to have at least one female board member .
Director related proposals 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 considers numerous factors.
Director Elections
SSGAs director election guideline focuses on companies governance profile to identify if a company demonstrates appropriate governance practices or if it exhibits negative governance practices. Factors SSGA considers when evaluating governance practices include, but are not limited to the following:
| Shareholder rights; |
| Board independence; and |
| Board structure. |
If a company demonstrates appropriate governance practices, SSGA 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 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 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. |
In the U.S. market 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 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 may withhold votes from directors based on the following:
| When overall average board tenure is excessive. In assessing excessive tenure, SSGA 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 not been responsive to a shareholder proposal which received a majority shareholder support at the last annual or special meeting; consideration maybe given if 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 bylaws that negatively impact SSGAs shareholder rights (such as fee-shifting, forum selection and exclusion service bylaws) 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. |
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Director Related Proposals
SSGA 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 generally votes against the following director related proposals:
| Requirements that candidates for directorships own large amounts of stock before being eligible to be elected; |
| 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 will generally support a majority vote standard based on votes cast for the election of directors.
SSGA 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 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 does not support cumulative voting structures for the election of directors.
Separation Chair/CEO
SSGA 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
In general, SSGA believes that proxy access is a fundamental right and an accountability mechanism for all long-term shareholders. SSGA will consider proposals relating to Proxy Access on a case-by-case basis. SSGA will support shareholder proposals that set parameters to empower long-term shareholders while providing management the flexibility to design a process that is appropriate for the companys circumstances.
SSGA will review the terms of all other proposals and will support those proposals that have been introduced in the spirit of enhancing shareholder rights.
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 governance structure; |
| Shareholder rights; and |
| Board performance. |
Age/Term Limits
Generally, SSGA 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 will support directors compensation, provided the amounts are not excessive relative to other
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issuers in the market or industry. In making our determination, we review whether the compensation is overly dilutive to existing shareholders.
Indemnification
Generally, SSGA 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 generally supports annual elections for the board of directors.
Confidential Voting
SSGA will support confidential voting.
Board Size
SSGA 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 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 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 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 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 supports share increases for general corporate purposes up to 100% of current authorized stock.
SSGA supports increases for specific corporate purposes up to 100% of the specific need plus 50% of current authorized common stock for US and Canadian firms.
When applying the thresholds, SSGA will also consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Increase in Authorized Preferred Shares
SSGA votes on a case-by-case basis on proposals to increase the number of preferred shares.
Generally, SSGA 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 will support proposals to create declawed blank check preferred stock (stock that cannot be used as a takeover defense). However, SSGA 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 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 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.
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However, SSGA 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, 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 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 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 anti-takeover 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.
Shareholder Rights Plans
US: SSGA will support mandates requiring shareholder approval of a shareholder rights plans (poison pill) and repeals of various anti-takeover related provisions.
In general, SSGA will vote against the adoption or renewal of a US issuers shareholder rights plan (poison pill).
SSGA 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).
Canada: SSGA analyzes proposals for shareholder approval of a shareholder rights plans (poison pill) on a case-by-case basis taking into consideration numerous factors, including but not limited to, whether it conforms to new generation rights plans and the scope of the plan.
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Special Meetings
SSGA 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 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 will vote for management proposals related to special meetings.
Written Consent
SSGA 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 will vote management proposals on written consent on a case-by-case basis.
SuperMajority
SSGA will generally vote against amendments to bylaws requiring super-majority shareholder votes to pass or repeal certain provisions. SSGA 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.
Advisory Vote on Executive Compensation and Frequency
SSGA 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 supports management proposals on executive compensation where there is a strong relationship between executive pay and performance over a five-year period. SSGA 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.
In Canada , where advisory votes on executive compensation are not commonplace, SSGA will rely primarily on engagement to evaluate compensation plans.
Employee Equity Award Plans
SSGA considers numerous criteria when examining equity award proposals. Generally, SSGA 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 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 five to eight percent are generally not supported.
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Repricing SSGA 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 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 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 will support the proposal to amend the plan.
Employee Stock Option Plans
SSGA generally votes for stock purchase plans with an exercise price of not less than 85% of fair market value. However, SSGA takes market practice into consideration.
Compensation Related Items
SSGA 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 will generally vote against the following proposals:
| Retirement bonuses for non-executive directors and auditors. |
Miscellaneous/Routine Items
SSGA 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; |
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| 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 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 a 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. |
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 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 overall strategy, operations and business activities. SSGAs 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.
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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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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155. 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: +617 786 3000.
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
Australia and New Zealand
State Street Global Advisors (SSGA) Australia & New Zealand Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in Australia and New Zealand. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) Australia and New Zealand 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 and 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 considers market specific nuances in the manner that we believe will best protect and promote the long-term economic value of client investments. SSGA 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 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 Australia and New Zealand, SSGA expects all companies at a minimum to comply with the ASX Corporate Governance Principles and proactively monitors companies adherence to the principles. Consistent with the comply or explain expectations established by the principles, SSGA encourages companies to proactively disclose their level of compliance with the principles. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader. 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.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration and accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and Asia-Pacific (APAC) investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in the region.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI). 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA believes independent directors are crucial to good corporate governance and help management establish sound
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ESG policies and practices. A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests. SSGA expects boards of ASX-300 and New Zealand listed companies to be comprised of at least a majority of independent directors. Further, SSGA expects boards of ASX-300 listed companies to have at least one female board member . At all other Australian listed companies, SSGA expects boards to be comprised of at least one-third independent directors.
SSGAs broad criteria for director independence in Australia and New Zealand 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 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 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 supports the annual election of directors and encourages Australian and New Zealand companies to adopt this practice.
While SSGA is generally supportive of having the roles of chairman and CEO separated in the Australia and New Zealand markets, SSGA assesses the division of responsibilities between chairman and CEO on a case-by-case basis, giving consideration to factors such as company-specific circumstances, overall level of independence on the board and general corporate governance standards in the company. Similarly, SSGA will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA 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 and breach of fiduciary responsibilities).
SSGA 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. ASX Corporate Governance Principles requires 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 holds Australian and New Zealand 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 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 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 believes that executive pay should be determined by the board of directors and SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. ASX Corporate Governance Principles requires 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 vote in the event of a second strike, SSGA 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 voting guidelines accommodate local market practice.
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Indemnification and limitations on liability
Generally, SSGA 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 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 to re-appoint at the annual meeting. When appointing external auditors and approving audit fees, SSGA 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 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 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 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 without pre-emption rights, SSGA may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 generally supports a proposal to repurchase shares, unless the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, and the timeframe for the repurchase. SSGA may vote against share repurchase requests that allow share repurchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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, liquidations, and other major changes to the corporation. Proposals that are in the best interests of 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 will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
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| 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 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 opposes anti-takeover 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 SSGAs 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 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 may oppose remuneration reports where there seems to be a misalignment between pay and shareholders interests and where incentive policies and schemes have a re-test option or feature. SSGA 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 Incentive Plans
SSGA 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 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 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 will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 encourages companies to be transparent about the environmental and social risks and opportunities they face and
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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 overall strategy, operations and business activities. SSGAs 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 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 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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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© 2017 State Street Corporation. All Rights Reserved.
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Europe
State Street Global Advisors (SSGA) European Proxy Voting and Engagement Guidelines i cover different corporate governance frameworks and practices in European markets excluding the United Kingdom and Ireland. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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State Street Global Advisors (SSGA) 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 and 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 European markets, SSGA 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 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 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 European companies, SSGA also considers guidance issued by the European Commission and country-specific governance codes and proactively monitors companies adherence to applicable guidance and requirements. Consistent with the diverse comply or explain expectations established by guidance and codes, SSGA encourages companies to proactively disclose their level of compliance with applicable guidance and requirements. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset
Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in European markets.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI). 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/reelection of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of STOXX Europe 600 listed companies to have at least one female board member.
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SSGAs 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. |
While, overall board independence requirements and board structures differ from market to market, SSGA considers voting against directors it deems nonindependent if overall board independence is below one third or overall independence is below fifty-percent after excluding employee-representatives and/or directors elected in accordance with local laws who are not elected by shareholders. SSGA 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 may 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 also considers the number of outside board directorships a non-executive can undertake, attendance at board meetings, and cross-directorships. In addition, SSGA 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 may vote against article/bylaw changes that seek to extend director terms. In addition, in certain markets, SSGA may vote against directors if their director terms extend beyond four years.
SSGA 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. SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA may vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA 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 may vote against the entire slate.
SSGA 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 and breach of fiduciary responsibilities).
Indemnification and Limitations on Liability
Generally, SSGA 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, with 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.
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Appointment of External Auditors
SSGA 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 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 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 may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA 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.
Shareholder Rights and Capital Related Issues
In some European markets, differential voting rights continue to exist. SSGA supports the one share one vote policy and favors a share structure where all shares have equal voting rights. SSGA 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 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 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 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 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 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 may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 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 timeframe for the repurchase. SSGA may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 expects
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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 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.
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 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 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 |
AntiTakeover Measures
European markets have diverse regulations concerning the use of share issuances as takeover defenses with legal
restrictions lacking in some markets. SSGA 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 opposes unlimited share issuance authorizations as they may be used as anti-takeover devices, and they have the potential for substantial voting and earnings dilution. SSGA 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 opposes anti-takeover 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 SSGAs 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 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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA 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 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 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.
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NonExecutive Director Pay
In European markets, authorities seeking shareholder approval for non-executive directors fees are generally not controversial. SSGA 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 will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9003-INST-7544 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
Japan
State Street Global Advisors (SSGA) Japan Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in Japan. These guidelines complement and should be read in conjunction with SSGAs overarching Global Proxy Voting and Engagement Guidelines, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) 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 and 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 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 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 also considers guidance issued by the Corporate Law Subcommittee of the Legislative Council within the Ministry of Justice as well as private study groups.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, and environmental and social issues. SSGA 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 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 SSGAs active investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in Japan.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with Japans Stewardship Code and Corporate Governance 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of TOPIX 500 listed companies to have at least one female board member.
Japanese companies have the option of having a traditional board of directors with statutory auditors, a board with a committee structure, or a hybrid board with board level audit committee. SSGA will generally support companies that seek shareholder approval to adopt a committee or hybrid board 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
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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 will support the election of statutory auditors, unless the outside statutory auditor nominee is regarded as non-independent based on SSGA 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 wrongdoing and breach of fiduciary responsibilities).
For companies with a statutory auditor structure there is no legal requirement that boards have outside directors, however, SSGA believes there should be a transparent process of independent and external monitoring of management on behalf of shareholders.
| SSGA believes that boards of TOPIX 500 companies should have at least three independent directors or be at least one-third independent, whichever requires fewer independent directors, otherwise, SSGA may oppose the top executive who is responsible for the director nomination process; and |
| For controlled, non-TOPIX 500 companies with a statutory auditor structure or hybrid structure, SSGA may oppose the top executive, if the board does not have at least two independent directors. |
| For non-controlled, non-TOPIX 500 companies with a statutory auditor structure or hybrid structure, SSGA may oppose the top executive, if the board does not have at least two outside directors. |
For companies with a committee structure or a hybrid board structure, SSGA also takes into consideration the overall independence level of the committees. In determining director independence, SSGA 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 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 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 believes limitations and indemnification are necessary to attract and retain qualified directors.
Audit Related Items
SSGA 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 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 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 supports the one share one vote policy and favors a share structure where all shares have equal voting rights. SSGA supports proposals to abolish voting caps or multiple voting rights and will oppose measures to introduce these types of restrictions on shareholder rights.
SSGA 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 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 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 will support capitalization changes that eliminate other classes of stock and/or unequal voting rights.
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Increase in Authorized Capital
SSGA 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 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 will consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 will oppose an amendment to articles allowing the repurchase of shares at the boards discretion. SSGA 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 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 timeframe for the repurchase. SSGA 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 evaluates mergers and structural reorganizations on a case-by-case basis. SSGA 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 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 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.
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 the adoption or renewal of a Japanese issuers shareholder rights plans (poison pill), SSGA considers the following conditions: (i) release of proxy circular with details of the proposal with adequate notice in
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advance of meeting, (ii) minimum trigger, flip-in or flip-over of 20%, (iii) maximum term of three years, (iv) sufficient number of independent directors, (v) presence of an independent committee, (vi) annual election of directors, (vii) no other protective or entrenchment features. Additionally, SSGA considers the total duration a shareholder rights plan has been in effect.
In evaluating an amendment to a shareholder rights plan (poison pill), in addition to the conditions above, SSGA will also evaluate and consider supporting proposals where the terms of the new plans are more favorable to shareholders ability to accept unsolicited offers.
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, 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 will generally support proposed increases to the ceiling if the company discloses the rationale for the increase. SSGA 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 believes that existing shareholder approval of the bonus should be considered best practice. As a result, SSGA 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 supports these payments unless the recipient is an outsider or in instances where the amount is not disclosed.
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 cannot calculate the dilution level and, therefore, SSGA may oppose such plans for poor disclosure. SSGA 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 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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.
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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 views proposals to expand and diversify the companys business activities as routine and non-contentious. SSGA 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 relationship manager.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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
© 2017 State Street Corporation. All Rights Reserved.
ID9004-INST-7547 0317 Exp. Date: 03/31/2018
i |
These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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United Kingdom and Ireland
State Street Global Advisors (SSGA), United Kingdom and Ireland Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in the United Kingdom and Ireland. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) United Kingdom (UK) and Ireland 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 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 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 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 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 and proactively monitors companies adherence to the Code. Consistent with the comply or explain expectations established by the Code, SSGA encourages companies to proactively disclose their level of compliance with the Code. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law,
remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA 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 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices.SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of FTSE-350 listed companies to have at least one female board member.
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SSGAs 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; |
| Family ties with any of the companys advisers, directors or senior employees; and |
| If the company classifies the director as non-independent. |
When considering the election or re-election of a director, SSGA 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 monitors other factors that may influence the independence of a non-executive director, such as performance related pay, cross-directorships and significant shareholdings. SSGA supports the annual election of directors.
While SSGA is generally supportive of having the roles of chairman and CEO separated in the UK market, SSGA 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 will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA 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 and breach of fiduciary responsibilities).
SSGA 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. SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA will vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA 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 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 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, with 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 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 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 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 may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA 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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Proxy Voting and Engagement Guidelines
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 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 may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 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 timeframe for the repurchase. SSGA may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 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 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 opposes anti-takeover 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 SSGAs analysis of executive paythere should be a direct relationship between remuneration and company performance over the long term.
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Proxy Voting and Engagement Guidelines
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration policies and reports, SSGA 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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA 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 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 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 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 will evaluate on a company- by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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.
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Proxy Voting and Engagement Guidelines
SSGA 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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
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Proxy Voting and Engagement Guidelines
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9006-INST-7551 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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March 2018
Proxy Voting and Engagement Guidelines
Rest of the World
State Street Global Advisors (SSGA) Rest of the World Proxy Voting and Engagement Guidelines i cover different corporate governance frameworks and practices in international markets not covered under specific country/regional guidelines. These guidelines complement and should be read in conjunction with SSGAs overarching Global Proxy Voting and Engagement Principles which provides a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
At State Street Global Advisors (SSGA), we recognize that countries in international markets not covered under specific country/regional guidelines are disparate in their corporate governance frameworks and practices. Concurrent with developing a company specific voting and engagement program, SSGA also evaluates the various factors that play into the corporate governance framework of a country. These factors include but are not limited to: (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 judiciary. 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, SSGAs proxy voting guidelines are designed to identify and address specific governance concerns in each market.
SSGAs Proxy Voting and Engagement Philosophy in Emerging Markets
SSGAs 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 SSGAs 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 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 SSGA Asset Stewardship 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 SSGAs proxy voting and engagement philosophy in emerging markets.
SSGAs 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
SSGA 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 performs in emerging market companies.
SSGA 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 expects companies to meet minimum overall board indepdence standards as defined in a corporate governance code or market practice. Therfore, in several countries, SSGA will vote against select non-independent directors if overall board indepdence levels do not meet market standards.
SSGAs 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. |
In some countries, market practice calls for the establishment of a board level audit committee. In such cases, SSGA believes companies should have an audit committee that is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence
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Proxy Voting and Engagement Guidelines
as well as their effectiveness and resource levels. Based on our desire to enhance the quality of financial and accounting oversight provided by independent directors, SSGA expects that listed companies have an audit committee that is constituted of a majority of independent directors.
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 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 encourages boards to appoint an audit committee composed of a majority of independent auditors.
Appointment of External Auditors
SSGA 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-appointment at the annual meeting. SSGA believes that it is imperative for audit committees to select outside auditors who are independent from management.
Shareholder Rights and Capital Related Issues
SSGA 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 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 Transcations
Most companies in emerging markets have a controlled ownership structure that often include complex cross-shareholdings 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 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 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 expects companies to clearly state the business purpose for the program and a definitive number of shares to be repurchased.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, 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 evaluates mergers and structural reorganizations on a case-by-case basis. SSGA 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 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. |
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.
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Remuneration
SSGA considers it to be the boards responsibility to set appropriate levels of executive remuneration. Despite the differences among the types of plans and the awards possible, there is a simple underlying philosophy that guides SSGAs analysis of executive remuneration; 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 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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 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, SSGAs guidelines consider several factors including historical dividend payouts, pending litigation, governmental investigations, charges of fraud or other indication of significant concerns.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9005-INST-7548 0317 Exp. Date: 03/31/2018
i |
These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
State Street Global Advisors | A-53 |
SPDR ® SERIES TRUST (THE TRUST)
STATEMENT OF ADDITIONAL INFORMATION
Dated October 31, 2018
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 prospectus dated October 31, 2018, as may be revised from time to time (Prospectus).
ETF |
TICKER | |
SPDR KENSHO INTELLIGENT STRUCTURES ETF |
XKII | |
SPDR KENSHO SMART MOBILITY ETF |
XKST | |
SPDR KENSHO FUTURE SECURITY ETF |
XKFS |
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, 2018 may be obtained without charge by writing to State Street Global Advisors Funds Distributors, LLC, the Trusts principal underwriter (referred to herein as Distributor or Principal Underwriter), One Iron Street, Boston, Massachusetts 02210, by visiting the Trusts website at www.spdrs.com or by calling 1-866-787-2257. The Report of Independent Registered Public Accounting Firm, financial highlights and financial statements of each Fund included in the Trusts Annual Report to Shareholders for the fiscal year ended June 30, 2018 are incorporated by reference into this SAI.
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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, including the SPDR Kensho Intelligent Structures ETF, SPDR Kensho Smart Mobility ETF and SPDR Kensho Future Security ETF (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 (Fund 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 performance of a specified market index (each an Index and together the Indexes). SSGA Funds Management, Inc. (SSGA FM or the Adviser) serves as the investment adviser for each Fund, as further described herein.
Each Fund offers and issues Fund Shares at their net asset value (sometimes referred to herein as NAV) only in aggregations of a specified number of Fund Shares (each, a Creation Unit). Each Fund generally offers and issues Fund 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 Fund Shares have been approved for listing and secondary trading on a national securities exchange (the Exchange). The Fund Shares will trade on the Exchange at market prices. These prices may differ from the Fund Shares net asset values. The Fund Shares are also redeemable only in Creation Unit aggregations, and generally in exchange for either (i) portfolio securities and a specified cash payment or (ii) cash (subject to applicable legal requirements). A Creation Unit of each Fund consists of 50,000 Fund Shares, as set forth in the Prospectus.
Fund 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.
Each Fund may invest in the following types of investments, consistent with its investment strategies and objective. Please see the Prospectus for additional information regarding each Funds 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 (RIC) for purposes of the Internal Revenue Code of 1986, as amended (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 objective.
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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COMMON STOCK
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 stock is 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.
CONCENTRATION
Each Fund will concentrate its investments in securities of issuers in the same industry as may be necessary to approximate the composition of the Funds underlying Index. 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.
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 stock. Convertible securities generally provide yields higher than the underlying common stock, 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 stock and interest rates. When the underlying common stock declines 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 stock rises 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.
EXCHANGE-TRADED FUNDS
Each Fund may invest in other exchange-traded funds (including ETFs managed by the Adviser). ETFs may be structured as investment companies that are registered under the 1940 Act, typically as open-end funds or unit investment trusts. These ETFs are generally based on specific domestic and foreign market securities indices. An index-based ETF seeks to provide investment results that match the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index. An enhanced ETF seeks to provide investment results that match a positive or negative multiple of the performance of an underlying index. In seeking to provide such results, an ETF and, in particular, an enhanced ETF, may engage in short sales of securities included in the underlying index and may invest in derivatives instruments, such as equity index swaps, futures contracts, and options on securities, futures contracts, and stock indices. Alternatively, ETFs may be structured as grantor trusts or other forms of pooled investment vehicles that are not registered or regulated under the 1940 Act. These ETFs typically hold commodities, precious metals, currency or other non-securities investments. ETFs, like mutual funds, have expenses associated with their operation, such as advisory and custody fees. When a Fund invests in an ETF, in addition to directly bearing expenses associated with its own operations, including the brokerage costs associated with the purchase and sale of shares of the ETF, the Fund will bear a
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pro rata portion of the ETFs expenses. In addition, it may be more costly to own an ETF than to directly own the securities or other investments held by the ETF because of ETF expenses. The risks of owning shares of an ETF generally reflect the risks of owning the underlying securities or other investments held by the ETF, although lack of liquidity in the market for the shares of an ETF could result in the ETFs value being more volatile than the underlying securities or other investments.
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 Funds 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. While foreign currency transactions on a spot and forward basis are exempt from the definition of swap under the Commodity Exchange Act (CEA), NDFs are not, and, thus, are subject to the jurisdiction of the Commodity Futures Trading Commission (CFTC). 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. In the event that the parties to a forward contract agree to offset or terminate the contract before its maturity, the contract is no longer exempt from the definition of swap under the CEA and shall be treated as a swap. 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 a Funds foreign holdings increases because of currency fluctuations.
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 transactions (including NDFs, 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 CFTC regulation or interpretation.
Recent legislation calls for new regulation of the derivatives markets. The extent and impact of the regulation is not yet fully known and may not be for some time. New regulations could adversely affect the value, availability and performance of certain derivative instruments, may make them more costly, and may limit or restrict their use by the Funds.
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. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract originally was written. Although the value of an index might be a function of the value of certain specified securities, physical delivery of these securities is not always made. A public market exists in futures contracts covering a number of indexes, as well as financial instruments, including, without limitation: U.S. Treasury bonds; U.S. Treasury notes; GNMA Certificates; three-month U.S. Treasury bills; 90-day commercial paper; bank certificates of deposit; Eurodollar certificates of deposit; the Australian Dollar; the Canadian Dollar; the British Pound; the Japanese Yen; the Swiss Franc; the Mexican Peso; and certain multinational currencies, such as the Euro. It is expected that other futures contracts will be developed and traded in the future. Futures contracts are standardized as to maturity date and underlying instrument and are traded on futures exchanges.
The Funds may purchase and write (sell) call and put options on futures. Options on futures give the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price upon expiration of, or at any time during the period of, the option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true.
A Fund is required to make a good faith margin deposit in cash or U.S. government securities (or other eligible collateral) 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.
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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 price changes, additional payments 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. Although some futures contracts call for making or taking delivery of the underlying commodity, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (involving the same exchange, underlying security or index and delivery month). If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs also must be included in these calculations.
Regulation Under the Commodity Exchange Act . Each Fund intends to use commodity interests, such as futures, swaps and options on futures in accordance with Rule 4.5 of the CEA. A Fund may use exchange-traded futures and options on futures, together with positions in cash and money market instruments, to simulate full investment in its underlying Index. Exchange-traded futures and options on futures 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 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 it is not subject to registration or regulation as a commodity pool operator under the CEA.
Restrictions on Trading in Commodity Interests . With respect to the Funds, the Trust has claimed an exclusion from registration as a commodity pool operator under the CEA pursuant to CFTC Rule 4.5 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, options thereon and swaps 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 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. 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).
Options . 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.
Short Sales Against the Box. The Funds may engage in short sales against the box. In a short sale against the box, a Fund agrees to sell at a future date a security that it either contemporaneously owns or has the right to acquire at no extra cost. If the price of the security has declined at the time the Fund is required to deliver the security, the Fund will benefit from the difference in the price. If the price of the security has increased, the Fund will be required to pay the difference.
Swap Transactions . Each Fund may enter into swap transactions, including interest rate swap, credit default swap, NDF, and total return swap transactions. Swap transactions 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 transactions 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. Swaps may be used in conjunction with other instruments to offset interest rate, currency or other underlying risks. For example, interest rate swaps may be offset with caps, floors or collars. A cap is essentially a call option which places a limit on the amount of floating rate interest that must be paid on a certain principal amount. A floor is essentially a put option which places a limit on the minimum amount that would be paid on a certain principal amount. A collar is essentially a combination of a long cap and a short floor where the limits are set at different levels.
The use of swap transactions by a Fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. Swaps are highly
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specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with stocks, bonds, and other traditional investments. 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 the possible market conditions. Because some swap transactions have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain swaps have the potential for unlimited loss, regardless of the size of the initial investment.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) that was signed into law on July 21, 2010 created a new statutory framework that comprehensively regulated the over-the-counter (OTC) derivatives markets for the first time. Key Dodd-Frank Act provisions relating to OTC derivatives require rulemaking by the SEC and the CFTC, not all of which has been proposed or finalized as at the date of this SAI. Prior to the Dodd-Frank Act, the OTC derivatives markets were traditionally traded on a bilateral basis (so-called bilateral OTC transactions). Under the Dodd-Frank Act, certain OTC derivatives transactions are now required to be centrally cleared and traded on exchanges or electronic trading platforms called swap execution facilities (SEFs).
Bilateral OTC transactions differ from exchange-traded or cleared derivatives transactions in several respects. Bilateral OTC transactions are transacted directly with dealers and not with a clearing corporation. Without the availability of a clearing corporation, bilateral OTC transaction pricing is normally done by reference to information from market makers and/or available index data, which information is carefully monitored by the Adviser and verified in appropriate cases. As bilateral OTC transactions are entered into directly with a dealer, there is a risk of nonperformance by the dealer as a result of its insolvency or otherwise. Under recently-adopted regulations by the CFTC and federal banking regulators (Margin Rules), a Fund is required to post collateral (known as variation margin) to cover the mark-to-market exposure in respect of its uncleared swaps. The Margin Rules also mandate that collateral in the form of initial margin be posted to cover potential future exposure attributable to uncleared swap transactions. However, due to the compliance timeline within the Margin Rules, it is unlikely that the Funds will be required to comply with such initial margin requirements until March 1, 2020. In the event a Fund is required to post collateral in the form of initial margin or variation margin in respect of its uncleared swap transactions, all such collateral will be posted with a third party custodian pursuant to a triparty custody agreement between the Fund, its dealer counterparty and an unaffiliated custodian.
The requirement to execute certain OTC derivatives contracts on SEFs may offer certain advantages over traditional bilateral OTC trading, such as ease of execution, price transparency, increased liquidity and/or favorable pricing. However, SEF trading may make it more difficult and costly for a Fund to enter into highly tailored or customized transactions and may result in additional costs and risks. Market participants such as the Funds that execute derivatives contracts through a SEF, whether directly or through a broker intermediary, are required to submit to the jurisdiction of the SEF and comply with SEF and CFTC rules and regulations which impose, among other things disclosure and recordkeeping obligations. In addition, a Fund will generally incur SEF or broker intermediary fees when it trades on a SEF. A Fund may also be required to indemnify the SEF or broker intermediary for any losses or costs that may result from the Funds transactions on the SEF.
Total Return Swaps . A Fund may enter into total return swap transactions for investment purposes. Total return swaps are transactions in which one party agrees to make periodic payments based on the change in market value of the underlying assets, which may include a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swaps may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market, including in cases in which there may be disadvantages associated with direct ownership of a particular security. In a typical total return equity swap, payments made by a Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. By entering into an equity index swap, for example, the index receiver can gain exposure to stocks making up the index of securities without actually purchasing those stocks. Total return swaps involve not only the risk associated with the investment in the underlying securities, but also the risk of the counterparty not fulfilling its obligations under the agreement.
Credit Default Swaps . A Fund may enter into credit default swap transactions for investment purposes. A credit default swap transaction may have as reference obligations one or more securities that are not currently held by the Fund. A Fund may be either the protection buyer or protection seller in the transaction. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors. As a protection seller, a Fund would generally receive an upfront payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the protection seller must pay the protection buyer the full face amount of the reference obligations that may have little or no value. The notional value of the credit default swap will be used to segregate liquid assets for selling protection on credit default swaps. If a Fund were a protection buyer and no credit event occurred during the term of the swap, the Fund would recover nothing if the swap were held through its termination date. However, if a credit event occurred, the protection buyer may elect to receive the full notional value of the swap in exchange for an equal face amount of the reference obligation that may have little or no value. Where a Fund is the
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protection buyer, credit default swaps involve the risk that the seller may fail to satisfy its payment obligations to the Fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce a Funds return. When a Fund buys credit default swaps it will segregate an amount at least equal to the amount of any accrued premium payment obligations including amounts for early terminations.
Currency Swaps . A Fund may enter into currency swap transactions for investment purposes. Currency swaps are similar to interest rate swaps, except that they involve multiple currencies. A Fund may enter into a currency swap when it has exposure to one currency and desires exposure to a different currency. Typically, the interest rates that determine the currency swap payments are fixed, although occasionally one or both parties may pay a floating rate of interest. Unlike an interest rate swap, however, the principal amounts are exchanged at the beginning of the contract and returned at the end of the contract. In addition to paying and receiving amounts at the beginning and end of the transaction, both sides will have to pay in full on a periodic basis based upon the currency they have borrowed. Change in foreign exchange rates and changes in interest rates, as described above, may negatively affect currency swaps.
Interest Rate Swaps . A Fund may enter into an interest rate swap in an effort to protect against declines in the value of fixed income securities held by the Fund. In such an instance, the Fund may agree to pay a fixed rate (multiplied by a notional amount) while a counterparty agrees to pay a floating rate (multiplied by the same notional amount). If interest rates rise, resulting in a diminution in the value of the Funds portfolio, the Fund would receive payments under the swap that would offset, in whole or in part, such diminution in value.
Options on Swaps . An option on a swap agreement, or a swaption, is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. In return, the purchaser pays a premium to the seller of the contract. The seller of the contract receives the premium and bears the risk of unfavorable changes on the underlying swap. A Fund may write (sell) and purchase put and call swaptions. A Fund may also enter into swaptions on either an asset-based or liability-based basis, depending on whether the Fund is hedging its assets or its liabilities. A Fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. A Fund may enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its holdings, as a duration management technique, to protect against an increase in the price of securities the Fund anticipates purchasing at a later date, or for any other purposes, such as for speculation to increase returns. Swaptions are generally subject to the same risks involved in a Funds use of options.
Depending on the terms of the particular option agreement, a Fund will generally incur a greater degree of risk when it writes a swaption than it will incur when it purchases a swaption. When a Fund purchases a swaption, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when a Fund writes a swaption, upon exercise of the option the Fund will become obligated according to the terms of the underlying agreement.
Certain additional risk factors related to derivatives are discussed below:
Derivatives Risk . Under recently adopted rules by the CFTC, transactions in some types of interest rate swaps and index credit default swaps on North American and European indices are required to be cleared. In addition, the CFTC may promulgate additional regulations that require clearing of other classes of swaps. In a cleared derivatives transaction (which includes commodities futures and cleared swaps transactions), a Funds counterparty is a clearing house (such as CME, ICE Clear Credit or LCH.Clearnet), rather than a bank or broker. Since each Fund is not a member of a clearing house and only members of a clearing house can participate directly in the clearing house, a Fund holds cleared derivatives through accounts at clearing members, who are futures commission merchants that are members of the clearing houses and who have the appropriate regulatory approvals to engage in cleared swap transactions. A Fund makes and receives payments owed under cleared derivatives transactions (including margin payments) through its accounts at clearing members. Clearing members guarantee performance of their clients obligations to the clearing house. In contrast to bilateral OTC transactions, clearing members generally can require termination of existing cleared derivatives transactions at any time and increases in margin above the margin that it required at the beginning of a transaction. Clearing houses also have broad rights to increase margin requirements for existing transactions and to terminate transactions. Any such increase or termination could interfere with the ability of a Fund to pursue its investment strategy. Also, a Fund is subject to execution risk if it enters into a derivatives transaction that is required to be cleared (or that the Advisor expects to be cleared), and no clearing member is willing or able to clear the transaction on the Funds behalf. While the documentation in place between a Fund and their clearing members generally provides that the clearing members will accept for clearing all transactions submitted for clearing that are within credit limits specified by the clearing members in advance, the Fund could be subject to this execution risk if the Fund submits for clearing transactions that exceed such credit limits, if the clearing house does not accept the transactions for clearing, or if the clearing members do not comply with their agreement to clear such transactions. In that case, the transaction might have to be terminated, and the Fund could lose some or all of the benefit of any increase in the value of the transaction after the time of the
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transaction. In addition, new 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 or increasing margin or capital requirements. If a Fund is not able to enter into a particular derivatives transaction, the Funds investment performance and risk profile could be adversely affected as a result.
Counterparty Risk . Counterparty risk with respect to OTC derivatives may be affected by new regulations promulgated by the CFTC and SEC affecting the derivatives market. As described under Derivatives Risk above, some derivatives transactions are required to be cleared, and a party to a cleared derivatives transaction is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared derivatives position, rather than the credit risk of its original counterparty to the derivative transaction. Clearing members are required to segregate all funds received from customers with respect to cleared derivatives transactions from the clearing members proprietary assets. However, all funds and other property received by a clearing broker from its customers are generally held by the clearing broker on a commingled basis in an omnibus account, which may also invest those funds in certain instruments permitted under the applicable regulations. Also, the clearing member transfers to the clearing house the amount of margin required by the clearing house for cleared derivatives transactions, which amounts are generally held in the relevant omnibus account at the clearing house for all customers of the clearing member.
For commodities futures positions, the clearing house may use all of the collateral held in the clearing members omnibus account to meet a loss in that account, without regard to which customer in fact supplied that collateral. Accordingly, in addition to bearing the credit risk of its clearing member, each customer to a futures transaction also bears fellow customer risk from other customers of the clearing member. However, with respect to cleared swaps positions, recent regulations promulgated by the CFTC require that the clearing member notify the clearing house of the amount of initial margin provided by the clearing member to the clearing house that is attributable to each customer. Because margin in respect of cleared swaps must be earmarked for specific clearing member customers, the clearing house may not use the collateral of one customer to cover the obligations of another customer. However, if the clearing member does not provide accurate reporting, a Fund is subject to the risk that a clearing house will use the Funds assets held in an omnibus account at the clearing house to satisfy payment obligations of a defaulting customer of the clearing member to the clearing house. In addition, clearing members may generally choose to provide to the clearing house the net amount of variation margin required for cleared swaps for all of its customers in the aggregate, rather than the gross amount for each customer.
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.
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.
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 40% of the value of its net 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.
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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 process especially 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, 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.
OTHER SHORT-TERM INSTRUMENTS
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 present minimal credit risk; 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. 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. Money market instruments also include shares of money market funds. The SEC and other government agencies continue to review the regulation of money market funds. The SEC has adopted changes to the rules that govern money market funds, and compliance with many of these amendments was required in October 2016. Legislative developments may also affect money market funds. These changes and developments may affect the investment strategies, performance, yield, operating expenses and continued viability of a money market fund.
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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 the Fund would be unable to acquire securities paying comparable rates with the redemption proceeds.
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) to the extent they invest 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 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.
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 Day as 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.
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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.
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).
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 percentage limit on 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.
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.
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 markets, and EDRs, in bearer form, are designated for
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use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world. A 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.
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 Fund 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 stock 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.
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.
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CONTINUOUS OFFERING
The method by which Creation Units of Fund Shares are created and traded may raise certain issues under applicable securities laws. Because new Creation Units of Fund 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 Fund Shares, and sells such Fund Shares directly to customers, or if it chooses to couple the creation of a supply of new Fund Shares with an active selling effort involving solicitation of secondary market demand for Fund 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 Fund Shares, whether or not participating in the distribution of Fund Shares, are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(a)(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 Fund Shares 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.
Certain affiliates of each Fund and the Adviser may purchase and resell or distribute Fund Shares pursuant to the registration statement of which this SAI is a part.
COUNTERPARTY RISK
Counterparty risk with respect to derivatives has been and may continue to be affected by new rules and regulations affecting the derivatives market. Some derivatives transactions are required to be centrally cleared, and a party to a cleared derivatives transaction is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared position, rather than the credit risk of its original counterparty to the derivatives transaction. Credit risk of market participants with respect to derivatives that are centrally cleared is concentrated in a few clearing houses, and it is not clear how an insolvency proceeding of a clearing house would be conducted, what effect the insolvency proceeding would have on any recovery by a Fund, and what impact an insolvency of a clearing house would have on the financial system more generally.
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.
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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 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 FM 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.
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TAX RISKS
As with any investment, you should consider how your investment in Fund Shares 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 Fund Shares.
Unless your investment in Fund 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.
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 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.
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. Under normal circumstances, invest less than 80% of its total assets in securities that comprise its relevant Index.
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 each Fund to loan up to 33 1 / 3 % of its total assets. With respect to borrowing, the 1940 Act presently allows each Fund to: (1) borrow from any bank (including pledging, mortgaging or hypothecating assets) in an amount up to 33 1 / 3 %
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. |
16
of its total assets, (2) borrow money for temporary purposes in an amount not exceeding 5% of the value of the Funds total assets at the time of the loan, and (3) enter into reverse repurchase agreements. However, under normal circumstances any borrowings by a Fund will not exceed 10% of the Funds total assets. The 1940 Act generally prohibits funds from issuing senior securities, although it does not 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 CEA 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 Funds will not purchase or sell real estate, except that a Fund may invest in companies that deal in real estate (including REITs) or in instruments that are backed or secured by real estate.
17
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 Fund Shares are approved for listing and trading on the Exchange, subject to notice of issuance. The Fund 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 a Funds shares will continue to be met.
The Exchange may consider the suspension of trading in, and may initiate delisting proceedings of, the Shares of a Fund under any of the following circumstances: (i) if any of the continued listing requirements set forth in the Exchange rules are not continuously maintained; (ii) if the Exchange files separate proposals under Section 19(b) of the Securities Exchange Act of 1934, as amended, and any of the statements or representations regarding (a) the description of the Index, portfolio, or reference asset; (b) limitations on the Index or the Funds portfolio holdings or reference assets; or (c) the applicability of the Exchange listing rules specified in such proposals are not continuously maintained; (iii) if following the initial 12-month period beginning at the commencement of trading of the Fund, there are fewer than 50 record or beneficial owners of the Shares of the Fund; (iv) if the value of the Funds underlying index or portfolio of securities on which the Fund is based is no longer calculated or available; or (v) such other event shall occur or condition shall exist that, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. If the Intraday Indicative Value of a Fund is not being disseminated as required by Exchange rules, the Exchange may halt trading during the day in which such interruption occurs. If the interruption persists past the trading day in which it occurred, the Exchange will halt trading in the Fund Shares. The Exchange will remove the Shares from listing and trading upon termination of a Fund. The Trust reserves the right to adjust the Fund 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 a 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 Fund Share is calculated and the trading currency is the currency in which the Funds shares are listed and traded on the Exchange.
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, 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. , the 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 presents the Board with information concerning the investment objectives, strategies and risks of the Fund, as well as proposed investment limitations for the
18
Fund. Additionally, the Funds Adviser provides the Board with an overview of, among other things, its 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 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 Investment Advisory Agreement with the Adviser, the Board meets with the Adviser to review such services. Among other things, the Board regularly considers the Advisers adherence to each 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. 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, 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 Funds, 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 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 seven members of the Board of Trustees, six 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.
19
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 One Iron Street Boston, MA 02210 1943 |
Independent Trustee, Chairman, Trustee Committee Chair |
Term: Unlimited Served: since September 2000 | Retired. | 125 | None. | |||||
BONNY EUGENIA BOATMAN c/o SPDR Series Trust One Iron Street Boston, MA 02210 1950 |
Independent Trustee | Term: Unlimited Served: since April 2010 | Retired. | 125 | None. | |||||
DWIGHT D. CHURCHILL c/o SPDR Series Trust One Iron Street Boston, MA 02210 1953 |
Independent Trustee | Term: Unlimited Served: since April 2010 |
Self-employed consultant since 2010; CEO and President, CFA Institute (June 2014 - January 2015). |
125 | Affiliated Managers Group, Inc. (Director). | |||||
CARL G. VERBONCOEUR c/o SPDR Series Trust One Iron Street Boston, MA 02210 1952 |
Independent Trustee, Audit Committee Chair |
Term: Unlimited Served: since April 2010 |
Self-employed consultant since 2009. |
125 | The Motley Fool Funds Trust (Trustee). | |||||
CLARE S. RICHER c/o SPDR Series Trust One Iron Street Boston, MA 02210 1958 |
Independent Trustee |
Term: Unlimited Served: since July 2018 |
Chief Financial Officer, Putnam Investments LLC (December 2008 May 2017). | 125 | Putnam Acquisition Financing Inc. (Director); Putnam Acquisition Financing LLC (Director); Putnam GP Inc. (Director); Putnam Investor Services, Inc. (Director); Putnam Investments Limited (Director); University of Notre Dame (Trustee). | |||||
SANDRA G. SPONEM c/o SPDR Series Trust One Iron Street Boston, MA 02210 1958 |
Independent Trustee |
Term: Unlimited Served: since July 2018 |
Chief Financial Officer, M.A. Mortenson Companies, Inc. (February 2007 April 2017). | 125 | Guggenheim / Rydex Funds (Trustee). |
20
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 |
|||||
INTERESTED TRUSTEE | ||||||||||
JAMES E. ROSS* SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1965 |
Interested Trustee |
Term: Unlimited Served as Trustee: since April 2010 | Chairman and Director, SSGA Funds Management, Inc. (2005-present); Executive Vice President, State Street Global Advisors (2012-present); Chief Executive Officer and Director, State Street Global Advisors Funds Distributors, LLC (May 2017 present); Director, State Street Global Markets, LLC (2013 - April 2017); President, SSGA Funds Management, Inc. (2005 - 2012); Principal, State Street Global Advisors (2000 - 2005). | 196 | SSGA SPDR ETFs Europe I plc (Director) (November 2016 - present); SSGA SPDR ETFs Europe II plc (Director) (November 2016 - present). |
|
For the purpose of determining the number of portfolios overseen by the Trustees, Fund Complex comprises registered investment companies for which SSGA Funds Management, Inc. serves as investment adviser. |
* |
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. |
21
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. One Iron Street Boston, MA 02210 1967 |
President |
Term: Unlimited Served: since October 2012 |
President and Director, SSGA Funds Management, Inc. (2001 - present)*; Senior Managing Director, State Street Global Advisors (1992 - present)*; Director, State Street Global Advisors Funds Distributors, LLC (May 2017 - present). | |||
BRUCE S. ROSENBERG SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1961 |
Treasurer |
Term: Unlimited Served: since February 2016 |
Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (July 2015 - present); Director, Credit Suisse (April 2008 - July 2015). | |||
ANN M. CARPENTER SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1966 |
Vice President; Deputy Treasurer |
Term: Unlimited Served: since August 2012 (with respect to Vice President); Unlimited Served: since February 2016 (with respect to Deputy Treasurer) |
Chief Operating Officer, SSGA Funds Management, Inc. (2005 - Present)*; Managing Director, State Street Global Advisors (2005 - present).* | |||
MICHAEL P. RILEY SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1969 |
Vice President |
Term: Unlimited Served: since February 2005 |
Managing Director, State Street Global Advisors (2005 - present).* | |||
JOSHUA A. WEINBERG SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1978 |
Chief Legal Officer |
Term: Unlimited Served: since February 2015 |
Managing Director and Managing Counsel, State Street Global Advisors (2011 - present); Clerk, SSGA Funds Management, Inc. (2013 - present); Associate, Financial Services Group, Dechert LLP (2006 - 2011). | |||
JESSE D. HALLEE State Street Bank and Trust Company 100 Summer Street, SUM0703 Boston, MA 02111 1976 |
Secretary |
Term: Unlimited Served: since August 2017 |
Vice President and Senior Counsel, State Street Bank and Trust Company (2013 - present); Vice President and Counsel, Brown Brothers Harriman & Co. (2007 - 2013).** | |||
ESTEFANIA SALOMON State Street Bank and Trust Company 100 Summer Street, SUM0703 Boston, MA 02111 1983 |
Assistant Secretary |
Term: Unlimited Served: since May 2018 |
Assistant Vice President and Associate Counsel, State Street Bank and Trust Company (2018 present); Senior Compliance Consultant, AdvisorAssist, LLC (2017); Attorney, Commonwealth of Massachusetts, Securities Division (2014-2017). |
22
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 |
|||
CHAD C. HALLETT SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1969 |
Deputy Treasurer |
Term: Unlimited Served: since February 2016 |
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).* | |||
DARLENE ANDERSON-VASQUEZ SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1968 |
Deputy Treasurer |
Term: Unlimited Served: since November 2016 |
Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (May 2016 - present); Senior Vice President, John Hancock Investments (September 2007 - May 2016). | |||
ARTHUR A. JENSEN SSGA Funds Management, Inc. 1600 Summer Street Stamford, CT 06905 1966 |
Deputy Treasurer |
Term: Unlimited Served: since August 2017 |
Vice President at State Street Global Advisors (July 2016 present); Deputy Treasurer of Elfun Funds (July 2016 present); Treasurer of State Street Institutional Funds, State Street Variable Insurance Series Funds, Inc. and GE Retirement Savings Plan Funds (June 2011 present); Treasurer of Elfun Funds (June 2011 - July 2016); Mutual Funds Controller of GE Asset Management Incorporated (April 2011 - July 2016); Senior Vice President at Citigroup (2008 2010); Vice President at JPMorgan (2005 2008). | |||
DANIEL FOLEY SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1972 |
Assistant Treasurer |
Term: Unlimited Served: since February 2016 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (April 2007 - present).* | |||
DANIEL G. PLOURDE SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1980 |
Assistant Treasurer |
Term: Unlimited Served: since May 2017 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (May 2015 - present); Officer, State Street Bank and Trust Company (March 2009 - May 2015). | |||
SUJATA UPRETI SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1974 |
Assistant Treasurer |
Term: Unlimited Served: since February 2016 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (May 2015 - present); Assistant Director, Cambridge Associates, LLC (July 2014 - January 2015); Vice President, Bank of New York Mellon (July 2012 - August 2013); Manager, PricewaterhouseCoopers, LLP (September 2003 - July 2012). |
23
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. One Iron Street Boston, MA 02210 1973 |
Chief Compliance Officer; Anti-Money Laundering Officer; Code of Ethics Compliance Officer |
Term: Unlimited Served: since November 2013 |
Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (June 2013 - present)*; Senior Vice President and Global Head of Investment Compliance, BofA Global Capital Management (2010 - 2013). |
* |
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 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 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 Ms. Richer should serve as Trustee because of the experience she gained serving as the Chief Financial Officer of a large financial services and investment management company, her knowledge of the financial services industry and her experience serving on the board of a major educational institution. Ms. Richer was appointed to serve as Trustee of the Trust in July 2018.
The Board has concluded that Ms. Sponem should serve as Trustee because of the experience she gained serving as the Chief Financial Officer of a large financial services company, her knowledge of the financial services industry and her experience serving on the board of another investment company. Ms. Sponem was appointed to serve as Trustee of the Trust in July 2018.
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 $245,000 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 $60,000 and the Chairman of the Audit Committee receives an additional annual fee of $30,000. Prior to July 1, 2018, each Independent Trustee received an annual fee of $230,000 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, 2018.
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 |
$ | 253,195 | N/A | N/A | $ | 345,000 | ||||||||||
Bonny Boatman |
$ | 216,479 | N/A | N/A | $ | 295,000 | ||||||||||
Dwight Churchill |
$ | 216,479 | N/A | N/A | $ | 295,000 | ||||||||||
David Kelly (2) |
$ | 190,764 | N/A | N/A | $ | 260,000 | ||||||||||
Clare Richer (3) |
$ | N/A | N/A | N/A | $ | N/A | ||||||||||
Sandra Sponem (3) |
$ | N/A | N/A | N/A | $ | N/A | ||||||||||
Carl Verboncoeur |
$ | 231,165 | N/A | N/A | $ | 315,000 |
(1) |
The Fund Complex includes the Trust. |
(2) |
Effective August 22, 2018, Mr. Kelly resigned from his position as Trustee and no longer serves as a trustee to the Trust. |
(3) |
Trustee was appointed to the Board as of July 1, 2018, and therefore did not receive any compensation from the Fund Complex for the fiscal year ended June 30, 2018. |
STANDING COMMITTEES
Audit Committee. The Board has an Audit Committee consisting of all Independent Trustees. Mr. Verboncoeur 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, 2018.
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) select any independent counsel of the independent trustees as well as make determinations as to that counsels independence; 5) review matters that are referred to the Committee by the Chief Legal Officer or other counsel to the Trust; and 6) 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, 2018.
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OWNERSHIP OF FUND SHARES
As of December 31, 2017, neither the Independent Trustees nor their immediate family members owned beneficially or of record any securities in the Adviser, Principal Underwriter or any person directly or indirectly controlling, controlled by, or under common control with the Adviser or Principal Underwriter, except as noted below:
Name of Trustee |
Relationship |
Company |
Title of Class | Value of Securities | Percent of Class | |||||||||
Clare S. Richer |
Self | State Street Corporation, parent company of the Adviser and Distributor | Common | $ | 38,134 | <1 | % |
The following table shows as of December 31, 2017, 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 | |||||
Bonny E. Boatman |
None | None | None | |||||
Dwight D. Churchill |
SPDR Nuveen S&P High Yield Municipal Bond ETF | Over $100,000 | Over $100,000 | |||||
Clare Richer |
None | None | None | |||||
Sandra Sponem |
SPDR Bloomberg Barclays High Yield Bond ETF | $50,001-$100,000 | $50,000-$100,000 | |||||
Carl G. Verboncoeur |
SPDR S&P Dividend ETF | $10,001 - $50,000 | $10,001 - $50,000 | |||||
SPDR S&P 600 Small Cap Value | $10,001 - $50,000 | |||||||
Interested Trustee: |
||||||||
James E. Ross |
SPDR Portfolio Large Cap | Over $100,000 | Over $100,000 | |||||
SPDR S&P Biotech ETF | $10,001 - $50,000 | |||||||
SPDR S&P Dividend ETF | $10,001 - $50,000 | |||||||
SPDR Portfolio Small Cap ETF | $10,001 - $50,000 | |||||||
SPDR Portfolio Mid Cap ETF | $10,001 - $50,000 | |||||||
SPDR Dow Jones REIT ETF | $10,001 - $50,000 | |||||||
SPDR S&P 400 Mid Cap Growth ETF | $10,001 - $50,000 | |||||||
SPDR Nuveen S&P High Yield Municipal Bond ETF | Over $100,000 |
CODES OF ETHICS
The Trust and the Adviser (which includes applicable reporting personnel of the Distributor) each have adopted a code of ethics under Rule 17j-1 of the 1940 Act, which is designed to prevent affiliated persons of the Trust, the 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 https://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. The Advisers proxy voting policy 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 https://www.sec.gov .
26
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 or State Street will not disseminate non-public information concerning the Trust, except information may be made available prior to its public availability: (i) to a party for a legitimate business purpose related to the day-to-day operations of the Funds, including: (a) a service provider, (b) the stock exchanges upon which an ETF is listed, (c) the NSCC, (d) the Depository Trust Company, and (e) financial data/research companies such as Morningstar, Bloomberg L.P., and Reuters, or (ii) to any other party for a legitimate business or regulatory purpose, upon waiver or exception, with the consent of an applicable Trust officer.
THE INVESTMENT ADVISER
SSGA FM acts as investment adviser to the Trust and, subject to the oversight of the Board, is responsible for the investment management of each Fund. As of June 30, 2018, the Adviser managed approximately $500.45 billion in assets. The Advisers principal address is, One Iron Street, Boston, Massachusetts 02210. The Adviser, a Massachusetts corporation, is a wholly-owned subsidiary of State Street Global Advisors, Inc., which is itself a wholly-owned subsidiary of State Street Corporation, a publicly held financial 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 oversight 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.
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 the Prospectus. From time to time, the Adviser may waive all or a portion of its fee. The Adviser has contractually agreed to waive a portion of 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) for each Fund until October 31, 2019. 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 prior to October 31, 2019 except with the approval of the Funds Board of Trustees. The Adviser pays all expenses of each Fund other than the management fee, 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.
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, 2018.
27
For the past three fiscal years ended June 30, the Funds paid the following amounts to the Adviser:
FUND |
FISCAL YEAR
ENDED JUNE 30, 2018 |
FISCAL YEAR
ENDED JUNE 30, 2017 |
FISCAL YEAR
ENDED JUNE 30, 2016 |
|||||||||
SPDR Kensho Intelligent Structures ETF |
$ | 10,003 | (1) | $ | N/A | (1) | $ | N/A | (1) | |||
SPDR Kensho Smart Mobility ETF |
$ | 10,672 | (1) | $ | N/A | (1) | $ | N/A | (1) | |||
SPDR Kensho Future Security ETF |
$ | 15,413 | (1) | $ | N/A | (1) | $ | N/A | (1) |
(1) |
The Fund commenced operations on December 27, 2017. |
PORTFOLIO MANAGERS
The Adviser manages the Funds using a team of investment professionals. The professionals primarily responsible for the day-to-day portfolio management of each Fund are:
Portfolio Management Team |
Fund |
|
Michael Feehily, Mark Krivitsky and Kala ODonnell | SPDR Kensho Intelligent Structures ETF | |
Michael Feehily, Mark Krivitsky and Kathleen Morgan | SPDR Kensho Smart Mobility ETF | |
Michael Feehily, Kathleen Morgan and Kala ODonnell | SPDR Kensho Future Security 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, 2018
Portfolio Manager |
Registered
Investment Company Accounts |
Assets Managed
(billions)* |
Other
Pooled Investment Vehicle Accounts |
Assets Managed
(billions)* |
Other Accounts |
Assets Managed
(billions)* |
Total Assets
Managed (billions) |
|||||||||||||||||||||
Michael Feehily |
140 | $ | 549.38 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,152.23 | |||||||||||||||||
Mark Krivitsky |
140 | $ | 549.38 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,152.23 | |||||||||||||||||
Kathleen Morgan |
140 | $ | 549.38 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,152.23 | |||||||||||||||||
Kala ODonnell |
140 | $ | 549.38 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,152.23 |
* |
There are no performance-based fees associated with these accounts. |
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The following table lists the dollar range of Shares beneficially owned by portfolio managers listed above as of June 30, 2018:
Portfolio Manager |
Fund |
Dollar Range of Trust
Shares Beneficially Owned |
||
Michael Feehily | SSPDR SSGA US Large Cap Low Volatility Index ETF | $50,001-$100,000 | ||
SPDR Dow Jones REIT ETF | $50,001-$100,000 | |||
SPDR S&P Dividend ETF | $50,001-$100,000 | |||
SPDR S&P 1500 Value Tilt ETF | $50,001-$100,000 | |||
Mark Krivitsky | None | None | ||
Kathleen Morgan | None | None | ||
Kala ODonnell | 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. 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.
SSGAs culture is complemented and reinforced by a total rewards strategy that is based on a pay for performance philosophy which seeks to offer a competitive pay mix of base salary, benefits, cash incentives and deferred compensation.
Salary is based on a number of factors, including external benchmarking data and market trends, State Street performance, SSGA performance, and individual overall performance. SSGAs Global Human Resources department regularly participates in compensation surveys in order to provide SSGA with market-based compensation information that helps support individual pay decisions.
Additionally, subject to State Street and SSGA business results, State Street allocates an incentive pool to SSGA to reward its employees. The size of the incentive pool for most business units is based on the firms overall profitability and other factors, including performance against risk-related goals. For most SSGA investment teams, SSGA recognizes and rewards performance by linking annual incentive decisions for investment teams to the firms or business units profitability and business unit investment performance over a multi-year period.
Incentive pool funding for most active investment teams is driven in part by the post-tax investment performance of fund(s) managed by the team versus the return levels of the benchmark index(es) of the fund(s) on a one-, three- and, in some cases, five-year basis. For most active investment teams, a material portion of incentive compensation for senior staff is deferred over a four-year period into the SSGA Long-Term Incentive (SSGA LTI) program. For these teams, The SSGA LTI program indexes the performance of these deferred awards against the post-tax investment performance of fund(s) managed by the team. This is intended to align our investment teams compensation with client interests, both through annual incentive compensation awards and through the long-term value of deferred awards in the SSGA LTI program.
29
For the passive equity investment team, incentive pool funding is driven in part by the post-tax 1 and 3-year tracking error of the funds managed by the team against the benchmark indexes of the funds.
The discretionary allocation of the incentive pool to the business units within SSGA is influenced by market-based compensation data, as well as the overall performance of each business unit. Individual compensation decisions are made by the employees manager, in conjunction with the senior management of the employees business unit. These decisions are based on the overall performance of the employee and, as mentioned above, on the performance of the firm and business unit. Depending on the job level, a portion of the annual incentive may be awarded in deferred compensation, which may include cash and/or Deferred Stock Awards (State Street stock), which typically vest over a four-year period. This helps to retain staff and further aligns SSGA employees interests with SSGA clients and shareholders long-term interests.
SSGA recognizes and rewards outstanding performance by:
|
Promoting employee ownership to connect employees directly to the companys success. |
|
Using rewards to reinforce mission, vision, values and business strategy. |
|
Seeking to recognize and preserve the firms unique culture and team orientation. |
|
Providing all employees the opportunity to share in the success of SSGA. |
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 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), which were accrued daily and paid monthly by the Adviser out of its management fee.
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 financial holding company, and is affiliated with the Adviser. State Streets mailing address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
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 its services provided under the SSGA Administration agreement, SSGA FM, shall receive fees for the services, calculated based on the average aggregate net assets of the Trust and SIS, which are accrued daily and paid monthly out of its management fee.
As compensation for its services under the Sub-Administration Agreement, Custodian Agreement and Transfer Agency Agreement, State Street shall receive a fee for the services, calculated based on the average aggregate net assets of the Trust and SIS, which are accrued daily and paid monthly by the Adviser from its management fee. For each series of the Trust and SIS, an annual minimum fee applies. 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 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.
30
SECURITIES LENDING ACTIVITIES
The Trusts Board has approved each Funds participation in a securities lending program. Under the securities lending program, each Fund has retained State Street to serve as the securities lending agent. Each Fund did not engage in securities lending activities during the fiscal year ended June 30, 2018.
THE DISTRIBUTOR
State Street Global Advisors Funds Distributors, LLC is the principal underwriter and Distributor of Fund Shares. Its principal address is One Iron Street, Boston, Massachusetts 02210. 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, as amended (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. An affiliate of 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. An affiliate of 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 SPDR 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 the date of this SAI, 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), Pershing LLC (Pershing), RBC Capital Markets, LLC (RBC) and TD Ameritrade, Inc. (TD Ameritrade). Pursuant to these arrangements, Schwab, Pershing, RBC and TD Ameritrade have agreed to promote certain SPDR funds to their customers and not to charge certain of their 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 Fund assets. 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.
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 continuation of the Distribution Agreement and any other related agreements is subject to annual approval of the Board, including by a majority of the Independent Trustees, as described above.
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) and/or DTC Participants (as defined below).
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.
31
INDEX PROVIDER AND OTHER PERSONS
An unaffiliated index provider may make payments from its own assets to other persons in consideration for services provided or other activities that may facilitate investment in SPDR funds.
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 (commonly referred to as best execution). 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 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, market share, execution-related costs, and prompt and reliable execution. 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. The Adviser uses the same negotiated equity commission schedule with each broker-dealer per market/region, and applies these for each account it trades for. The Advisers negotiated equity commission rates are execution service rates and take into account considerations such as liquidity, market conditions or trading expertise needed to achieve execution. They do not take into account the value of any research received. The Adviser may aggregate trades with other 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 and seeking best execution.
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 each Fund for the past three fiscal years ended June 30. Brokerage commissions paid by the Fund may be substantially different from year to year for multiple reasons, including market volatility and the demand for the Fund.
32
FUND |
FISCAL YEAR
ENDED JUNE 30, 2018 |
FISCAL YEAR
ENDED JUNE 30, 2017 |
FISCAL YEAR
ENDED JUNE 30, 2016 |
|||||||||
SPDR Kensho Intelligent Structures ETF |
$ | 329 | (1) | $ | N/A | (1) | $ | N/A | (1) | |||
SPDR Kensho Smart Mobility ETF |
$ | 610 | (1) | $ | N/A | (1) | $ | N/A | (1) | |||
SPDR Kensho Future Security ETF |
$ | 425 | (1) | $ | N/A | (1) | $ | N/A | (1) |
(1) |
The Fund commenced operations on December 27, 2017. |
Securities of Regular Broker-Dealers. 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, 2018:
JPMorgan Chase & Co. |
$ | 567,944,032 | ||
Merrill Lynch & Co., Inc. |
$ | 549,957,803 | ||
Goldman Sachs & Co. |
$ | 346,108,972 | ||
Morgan Stanley |
$ | 327,478,685 | ||
Citigroup, Inc. |
$ | 301,471,650 | ||
Deutsche Bank |
$ | 114,433,276 | ||
UBS Securities LLC |
$ | 82,884,978 | ||
Credit Suisse |
$ | 30,988,579 | ||
Investment Technology Group, Inc. |
$ | 4,652,106 | ||
Virtu Americas LLC |
$ | 3,277,411 |
Portfolio Turnover. 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 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 Fund 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 Fund 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 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).
33
Beneficial ownership of Fund Shares is limited to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership of beneficial interests in Fund 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 Fund 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 Fund Shares 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 Fund 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.
Fund Share distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all Fund 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 Fund Shares as shown on the records of DTC or its nominee. Payments by DTC Participants to Indirect Participants and Beneficial Owners of Fund 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 Fund 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 Fund 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 Fund Shares, unless the Trust makes other arrangements with respect thereto satisfactory to the Exchange.
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 5, 2018, 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 of Ownership |
||||
SPDR KENSHO INTELLIGENT STRUCTURES ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
46.15 | % | |||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
18.10 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
10.01 | % |
34
Fund | Name and Address |
Percentage of Ownership |
||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
9.53 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
5.50 | % | ||||
SPDR KENSHO SMART MOBILITY ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
42.92 | % | |||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
19.74 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
12.74 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
11.03 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
5.33 | % | ||||
SPDR KENSHO FUTURE SECURITY ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
33.90 | % | |||
Merrill Lynch, Pierce, Fenner & Smith Inc.* 1 Bryant Park New York, NY 10036 |
21.07 | % | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated 4803 Deer Lake Drive W Jacksonville, FL 32246 |
12.17 | % | ||||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
11.91 | % | ||||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
8.48 | % |
An Authorized Participant (as defined below) may hold of record more than 25% of the outstanding Fund Shares. 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 Fund Shares. In such cases, the Agent shall mirror vote (or abstain from voting) such Fund Shares in the same proportion as all other beneficial owners of the Fund.
35
As of October 5, 2018, to the knowledge of the Trust, the following persons held of record or beneficially through one or more accounts 25% or more of the outstanding shares of the Funds.
Fund | Name and Address |
Percentage of Ownership |
||||
SPDR KENSHO INTELLIGENT STRUCTURES ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
46.15 | % | |||
SPDR KENSHO SMART MOBILITY ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
42.92 | % | |||
SPDR KENSHO FUTURE SECURITY ETF |
TD Ameritrade Clearing, Inc. 4211 South 102nd Street Omaha, NE 68127 |
33.90 | % |
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 Fund Shares on a continuous basis, at net asset value, only in a large specified number of Fund 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 each Fund is determined once each business day, as described under Determination of Net Asset Value. Creation Unit sizes are 50,000 Fund Shares per Creation Unit. 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 the Fund is set forth in the table below:
FUND |
CREATION* | REDEMPTION* | ||
SPDR Kensho Intelligent Structures ETF | In-Kind | In-Kind | ||
SPDR Kensho Smart Mobility ETF | In-Kind | In-Kind | ||
SPDR Kensho Future Security ETF | In-Kind | In-Kind |
* |
May be revised at any time without notice. |
PURCHASE (CREATION). The Trust issues and sells Fund 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.
36
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 Fund 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 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, 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.
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). 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.
37
All orders to purchase Fund 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 Fund 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 closes 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. 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 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 second Business Day (T+2) 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 second 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
38
initial deposit will have a value greater than the net asset value of the Fund 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 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 Fund Shares ordered, would own 80% or more of the currently outstanding Fund 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. Fund 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 FUND SHARES IN AMOUNTS LESS THAN CREATION UNITS. Investors must accumulate enough Fund Shares in the secondary market to constitute a Creation Unit in order to have such Fund 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 Fund Shares to constitute a redeemable Creation Unit.
With respect to each Fund, the Custodian, through the NSCC, makes available 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 prior to the opening of business 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 Fund 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 Fund 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, 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.
39
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 Fund 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 Fund 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 Fund 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 two 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 two 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 Fund 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 Fund 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 Fund Shares based on the NAV of Fund 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, as of the close of the Business Day on which the redemption request was submitted, it (or its client) will own (within the meaning of Rule 200 of Regulation SHO) or has arranged to borrow for delivery to the Trust on or prior to the Settlement Date of the redemption request, the requisite number of Shares of the relevant Fund to be redeemed as a Creation Unit. In either case, the Authorized Participant is deemed to acknowledge that: (i) it (or its client) has full legal authority and legal right to tender for redemption the requisite number of Shares of the applicable Fund and to receive the entire proceeds of the redemption; and (ii) if such Shares submitted for redemption have been loaned or pledged to another party or are the subject of a repurchase agreement, securities lending agreement or any other arrangement affecting legal or beneficial ownership of such Shares being tendered, there are no restrictions precluding the tender and delivery of such Shares (including borrowed shares, if any) for redemption, free and clear of liens, on the redemption Settlement Date. 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 Fund 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
40
equivalent amount of cash. The Authorized Participant may request the redeeming investor of the Fund 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 Fund Shares of the Fund or determination of the NAV of the Fund 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/or the applicable order form, certain Funds may require orders to be placed 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. The cut-off time to receive the trade dates net asset value will not precede the calculation of the net asset value of a Funds shares on the prior Business Day. Orders to purchase Fund 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.
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 Kensho Intelligent Structures ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Kensho Smart Mobility ETF |
$ | 250 | $ | 1,000 | ||||
SPDR Kensho Future Security 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. |
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction with the sections in the Prospectus entitled PURCHASE AND SALE INFORMATION and ADDITIONAL PURCHASE AND SALE INFORMATION.
Net asset value per Fund 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 Fund 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 each 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
41
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 Fund 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 a 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 Fund 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 quarterly for each Fund, 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 Fund Shares are distributed, as described below, on a pro rata basis to Beneficial Owners of such Fund 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 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 Fund 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 Prospectus 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 Prospectus. 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 a 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, such 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 five 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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As discussed more fully below, each Fund intends to distribute substantially all of its net investment income and its capital gains for each taxable year.
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 Fund 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 indefinitely 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 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, and the portion of dividends which may qualify for treatment as qualified dividend income.
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 by a Fund 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 50% 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 Fund 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 Fund Shares, and, if they borrow to acquire or otherwise incur debt attributable to Fund Shares, they may be denied a portion of the dividends-received deduction with respect to those Fund Shares. Any corporate shareholder should consult its tax adviser regarding the possibility that its tax basis in its Fund Shares may be reduced, for U.S. federal income tax purposes, by reason of extraordinary dividends received with respect to the Fund 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 Fund Shares. Long-term capital gains are generally 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.
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 Fund Shares on which the distribution was received are sold. After a shareholders basis in the Fund Shares has been reduced to zero, distributions in excess of earnings and profits will be treated as gain from the sale of the shareholders Fund Shares.
Distributions that are reinvested in additional Fund 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 Fund Shares) are generally taken into account in computing a shareholders net investment income.
Distributions of ordinary income and capital gains may also be subject to foreign, state and local taxes depending on a shareholders circumstances.
TAXATION OF SHAREHOLDERS SALE OF FUND SHARES. In general, a sale of Fund Shares results in capital gain or loss, and for individual shareholders, is taxable at a federal rate dependent upon the length of time the Fund 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 generally taxed to non-corporate shareholders at rates of up to 20%.
Gain or loss on the sale of Fund Shares is measured by the difference between the amount received and the adjusted tax basis of the Fund Shares. Shareholders should keep records of investments made (including Fund Shares acquired through reinvestment of dividends and distributions) so they can compute the tax basis of their Fund Shares.
A loss realized on a sale of Fund Shares may be disallowed if substantially identical Fund 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 Fund Shares are disposed of. In such a case, the basis of the Fund Shares acquired must be adjusted to
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reflect the disallowed loss. Any loss upon the sale of Fund 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 Fund Shares acquired by purchase will generally be based on the amount paid for the Fund 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 Fund Shares generally determines the amount of the capital gain or loss realized on the sale or exchange of Fund Shares. Contact the broker through whom you purchased your Fund 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 consists of certain foreign securities (generally including foreign government securities), then the Fund should be eligible to file an election with the Internal Revenue Service (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. Under certain circumstances, if a Fund receives a refund of foreign taxes paid in respect of a prior year, the value of Fund Shares could be reduced or any foreign tax credits or deductions passed through to shareholders in respect of the Funds foreign taxes for the current year could be reduced.
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.
Certain investments made by a Fund may be treated as equity in passive foreign investment companies or PFICs for federal income tax purposes. In general, a passive foreign investment company is a foreign corporation (i) that receives at least 75% of its annual gross income from passive sources (such as interest, dividends, certain rents and royalties, or capital gains) or (ii) where at least 50% of its assets (computed based on average fair market value) either produce or are held for the production of passive income. If a Fund acquires any equity interest (generally including, under Treasury regulations that may be promulgated in the future, not only stock but also an option to acquire stock such as is inherent in a convertible bond) in a PFIC, 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. Under proposed Treasury regulations, certain income derived by a Fund for a taxable
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year from a PFIC with respect to which the Fund has made a qualified electing fund election would generally constitute qualifying income only to the extent the PFIC makes distributions in respect of that income to the Fund for that taxable year. The Funds may limit and/or manage their holdings in PFICs to limit their tax liability or maximize their returns from these investments.
If a sufficient portion of the interests in a foreign issuer are held or deemed held by a Fund, independently or together with certain other U.S. persons, that issuer may be treated as a controlled foreign corporation (a CFC) with respect to the Fund, in which case the Fund will be required to take into account each year, as ordinary income, its share of certain portions of that issuers income, whether or not such amounts are distributed. A Fund may have to dispose of its portfolio securities (potentially resulting in the recognition of taxable gain or loss, and potentially under disadvantageous circumstances) to generate cash, or may have to borrow the cash, to meet its distribution requirements and avoid Fund-level taxes. Under proposed Treasury Regulations, certain income derived by a Fund from a CFC for a taxable year would generally constitute qualifying income only to the extent the CFC makes distributions in respect of that income to the Fund for that taxable year. In addition, some Fund gains on the disposition of interests in such an issuer may be treated as ordinary income. A Fund may limit and/or manage its holdings in issuers that could be treated as CFCs in order to limit its tax liability or maximize its after-tax return 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.
Noncorporate taxpayers are generally eligible for a deduction of up to 20% of qualified REIT dividends. A Fund will not be able to claim such a deduction in respect of any REIT dividends it receives, and shareholders will not be able to claim such a deduction in respect of Fund dividends attributable to any REIT dividends.
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) Fund 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.
Certain tax-exempt educational institutions will be subject to a 1.4% tax on net investment income. For these purposes, certain dividends and capital gain distributions, and certain gains from the disposition of Fund Shares (among other categories of income), are generally taken into account in computing a shareholders net investment income.
FOREIGN SHAREHOLDERS. Dividends, other than capital gains dividends, short-term capital gain dividends and interest-related dividends (described below), 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 Fund Shares held through an intermediary, the intermediary may withhold even if the 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.
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Unless certain non-U.S. entities that hold Fund 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 payable to such entities and, after December 31, 2018, to redemptions and certain capital gain dividends payable to such entities. 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 21%, 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, Fund Shares may qualify as USRPIs, which could result in 15% withholding on certain distributions and gross redemption proceeds paid to certain non-U.S. investors.
BACKUP WITHHOLDING. A Fund will be required in certain cases to withhold (as backup withholding) on amounts 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 24%. 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 Fund 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 Fund 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 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 Fund 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 Fund 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 Fund 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
48
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 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 Fund Shares should consult their own tax advisors as to the tax consequences of investing in such Fund 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.
C APITAL STOCK AND SHAREHOLDER REPORTS
Each Fund issues shares of beneficial interest, par value $.01 per Fund Share. The Board may designate additional funds.
Each Fund Share issued by the Trust has a pro rata interest in the assets of the corresponding series of the Trust. Fund Shares have no preemptive, exchange, subscription or conversion rights and are freely transferable. Each Fund 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 Fund 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 Fund 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 Advisors Funds Distributors, LLC at One Iron Street, Boston, Massachusetts 02210.
COUNSEL AND INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Morgan, Lewis & Bockius LLP, 1111 Pennsylvania Avenue, NW, Washington, DC 20004, serves as counsel to the Trust. Ernst & Young LLP, located at 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.
49
LOCAL MARKET HOLIDAY SCHEDULES
The Trust generally intends to effect deliveries of portfolio securities on a basis of T plus two 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 two 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 two 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 2018 (the only year for which holidays are known at the time of this SAI filing) in which the regular holidays in non-U.S. markets may impact Fund settlement. This list is based on information available to the Funds. The list may not be accurate or complete and is subject to change:
50
Botswana |
Brazil |
Bulgaria |
Burkina Faso |
Canada |
||||
January 1-2 | January 1, 25 | January 1 | January 1 | January 1-2 | ||||
March 30 | February 12-14 | March 5 | April 2 | February 12, 19 | ||||
April 2 | March 30 | April 6, 9 | May 1, 10, 21 | March 30 | ||||
May 1, 10 | May 1, 31 | May 1, 7, 24 | June 11, 15 | May 21 | ||||
July 2, 16-17 | July 9 | September 6, 24 | August 7, 15, 22 | June 25 | ||||
October 1-2 | September 7 | December 24-26 | November 1, 15, 21 | July 2 | ||||
December 25-26 | October 12 | December 25 | August 6 | |||||
November 2, 15, 20 | September 3 | |||||||
December 24-25, 31 | October 8 | |||||||
November 12 | ||||||||
December 25-26 | ||||||||
Chile |
China |
Colombia |
Costa Rica |
Croatia |
||||
January 1 | January 1 | January 1-8 | January 1 | January 1 | ||||
March 30 | February 15-16, 19-21 | March 19, 29-30 | March 29-30 | March 30 | ||||
May 1, 21 | April 5-6, 30 | May 1, 14 | April 11 | April 2 | ||||
July 2, 16 | May 1 | June 4, 11 | May 1 | May 1, 31 | ||||
August 15 | June 18 | July 2, 20 | July 25 | June 22, 25 | ||||
September 17-19 | September 24 | August 7, 20 | August 2, 15 | August 15 | ||||
October 15 | October 1-5 | October 15 | October 15 | October 8 | ||||
November 1-2 | November 5, 12 | December 25 | November 1 | |||||
December 25, 31 | December 25 | December 24-26, 31 | ||||||
Cyprus |
The Czech Republic |
Denmark |
Egypt* |
Estonia |
||||
January 1 | January 1 | January 1 | January 1, 7, 25 | January 1 | ||||
February 19 | March 30 | March 29-30 | April 8-9, 25 | March 30 | ||||
March 30 | April 2 | April 2, 27 | May 1 | April 2 | ||||
April 2, 6, 9-10 | May 1, 8 | May 10-11, 21 | June 17 | May 1, 10 | ||||
May 1, 28 | July 5-6 | June 5 | July 1, 23 | August 20 | ||||
August 15 | September 28 | December 24-26, 31 | August 20-22 | December 24-26, 31 | ||||
October 1 | December 24-26, 31 | September 11 | ||||||
December 24-26 | November 20 | |||||||
* Market closed every Friday |
||||||||
Finland |
France |
Georgia |
Germany |
Ghana |
||||
January 1 | January 1 | January 1-2, 19 | January 1 | January 1 | ||||
March 30 | March 30 | March 8 | March 30 | March 6, 30 | ||||
April 2 | April 2 | April 6, 9 | April 2 | April 2 | ||||
May 1-10 | May 1 | May 9 | May 1, 21 | May 1, 25 | ||||
June 22 | December 24-26, 31 | August 28 | October 3 | June 15 | ||||
December 6, 24-26, 31 | November 23 | December 24-26, 31 | July 2 | |||||
August 22 | ||||||||
September 21 | ||||||||
December 7, 25-26 | ||||||||
Greece |
Guinea-Bissau |
Hong Kong |
Hungary |
Iceland |
||||
January 1 | January 1 | January 1, 27 | January 1 | January 1 | ||||
February 19 | April 2 | February 15-16, 19 | March 15-16, 30 | March 29-30 | ||||
March 30 | May 1, 10, 21 | March 30 | April 2, 30 | April 2, 19 | ||||
April 2, 6, 9 | June 11, 15 | April 2, 5 | May 1, 21 | May 1, 10, 21 | ||||
May 1, 28 | August 7, 15, 22 | May 1, 22 | August 20 | August 6 | ||||
August 15 | November 1, 15, 21 | June 18 | October 22-23 | December 24-26, 31 | ||||
December 24-26 | December 25 | July 2 | November 1-2 | |||||
September 25 | December 24-26, 31 | |||||||
October 1, 17 | ||||||||
December 24-26, 31 |
51
52
Morocco |
Namibia |
The Netherlands |
New Zealand |
Niger |
||||
January 1, 11 | January 1 | January 1 | January 1-2 | January 1 | ||||
May 1 | March 21, 30 | March 30 | February 6 | April 2 | ||||
June 14, 30 | April 2, 27 | April 2 | March 30 | May 1, 10, 21 | ||||
August 14, 20-22 | May 1, 4, 25 | May 1 | April 2, 25 | June 11, 15 | ||||
September 11 | August 9, 27 | December 24-26, 31 | June 4 | August 7, 15, 22 | ||||
November 6, 20 | September 24 | October 22 | November 15, 21 | |||||
December 10, 17, 25-26 | December 25-26 | December 25 | ||||||
Nigeria |
Norway |
Oman* |
Pakistan |
Panama |
||||
January 1 | January 1 | January 1 | January 1 | January 1, 8 | ||||
March 30 | March 28-30 | June 17-18 | February 5 | February 13 | ||||
April 2 | April 2 | July 23 | March 23 | March 30 | ||||
May 1, 29 | May 1, 10, 17, 21 | August 22-23 | May 1 | May 1 | ||||
June 15, 18 | December 24-26, 31 | September 11 | June 15, 18 | November 5, 26 | ||||
August 22-23 | November 18-20 | July 2 | December 25, 31 | |||||
October 1 | August 22-24 | |||||||
November 19 | September 20-21 | |||||||
December 25-26 | November 20 | |||||||
December 25 | ||||||||
* Market closed every Friday |
||||||||
Peru |
The Philippines |
Poland |
Portugal |
Puerto Rico |
||||
January 1 | January1- 2 | January 1-2 | January 1 | January 1, 15 | ||||
March 29-30 | February 16 | March 30 | March 30 | February 19 | ||||
May 1 | March 29-30 | April 2 | April 2 | March 30 | ||||
June 29 | April 9 | May 1, 3, 31 | May 1 | May 28 | ||||
August 30 | May 1 | August 15 | December 24-26, 31 | July 4 | ||||
October 8 | June 12 | November 1 | September 3 | |||||
November 1 | August 21, 27 | December 24-26, 31 | October 8 | |||||
December 25 | November 1-2, 30 | November 12-23 | ||||||
December 24-25, 31 | December 24-25 | |||||||
Qatar* |
Romania |
Russia |
Saudi Arabia* |
Senegal |
||||
January 1 | January 1-2, 24 | January 1-2, 8 | June 17-21 | January 1 | ||||
February 13 | April 9 | February 23 | August 19-23 | April 2 | ||||
March 4 | May 1, 28 | March 8 | September 23 | May 1, 10, 21 | ||||
June 17-19 | June 1 | May 1-9 | June 11, 15 | |||||
August 20-22 | August 15 | June 12 | August 7, 15, 22 | |||||
December 18 | November 30 | November 5 | November 1, 15, 21 | |||||
December 25-26 | December 31 | December 25 | ||||||
* Market closed every Friday |
* Market closed every Friday |
|||||||
Serbia |
Singapore |
The Slovak Republic |
Slovenia |
South Africa |
||||
January 1-2 | January 1 | January 1 | January 1-2 | January 1 | ||||
February 15-16 | February 16 | March 30 | February 8 | March 21, 30 | ||||
April 6, 9 | March 30 | April 2 | March 30 | April 2, 27 | ||||
May 1-2 | May 1, 29 | May 1, 8 | April 2, 27 | May 1 | ||||
November 12 | June 15 | July 5 | May 1-2 | August 9 | ||||
December 31 | August 9, 22 | August 29 | June 25 | September 24 | ||||
November 6 | November 1 | August 15 | December 17, 25-26 | |||||
December 25 | December 24-26 | October 31 | ||||||
November 1 | ||||||||
December 24-26, 31 |
53
South Korea |
Spain |
Sri Lanka |
Srpska |
Swaziland |
||||
January 1 | January 1 | January 1, 15, 31 | January 1-2, 9 | January 1, 5 | ||||
February 15-16 | March 30 | February 5, 13 | April 6, 9 | March 30 | ||||
March 1 | April 2 | March 1, 30 | May 1-2, 9 | April 2, 19, 25 | ||||
May 1, 7, 22 | May 1 | April 13, 20, 30 | November 21 | May 1, 10 | ||||
June 6, 13 | December 24-26, 31 | May 1, 29 | July 23 | |||||
August 15 | June 15, 27 | August 27 | ||||||
September 24-26 | July 27 | September 6 | ||||||
August 22 | December 25-26 | |||||||
September 24 | ||||||||
October 24 | ||||||||
November 20-22 December 25 | ||||||||
Sweden |
Switzerland |
Taiwan |
Tanzania |
Thailand |
||||
January 1, 5 | January 1-2 | January 1 | January 1, 12 | January 1-2 | ||||
March 29-30 | March 30 | February 13-16, 19-20, 28 | March 30 | March 1 | ||||
April 2 | April 2 | April 4-6 | April 2, 26 | April 6, 13, 16 | ||||
May 1, 9-10 | May 1, 10, 21 | May 1 | May 1 | May 1, 29 | ||||
June 6, 22 | August 1 | June 18 | June 15 | July 27, 30 | ||||
November 2 | December 25-26 | September 24 | August 8, 22 | August 13 | ||||
December 24-26, 31 | October 10 | November 21 | October 15, 23 | |||||
December 31 | December 20, 25-26 | December 5, 10, 31 | ||||||
Togo |
Tunisia |
Turkey |
Uganda |
Ukraine |
||||
January 1 | January 1 | January 1 | January 1, 26 | January 1, 8 | ||||
April 2 | March 20 | April 23 | February 16 | March 8 | ||||
May 1, 10, 21 | April 9 | May 1 | March 8, 30 | April 9 | ||||
June 11, 15 | May 1 | June 14-15 | April 2 | May 1-2, 9, 28 | ||||
August 7, 15, 22 | June 15 | August 20-24, 30 | May 1 | June 28 | ||||
November 1, 15, 21 | July 25 | October 29 | June 15 | August 24 | ||||
December 25 | August 13, 21 | August 21 | October 15 | |||||
September 12 | October 9 | December 25 | ||||||
October 15 | November 30 | |||||||
November 20 | December 25-26 | |||||||
The United Arab Emirates* |
The United Kingdom |
The United States Bond Market |
Uruguay |
Venezuela |
||||
January 1 | January 1 | January 1, 15 | January 1 | January 1 | ||||
June 14 | March 30 | February 19 | February 12-13 | February 12-13 | ||||
August 20-22 | April 2 | March 29*, 30 | March 29-30 | March 19, 29-30 | ||||
September 11 | May 7, 28 | May 25*, 28 | April 23 | April 19 | ||||
November 20 | August 27 | July 3*- 4 | May 1, 21 | May 1, 14 | ||||
December 2-3 | December 24-26, 31 | September 4 | June 19 | June 4 | ||||
October 8 | July 18 | July 2, 5, 24 | ||||||
November 22, 23*, 24* | October 15 | August 20 | ||||||
December 25, 31* | November 2 | September 10 | ||||||
December 25 |
October 12 November 5 December 24-25, 31 |
|||||||
* Market closed every Friday |
* The U.S. bond market has recommended early close. |
|||||||
Vietnam |
Zambia |
Zimbabwe |
||||||
January 1 | January 1 | January 1 | ||||||
February 14-16, 19-20 | March 8, 12, 30 | February 21 | ||||||
April 25, 30 | April 2 | March 30 | ||||||
May 1 | May 1, 25 | April 2, 18 | ||||||
September 3 | July 2-3 | May 1, 25 | ||||||
August 6 | August 13-14 | |||||||
October 18, 24 | December 25-26 | |||||||
December 25 |
54
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 year 2018, the dates of regular holidays affecting the following securities markets present the worst-case redemption cycles* for a Fund as follows:
2018
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Argentina |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
03/28/18 | 04/05/18 | 8 | ||||
Australia |
03/27/18 | 04/04/18 | 8 | |||
03/28/18 | 04/05/18 | 8 | ||||
03/29/18 | 04/06/18 | 8 | ||||
12/19/18 | 12/27/18 | 8 | ||||
12/20/18 | 12/28/18 | 8 | ||||
12/21/18 | 01/02/19 | 12 | ||||
Bangladesh |
08/16/18 | 08/26/18 | 10 | |||
08/19/18 | 08/27/18 | 8 | ||||
08/20/18 | 08/28/18 | 8 | ||||
Bosnia and Herzegovina |
04/25/18 | 05/03/18 | 8 | |||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
Brazil |
02/07/18 | 02/15/18 | 8 | |||
02/08/18 | 02/16/18 | 8 | ||||
02/09/18 | 02/19/18 | 10 | ||||
China |
02/12/18 | 02/22/18 | 10 | |||
02/13/18 | 02/23/18 | 10 | ||||
02/14/18 | 02/26/18 | 12 | ||||
09/26/18 | 10/08/18 | 12 | ||||
09/27/18 | 10/09/18 | 12 | ||||
09/28/18 | 10/10/18 | 12 | ||||
Indonesia |
06/08/18 | 06/20/18 | 12 | |||
06/11/18 | 06/21/18 | 10 | ||||
06/12/18 | 06/22/18 | 10 | ||||
Israel |
03/28/18 | 04/08/18 | 11 | |||
03/29/18 | 04/09/18 | 11 | ||||
09/17/18 | 10/02/18 | 15 | ||||
09/20/18 | 10/03/18 | 13 | ||||
Japan |
04/27/18 | 05/07/18 | 10 | |||
Kuwait |
08/16/18 | 08/26/18 | 10 | |||
08/19/18 | 08/27/18 | 8 |
55
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Malawi |
01/08/18 | 01/16/18 | 8 | |||
01/09/18 | 01/17/18 | 8 | ||||
01/10/18 | 01/18/18 | 8 | ||||
01/11/18 | 01/19/18 | 8 | ||||
01/12/18 | 01/22/18 | 10 | ||||
02/26/18 | 03/06/18 | 8 | ||||
02/27/18 | 03/07/17 | 8 | ||||
02/28/18 | 03/08/18 | 8 | ||||
03/01/18 | 03/09/18 | 8 | ||||
03/02/18 | 03/12/18 | 10 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/07/18 | 05/15/18 | 8 | ||||
05/08/18 | 05/16/18 | 8 | ||||
05/09/18 | 05/17/18 | 8 | ||||
05/10/18 | 05/18/18 | 8 | ||||
05/11/18 | 05/21/18 | 10 | ||||
06/08/18 | 06/18/18 | 10 | ||||
06/11/18 | 06/19/18 | 8 | ||||
06/12/18 | 06/20/18 | 8 | ||||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/22/18 | 8 | ||||
06/29/18 | 07/09/18 | 10 | ||||
07/02/18 | 07/10/18 | 8 | ||||
07/03/18 | 07/11/18 | 8 | ||||
07/04/18 | 07/12/18 | 8 | ||||
07/05/18 | 07/13/18 | 8 | ||||
10/08/18 | 10/16/18 | 8 | ||||
10/09/18 | 10/17/18 | 8 | ||||
10/10/18 | 10/18/18 | 8 | ||||
10/11/18 | 10/19/18 | 8 | ||||
10/12/18 | 10/22/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 |
56
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Mexico |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
03/28/18 | 04/05/18 | 8 | ||||
Morocco |
08/15/18 | 08/23/18 | 8 | |||
08/16/18 | 08/24/18 | 8 | ||||
08/17/18 | 08/27/18 | 10 | ||||
Namibia |
03/14/18 | 03/22/18 | 8 | |||
03/15/18 | 03/23/18 | 8 | ||||
03/16/18 | 03/26/18 | 10 | ||||
03/19/18 | 03/27/18 | 8 | ||||
03/20/18 | 03/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/25/18 | 05/07/18 | 12 | ||||
04/26/18 | 05/08/18 | 12 | ||||
05/02/18 | 05/10/18 | 8 | ||||
05/03/18 | 05/11/18 | 8 | ||||
05/18/18 | 05/28/18 | 10 | ||||
05/21/18 | 05/29/18 | 8 | ||||
05/22/18 | 05/30/18 | 8 | ||||
05/23/18 | 05/31/18 | 8 | ||||
05/24/18 | 06/01/18 | 8 | ||||
08/02/18 | 08/10/18 | 8 | ||||
08/03/18 | 08/13/18 | 10 | ||||
08/06/18 | 08/14/18 | 8 | ||||
08/07/18 | 08/15/18 | 8 | ||||
08/08/18 | 08/16/18 | 8 | ||||
08/20/18 | 08/28/18 | 8 | ||||
08/21/18 | 08/29/18 | 8 | ||||
08/22/18 | 08/30/18 | 8 | ||||
08/23/18 | 08/31/18 | 8 | ||||
08/24/18 | 09/03/18 | 10 | ||||
09/17/18 | 09/25/18 | 8 | ||||
09/18/18 | 09/26/18 | 8 | ||||
09/19/18 | 09/27/18 | 8 | ||||
09/20/18 | 09/28/18 | 8 |
57
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
09/21/18 | 10/01/18 | 10 | ||||
12/03/18 | 12/11/18 | 8 | ||||
12/04/18 | 12/12/18 | 8 | ||||
12/05/18 | 12/13/18 | 8 | ||||
12/06/18 | 12/14/18 | 8 | ||||
12/07/18 | 12/18/18 | 11 | ||||
12/11/18 | 12/19/18 | 8 | ||||
12/12/18 | 12/20/18 | 8 | ||||
12/13/18 | 12/21/18 | 8 | ||||
12/14/18 | 12/24/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Norway |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
Oman |
11/13/18 | 11/21/18 | 8 | |||
11/14/18 | 11/22/18 | 8 | ||||
11/15/18 | 11/25/18 | 10 | ||||
Qatar |
06/12/18 | 06/20/18 | 8 | |||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/24/18 | 10 | ||||
08/15/18 | 08/23/18 | 8 | ||||
08/16/18 | 08/26/18 | 10 | ||||
08/19/18 | 08/27/18 | 8 | ||||
Saudi Arabia |
06/13/18 | 06/24/18 | 11 | |||
06/14/18 | 06/25/18 | 11 | ||||
08/15/18 | 08/26/18 | 11 |
58
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
08/16/18 | 08/27/18 | 11 | ||||
Serbia |
12/26/18 | 01/03/19 | 8 | |||
12/27/18 | 01/04/19 | 8 | ||||
12/28/18 | 01/07/19 | 10 | ||||
South Africa |
03/14/18 | 03/22/18 | 8 | |||
03/15/18 | 03/23/18 | 8 | ||||
03/16/18 | 03/26/18 | 10 | ||||
03/19/18 | 03/27/18 | 8 | ||||
03/20/18 | 03/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/25/18 | 05/04/18 | 9 | ||||
04/26/18 | 05/07/18 | 11 | ||||
04/30/18 | 05/08/18 | 8 | ||||
08/02/18 | 08/10/18 | 8 | ||||
08/03/18 | 08/13/18 | 10 | ||||
08/06/18 | 08/14/18 | 8 | ||||
08/07/18 | 08/15/18 | 8 | ||||
08/08/18 | 08/16/18 | 8 | ||||
09/17/18 | 09/25/18 | 8 | ||||
09/18/18 | 09/26/18 | 8 | ||||
09/19/18 | 09/27/18 | 8 | ||||
09/20/18 | 09/28/18 | 8 | ||||
09/21/18 | 10/01/18 | 10 | ||||
12/10/18 | 12/18/18 | 8 | ||||
12/11/18 | 12/19/18 | 8 | ||||
12/12/18 | 12/20/18 | 8 | ||||
12/13/18 | 12/21/18 | 8 | ||||
12/14/18 | 12/24/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Swaziland |
01/02/18 | 01/10/18 | 8 | |||
01/03/18 | 01/11/18 | 8 | ||||
01/04/18 | 1/12/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 |
59
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
03/29/18 | 04/09/18 | 11 | ||||
04/12/18 | 04/20/18 | 8 | ||||
04/13/18 | 04/23/18 | 10 | ||||
04/16/18 | 04/24/18 | 8 | ||||
04/17/18 | 04/26/18 | 9 | ||||
04/18/18 | 04/27/18 | 9 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/03/18 | 05/11/18 | 8 | ||||
05/04/18 | 05/14/18 | 10 | ||||
05/07/18 | 05/15/18 | 8 | ||||
05/08/18 | 05/16/18 | 8 | ||||
05/09/18 | 05/17/18 | 8 | ||||
07/16/18 | 07/24/18 | 8 | ||||
07/17/18 | 07/25/18 | 8 | ||||
07/18/18 | 07/26/18 | 8 | ||||
07/19/18 | 07/27/18 | 8 | ||||
07/20/18 | 07/30/18 | 10 | ||||
08/20/18 | 08/28/18 | 8 | ||||
08/21/18 | 08/29/18 | 8 | ||||
08/22/18 | 08/30/18 | 8 | ||||
08/23/18 | 08/31/18 | 8 | ||||
08/24/18 | 09/03/18 | 10 | ||||
08/30/18 | 09/07/18 | 8 | ||||
08/31/18 | 09/10/18 | 10 | ||||
09/03/18 | 09/11/18 | 8 | ||||
09/04/18 | 09/12/18 | 8 | ||||
09/05/18 | 09/13/18 | 8 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Taiwan |
02/09/18 | 02/21/18 | 12 | |||
02/12/18 | 02/22/18 | 10 | ||||
Tanzania |
12/19/18 | 12/27/18 | 8 | |||
Thailand |
12/26/18 | 01/03/19 | 8 | |||
12/27/18 | 01/04/19 | 8 | ||||
12/28/18 | 01/07/19 | 10 | ||||
Turkey |
08/16/18 | 08/27/18 | 11 | |||
08/17/18 | 08/28/18 | 11 |
60
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Uganda |
01/19/18 | 01/29/18 | 10 | |||
01/22/18 | 01/30/18 | 8 | ||||
01/23/18 | 01/31/18 | 8 | ||||
01/24/18 | 02/01/18 | 8 | ||||
01/25/18 | 02/02/18 | 8 | ||||
02/09/18 | 02/19/18 | 10 | ||||
02/12/18 | 02/20/18 | 8 | ||||
02/13/18 | 02/21/18 | 8 | ||||
02/14/18 | 02/22/18 | 8 | ||||
02/15/18 | 02/23/18 | 8 | ||||
03/01/18 | 03/09/18 | 8 | ||||
03/02/18 | 03/12/18 | 10 | ||||
03/05/18 | 03/13/18 | 8 | ||||
03/06/18 | 03/14/18 | 8 | ||||
03/07/18 | 03/15/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
06/08/18 | 06/18/18 | 10 | ||||
06/11/18 | 06/19/18 | 8 | ||||
06/12/18 | 06/20/18 | 8 | ||||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/22/18 | 8 | ||||
08/14/18 | 08/22/18 | 8 | ||||
08/15/18 | 08/23/18 | 8 | ||||
08/16/18 | 08/24/18 | 8 | ||||
08/17/18 | 08/27/18 | 10 | ||||
08/20/18 | 08/28/18 | 8 | ||||
10/02/18 | 10/10/18 | 8 | ||||
10/03/18 | 10/11/18 | 8 | ||||
10/04/18 | 10/12/18 | 8 | ||||
10/05/18 | 10/15/18 | 10 | ||||
10/08/18 | 10/16/18 | 8 | ||||
11/23/18 | 12/03/18 | 10 | ||||
11/26/18 | 12/04/18 | 8 | ||||
11/27/18 | 12/05/18 | 8 | ||||
11/28/18 | 12/06/18 | 8 | ||||
11/29/18 | 12/07/18 | 8 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 |
61
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Vietnam |
02/09/18 | 02/21/18 | 12 | |||
02/12/18 | 02/22/18 | 10 | ||||
02/13/18 | 02/23/18 | 10 | ||||
Zimbabwe |
02/14/18 | 02/22/18 | 8 | |||
02/15/18 | 02/23/18 | 8 | ||||
02/16/18 | 02/26/18 | 10 | ||||
02/19/18 | 02/27/18 | 8 | ||||
02/20/18 | 02/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/11/18 | 04/19/18 | 8 | ||||
04/12/18 | 04/20/18 | 8 | ||||
04/13/18 | 04/23/18 | 10 | ||||
04/16/18 | 04/24/18 | 8 | ||||
04/17/18 | 04/25/18 | 8 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/18/18 | 05/28/18 | 10 | ||||
05/21/18 | 05/29/18 | 8 | ||||
05/22/18 | 05/30/18 | 8 | ||||
05/23/18 | 05/31/18 | 8 | ||||
05/24/18 | 06/01/18 | 8 | ||||
08/06/18 | 08/15/18 | 9 | ||||
08/07/18 | 08/16/18 | 9 | ||||
08/08/18 | 08/17/18 | 9 | ||||
08/09/18 | 08/20/18 | 11 | ||||
08/10/18 | 08/21/18 | 11 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 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. |
62
The financial statements and financial highlights of the Funds for the fiscal year ended June 30, 2018, 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.
63
March 2018
Global Proxy Voting and Engagement Principles
State Street Global Advisors (SSGA), one of the industrys largest institutional asset managers, is the investment management arm of State Street Corporation, a leading provider of financial services to institutional investors. As an investment manager, SSGA has discretionary proxy voting authority over most of its client accounts, and SSGA 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 this document i .
A-1
Global Proxy Voting and Engagement Principles
State Street Global Advisors (SSGA) maintains Proxy Voting and Engagement Guidelines for select markets, including: Australia, the EU, Japan, New Zealand , North America (Canada and the US), the UK and emerging markets. International markets that do not have specific guidelines are reviewed and voted consistent with our Global Proxy Voting and Engagement Principles; however, SSGA also endeavors to show sensitivity to local market practices when voting in these various markets.
SSGAs Approach to Proxy Voting and Issuer Engagement
At SSGA, 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 guidelines, analyzing corporate governance issues on a case-by-case basis at the company level, and exercising our voting rightsall to maximize shareholder value.
SSGAs 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 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, depending on the product or strategy, the fiduciary responsibilities of share ownership and voting for which SSGA 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 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 also evaluates the various factors that play into the corporate governance framework of a country, including but not limited to, 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. SSGA understands that regulatory requirements and investor expectations relating to governance practices and engagement activities differ from country-to-country. As a result, SSGA engages with issuers, regulators, or both, depending on the market. SSGA 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.
To help mitigate company specific risk, the SSGA Asset Stewardship 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 conducts issuer specific engagements with companies covering various corporate governance and sustainability related topics.
The SSGA Asset Stewardship 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 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 believes issuer engagement can take many forms and be triggered under numerous circumstances. The following methods represent how SSGA defines engagement methods:
Active
SSGA 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 will actively seek direct dialogue with the board and management of companies we have identified through our
State Street Global Advisors | A-2 |
Global Proxy Voting and Engagement Principles
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.
Reactive
Reactive engagement is initiated by the issuers. SSGA 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 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 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 as requiring active engagement, such as shareholder conference calls.
Proxy Voting Procedure
Oversight
The SSGA Asset Stewardship 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 (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 (IC). The IC reviews and approves amendments to the Guidelines. The PRC reports to the IC, and may refer certain significant proxy items to that committee.
Proxy Voting Process
In order to facilitate SSGAs proxy voting process, SSGA retains Institutional Shareholder Services Inc. (ISS), a firm with expertise in proxy voting and corporate governance. SSGA utilizes ISSs services in three ways: (1) as SSGAs proxy voting agent (providing SSGA 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 Asset Stewardship 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 Asset Stewardship 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 Asset Stewardship Team may refer significant issues to the PRC for a determination of the proxy vote. In addition, in determining whether to refer a proxy vote to the PRC, the Asset Stewardship Team will consider whether a material conflict of interest exists between the interests of our client and those of SSGA or its affiliates (as explained in greater detail in our Conflict Mitigation Guidelines).
SSGA votes in all markets where it is feasible; however, SSGA 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 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 Conflict Mitigation Guidelines.
State Street Global Advisors | A-3 |
Global Proxy Voting and Engagement Principles
Proxy Voting and Engagement Principles
Directors and Boards
The election of directors is one of the most important fiduciary duties SSGA performs as a shareholder. SSGA believes that well-governed companies can protect and pursue shareholder interests better and withstand the challenges of an uncertain economic environment. As such, SSGA 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 SSGAs 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 SSGAs engagement process, SSGA routinely discusses the importance of these responsibilities with the boards of issuers.
SSGA believes the quality of a board is a measure of director independence, director succession planning, board diversity, evaluations and refreshment and company governance practices. In voting to elect nominees, SSGA considers many factors. SSGA 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 also believes the right mix of skills, independence, diversity 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 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 believes audit committees should have independent directors as members, and SSGA 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 believes the company should have a well explained business rationale that is consistent with corporate strategy and not overly dilutive to its shareholders.
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, liquidations, and other major changes to the corporation.
Proposals that are in the best interests of shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In evaluating mergers and acquisitions, SSGA considers the adequacy of the consideration and the impact of the corporate governance provisions to shareholders. In all cases, SSGA 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 does not support proposals that reduce shareholders rights, entrench management or reduce the likelihood of shareholders right to vote on reasonable offers.
Compensation
SSGA 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 SSGAs analysis of executive compensation; SSGA 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 considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer
State Street Global Advisors | A-4 |
Global Proxy Voting and Engagement Principles
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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA may also consider executive compensation practices when re-electing members of the remuneration committee.
SSGA 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.
Environmental and Social Issues
As a fiduciary, SSGA 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 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. SSGAs 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 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 does not seek involvement in the day-to-day operations of an organization, SSGA recognizes the need for conscientious oversight and input into management decisions that may affect a companys value. SSGA 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.
Fixed Income Stewardship
The two elements of SSGAs fixed income stewardship program are:
Proxy Voting:
While matters that come up for a vote at bondholder meetings vary by jurisdiction, examples of common proxy voting resolutions at bondholder meetings include:
| Approving amendments to debt covenants and/or terms of issuance; |
| Authorizing procedural matters such as filing of required documents/other formalities; |
| Approving debt restructuring plans; |
| Abstaining from challenging the bankruptcy trustees; |
| Authorizing repurchase of issued debt security; |
| Approving the placement of unissued debt securities under the control of directors; and, |
| Approve spin-off/absorption proposals. |
Given the nature of the items that come up for vote at bondholder meetings, SSGA takes a case-by-case approach to voting bondholder resolutions. Where necessary, SSGA will engage with issuers on voting matters prior to arriving at voting decisions. All voting decisions will be made in the best interest of our clients.
Issuer Engagement:
SSGA recognizes that debt holders have limited leverage with companies on a day-to-day basis. However, we believe that given the size of our holdings in corporate debt, SSGA can meaningfully influence ESG practices of companies through issuer engagement. Our guidelines for engagement with fixed income issuers broadly follow the engagement guidelines for our equity holdings as described above.
Securities on Loan
For funds where SSGA acts as trustee, SSGA may recall securities in instances where SSGA believes that a particular vote will have a material impact on the fund(s). Several factors shape this process. First, SSGA must receive notice of the vote in sufficient time to recall the shares on or before the record date. In many cases, SSGA does not receive timely
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Global Proxy Voting and Engagement Principles
notice, and is unable to recall the shares on or before the record date. Second, SSGA, exercising its discretion may recall shares if it believes the benefit of voting shares will outweigh the foregone lending income. This determination requires SSGA, 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 relationship manager.
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Global Proxy Voting and Engagement Principles
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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. 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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9001-INST-7541 0317 Exp. Date: 03/31/2018
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These Global Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
State Street Corporation has a comprehensive standalone Conflicts of Interest Policy and other policies that address a range of conflicts of interests identified. In addition, State Street Global Advisors (SSGA), the asset management business of State Street Corporation, maintains a conflicts register that identifies key conflicts and describes systems in place to mitigate the conflicts. This guidance i 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 and engagement activities.
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Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
Managing Conflicts of Interest Related to Proxy Voting
State Street Global Advisors (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), State Street Global Advisors, 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 Asset Stewardship team. Members of the Asset Stewardship 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 Asset Stewardship 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 our investment strategy; |
| Prohibiting members of SSGAs Asset Stewardship 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 Asset Stewardship team, Global Proxy Review Committee (PRC) and Investment Committee (IC) of any personal conflict of interest (e.g., familial relationship with company management, serves as a director on the board of a listed company) to the Head of the Asset Stewardship 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 Proxy Voting and Engagement Guidelines (Guidelines); and |
| Reporting of voting guideline 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 guidance is not in the best interests of its clients, the Head of the Asset Stewardship team will determine whether a Material Relationship exists. If so, the matter is referred to the PRC. The 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 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 IC for further evaluation or (iii) retain an independent fiduciary to determine the appropriate vote.
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Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA ), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9008-INST-7553 0317 Exp. Date: 03/31/2018
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These Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
North America (United States & Canada)
State Street Global Advisors (SSGA) North America Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in the US and Canada. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidance.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) North America 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 of companies listed on stock exchanges in the US and Canada (North America). 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 and 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 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 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 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 North America, SSGA 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. Further, as a founding member of the Investor Stewardship Group (ISG), SSGA proactively monitors companies adherence to the Corporate Governance Principles for US listed companies. Consistent with the comply or explain expectations established by the principles, SSGA encourages companies to proactively disclose their level of compliance with the principles. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active investment teams; collaborating on issuer engagements and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in North America.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the US Investor Stewardship Group Principles. 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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
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Proxy Voting and Engagement Guidelines
shareholder interests. Further, SSGA expects boards of Russell 3000 and TSX listed companies to have at least one female board member .
Director related proposals 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 considers numerous factors.
Director Elections
SSGAs director election guideline focuses on companies governance profile to identify if a company demonstrates appropriate governance practices or if it exhibits negative governance practices. Factors SSGA considers when evaluating governance practices include, but are not limited to the following:
| Shareholder rights; |
| Board independence; and |
| Board structure. |
If a company demonstrates appropriate governance practices, SSGA 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 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 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. |
In the U.S. market 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 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 may withhold votes from directors based on the following:
| When overall average board tenure is excessive. In assessing excessive tenure, SSGA 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 not been responsive to a shareholder proposal which received a majority shareholder support at the last annual or special meeting; consideration maybe given if 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 bylaws that negatively impact SSGAs shareholder rights (such as fee-shifting, forum selection and exclusion service bylaws) 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. |
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Proxy Voting and Engagement Guidelines
Director Related Proposals
SSGA 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 generally votes against the following director related proposals:
| Requirements that candidates for directorships own large amounts of stock before being eligible to be elected; |
| 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 will generally support a majority vote standard based on votes cast for the election of directors.
SSGA 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 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 does not support cumulative voting structures for the election of directors.
Separation Chair/CEO
SSGA 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
In general, SSGA believes that proxy access is a fundamental right and an accountability mechanism for all long-term shareholders. SSGA will consider proposals relating to Proxy Access on a case-by-case basis. SSGA will support shareholder proposals that set parameters to empower long-term shareholders while providing management the flexibility to design a process that is appropriate for the companys circumstances.
SSGA will review the terms of all other proposals and will support those proposals that have been introduced in the spirit of enhancing shareholder rights.
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 governance structure; |
| Shareholder rights; and |
| Board performance. |
Age/Term Limits
Generally, SSGA 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 will support directors compensation, provided the amounts are not excessive relative to other
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Proxy Voting and Engagement Guidelines
issuers in the market or industry. In making our determination, we review whether the compensation is overly dilutive to existing shareholders.
Indemnification
Generally, SSGA 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 generally supports annual elections for the board of directors.
Confidential Voting
SSGA will support confidential voting.
Board Size
SSGA 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 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 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 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 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 supports share increases for general corporate purposes up to 100% of current authorized stock.
SSGA supports increases for specific corporate purposes up to 100% of the specific need plus 50% of current authorized common stock for US and Canadian firms.
When applying the thresholds, SSGA will also consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Increase in Authorized Preferred Shares
SSGA votes on a case-by-case basis on proposals to increase the number of preferred shares.
Generally, SSGA 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 will support proposals to create declawed blank check preferred stock (stock that cannot be used as a takeover defense). However, SSGA 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 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 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.
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Proxy Voting and Engagement Guidelines
However, SSGA 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, 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 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 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 anti-takeover 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.
Shareholder Rights Plans
US: SSGA will support mandates requiring shareholder approval of a shareholder rights plans (poison pill) and repeals of various anti-takeover related provisions.
In general, SSGA will vote against the adoption or renewal of a US issuers shareholder rights plan (poison pill).
SSGA 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).
Canada: SSGA analyzes proposals for shareholder approval of a shareholder rights plans (poison pill) on a case-by-case basis taking into consideration numerous factors, including but not limited to, whether it conforms to new generation rights plans and the scope of the plan.
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Proxy Voting and Engagement Guidelines
Special Meetings
SSGA 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 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 will vote for management proposals related to special meetings.
Written Consent
SSGA 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 will vote management proposals on written consent on a case-by-case basis.
SuperMajority
SSGA will generally vote against amendments to bylaws requiring super-majority shareholder votes to pass or repeal certain provisions. SSGA 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.
Advisory Vote on Executive Compensation and Frequency
SSGA 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 supports management proposals on executive compensation where there is a strong relationship between executive pay and performance over a five-year period. SSGA 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.
In Canada , where advisory votes on executive compensation are not commonplace, SSGA will rely primarily on engagement to evaluate compensation plans.
Employee Equity Award Plans
SSGA considers numerous criteria when examining equity award proposals. Generally, SSGA 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 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 five to eight percent are generally not supported.
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Proxy Voting and Engagement Guidelines
Repricing SSGA 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 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 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 will support the proposal to amend the plan.
Employee Stock Option Plans
SSGA generally votes for stock purchase plans with an exercise price of not less than 85% of fair market value. However, SSGA takes market practice into consideration.
Compensation Related Items
SSGA 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 will generally vote against the following proposals:
| Retirement bonuses for non-executive directors and auditors. |
Miscellaneous/Routine Items
SSGA 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; |
State Street Global Advisors | A-18 |
Proxy Voting and Engagement Guidelines
| 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 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 a 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. |
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 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 overall strategy, operations and business activities. SSGAs 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.
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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. |
State Street Global Advisors | A-19 |
Proxy Voting and Engagement Guidelines
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155. 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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9007-INST-7552 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
State Street Global Advisors | A-20 |
March 2018
Proxy Voting and Engagement Guidelines
Australia and New Zealand
State Street Global Advisors (SSGA) Australia & New Zealand Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in Australia and New Zealand. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) Australia and New Zealand 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 and 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 considers market specific nuances in the manner that we believe will best protect and promote the long-term economic value of client investments. SSGA 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 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 Australia and New Zealand, SSGA expects all companies at a minimum to comply with the ASX Corporate Governance Principles and proactively monitors companies adherence to the principles. Consistent with the comply or explain expectations established by the principles, SSGA encourages companies to proactively disclose their level of compliance with the principles. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader. 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.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration and accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and Asia-Pacific (APAC) investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in the region.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI). 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA believes independent directors are crucial to good corporate governance and help management establish sound
State Street Global Advisors | A-22 |
Proxy Voting and Engagement Guidelines
ESG policies and practices. A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests. SSGA expects boards of ASX-300 and New Zealand listed companies to be comprised of at least a majority of independent directors. Further, SSGA expects boards of ASX-300 listed companies to have at least one female board member . At all other Australian listed companies, SSGA expects boards to be comprised of at least one-third independent directors.
SSGAs broad criteria for director independence in Australia and New Zealand 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 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 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 supports the annual election of directors and encourages Australian and New Zealand companies to adopt this practice.
While SSGA is generally supportive of having the roles of chairman and CEO separated in the Australia and New Zealand markets, SSGA assesses the division of responsibilities between chairman and CEO on a case-by-case basis, giving consideration to factors such as company-specific circumstances, overall level of independence on the board and general corporate governance standards in the company. Similarly, SSGA will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA 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 and breach of fiduciary responsibilities).
SSGA 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. ASX Corporate Governance Principles requires 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 holds Australian and New Zealand 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 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 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 believes that executive pay should be determined by the board of directors and SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. ASX Corporate Governance Principles requires 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 vote in the event of a second strike, SSGA 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 voting guidelines accommodate local market practice.
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Proxy Voting and Engagement Guidelines
Indemnification and limitations on liability
Generally, SSGA 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 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 to re-appoint at the annual meeting. When appointing external auditors and approving audit fees, SSGA 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 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 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 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 without pre-emption rights, SSGA may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 generally supports a proposal to repurchase shares, unless the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, and the timeframe for the repurchase. SSGA may vote against share repurchase requests that allow share repurchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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, liquidations, and other major changes to the corporation. Proposals that are in the best interests of 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 will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
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Proxy Voting and Engagement Guidelines
| 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 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 opposes anti-takeover 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 SSGAs 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 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 may oppose remuneration reports where there seems to be a misalignment between pay and shareholders interests and where incentive policies and schemes have a re-test option or feature. SSGA 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 Incentive Plans
SSGA 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 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 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 will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 encourages companies to be transparent about the environmental and social risks and opportunities they face and
State Street Global Advisors | A-25 |
Proxy Voting and Engagement Guidelines
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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
State Street Global Advisors | A-26 |
Proxy Voting and Engagement Guidelines
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9002-INST-7542 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
Europe
State Street Global Advisors (SSGA) European Proxy Voting and Engagement Guidelines i cover different corporate governance frameworks and practices in European markets excluding the United Kingdom and Ireland. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) 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 and 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 European markets, SSGA 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 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 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 European companies, SSGA also considers guidance issued by the European Commission and country-specific governance codes and proactively monitors companies adherence to applicable guidance and requirements. Consistent with the diverse comply or explain expectations established by guidance and codes, SSGA encourages companies to proactively disclose their level of compliance with applicable guidance and requirements. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset
Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in European markets.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI). 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/reelection of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of STOXX Europe 600 listed companies to have at least one female board member.
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SSGAs 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. |
While, overall board independence requirements and board structures differ from market to market, SSGA considers voting against directors it deems nonindependent if overall board independence is below one third or overall independence is below fifty-percent after excluding employee-representatives and/or directors elected in accordance with local laws who are not elected by shareholders. SSGA 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 may 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 also considers the number of outside board directorships a non-executive can undertake, attendance at board meetings, and cross-directorships. In addition, SSGA 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 may vote against article/bylaw changes that seek to extend director terms. In addition, in certain markets, SSGA may vote against directors if their director terms extend beyond four years.
SSGA 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. SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA may vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA 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 may vote against the entire slate.
SSGA 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 and breach of fiduciary responsibilities).
Indemnification and Limitations on Liability
Generally, SSGA 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, with 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.
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Appointment of External Auditors
SSGA 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 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 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 may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA 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.
Shareholder Rights and Capital Related Issues
In some European markets, differential voting rights continue to exist. SSGA supports the one share one vote policy and favors a share structure where all shares have equal voting rights. SSGA 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 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 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 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 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 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 may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 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 timeframe for the repurchase. SSGA may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 expects
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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 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.
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 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 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 |
AntiTakeover Measures
European markets have diverse regulations concerning the use of share issuances as takeover defenses with legal
restrictions lacking in some markets. SSGA 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 opposes unlimited share issuance authorizations as they may be used as anti-takeover devices, and they have the potential for substantial voting and earnings dilution. SSGA 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 opposes anti-takeover 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 SSGAs 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 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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA 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 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 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.
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NonExecutive Director Pay
In European markets, authorities seeking shareholder approval for non-executive directors fees are generally not controversial. SSGA 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 will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9003-INST-7544 0317 Exp. Date: 03/31/2018
i |
These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Japan
State Street Global Advisors (SSGA) Japan Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in Japan. These guidelines complement and should be read in conjunction with SSGAs overarching Global Proxy Voting and Engagement Guidelines, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) 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 and 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 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 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 also considers guidance issued by the Corporate Law Subcommittee of the Legislative Council within the Ministry of Justice as well as private study groups.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, and environmental and social issues. SSGA 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 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 SSGAs active investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in Japan.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with Japans Stewardship Code and Corporate Governance 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of TOPIX 500 listed companies to have at least one female board member.
Japanese companies have the option of having a traditional board of directors with statutory auditors, a board with a committee structure, or a hybrid board with board level audit committee. SSGA will generally support companies that seek shareholder approval to adopt a committee or hybrid board 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
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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 will support the election of statutory auditors, unless the outside statutory auditor nominee is regarded as non-independent based on SSGA 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 wrongdoing and breach of fiduciary responsibilities).
For companies with a statutory auditor structure there is no legal requirement that boards have outside directors, however, SSGA believes there should be a transparent process of independent and external monitoring of management on behalf of shareholders.
| SSGA believes that boards of TOPIX 500 companies should have at least three independent directors or be at least one-third independent, whichever requires fewer independent directors, otherwise, SSGA may oppose the top executive who is responsible for the director nomination process; and |
| For controlled, non-TOPIX 500 companies with a statutory auditor structure or hybrid structure, SSGA may oppose the top executive, if the board does not have at least two independent directors. |
| For non-controlled, non-TOPIX 500 companies with a statutory auditor structure or hybrid structure, SSGA may oppose the top executive, if the board does not have at least two outside directors. |
For companies with a committee structure or a hybrid board structure, SSGA also takes into consideration the overall independence level of the committees. In determining director independence, SSGA 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 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 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 believes limitations and indemnification are necessary to attract and retain qualified directors.
Audit Related Items
SSGA 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 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 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 supports the one share one vote policy and favors a share structure where all shares have equal voting rights. SSGA supports proposals to abolish voting caps or multiple voting rights and will oppose measures to introduce these types of restrictions on shareholder rights.
SSGA 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 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 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 will support capitalization changes that eliminate other classes of stock and/or unequal voting rights.
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Increase in Authorized Capital
SSGA 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 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 will consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 will oppose an amendment to articles allowing the repurchase of shares at the boards discretion. SSGA 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 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 timeframe for the repurchase. SSGA 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 evaluates mergers and structural reorganizations on a case-by-case basis. SSGA 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 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 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.
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 the adoption or renewal of a Japanese issuers shareholder rights plans (poison pill), SSGA considers the following conditions: (i) release of proxy circular with details of the proposal with adequate notice in
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advance of meeting, (ii) minimum trigger, flip-in or flip-over of 20%, (iii) maximum term of three years, (iv) sufficient number of independent directors, (v) presence of an independent committee, (vi) annual election of directors, (vii) no other protective or entrenchment features. Additionally, SSGA considers the total duration a shareholder rights plan has been in effect.
In evaluating an amendment to a shareholder rights plan (poison pill), in addition to the conditions above, SSGA will also evaluate and consider supporting proposals where the terms of the new plans are more favorable to shareholders ability to accept unsolicited offers.
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, 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 will generally support proposed increases to the ceiling if the company discloses the rationale for the increase. SSGA 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 believes that existing shareholder approval of the bonus should be considered best practice. As a result, SSGA 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 supports these payments unless the recipient is an outsider or in instances where the amount is not disclosed.
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 cannot calculate the dilution level and, therefore, SSGA may oppose such plans for poor disclosure. SSGA 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 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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.
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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 views proposals to expand and diversify the companys business activities as routine and non-contentious. SSGA 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 relationship manager.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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
© 2017 State Street Corporation. All Rights Reserved.
ID9004-INST-7547 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
United Kingdom and Ireland
State Street Global Advisors (SSGA), United Kingdom and Ireland Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in the United Kingdom and Ireland. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) United Kingdom (UK) and Ireland 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 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 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 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 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 and proactively monitors companies adherence to the Code. Consistent with the comply or explain expectations established by the Code, SSGA encourages companies to proactively disclose their level of compliance with the Code. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law,
remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA 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 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices.SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of FTSE-350 listed companies to have at least one female board member.
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SSGAs 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; |
| Family ties with any of the companys advisers, directors or senior employees; and |
| If the company classifies the director as non-independent. |
When considering the election or re-election of a director, SSGA 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 monitors other factors that may influence the independence of a non-executive director, such as performance related pay, cross-directorships and significant shareholdings. SSGA supports the annual election of directors.
While SSGA is generally supportive of having the roles of chairman and CEO separated in the UK market, SSGA 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 will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA 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 and breach of fiduciary responsibilities).
SSGA 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. SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA will vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA 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 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 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, with 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 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 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 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 may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA 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 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 may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 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 timeframe for the repurchase. SSGA may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 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 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 opposes anti-takeover 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 SSGAs analysis of executive paythere should be a direct relationship between remuneration and company performance over the long term.
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Proxy Voting and Engagement Guidelines
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration policies and reports, SSGA 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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA 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 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 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 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 will evaluate on a company- by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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.
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SSGA 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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9006-INST-7551 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
Rest of the World
State Street Global Advisors (SSGA) Rest of the World Proxy Voting and Engagement Guidelines i cover different corporate governance frameworks and practices in international markets not covered under specific country/regional guidelines. These guidelines complement and should be read in conjunction with SSGAs overarching Global Proxy Voting and Engagement Principles which provides a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
At State Street Global Advisors (SSGA), we recognize that countries in international markets not covered under specific country/regional guidelines are disparate in their corporate governance frameworks and practices. Concurrent with developing a company specific voting and engagement program, SSGA also evaluates the various factors that play into the corporate governance framework of a country. These factors include but are not limited to: (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 judiciary. 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, SSGAs proxy voting guidelines are designed to identify and address specific governance concerns in each market.
SSGAs Proxy Voting and Engagement Philosophy in Emerging Markets
SSGAs 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 SSGAs 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 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 SSGA Asset Stewardship 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 SSGAs proxy voting and engagement philosophy in emerging markets.
SSGAs 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
SSGA 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 performs in emerging market companies.
SSGA 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 expects companies to meet minimum overall board indepdence standards as defined in a corporate governance code or market practice. Therfore, in several countries, SSGA will vote against select non-independent directors if overall board indepdence levels do not meet market standards.
SSGAs 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. |
In some countries, market practice calls for the establishment of a board level audit committee. In such cases, SSGA believes companies should have an audit committee that is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence
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Proxy Voting and Engagement Guidelines
as well as their effectiveness and resource levels. Based on our desire to enhance the quality of financial and accounting oversight provided by independent directors, SSGA expects that listed companies have an audit committee that is constituted of a majority of independent directors.
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 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 encourages boards to appoint an audit committee composed of a majority of independent auditors.
Appointment of External Auditors
SSGA 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-appointment at the annual meeting. SSGA believes that it is imperative for audit committees to select outside auditors who are independent from management.
Shareholder Rights and Capital Related Issues
SSGA 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 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 Transcations
Most companies in emerging markets have a controlled ownership structure that often include complex cross-shareholdings 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 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 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 expects companies to clearly state the business purpose for the program and a definitive number of shares to be repurchased.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, 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 evaluates mergers and structural reorganizations on a case-by-case basis. SSGA 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 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. |
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.
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Proxy Voting and Engagement Guidelines
Remuneration
SSGA considers it to be the boards responsibility to set appropriate levels of executive remuneration. Despite the differences among the types of plans and the awards possible, there is a simple underlying philosophy that guides SSGAs analysis of executive remuneration; 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 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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 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, SSGAs guidelines consider several factors including historical dividend payouts, pending litigation, governmental investigations, charges of fraud or other indication of significant concerns.
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Proxy Voting and Engagement Guidelines
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9005-INST-7548 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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SPDR ® SERIES TRUST (THE TRUST)
STATEMENT OF ADDITIONAL INFORMATION
Dated October 31, 2018
This Statement of Additional Information (SAI) is not a prospectus. With respect to the Trusts series listed below, this SAI should be read in conjunction with the prospectus dated October 31, 2018, as may be revised from time to time (Prospectus).
ETF | TICKER | |||
SPDR ® Dorsey Wright ® Fixed Income Allocation ETF |
DWFI |
Principal U.S. Listing Exchange for the ETF: NASDAQ Stock Market LLC
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 Report to Shareholders dated June 30, 2018 may be obtained without charge by writing to State Street Global Advisors Funds Distributors, LLC, the Trusts principal underwriter (referred to herein as Distributor or Principal Underwriter), One Iron Street, Boston, Massachusetts 02210, by visiting the Trusts website at https://www.spdrs.com or by calling 1-866-787-2257. The Report of Independent Registered Public Accounting Firm, financial highlights and financial statements of the Fund included in the Trusts Annual Report to Shareholders for the fiscal year ended June 30, 2018 are incorporated by reference into this SAI.
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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 SPDR Dorsey Wright Fixed Income Allocation ETF (the Fund). The Trust was organized as a Massachusetts business trust on June 12, 1998. The offering of the Funds shares (Shares) is registered under the Securities Act of 1933, as amended (the Securities Act). The investment objective of the Fund is to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of a specified market index (the Index). SSGA Funds Management, Inc. serves as the investment adviser for the Fund (SSGA FM or the Adviser).
The Fund offers and issues Shares at its net asset value (sometimes referred to herein as NAV) only in aggregations of a specified number of Shares (each, a Creation Unit). The 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 the 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 the Fund consists of 25,000 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 Fund may invest directly, or indirectly through an underlying ETF, in the following types of investments, consistent with its investment strategies and objective. Please see the Funds Prospectus for additional information regarding its principal investment strategies.
DIVERSIFICATION STATUS
The Fund is classified as a non-diversified investment company under the 1940 Act. A non-diversified classification means that the 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 the 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 the Index and, therefore, the securities may constitute a greater portion of the Funds portfolio. This may have an adverse effect on the Funds performance or subject the Funds Shares to greater price volatility than more diversified investment companies.
Although the Fund is non-diversified for purposes of the 1940 Act, the Fund intends to maintain the required level of diversification and otherwise conduct its operations so as to qualify as a regulated investment company (RIC) for purposes of the Internal Revenue Code of 1986, as amended (Internal Revenue Code), and to relieve the 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 limit the investment flexibility of the Fund and may make it less likely that the Fund will meet its investment objective.
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.
BANK LOANS
Bank loans include floating rate loans and institutionally traded floating rate debt obligations issued by asset-backed pools and other issues, and interests therein. Bank loan interests may be acquired from U.S. or foreign commercial banks, insurance companies, finance companies or other financial institutions that have made loans or are members of a lending syndicate or from other holders of loan interests. Bank loans typically pay interest at rates which are re-determined periodically on the basis of a floating base lending rate (such as the London Inter-Bank Offered Rate) plus a premium. Bank loans are typically of below investment-grade quality. Bank loans generally (but not always) hold the most senior position in the capital structure of a borrower and are often secured with collateral.
The Fund may invest in both secured and unsecured bank loans. Holders claims under unsecured loans are subordinated to claims of creditors holding secured indebtedness and possibly other classes of creditors holding unsecured debt. Unsecured loans have a greater risk of default than secured loans, particularly during periods of deteriorating economic conditions. Also, since they do not afford the lender recourse to collateral, unsecured loans are subject to greater risk of nonpayment in the event of default than secured loans. Many such loans are relatively illiquid and may be difficult to value.
Some bank loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate the bank loans to presently existing or future indebtedness of the borrower or take other action detrimental to the holders of the bank loans, including, in certain circumstances, invalidating such bank loans or causing interest previously paid to be refunded to the borrower. If interest were required to be refunded, it could negatively affect Fund performance.
Indebtedness of companies whose creditworthiness is poor involves substantially greater risks and may be highly speculative. Some companies may never pay off their indebtedness or pay only a small fraction of the amount owed. Consequently, when investing in indebtedness of companies with poor credit, the Fund bears a substantial risk of losing the entire amount invested.
Investments in bank loans through a direct assignment of the financial institutions interest with respect to the bank loan may involve additional risks. For example, if a secured bank loan is foreclosed, the Fund could become part owner of any collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is conceivable that under emerging legal theories of lender liability, the Fund could be held liable as a co-lender.
Bank loans may be structured to include both term loans, which are generally fully funded at the time of investment, and revolving credit facilities, which would require the Fund to make additional investments in the bank loans as required under the terms of the credit facility at the borrowers demand.
A financial institutions employment as agent bank may be terminated in the event that it fails to observe a requisite standard of care or becomes insolvent. A successor agent bank would generally be appointed to replace the terminated agent bank, and assets held by the agent bank under the loan agreement would remain available to the holders of such indebtedness. However, if assets held by the agent bank for the benefit of the Fund were determined to be subject to the claims of the agent banks general creditors, the Fund may incur certain costs and delays in realizing payments on a bank loan or loan participation and could suffer a loss of principal and/or interest.
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 the 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 the Fund holding
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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. The 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.
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.
COMMON STOCK
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 the Funds portfolio securities and therefore a decrease in the value of Shares of the Fund). Common stock is 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.
CONCENTRATION
The Fund will concentrate its investments in securities of issuers in the same industry as may be necessary to approximate the composition of the Funds underlying Index. The securities of issuers in particular industries may dominate the benchmark Index of the Fund and consequently the Funds investment portfolio. This may adversely affect the 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, the 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 the 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.
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 the 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 stock. Convertible securities generally provide yields higher than underlying common stock, 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 stock and interest rates. When the underlying common stock declines 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 stock rises 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
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the value of convertible securities will generally not increase to the same extent as the value of the underlying common stock. 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.
EXCHANGE-TRADED FUNDS
The Fund may invest in other exchange-traded funds (including ETFs managed by the Adviser). ETFs may be structured as investment companies that are registered under the 1940 Act, typically as open-end funds or unit investment trusts. An index-based ETF seeks to provide investment results that match the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index. An actively-managed ETF invests in securities based on an advisers investment strategy. An enhanced ETF seeks to provide investment results that match a positive or negative multiple of the performance of an underlying index. In seeking to provide such results, an ETF and, in particular, an enhanced ETF, may engage in short sales of securities included in the underlying index and may invest in derivatives instruments, such as equity index swaps, futures contracts, and options on securities, futures contracts, and stock indices. Alternatively, ETFs may be structured as grantor trusts or other forms of pooled investment vehicles that are not registered or regulated under the 1940 Act. These ETFs typically hold commodities, precious metals, currency or other non-securities investments. ETFs, like mutual funds, have expenses associated with their operation, such as advisory and custody fees. When the Fund invests in an ETF, in addition to directly bearing expenses associated with its own operations, including the brokerage costs associated with the purchase and sale of shares of the ETF, the Fund will bear a pro rata portion of the ETFs expenses. In addition, it may be more costly to own an ETF than to directly own the securities or other investments held by the ETF because of ETF expenses. The risks of owning shares of an ETF generally reflect the risks of owning the underlying securities or other investments held by the ETF, although lack of liquidity in the market for the shares of an ETF could result in the ETFs value being more volatile than the underlying securities or other investments.
FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS
The 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 transactions (including NDFs interest rate swaps, total return swaps, excess return swaps, and credit default swaps). The Fund will segregate cash and/or appropriate liquid assets if required to do so by SEC or CFTC regulation or interpretation.
Recent legislation calls for new regulation of the derivatives markets. The extent and impact of the regulation is not yet fully known and may not be for some time. New regulations could adversely affect the value, availability and performance of certain derivative instruments, may make them more costly, and may limit or restrict their use by the Fund.
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. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract originally was written. Although the value of an index might be a function of the value of certain specified securities, physical delivery of these securities is not always made. A public market exists in futures contracts covering a number of indexes, as well as financial instruments, including, without limitation: U.S. Treasury bonds; U.S. Treasury notes; GNMA Certificates; three-month U.S. Treasury bills; 90-day commercial paper; bank certificates of deposit; Eurodollar certificates of deposit; the Australian Dollar; the Canadian Dollar; the British Pound; the Japanese Yen; the Swiss Franc; the Mexican Peso; and certain multinational currencies, such as the Euro. It is expected that other futures contracts will be developed and traded in the future. Futures contracts are standardized as to maturity date and underlying instrument and are traded on futures exchanges.
The Fund may purchase and write (sell) call and put options on futures. Options on futures give the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price upon expiration of, or at any time during the period of, the option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true.
The Fund is required to make a good faith margin deposit in cash or U.S. government securities (or other eligible collateral) 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 price changes additional payments will be required. Conversely, change in the
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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, the Fund would expect to earn interest income on its margin deposits. Although some futures contracts call for making or taking delivery of the underlying commodity, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (involving the same exchange, underlying security or index and delivery month). If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs also must be included in these calculations.
Regulation Under the Commodity Exchange Act. The Fund intends to use commodity interests such as futures, swaps and options on futures in accordance with Rule 4.5 of the Commodity Exchange Act (CEA). The Fund may use exchange-traded futures and options on futures, together with positions in cash and money market instruments, to simulate full investment in its underlying Index. Exchange-traded futures and options on futures 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 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 it is not subject to registration or regulation as a commodity pool operator under the CEA.
Restrictions on Trading in Commodity Interests. With respect to the Fund, the Trust has claimed an exclusion from registration as a commodity pool operator under the CEA pursuant to CFTC Rule 4.5 and, therefore, is not subject to the registration and regulatory requirements of the CEA. The Fund reserves the right to engage in transactions involving futures, options thereon and swaps to the extent allowed by the CFTC regulations in effect from time to time and in accordance with the Funds policies. The 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 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). 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).
Options. The 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.
Short Sales Against the Box. The Fund may engage in short sales against the box. In a short sale against the box, the Fund agrees to sell at a future date a security that it either contemporaneously owns or has the right to acquire at no extra cost. If the price of the security has declined at the time the Fund is required to deliver the security, the Fund will benefit from the difference in the price. If the price of the security has increased, the Fund will be required to pay the difference.
Swap Transactions. The Fund may enter into swap transactions, including interest rate, swap, credit default swap, NDF, and total return swap transactions. Swap transactions 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 transactions will usually be done on a net basis, i.e. , where the two parties make net payments with the 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 the 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. Swaps may be used in conjunction with other instruments to offset interest rate, currency or other underlying risks. For example, interest rate swaps may be offset with caps, floors or collars. A cap is essentially a call option which places a limit on the amount of floating rate interest that must be paid on a certain principal amount. A floor is essentially a put option which places a limit on the minimum amount that would be paid on a certain principal amount. A collar is essentially a combination of a long cap and a short floor where the limits are set at different levels.
The use of swap transactions by the Fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. Swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with stocks, bonds, and other traditional investments. 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 the possible market conditions. Because some swap transactions have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain swaps have the potential for unlimited loss, regardless of the size of the initial investment.
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The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) that was signed into law on July 21, 2010 created a new statutory framework that comprehensively regulated the over-the-counter (OTC) derivatives markets for the first time. Key Dodd-Frank Act provisions relating to OTC derivatives require rulemaking by the SEC and the CFTC, not all of which has been proposed or finalized as at the date of this SAI. Prior to the Dodd-Frank Act, the OTC derivatives markets were traditionally traded on a bilateral basis (so-called bilateral OTC transactions). Under the Dodd-Frank Act, certain OTC derivatives transactions are now required to be centrally cleared and traded on exchanges or electronic trading platforms called swap execution facilities (SEFs).
Bilateral OTC transactions differ from exchange-traded or cleared derivatives transactions in several respects. Bilateral OTC transactions are transacted directly with dealers and not with a clearing corporation. Without the availability of a clearing corporation, bilateral OTC transaction pricing is normally done by reference to information from market makers and/or available index data, which information is carefully monitored by the Adviser and verified in appropriate cases. As bilateral OTC transactions are entered into directly with a dealer, there is a risk of nonperformance by the dealer as a result of its insolvency or otherwise. Under recently-adopted regulations by the CFTC and federal banking regulators (Margin Rules), the Fund is required to post collateral (known as variation margin) to cover the mark-to-market exposure in respect of its uncleared swaps. The Margin Rules also mandate that collateral in the form of initial margin be posted to cover potential future exposure attributable to uncleared swap transactions. However, due to the compliance timeline within the Margin Rules, it is unlikely that the Fund will be required to comply with such initial margin requirements until March 1, 2020. In the event the Fund is required to post collateral in the form of initial margin or variation margin in respect of its uncleared swap transactions, all such collateral will be posted with a third party custodian pursuant to a triparty custody agreement between the Fund, its dealer counterparty and an unaffiliated custodian.
The requirement to execute certain OTC derivatives contracts on SEFs may offer certain advantages over traditional bilateral OTC trading, such as ease of execution, price transparency, increased liquidity and/or favorable pricing. However, SEF trading may make it more difficult and costly for the Fund to enter into highly tailored or customized transactions and may result in additional costs and risks. Market participants such as the Fund that execute derivatives contracts through a SEF, whether directly or through a broker intermediary, are required to submit to the jurisdiction of the SEF and comply with SEF and CFTC rules and regulations which impose, among other things disclosure and recordkeeping obligations. In addition, the Fund will generally incur SEF or broker intermediary fees when it trades on a SEF. The Fund may also be required to indemnify the SEF or broker intermediary for any losses or costs that may result from the Funds transactions on the SEF.
Total Return Swaps. The Fund may enter into total return swap transactions for investment purposes. Total return swaps are transactions in which one party agrees to make periodic payments based on the change in market value of the underlying assets, which may include a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swaps may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market, including in cases in which there may be disadvantages associated with direct ownership of a particular security. In a typical total return equity swap, payments made by the Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. By entering into an equity index swap, for example, the index receiver can gain exposure to stocks making up the index of securities without actually purchasing those stocks. Total return swaps involve not only the risk associated with the investment in the underlying securities, but also the risk of the counterparty not fulfilling its obligations under the agreement.
Credit Default Swaps. The Fund may enter into credit default swap transactions for investment purposes. A credit default swap transaction may have as reference obligations one or more securities that are not currently held by the Fund. The Fund may be either the protection buyer or protection seller in the transaction. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors. As a protection seller, the Fund would generally receive an upfront payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the protection seller must pay the protection buyer the full face amount of the reference obligations that may have little or no value. The notional value of the credit default swap will be used to segregate liquid assets for selling protection on credit default swaps. If the Fund were a protection buyer and no credit event occurred during the term of the swap, the Fund would recover nothing if the swap were held through its termination date. However, if a credit event occurred, the protection buyer may elect to receive the full notional value of the swap in exchange for an equal face amount of the reference obligation that may have little or no value. Where the Fund is the protection buyer, credit default swaps involve the risk that the seller may fail to satisfy its payment obligations to the Fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce the Funds return. When the Fund buys credit default swaps it will segregate an amount at least equal to the amount of any accrued premium payment obligations including amounts for early terminations.
Currency Swaps. The Fund may enter into currency swap transactions for investment purposes. Currency swaps are similar to interest rate swaps, except that they involve multiple currencies. The Fund may enter into a currency swap when it has exposure to one currency and desires exposure to a different currency. Typically, the interest rates that determine the currency swap payments are fixed, although occasionally one or both parties may pay a floating rate of interest. Unlike an interest rate swap, however, the principal
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amounts are exchanged at the beginning of the contract and returned at the end of the contract. In addition to paying and receiving amounts at the beginning and end of the transaction, both sides will have to pay in full on a periodic basis based upon the currency they have borrowed. Change in foreign exchange rates and changes in interest rates, as described above, may negatively affect currency swaps.
Interest Rate Swaps. The Fund may enter into an interest rate swap in an effort to protect against declines in the value of fixed income securities held by the Fund. In such an instance, the Fund may agree to pay a fixed rate (multiplied by a notional amount) while a counterparty agrees to pay a floating rate (multiplied by the same notional amount). If interest rates rise, resulting in a diminution in the value of the Funds portfolio, the Fund would receive payments under the swap that would offset, in whole or in part, such diminution in value.
Options on Swaps. An option on a swap agreement, or a swaption, is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. In return, the purchaser pays a premium to the seller of the contract. The seller of the contract receives the premium and bears the risk of unfavorable changes on the underlying swap. The Fund may write (sell) and purchase put and call swaptions. The Fund may also enter into swaptions on either an asset-based or liability-based basis, depending on whether the Fund is hedging its assets or its liabilities. The Fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. The Fund may enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its holdings, as a duration management technique, to protect against an increase in the price of securities the Fund anticipates purchasing at a later date, or for any other purposes, such as for speculation to increase returns. Swaptions are generally subject to the same risks involved in the Funds use of options.
Depending on the terms of the particular option agreement, the Fund will generally incur a greater degree of risk when it writes a swaption than it will incur when it purchases a swaption. When the Fund purchases a swaption, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when the Fund writes a swaption, upon exercise of the option the Fund will become obligated according to the terms of the underlying agreement.
Certain additional risk factors related to derivatives are discussed below:
Derivatives Risk. Under recently adopted rules by the CFTC, transactions in some types of interest rate swaps and index credit default swaps on North American and European indices are required to be cleared. In addition, the CFTC may promulgate additional regulations that require clearing of other classes of swaps. In a cleared derivatives transaction (which includes commodities futures and cleared swaps transactions), the Funds counterparty is a clearing house (such as CME, ICE Clear Credit or LCH.Clearnet), rather than a bank or broker. Since the 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, who are futures commission merchants that are members of the clearing houses and who have the appropriate regulatory approvals to engage in cleared swap transactions. The Fund makes and receives payments owed under cleared derivatives transactions (including margin payments) through its accounts at clearing members. Clearing members guarantee performance of their clients obligations to the clearing house. In contrast to bilateral OTC transactions, clearing members generally can require termination of existing cleared derivatives transactions at any time and increases in margin above the margin that it required at the beginning of a transaction. Clearing houses also have broad rights to increase margin requirements for existing transactions and to terminate transactions. Any such increase or termination could interfere with the ability of the Fund to pursue its investment strategy. Also, the Fund is subject to execution risk if it enters into a derivatives transaction that is required to be cleared (or that the Advisor expects to be cleared), and no clearing member is willing or able to clear the transaction on the Funds behalf. While the documentation in place between the Fund and its clearing members generally provides that the clearing members will accept for clearing all transactions submitted for clearing that are within credit limits specified by the clearing members in advance, the Fund could be subject to this execution risk if the Fund submits for clearing transactions that exceed such credit limits, if the clearing house does not accept the transactions for clearing, or if the clearing members do not comply with their agreement to clear such transactions. In that case, the transaction might have to be terminated, and the Fund could lose some or all of the benefit of any increase in the value of the transaction after the time of the transaction. In addition, new regulations could, among other things, restrict the 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 or increasing margin or capital requirements. If the Fund is not able to enter into a particular derivatives transaction, the Funds investment performance and risk profile could be adversely affected as a result.
Counterparty Risk. Counterparty risk with respect to OTC derivatives may be affected by new regulations promulgated by the CFTC and SEC affecting the derivatives market. As described under Derivatives Risk above, some derivatives transactions are required to be cleared, and a party to a cleared derivatives transaction is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared derivatives position, rather than the credit risk of its original counterparty to the derivative transaction. Clearing members are required to segregate all funds received from customers with respect to cleared derivatives transactions from the clearing members proprietary assets. However, all funds and other property received by a clearing broker from
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its customers are generally held by the clearing broker on a commingled basis in an omnibus account, which may also invest those funds in certain instruments permitted under the applicable regulations. Also, the clearing member transfers to the clearing house the amount of margin required by the clearing house for cleared derivatives transactions, which amounts are generally held in the relevant omnibus account at the clearing house for all customers of the clearing member.
For commodities futures positions, the clearing house may use all of the collateral held in the clearing members omnibus account to meet a loss in that account, without regard to which customer in fact supplied that collateral. Accordingly, in addition to bearing the credit risk of its clearing member, each customer to a futures transaction also bears fellow customer risk from other customers of the clearing member. However, with respect to cleared swaps positions, recent regulations promulgated by the CFTC require that the clearing member notify the clearing house of the amount of initial margin provided by the clearing member to the clearing house that is attributable to each customer. Because margin in respect of cleared swaps must be earmarked for specific clearing member customers, the clearing house may not use the collateral of one customer to cover the obligations of another customer. However, if the clearing member does not provide accurate reporting, the Fund is subject to the risk that a clearing house will use the Funds assets held in an omnibus account at the clearing house to satisfy payment obligations of a defaulting customer of the clearing member to the clearing house. In addition, clearing members may generally choose to provide to the clearing house the net amount of variation margin required for cleared swaps for all of its customers in the aggregate, rather than the gross amount for each customer.
FUTURE DEVELOPMENTS
The 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, the Fund will provide appropriate disclosure.
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.
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 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.
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INFLATION-PROTECTED OBLIGATIONS
The Fund may invest in inflation-protected obligations, commonly known as TIPS, of the U.S. Treasury, as well as TIPS of major governments and emerging market countries, excluding the United States. 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.
INVESTMENT COMPANIES
The 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), the 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, the Funds investment restrictions and the Trusts exemptive relief, the 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 the 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
The Fund may lend portfolio securities to certain creditworthy borrowers in U.S. and non-U.S. markets in an amount not to exceed 40% of the value of its net 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. The Fund may terminate a loan at any time and obtain the securities loaned. The Fund receives the value of any interest or cash or non-cash distributions paid on the loaned securities. The 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. The 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, the 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 Fund or through one or more joint accounts or money market funds, which may include those managed by the Adviser.
The 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 Fund in accordance with guidelines approved by the Board. In such capacity, the lending agent causes the delivery of loaned securities from the 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 the 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 process especially 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 the 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 the Fund with indemnification in the event of a borrower default, the Fund is still exposed to the risk of losses in the event a borrower does not return the Funds securities as agreed. For example, delays in recovery of lent securities may cause the Fund to lose the opportunity to sell the securities at a desirable price.
LEVERAGING
While the Fund does not anticipate doing so, the Fund may borrow money in an amount greater than 5% of the value of the Funds total assets. However, under normal circumstances, the 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 the Funds assets will fluctuate in value, whereas the interest obligations on borrowings may be fixed, the NAV of the Fund will increase more when the 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.
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 Fund may 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. An underlying fund may use TBA transactions in several ways. For example, an underlying fund may 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 an underlying 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, an underlying 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 the 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, an underlying 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, an underlying fund may accept assignments of TBA transactions from Authorized Participants (as defined below) from time to time. An underlying funds use of TBA rolls may cause the underlying fund to experience higher portfolio turnover, higher transaction costs and to pay higher capital gain distributions to shareholders (which may be taxable) than funds that do not use TBA rolls.
The an underlying fund may 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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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 Fund 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, the 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 Fund to value accurately than securities of public corporations. If the Fund invests a significant portion of its portfolio in municipal securities, the Fund 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.
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 the Funds municipal securities in the same manner.
Municipal Leases and Certificates of Participation. Also included within the general category of municipal securities 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, the 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.
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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 the 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. 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 the Fund.
OTHER SHORT-TERM INSTRUMENTS
The 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 present minimal credit risks; 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 the Fund. Any of these instruments may be purchased on a current or a forward-settled basis. 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. Money market instruments also include shares of money market funds. The SEC and other government agencies continue to review the regulation of money market funds. The SEC has adopted changes to the rules that govern money market funds, and compliance with many of these amendments was required in October 2016. Legislative developments may also affect money market funds. These changes and developments may affect the investment strategies, performance, yield, operating expenses and continued viability of a money market fund.
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.
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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.
RATINGS
An investment-grade rating means the security or issuer is rated investment-grade by Moodys, S&P, Fitch, Inc. (Fitch), 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 the 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 or Fitch 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.
REPURCHASE AGREEMENTS
The 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 the 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 Day as 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 the Fund and is unrelated to the interest rate on the underlying instrument.
In these repurchase agreement transactions, the securities acquired by the 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 the 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, the 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 the 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
The 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 the 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 the Fund is able to keep some of the interest income associated with those securities. Such transactions are only advantageous if the 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 the Fund intends to use the reverse repurchase technique only when the Adviser believes it will be advantageous to
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the Fund. The use of reverse repurchase agreements may exaggerate any interim increase or decrease in the value of the Funds assets. The 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 percentage limit on Fund assets that can be used in connection with reverse repurchase agreements, the Fund does not expect to engage, under normal circumstances, in reverse repurchase agreements with respect to more than 10% of its total assets.
SENIOR LOANS
Senior Loans consist generally of obligations of companies and other entities (collectively, borrowers) incurred for the purpose of reorganizing the assets and liabilities of a borrower; acquiring another company; taking over control of a company (leveraged buyout); temporary refinancing; or financing internal growth or other general business purposes. Senior Loans are often obligations of borrowers who have incurred a significant percentage of debt compared to their total assets and thus are highly leveraged. The Fund does not treat the banks originating or acting as agents for the lenders, or granting or acting as intermediary in participation interests, in loans held by the Fund as the issuers of such loans.
Senior Loans may be acquired by direct investment as a lender at the inception of the loan or by assignment of a portion of a loan previously made to a different lender or by purchase of a participation interest. If the Fund makes a direct investment in a Senior Loan as one of the lenders, it generally acquires the loan at or below par. This means the Fund receives a return at or above the full interest rate for the loan. If the Fund acquires its interest in Senior Loans in the secondary market or acquires a participation interest, the loans may be purchased or sold above, at, or below par, which can result in a yield that is below, equal to, or above the stated interest rate of the loan. At times, the Fund may be able to invest in Senior Loans only through assignments or participations.
When the Fund is a purchaser of an assignment, it succeeds to all the rights and obligations under the loan agreement of the assigning lender and becomes a lender under the loan agreement with the same rights and obligations as the assigning lender. These rights include the ability to vote along with the other lenders on such matters as enforcing the terms of the loan agreement (e.g., declaring defaults, initiating collection actions, etc.). Taking such actions typically requires at least a vote of the lenders holding a majority of the investment in the loan and may require a vote by lenders holding two-thirds or more of the investment in the loan. Because the Fund usually does not hold a majority of the investment in any loan, it will not be able by itself to control decisions that require a vote by the lenders.
The Fund may, but will not typically, invest in Senior Loans through participations. A participation interest represents a fractional interest in a loan held by the lender selling the Fund the participation interest. In the case of participations, the Fund will not have any direct contractual relationship with the borrower, the Funds rights to consent to modifications of the loan are limited and it is dependent upon the participating lender to enforce the Funds rights upon a default. The Fund will have the right to receive payments of principal, interest, and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. The Fund will only purchase participations from lenders with credit ratings of Baa3 or higher by Moodys or BBB- or higher by S&P or Fitch, or a comparable rating by another nationally recognized rating agency.
The Fund may be affected by the credit of both the agent and the lender from whom the Fund acquires a participation interest. These credit risks may include delay in receiving payments of principal and interest paid by the borrower to the agent or by the agent to the lender or offsets against payments received from the borrower. In the event of the borrowers bankruptcy, the borrowers obligation to repay the loan may be subject to defenses that the borrower can assert as a result of improper conduct by the agent.
Historically, the amount of public information available about a specific Senior Loan has been less extensive than if the loan were registered or exchange-traded.
The loans in which the Fund will invest will, in most instances, be Senior Loans, which are secured and senior to other indebtedness of the borrower. Each Senior Loan will generally be secured by collateral such as accounts receivable, inventory, equipment, real estate, intangible assets such as trademarks, copyrights and patents, and securities of subsidiaries or affiliates. The value of the collateral generally will be determined by reference to financial statements of the borrower, by an independent appraisal, by obtaining the market value of such collateral, in the case of cash or securities if readily ascertainable, or by other customary valuation techniques considered appropriate by the Adviser. The value of collateral may decline after the Funds investment, and collateral may be difficult to sell in the event of default. Consequently, the Fund may not receive all the payments to which it is entitled. By virtue of their senior position and collateral, Senior Loans typically provide lenders with the first right to cash flows or proceeds from the sale of a borrowers collateral if the borrower becomes insolvent (subject to the limitations of bankruptcy law, which may provide higher priority to certain claims such as employee salaries, employee pensions, and taxes). This means Senior Loans are generally repaid before unsecured bank loans, corporate bonds, subordinated debt, trade creditors, and preferred or common stockholders. To the extent that the Fund invests in unsecured loans, if the borrower defaults on such loan, there is no specific collateral on which the lender can foreclose. If the borrower defaults on a subordinated loan, the collateral may not be sufficient to cover both the senior and subordinated loans.
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Senior Loans will usually require, in addition to scheduled payments of interest and principal, the prepayment of the Senior Loan from free cash flow, as further described below. The degree to which borrowers prepay Senior Loans, whether as a contractual requirement or at their election, may be affected by general business conditions, the financial condition of the borrower and competitive conditions among loan investors, among others. As such, prepayments cannot be predicted with accuracy. Recent market conditions, including falling default rates among others, have led to increased prepayment frequency and loan renegotiations. These renegotiations are often on terms more favorable to borrowers. Upon a prepayment, either in part or in full, the actual outstanding debt on which the Fund derives interest income will be reduced. However, the Fund may receive a prepayment penalty fee assessed against the prepaying borrower.
Senior Loans typically pay interest at least quarterly at rates which equal a fixed percentage spread over a base rate such as the London Interbank Offered Rate (LIBOR). For example, if LIBOR were 0.3% and the borrower was paying a fixed spread of 2.50%, the total interest rate paid by the borrower would be 2.80%. Additionally, many Senior Loans also have a minimum base rate, or floor, which will be used if the actual base rate is below this minimum base rate. This measure is designed to ensure lenders receive a minimum interest rate in periods of low interest rates. By illustration, if LIBOR were 0.3% and the borrower was paying a fixed spread of 2.50%, the total interest rate paid by the borrower would be 2.80%. However, if the same Senior Loan had a LIBOR floor of 1.50%, then 1.50% would be used as the base rate notwithstanding that LIBOR was currently at 0.3%, thereby making the interest rate paid the borrower 4.00% (1.50% LIBOR floor base rate plus 2.50% fixed spread). During periods when LIBOR is greater than the LIBOR floor, the LIBOR floor would have no impact on the interest rate paid by the borrower. Not all Senior Loans have LIBOR floors and this feature is a relatively recent invention which may not persist in future issuances of Senior Loans.
Although a base rate such as LIBOR can change every day, loan agreements for Senior Loans typically allow the borrower the ability to choose how often the base rate for its loan will reset. A single loan may have multiple reset periods at the same time, with each reset period applicable to a designated portion of the loan. Such reset periods can range from one day to one year, with most borrowers choosing monthly or quarterly reset periods. During periods of rising interest rates, borrowers will tend to choose longer reset periods, and during periods of declining interest rates, borrowers will tend to choose shorter reset periods. The fixed spread over the base rate on a Senior Loan typically does not change.
Senior Loans generally are arranged through private negotiations between a borrower and several financial institutions represented by an agent who is usually one of the originating lenders. In larger transactions, it is common to have several agents; however, generally only one such agent has primary responsibility for ongoing administration of a Senior Loan. Agents are typically paid fees by the borrower for their services.
The agent is primarily responsible for negotiating the loan agreement which establishes the terms and conditions of the Senior Loan and the rights of the borrower and the lenders. The agent also is responsible for monitoring collateral and for exercising remedies available to the lenders such as foreclosure upon collateral. The Sub-Adviser or its affiliates may from time to time borrow from financial institutions that act as agents for loans.
Loan agreements may provide for the termination of the agents agency status in the event that it fails to act as required under the relevant loan agreement, becomes insolvent, enters Federal Deposit Insurance Corporation (FDIC) receivership or, if not FDIC insured, enters into bankruptcy. Should such an agent, lender or assignor with respect to an assignment interpositioned between the Fund and the borrower become insolvent or enter FDIC receivership or bankruptcy, any interest in the Senior Loan of such person and any loan payment held by such person for the benefit of the Fund should not be included in such persons or entitys bankruptcy estate. If, however, any such amount were included in such persons or entitys bankruptcy estate, the Fund would incur certain costs and delays in realizing payment or could suffer a loss of principal or interest. In this event, the Fund could experience a decrease in the NAV.
Most borrowers pay their debts from cash flow generated by their businesses. If a borrowers cash flow is insufficient to pay its debts, it may attempt to restructure its debts rather than sell collateral. Borrowers may try to restructure their debts by filing for protection under the federal bankruptcy laws or negotiating a work-out. If a borrower becomes involved in a bankruptcy proceeding, access to collateral may be limited by bankruptcy and other laws. Such action by a court could be based, for example, on a fraudulent conveyance claim to the effect that the borrower did not receive fair consideration for granting the security interest in the loan collateral to the Fund. If a court decides that access to collateral is limited or void, the Fund may not recover the full amount of principal and interest that is due.
A borrower must comply with certain restrictive covenants contained in the loan agreement. In addition to requiring the scheduled payment of principal and interest, these covenants may include restrictions on the payment of dividends and other distributions to the borrowers shareholders, provisions requiring compliance with specific financial ratios, and limits on total indebtedness. The agreement may also require the prepayment of the loans from excess cash flow. A breach of a covenant that is not waived by the agent (or lenders directly) is normally an event of default, which provides the agent and lenders the right to call for repayment of the outstanding loan. The typical practice of an agent or a loan investor in relying exclusively or primarily on reports from the borrower to monitor the borrowers compliance with covenants may involve a risk of fraud by the borrower.
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In the process of buying, selling and holding Senior Loans, the Fund may receive and/or pay certain fees. These fees are in addition to interest payments received and may include facility fees, commitment fees, commissions and prepayment penalty fees. When the Fund buys or sells a Senior Loan it may pay a facility fee. On an ongoing basis, the Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a Senior Loan. In certain circumstances, the Fund may receive a prepayment penalty fee upon prepayment of a Senior Loan. Other fees received by the Fund may include covenant waiver fees, covenant modification fees or other consent or amendment fees.
Notwithstanding its intention in certain situations to not receive material, non-public information with respect to its management of investments in Senior Loans, the Adviser and/or Sub-Adviser may from time to time come into possession of material, non-public information about the issuers of loans that may be held in the Funds portfolio. Possession of such information may in some instances occur despite the Advisers and/or Sub-Advisers efforts to avoid such possession, but in other instances the Adviser and/or Sub-Adviser may choose to receive such information (for example, in connection with participation in a creditors committee with respect to a financially distressed issuer). The Advisers and/or Sub-Advisers ability to trade in these Senior Loans for the account of the Fund could potentially be limited by its possession of such information. Such limitations on the Advisers and/or Sub-Advisers ability to trade could have an adverse effect on the Fund by, for example, preventing the Fund from selling a Senior Loan that is experiencing a material decline in value. In some instances, these trading restrictions could continue in effect for a substantial period of time.
The loan market, as represented by the S&P/LSTA (Loan Syndications and Trading Association) Leveraged Loan Index, experienced significant growth in terms of number and aggregate volume of loans outstanding since the inception of the index in 1997. In 1997, the total amount of loans in the market aggregated less than $10 billion. By April of 2000, it had grown to over $100 billion, and by July of 2007 the market had grown to over $500 billion. The size of the market peaked in November of 2008 at $594 billion. During this period, the demand for loans and the number of investors participating in the loan market also increased significantly.
Since 2008, the aggregate size of the market has contracted, characterized by limited new loan issuance and payoffs of outstanding loans. From the peak in 2008 through July 2010, the overall size of the loan market contracted by approximately 15%. The number of market participants also decreased during that period. There can be no assurance that the size of the loan market, and the number of participants, will return to earlier levels.
An increase in demand for Senior Loans may benefit the Fund by providing increased liquidity for such loans and higher sales prices, but it may also adversely affect the rate of interest payable on such loans acquired by the Fund and the rights provided to the Fund under the terms of the applicable loan agreement, and may increase the price of loans that the Fund wishes to purchase in the secondary market. A decrease in the demand for Senior Loans may adversely affect the price of loans in the Funds portfolio, which could cause the Funds and, therefore, the Funds net asset value to decline.
The Fund may acquire interests in Senior Loans which are designed to provide temporary or bridge financing to a borrower pending the sale of identified assets or the arrangement of longer-term loans or the issuance and sale of debt obligations. The Fund may also invest in Senior Loans of borrowers that have obtained bridge loans from other parties. A borrowers use of bridge loans involves a risk that the borrower may be unable to locate permanent financing to replace the bridge loan, which may impair the borrowers perceived creditworthiness. Bridge loans may have less liquidity than other Senior Loans that were issued to fund corporate purposes on a longer term basis.
Although not anticipated in the normal course, the Fund may occasionally acquire warrants and other equity securities as part of a unit combining a Senior Loan and equity securities of a borrower or its affiliates. The acquisition of such equity securities will only be incidental to the Funds purchase of a Senior Loan. The Fund may also acquire equity securities or credit securities (including non-dollar denominated equity or credit securities) issued in exchange for a Senior Loan or issued in connection with the debt restructuring or reorganization of a Borrower, or if such acquisition, in the judgment of the Adviser may enhance the value of a Senior Loan or would otherwise be consistent with the Funds investment policies. Such warrants and equity securities will typically have limited value and there is no assurance that such securities will ever obtain value.
OTHER LOANS
The Fund may invest in secured loans that are not first lien and loans that are unsecured. These loans have the same characteristics as Senior Loans except that such loans are not first in priority of repayment and/or are not secured by collateral. Accordingly, the risks associated with these loans are higher than the risks for loans with first priority over the collateral. Because these loans are lower in priority and/or unsecured, they are subject to the additional risk that the cash flow of the borrower may be insufficient to meet scheduled payments after giving effect to the secured obligations of the borrower. In the event of default on such a loan, the first priority lien holder has first claim to the underlying collateral of the loan. It is possible that no value would remain for the holders of secured loans that are not first lien and loans that are unsecured and therefore result in a loss of investment to the Fund.
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Secured loans that are not first lien and loans that are unsecured generally have greater price volatility than Senior Loans and may be less liquid. There is also a possibility that originators will not be able to sell participations in these loans, which would create greater credit risk exposure for the holders of such loans. Secured loans that are not first lien and loans that are unsecured share the same risks as other below investment-grade instruments.
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.
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), 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. It is believed that the amendment puts Fannie Mae and Freddie Mac in a better position to service their debt because the companies no longer have to borrow from the U.S. Treasury to make fixed dividend payments. As part of the terms, Fannie Mae and Freddie Mac also will be required to reduce their investment portfolios at an annual rate of 15% instead of the previous 10%, which puts each of them on track to cut their portfolios to a targeted $250 billion in 2018.
Fannie Mae and Freddie Mac are the subject of several continuing class action lawsuits and investigations by federal regulators over certain accounting, disclosure or corporate governance matters, which (along with any resulting financial restatements) may adversely affect the guaranteeing entities. Importantly, the future of the entities is in serious question as the U.S. government reportedly is considering multiple options, ranging from nationalization, privatization, consolidation, or abolishment of the entities.
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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) states, municipalities and other political subdivisions, agencies, authorities and instrumentalities or states and multi-state agencies or authorities (3) corporations, (4) financial institutions, (5) insurance companies or (6) 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 Fund 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.
SPECIAL CONSIDERATIONS AND RISKS
A discussion of the risks associated with an investment in the Fund is contained in the Prospectus. The discussion below supplements, and should be read in conjunction with, the Prospectus.
GENERAL
Investment in the Fund should be made with an understanding that the value of the 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 the 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 stock 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 stock 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 the 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 the Funds Shares will be adversely affected if trading markets for the Funds portfolio securities are limited or absent or if bid/ask spreads are wide.
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CONFLICTS OF INTEREST RISK
An investment in the 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 the 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. The 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 the 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 the 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(a)(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 the 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 the 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.
COUNTERPARTY RISK
Counterparty risk with respect to derivatives has been and may continue to be affected by new rules and regulations affecting the derivatives market. Some derivatives transactions are required to be centrally cleared, and a party to a cleared derivatives transaction is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared position, rather than the credit risk of its original counterparty to the derivatives transaction. Credit risk of market participants with respect to derivatives that are centrally cleared is concentrated in a few clearing houses, and it is not clear how an insolvency proceeding of a clearing house would be conducted, what effect the insolvency proceeding would have on any recovery by the Fund, and what impact an insolvency of a clearing house would have on the financial system more generally.
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, the Fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if the 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, the Fund may be required to make delivery of the instruments underlying futures contracts it has sold.
The 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.
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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 Fund does 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. The 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 the 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 the Fund of margin deposits in the event of bankruptcy of a broker with whom the 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, the 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, the Funds counterparty to the transaction is a central derivatives clearing organization, or clearing house, rather than a bank or broker. Because the 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, the 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 the Fund than bilateral (non-cleared) arrangements. For example, the 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 the 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. The Fund is subject to risk if it enters into a derivatives transaction that is required to be cleared (or which SSGA FM 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 the 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 the 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 the 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 the Funds limitation on
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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 the Funds interest.
If the 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 the 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 the 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 the Fund makes distributions or you sell Shares.
The Trust has adopted the following investment restrictions as fundamental policies with respect to the Fund. These restrictions cannot be changed without the approval of the holders of a majority of the Funds outstanding voting securities. For purposes of the 1940 Act, a majority of the outstanding voting securities of the 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, the 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.
In addition to the investment restrictions adopted as fundamental policies as set forth above, the Fund observes the following restrictions, which may be changed by the Board without a shareholder vote. The 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;
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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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;
3. Under normal circumstances, invest less than 80% of its total assets in component securities that comprise its Index; and
4. Under normal circumstances, invest directly, or indirectly through underlying ETFs, less than 80% of its net assets, plus the amount of borrowings for investment purposes, in fixed income securities. Prior to any change in the Funds 80% investment policy, the Fund will provide shareholders with 60 days written notice.
The Fund defines the foregoing terms in accordance with the definition of such terms per the 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 the 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 the 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 Fund to loan up to 33 1/3% of its total assets. With respect to borrowing, the 1940 Act presently allows the Fund to: (1) borrow from any bank (including pledging, mortgaging or hypothecating assets) in an amount up to 33 1 / 3 % of its total assets, (2) borrow money for temporary purposes in an amount not exceeding 5% of the value of the 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 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 Fund to invest in commodities in accordance with investment policies contained in its prospectus and SAI. Any such investment shall also comply with the CEA 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 real estate investment trusts (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 the 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 the 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 the Fund will continue to be met.
The Exchange may consider the suspension of trading in, and may initiate delisting proceedings of, the Shares of the Fund under any of the following circumstances: (i) if any of the continued listing requirements set forth in the Exchange rules are not continuously maintained; (ii) if the Exchange files separate proposals under Section 19(b) of the Securities Exchange Act of 1934, as amended, and any of the statements or representations regarding (a) the description of the Index, portfolio, or reference asset; (b) limitations on the Index or the Funds portfolio holdings or reference assets; or (c) the applicability of the Exchange listing rules specified in such proposals are not continuously maintained; (iii) if following the initial 12-month period beginning at the commencement of trading of the Fund, there are fewer than 50 record or beneficial owners of the Shares of the Fund; (iv) if the value of the Funds underlying index or portfolio of securities on which the Fund is based is no longer calculated or available; or (v) such other event shall occur or condition shall exist that, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. If the Intraday Indicative Value of the Fund is not being disseminated as required by Exchange rules, the Exchange may halt trading during the day in which such interruption occurs. If the interruption persists past the trading day in which it occurred, the Exchange will halt trading in the Fund Shares. The Exchange will remove the Shares from listing and trading upon termination of the Fund. The Trust reserves the right to adjust the Fund Share price of the 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.
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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 the Fund is the U.S. dollar. The base currency is the currency in which the Funds net asset value per Share is calculated and the trading currency is the currency in which Shares of the Fund are listed and traded on the Exchange.
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 Fund 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, 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 Fund. The Fund and its 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., the Adviser is responsible for the day-to-day management of the 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 the Fund, at which time the Funds 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 provides the Board with an overview of, among other things, its 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 the Fund may be exposed.
The Board is responsible for overseeing the nature, extent and quality of the services provided to the Fund by the 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 Investment Advisory Agreement with the Adviser, the Board meets with the Adviser to review such services. Among other things, the Board regularly considers the 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 the 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. 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 the Funds financial statements, focusing on major areas of risk encountered by the Fund 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
25
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, 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 the 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 the 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 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 seven members of the Board of Trustees, six 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 One Iron Street Boston, MA 02210 1943 |
|
Independent
Trustee,
Chairman, Trustee
|
|
|
Term:
Unlimited Served: since
September
|
|
Retired. | 125 | None. | |||||||
BONNY EUGENIA BOATMAN c/o SPDR Series Trust One Iron Street Boston, MA 02210 1950 |
|
Independent
Trustee |
|
|
Term:
Unlimited Served: since April 2010 |
|
Retired. | 125 | None. |
26
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 One Iron Street Boston, MA 02210 1953 |
Independent
Trustee |
Term:
Unlimited Served: since April 2010 |
Self-employed consultant since 2010; CEO and President, CFA Institute (June 2014 - January 2015). |
125 | Affiliated Managers Group, Inc. (Director). | |||||
CARL G. VERBONCOEUR c/o SPDR Series Trust One Iron Street Boston, MA 02210 1952 |
Independent
Trustee,
|
Term:
Unlimited Served: since April 2010 |
Self-employed consultant since 2009. |
125 | The Motley Fool Funds Trust (Trustee). | |||||
CLARE S. RICHER c/o SPDR Series Trust One Iron Street Boston, MA 02210 1958 |
Independent
Trustee |
Term:
Unlimited Served: since July 2018 |
Chief Financial Officer, Putnam Investments LLC (December 2008 May 2017). | 125 | Putnam Acquisition Financing Inc. (Director); Putnam Acquisition Financing LLC (Director); Putnam GP Inc. (Director); Putnam Investor Services, Inc. (Director); Putnam Investments Limited (Director); University of Notre Dame (Trustee). | |||||
SANDRA G. SPONEM c/o SPDR Series Trust One Iron Street Boston, MA 02210 1958 |
Independent
Trustee |
Term:
Unlimited Served: since July 2018 |
Chief Financial Officer, M.A. Mortenson Companies, Inc. (February 2007 April 2017). | 125 | Guggenheim / Rydex Funds (Trustee). |
27
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 |
|||||||||||
INTERESTED TRUSTEE |
||||||||||||||||
JAMES E. ROSS* SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1965 |
|
Interested
Trustee |
|
|
Term:
Unlimited Served as Trustee: since April 2010 |
|
Chairman and Director, SSGA Funds Management, Inc. (2005 - present); Executive Vice President, State Street Global Advisors (2012 - present); Chief Executive Officer and Director, State Street Global Advisors Funds Distributors, LLC (May 2017 present); Director, State Street Global Markets, LLC (2013 - April 2017); President, SSGA Funds Management, Inc. (2005 - 2012); Principal, State Street Global Advisors (2000 - 2005). | 196 | SSGA SPDR ETFs Europe I plc (Director) (November 2016 - present); SSGA SPDR ETFs Europe II plc (Director) (November 2016 - present). |
|
For the purpose of determining the number of portfolios overseen by the Trustees, Fund Complex comprises registered investment companies for which SSGA Funds Management, Inc. serves as investment adviser. |
* |
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. |
28
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. One Iron Street Boston, MA 02210 1967 |
President |
Term: Unlimited Served: since October 2012 |
President and Director, SSGA Funds Management, Inc. (2001 - present)*; Senior Managing Director, State Street Global Advisors (1992 - present)*; Director, State Street Global Advisors Funds Distributors, LLC (May 2017 - present). | |||
ANN M. CARPENTER SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1966 |
Vice President;
Deputy Treasurer |
Term: Unlimited Served: since August 2012 (with respect to Vice President); Unlimited Served: since February 2016 (with respect to Deputy Treasurer) |
Chief Operating Officer, SSGA Funds Management, Inc. (2005 - Present)*; Managing Director, State Street Global Advisors (2005 - present).* | |||
MICHAEL P. RILEY SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1969 |
Vice President |
Term: Unlimited Served: since February 2005 |
Managing Director, State Street Global Advisors (2005 - present).* |
29
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 |
|||
JOSHUA A. WEINBERG SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1978 |
Chief Legal
Officer |
Term: Unlimited Served: since February 2015 |
Managing Director and Managing Counsel, State Street Global Advisors (2011 - present); Clerk, SSGA Funds Management, Inc. (2013 - present); Associate, Financial Services Group, Dechert LLP (2006 - 2011). | |||
JESSE D. HALLEE State Street Bank and Trust Company 100 Summer Street, SUM0703 Boston, MA 02111 1976 |
Secretary |
Term: Unlimited Served: since August 2017 |
Vice President and Senior Counsel, State Street Bank and Trust Company (2013 - present); Vice President and Counsel, Brown Brothers Harriman & Co. (2007 - 2013).** | |||
ESTEFANIA SALOMON State Street Bank and Trust Company 100 Summer Street, SUM0703 Boston, MA 02111 1983 |
Assistant
Secretary |
Term: Unlimited Served: since May 2018 |
Assistant Vice President and Associate Counsel, State Street Bank and Trust Company (2018 present); Senior Compliance Consultant, AdvisorAssist, LLC (2017); Attorney, Commonwealth of Massachusetts, Securities Division (2014-2017). | |||
BRUCE S. ROSENBERG SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1961 |
Treasurer |
Term: Unlimited Served: since February 2016 |
Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (July 2015 - present). |
30
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 |
|||
CHAD C. HALLETT SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1969 |
Deputy
Treasurer |
Term: Unlimited Served: since February 2016 |
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).* |
|||
DARLENE ANDERSON-VASQUEZ SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1968 |
Deputy
Treasurer |
Term: Unlimited Served: since November 2016 |
Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (May 2016 - present); Senior Vice President, John Hancock Investments (September 2007 - May 2016). | |||
ARTHUR A. JENSEN SSGA Funds Management, Inc. 1600 Summer Street Stamford, CT 06905 1966 |
Deputy
Treasurer |
Term: Unlimited Served: since August 2017 |
Vice President at State Street Global Advisors (July 2016 present); Deputy Treasurer of Elfun Funds (July 2016 present); Treasurer of State Street Institutional Funds, State Street Variable Insurance Series Funds, Inc. and GE Retirement Savings Plan Funds (June 2011 present); Treasurer of Elfun Funds (June 2011 - July 2016); Mutual Funds Controller of GE Asset Management Incorporated (April 2011 - July 2016); Senior Vice President at Citigroup (2008 2010); Vice President at JPMorgan (2005 2008). | |||
DANIEL FOLEY SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1972 |
Assistant
Treasurer |
Term: Unlimited Served: since February 2016 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (April 2007 - present).* | |||
DANIEL G. PLOURDE SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1980 |
Assistant
Treasurer |
Term: Unlimited Served: since May 2017 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (May 2015 - present); Officer, State Street Bank and Trust Company (March 2009 - May 2015). | |||
SUJATA UPRETI SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1974 |
Assistant
Treasurer |
Term: Unlimited Served: since February 2016 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (May 2015 - present); Assistant Director, Cambridge Associates, LLC (July 2014 - January 2015); Vice President, Bank of New York Mellon (July 2012 - August 2013); Manager, PricewaterhouseCoopers, LLP (September 2003 - July 2012). | |||
BRIAN HARRIS SSGA Funds Management, Inc. One Iron Street Boston, MA 02210 1973 |
Chief
Compliance
Anti-
Officer;
|
Term: Unlimited Served: since November 2013 |
Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (June 2013 - present)*; Senior Vice President and Global Head of Investment Compliance, BofA Global Capital Management (2010 - 2013). |
* |
Served in various capacities and/or with various affiliated entities during noted time period. |
31
** |
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 Fund 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 Fund, and to exercise his or her business judgment in a manner that serves the best interests of the 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 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 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 Ms. Richer should serve as Trustee because of the experience she gained serving as the Chief Financial Officer of a large financial services and investment management company, her knowledge of the financial services industry and her experience serving on the board of a major educational institution. Ms. Richer was appointed to serve as Trustee of the Trust in July 2018.
The Board has concluded that Ms. Sponem should serve as Trustee because of the experience she gained serving as the Chief Financial Officer of a large financial services company, her knowledge of the financial services industry and her experience serving on the board of another investment company. Ms. Sponem was appointed to serve as Trustee of the Trust in July 2018.
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).
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 Fund.
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 $245,000 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 $60,000 and the Chairman of the Audit Committee receives an additional annual fee of $30,000. Prior to July 1, 2018, each Independent Trustee received an annual fee of $230,000 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.
32
The table below shows the compensation that the Independent Trustees received during the Trusts fiscal year ended June 30, 2018.
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 |
$ | 253,195 | N/A | N/A | $ | 345,000 | ||||||||||
Bonny Boatman |
$ | 216,479 | N/A | N/A | $ | 295,000 | ||||||||||
Dwight Churchill |
$ | 216,479 | N/A | N/A | $ | 295,000 | ||||||||||
David Kelly (2) |
$ | 190,764 | N/A | N/A | $ | 260,000 | ||||||||||
Clare Richer (3) |
$ | N/A | N/A | N/A | $ | N/A | ||||||||||
Sandra Sponem (3) |
$ | N/A | N/A | N/A | $ | N/A | ||||||||||
Carl Verboncoeur |
$ | 231,165 | N/A | N/A | $ | 315,000 |
(1) |
The Fund Complex includes the Trust. |
(2) |
Effective August 22, 2018, Mr. Kelly resigned from his position as Trustee and no longer serves as a trustee to the Trust. |
(3) |
Trustee was appointed to the Board as of July 1, 2018, and therefore did not receive any compensation from the Fund Complex for the fiscal year ended June 30, 2018. |
STANDING COMMITTEES
Audit Committee. The Board has an Audit Committee consisting of all Independent Trustees. Mr. Verboncoeur 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, 2018.
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 Fund; 3) review proposed resolutions and conflicts of interest that may arise in the business of the Fund and may have an impact on the investors of the Fund; 4) select any independent counsel of the independent trustees as well as make determinations as to that counsels independence; 5) review matters that are referred to the Committee by the Chief Legal Officer or other counsel to the Trust; and 6) provide general oversight of the Fund on behalf of the investors of the Fund. 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, 2018.
33
OWNERSHIP OF FUND SHARES
As of December 31, 2017, neither the Independent Trustees nor their immediate family members owned beneficially or of record any securities in the Adviser, Principal Underwriter or any person directly or indirectly controlling, controlled by, or under common control with the Adviser or Principal Underwriter, except as noted below:
Name of Trustee |
Relationship |
Company |
Title of Class | Value of Securities | Percent of Class | |||||||||
Clare S. Richer |
Self | State Street Corporation, parent company of the Adviser and Distributor | Common | $ | 38,134 | <1 | % |
The following table shows, as of December 31, 2016, 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 | |||
Bonny Eugenia Boatman |
None | None | None | |||
Dwight D. Churchill |
SPDR Nuveen S&P High Yield Municipal Bond ETF | Over $100,000 | Over $100,000 | |||
Clare Richer |
None | None | None | |||
Sandra Sponem |
SPDR Bloomberg Barclays High Yield Bond ETF | $50,001 - $100,000 | $50,000 - $100,000 | |||
Carl G. Verboncoeur |
SPDR S&P Dividend ETF | $10,001 - $50,000 | $10,001 - $50,000 | |||
SPDR S&P 600 Small Cap Value ETF | $10,001 - $50,000 | |||||
Interested Trustee: |
||||||
James E. Ross |
SPDR Portfolio Large Cap | Over $100,000 | Over $100,000 | |||
SPDR S&P Biotech ETF | $10,001 - $50,000 | |||||
SPDR S&P Dividend ETF | $10,001 - $50,000 | |||||
SPDR Portfolio Small Cap ETF | $10,001 - $50,000 | |||||
SPDR Portfolio Mid Cap ETF | $10,001 - $50,000 | |||||
SPDR Dow Jones REIT ETF | $10,001 - $50,000 | |||||
SPDR S&P 400 Mid Cap Growth ETF | $10,001 - $50,000 | |||||
SPDR Nuveen S&P High Yield Municipal Bond ETF | Over $100,000 |
CODES OF ETHICS
The Trust and the Adviser (which includes applicable reporting personnel of the Distributor) have each adopted a code of ethics under Rule 17j-1 of the 1940 Act, which is designed to prevent affiliated persons of the Trust, the Adviser and the Distributor from engaging in deceptive, manipulative or fraudulent activities in connection with securities held or to be acquired by the Fund (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 Fund.
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 https://www.sec.gov.
PROXY VOTING POLICIES
The Board believes that the voting of proxies on securities held by the 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. The Advisers proxy voting policy is attached at the end of this SAI. Information regarding how the 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 https://www.spdrs.com; and (3) on the SECs website at https://www.sec.gov.
34
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 the 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 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 the Fund. The Trust, the Adviser or State Street will not disseminate non-public information concerning the Trust, except information may be made available prior to its public availability: (i) to a party for a legitimate business purpose related to the day-to-day operations of the Fund, including (a) a service provider, (b) the stock exchanges upon which the ETF is listed, (c) the NSCC, (d) the Depository Trust Company, and (e) financial data/research companies such as Morningstar, Bloomberg L.P., and Reuters, or (ii) to any other party for a legitimate business or regulatory purpose, upon waiver or exception, with the consent of an applicable Trust officer.
THE INVESTMENT ADVISER
SSGA FM acts as investment adviser to the Trust and, subject to the oversight of the Board, is responsible for the investment management of the Fund. As of June 30, 2018, the Adviser managed approximately $500.45 billion in assets. The Advisers principal address is One Iron Street, Boston, Massachusetts 02210. The Adviser, a Massachusetts corporation, is a wholly-owned subsidiary of State Street Global Advisors Inc., which is itself a wholly-owned subsidiary of State Street Corporation, a publicly held financial 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 the Fund pursuant to an investment advisory agreement (Investment Advisory Agreement) between the Trust and the Adviser. The Investment Advisory Agreement, with respect to the 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 the 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 the 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 oversight of the Board and in conformity with the stated investment policies of the Fund, manages the investment of the Funds assets. The Adviser is responsible for placing purchase and sale orders and providing continuous supervision of the investment portfolio of the 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 of the Investment Advisory Agreement regarding the Fund is available in the Trusts Annual Report to Shareholders for the period ended June 30, 2018.
For the services provided to the Fund under the Investment Advisory Agreement, the Fund pays the Adviser monthly fees based on a percentage of the Funds average daily net assets as set forth in the Funds Prospectus reduced by any acquired fund fees and expenses attributable to the Funds investments in other investment companies. From time to time, the Adviser may waive all or a portion of its fee. The Adviser pays all expenses of the Fund other than the management fee, brokerage, taxes, interest, fees and expenses of the Independent Trustees (including any Trustees counsel fees), litigation expenses and other extraordinary expenses.
For the past three fiscal years ended June 30, the Fund paid the following amounts to the Adviser:
FUND |
FISCAL YEAR
ENDED JUNE 30, 2018 |
FISCAL YEAR
ENDED JUNE 30, 2017 |
FISCAL YEAR
ENDED JUNE 30, 2016 |
|||||||||
SPDR Dorsey Wright Fixed Income Allocation ETF |
$ | 179,852 | $ | 148,689 | $ | 4,252 | (1) |
(1) |
The Fund commenced operations on June 2, 2016. |
35
PORTFOLIO MANAGERS
The Adviser manages the Fund using a team of investment professionals. The professionals primarily responsible for the day-to-day portfolio management of the Fund are Michael Feehily, Karl Schneider and Raymond Donofrio. 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 the Fund and assets under management in those accounts. The total numbers 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, 2018:
Portfolio Manager |
Registered
Investment Company Accounts |
Assets
Managed (billions)* |
Other
Pooled Investment Vehicle Accounts |
Assets
Managed (billions)* |
Other
Accounts |
Assets
Managed (billions)* |
Total
Assets Managed (billions) |
|||||||||||||||||||||
Michael Feehily |
142 | $ | 549.25 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,152.10 | |||||||||||||||||
Karl Schneider |
142 | $ | 549.25 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,152.10 | |||||||||||||||||
Raymond Donofrio |
142 | $ | 549.25 | 274 | $ | 329.51 | 446 | $ | 273.34 | $ | 1,152.10 |
* |
There are no performance-based fees associated with these accounts. |
The following table lists the dollar range of Shares beneficially owned by portfolio managers listed above as of June 30, 2018:
Portfolio Manager |
Fund |
Dollar Range of Trust Shares
Beneficially Owned |
||
Michael Feehily |
SPDR SSGA US Large Cap Low Volatility Index ETF | $50,001-$100,000 | ||
SPDR Dow Jones REIT ETF | $50,001-$100,000 | |||
SPDR S&P Dividend ETF | $50,001-$100,000 | |||
SPDR S&P 1500 Value Tilt ETF | $50,001-$100,000 | |||
Karl Schneider |
None | None | ||
Raymond Donofrio |
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 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.
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 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.
36
SSGAs culture is complemented and reinforced by a total rewards strategy that is based on a pay for performance philosophy which seeks to offer a competitive pay mix of base salary, benefits, cash incentives and deferred compensation.
Salary is based on a number of factors, including external benchmarking data and market trends, State Street performance, SSGA performance, and individual overall performance. SSGAs Global Human Resources department regularly participates in compensation surveys in order to provide SSGA with market-based compensation information that helps support individual pay decisions.
Additionally, subject to State Street and SSGA business results, State Street allocates an incentive pool to SSGA to reward its employees. The size of the incentive pool for most business units is based on the firms overall profitability and other factors, including performance against risk-related goals. For most SSGA investment teams, SSGA recognizes and rewards performance by linking annual incentive decisions for investment teams to the firms or business units profitability and business unit investment performance over a multi-year period.
Incentive pool funding for most active investment teams is driven in part by the post-tax investment performance of fund(s) managed by the team versus the return levels of the benchmark index(es) of the fund(s) on a one-, three- and, in some cases, five-year basis. For most active investment teams, a material portion of incentive compensation for senior staff is deferred over a four-year period into the SSGA Long-Term Incentive (SSGA LTI) program. For these teams, The SSGA LTI program indexes the performance of these deferred awards against the post-tax investment performance of fund(s) managed by the team. This is intended to align our investment teams compensation with client interests, both through annual incentive compensation awards and through the long-term value of deferred awards in the SSGA LTI program.
For the passive equity investment team, incentive pool funding is driven in part by the post-tax 1 and 3-year tracking error of the funds managed by the team against the benchmark indexes of the funds.
The discretionary allocation of the incentive pool to the business units within SSGA is influenced by market-based compensation data, as well as the overall performance of each business unit. Individual compensation decisions are made by the employees manager, in conjunction with the senior management of the employees business unit. These decisions are based on the overall performance of the employee and, as mentioned above, on the performance of the firm and business unit. Depending on the job level, a portion of the annual incentive may be awarded in deferred compensation, which may include cash and/or Deferred Stock Awards (State Street stock), which typically vest over a four-year period. This helps to retain staff and further aligns SSGA employees interests with SSGA clients and shareholders long-term interests.
SSGA recognizes and rewards outstanding performance by:
|
Promoting employee ownership to connect employees directly to the companys success. |
|
Using rewards to reinforce mission, vision, values and business strategy. |
|
Seeking to recognize and preserve the firms unique culture and team orientation. |
|
Providing all employees the opportunity to share in the success of SSGA. |
37
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 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), which were accrued daily and paid monthly by the Adviser out of its management fee.
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 financial holding company, and is affiliated with the Adviser. State Streets mailing address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
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 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 its services provided under the SSGA Administration agreement, SSGA FM, shall receive fees for the services, calculated based on the average aggregate net assets of the Trust and SIS, which are accrued daily and paid monthly out of its management fee.
As compensation for its services under the Sub-Administration Agreement, Custodian Agreement and Transfer Agency Agreement, State Street shall receive a fee for the services, calculated based on the average aggregate net assets of the Trust and SIS, which are accrued daily and paid monthly by the Adviser from its management fee. For each series of the Trust and SIS, an annual minimum fee applies. 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 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.
SECURITIES LENDING ACTIVITIES
The Trusts Board has approved the Funds participation in a securities lending program. Under the securities lending program, the Fund has retained State Street to serve as the securities lending agent.
For the fiscal year ended June 30, 2018, the income earned by the Fund as well as the fees and/or compensation paid by the Fund (in dollars) pursuant to the Master Amended and Restated Securities Lending Authorization Agreement among SPDR Series Trust, SPDR
38
Index Shares Funds, SSGA Active Trust and SSGA Master Trust, each on behalf of its respective series, and State Street (the Securities Lending Authorization Agreement) were as follows:
Fees and/or compensation paid by the Fund for securities lending activities
and
related services |
||||||||||||||||||||||||||||||||||||
Gross
income earned by the Fund from securities lending activities |
Fees paid
to State Street from a revenue split |
Fees paid for
any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in a revenue split |
Administrative
fees not included in a revenue split |
Indemnification
fees not included in a revenue split |
Rebate
(paid to borrower) |
Other fees
not included in a revenue split |
Aggregate
fees and/or compensation paid by the Fund for securities lending activities and related services |
Net income
from securities lending activities |
||||||||||||||||||||||||||||
SPDR Dorsey Wright Fixed Income Allocation ETF |
$ | 195,669.19 | $ | 16,026.02 | $ | 2,633.18 | $ | 0.00 | $ | 0.00 | $ | 86,197.49 | $ | 0.00 | $ | 104,856.69 | $ | 90,812.50 |
For the fiscal year ended June 30, 2018, State Street, acting as agent of the Fund, provided the following services to the Fund in connection with the Funds securities lending activities: (i) locating borrowers among an approved list of prospective borrowers; (ii) monitoring the value of loaned securities, the value of collateral received, and other lending parameters; (iii) seeking additional collateral, as necessary, from borrowers; (iv) receiving and holding collateral from borrowers, and facilitating the investment and reinvestment of all or substantially all cash collateral in an investment vehicle designated by the Fund; (v) returning collateral to borrowers; (vi) facilitating substitute dividend, interest, and other distribution payments to the Fund from borrowers; (vii) negotiating the terms of each loan of securities, including but not limited to the amount of any loan premium, and monitoring the terms of securities loan agreements with prospective borrowers for consistency with the requirements of the Funds Securities Lending Authorization Agreement; (viii) selecting securities, including amounts (percentages), to be loaned; (ix) recordkeeping and accounting servicing; and (x) arranging for return of loaned securities to the Fund in accordance with the terms of the Securities Lending Authorization Agreement.
THE DISTRIBUTOR
State Street Global Advisors Funds Distributors, LLC is the principal underwriter and Distributor of Shares. Its principal address is One Iron Street, Boston, Massachusetts 02210. 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 the 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. An affiliate of 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. An affiliate of 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 SPDR 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 the date of this SAI, 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), Pershing LLC (Pershing), RBC Capital Markets, LLC (RBC) and TD Ameritrade, Inc. (TD Ameritrade). Pursuant to these arrangements, Schwab, Pershing, RBC and TD Ameritrade have agreed to promote certain SPDR funds to their customers and not to charge certain of their customers any commissions when those customers purchase or sell shares of certain SPDR funds. Payments to a broker-dealer or intermediary
39
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 Fund assets. 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.
The Distribution Agreement provides that it may be terminated at any time, without the payment of any penalty, as to the 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 continuation of the Distribution Agreement and any other related agreements is subject to annual approval of the Board, including by a majority of the Independent Trustees, as described above.
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 Shares. Such Soliciting Dealers may also be Participating Parties (as defined in the Book Entry Only System section below) and/or DTC Participants (as defined below).
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.
INDEX PROVIDER AND OTHER PERSONS
An unaffiliated index provider may make payments from its own assets to other persons in consideration for services provided or other activities that may facilitate investment in SPDR funds.
The policy of the Trust regarding purchases and sales of securities for the Fund is that primary consideration will be given to obtaining the most favorable prices and efficient executions of transactions (commonly referred to as best execution). 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 the 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 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 the 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 sales 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, market share, execution-related costs, and prompt and reliable execution. 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. The Adviser uses the same negotiated equity commission schedule with each broker-dealer per market/region, and applies these for each account it trades for. The Advisers negotiated equity commission rates are execution service rates and take into account considerations such as liquidity, market conditions or trading expertise needed to achieve execution. They do not take into account the value of any research received. The Adviser may aggregate trades with other 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.
40
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 and seeking best execution.
The Fund 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 Fund for the past three fiscal years ended June 30. Brokerage commissions paid by the Fund may be substantially different from year to year for multiple reasons, including market volatility and the demand for the Fund.
PORTFOLIO(1) |
FISCAL YEAR
ENDED JUNE 30, 2018 |
FISCAL YEAR
ENDED JUNE 30, 2017 |
FISCAL YEAR
ENDED JUNE 30, 2016 |
|||||||||
SPDR Dorsey Wright Fixed Income Allocation ETF (1) |
$ | 32,260 | $ | 4,161 | 51 |
(1) |
The Fund commenced operations on June 2, 2016. |
Securities of Regular Broker-Dealers. The 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, 2018:
JPMorgan Chase & Co. |
$ | 567,944,032 | ||
Merrill Lynch & Co., Inc. |
$ | 549,957,803 | ||
Goldman Sachs & Co. |
$ | 346,108,972 | ||
Morgan Stanley |
$ | 327,478,685 | ||
Citigroup, Inc. |
$ | 301,471,650 | ||
Deutsche Bank |
$ | 114,433,276 | ||
UBS Securities LLC |
$ | 82,884,978 | ||
Credit Suisse |
$ | 30,988,579 | ||
Investment Technology Group, Inc. |
$ | 4,652,106 | ||
Virtu Americas LLC |
$ | 3,277,411 |
Portfolio Turnover. 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 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 the 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
41
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 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 the 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 the 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.
42
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Although the Fund does not have information concerning its beneficial ownership held in the names of DTC Participants, as of October 5, 2018, the names, addresses and percentage ownership of each DTC Participant that owned of record 5% or more of the outstanding Shares of the Fund are as follows:
Name and Address |
Percentage of Ownership |
|||
Wells Fargo Clearing Services, LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
30.43 | % | ||
National Financial Services Corporation 200 Liberty Street New York, NY 10281 |
22.03 | % | ||
LPL Financial Corporation 4707 Executive Drive San Diego, CA 92121 |
11.03 | % | ||
Morgan Stanley Smith Barney LLC 1 Harborside Financial Center, Plaza II Jersey City, NJ 07311 |
9.19 | % | ||
Charles Schwab & Co., Inc. 101 Montgomery Street San Francisco, CA 94104 |
6.93 | % | ||
Pershing LLC One Pershing Plaza Jersey City, NJ 07399 |
5.83 | % |
An Authorized Participant (as defined below) may hold of record more than 25% of the outstanding Shares of the Fund. From time to time, Authorized Participants may be a beneficial and/or legal owner of the Fund, may be affiliated with an index provider, may be deemed to have control of the 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 the 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.
As of October 5, 2018, to the knowledge of the Trust, the following persons held of record or beneficially through one or more accounts 25% or more of the outstanding shares of the Fund.
Name and Address |
Percentage of Ownership |
|||
Wells Fargo Clearing Services, LLC 1 North Jefferson Avenue St. Louis, MO 63103 |
30.43 | % |
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.
43
PURCHASE AND REDEMPTION OF CREATION UNITS
The 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 Index or in cash for the value of such securities. The value of the Fund is determined once each business day, as described under Determination of Net Asset Value. The Creation Unit size for the Fund may change. Authorized Participants (as defined below) will be notified of such change. The principal consideration for creations and redemptions for the Fund is set forth in the table below:
FUND |
CREATION* | REDEMPTION* | ||
SPDR Dorsey Wright Fixed Income Allocation ETF |
In-Kind | In-Kind |
* |
May be revised at any time without notice. |
PURCHASE (CREATION). The Trust issues and sells Shares of the 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 the Fund is, generally, any day on which the NYSE is open for business.
FUND DEPOSIT. The consideration for purchase of a Creation Unit of the 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 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 Cash Component, computed as described below. When accepting purchases of Creation Units for cash, the 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 the 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 the Fund 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 the 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, prior to the opening of business on the NYSE (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 the Fund. Such Fund Deposit is subject to any applicable adjustments as described below, in order to effect purchases of Creation Units of the 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 the 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 a 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 the Funds Index.
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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 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 the 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 the 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 the 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, the Fund may require orders to create Creation Units to be placed earlier in the day. In addition, if a market or markets on which the 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. 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 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 the 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 the Fund or its agents by no later than the Settlement Date. The Settlement Date for the Fund is generally the second Business Day (T+2) 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 second Business Day following the day on which the purchase order is deemed received by the Distributor.
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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 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 the 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 the Fund through the Transfer Agent and only on a Business Day. EXCEPT UPON LIQUIDATION OF THE 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.
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With respect to the Fund, the Custodian, through the NSCC, makes available prior to the opening of business on the NYSE (currently 9:30 a.m. Eastern time) on each Business Day, the list of the names and share quantities of the 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 the Fund, redemption proceeds for a Creation Unit will consist of Fund Securities as announced by the Custodian prior to the opening of business 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, 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 the 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 the 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 two 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 two 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 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). The 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, as of the close of the Business Day on which the redemption request was submitted, it (or its client) will own (within the meaning of Rule 200 of Regulation SHO) or has arranged to borrow for delivery to the Trust on or prior to the Settlement Date of the redemption request, the requisite number of Shares of the Fund to be redeemed as a Creation Unit. In either case, the Authorized Participant is deemed to acknowledge that: (i) it (or its client) has full legal authority and legal right to tender for redemption the requisite number of Shares of the Fund and to receive the entire proceeds of the redemption; and (ii) if such Shares submitted for redemption have been loaned or pledged to another party or
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are the subject of a repurchase agreement, securities lending agreement or any other arrangement affecting legal or beneficial ownership of such Shares being tendered, there are no restrictions precluding the tender and delivery of such Shares (including borrowed shares, if any) for redemption, free and clear of liens, on the redemption Settlement Date. The Trust reserves the right to verify these representations at its discretion, but will typically require verification with respect to a redemption request from the 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 the 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 the 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/or applicable order form, certain series of the Trust may require orders to be placed 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. The cut-off time to receive the trade dates net asset value will not precede the calculation of the net asset value of the Funds shares on the prior Business Day. 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.
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. The 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 Dorsey Wright Fixed Income Allocation ETF |
$ | 75 | $ | 300 |
* |
From time to time, the 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 Fund 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 the 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 Prospectus entitled PURCHASE AND SALE INFORMATION and ADDITIONAL PURCHASE AND SALE INFORMATION.
Net asset value per Share for the 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 the 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 the 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 the 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. The 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, the 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. The 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 the 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 the 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 the 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 Funds benchmark Index. With respect to securities that are primarily listed on foreign exchanges, the value of the 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 the Fund, 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 the 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.
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Management of the Trust reserves the right to declare special dividends if, in its reasonable discretion, such action is necessary or advisable to preserve the Funds eligibility for treatment as a 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 Fund and its shareholders that supplements the discussion in the Prospectus. No attempt is made to present a comprehensive explanation of the federal, state, local or foreign tax treatment of the Fund or its 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 Prospectus entitled ADDITIONAL TAX INFORMATION.
TAXATION OF THE FUND. The Fund is treated as a separate corporation for federal income tax purposes. The Fund therefore is considered to be a separate entity in determining its treatment under the rules for RICs described herein and in the Prospectus. 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. The 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, the 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, the 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 the 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, the Fund may be required to dispose of certain assets. If these relief provisions were not available to the 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
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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 the 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 five years of qualifying as a RIC in a subsequent year. The Board reserves the right not to maintain the qualification of the Fund for treatment as a RIC if it determines such course of action to be beneficial to shareholders.
As discussed more fully below, the Fund intends to distribute substantially all of its net investment income and its capital gains for each taxable year.
If the 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. The 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 in the Fund 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 the 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.
The 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. The 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.
The 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, the Fund may carry a net capital loss from any taxable year forward indefinitely 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 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 Fund may not carry forward any losses other than net capital losses.
The Fund will not be able to offset gains distributed by any of the RICs in which it invests (the Underlying RICs) against losses incurred by another Underlying RIC because the Underlying RICs cannot distribute losses. The Funds redemptions and sales of shares in an Underlying RIC, including those resulting from changes in the allocation among Underlying RICs, could cause the Fund to recognize taxable gain or loss. A portion of any such gains may be short-term capital gains that would be distributable as ordinary income to shareholders of the Fund. Further, a portion of losses on redemptions of shares in the Underlying RICs may be deferred. Short-term capital gains earned by an Underlying RIC will be treated as ordinary dividends when distributed to the Fund and therefore may not be offset by any short-term capital losses incurred by the Fund. Thus, the Funds short-term capital losses may offset its long-term capital gains, which might otherwise be eligible for reduced U.S. federal income tax rates for noncorporate shareholders. As a result of these factors, the use of the fund-of-funds structure by the Fund could adversely affect the amount, timing and character of distributions to its shareholders.
TAXATION OF SHAREHOLDERSDISTRIBUTIONS. The 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). The 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.
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Subject to certain limitations, dividends reported by the Fund as qualified dividend income will be taxable to noncorporate shareholders at rates of up to 20%. Dividends may be reported by the 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 Fund and to the Funds investments in underlying dividend-paying stock. Dividends received by the Fund from the Underlying RICs may generally be treated as qualified dividend income to the extent the Underlying RICs report the dividends as qualified dividend income. If 95% or more of the 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, the Fund may report all distributions of such income as qualified dividend income.
Certain dividends received by the Fund (or attributable to dividends received by an Underlying RIC) from U.S. corporations (generally, dividends received by the Fund or the applicable Underlying RIC 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 50% 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. 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 the Funds net short-term capital gains will generally be taxable to shareholders as ordinary income. Distributions from the Funds net capital gain will be taxable to shareholders at long-term capital gains rates, regardless of how long shareholders have held their Shares in the Fund. Long-term capital gains are generally taxed to noncorporate shareholders at rates of up to 20%.
One or more Underlying RICs may 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. The Fund will be eligible to report exempt-interest dividends to the extent that it receives exempt-interest dividends from Underlying RICs. 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 an Underlying RIC 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 Fund 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.
If an Underlying RIC purchases a municipal security at a market discount, any gain realized by the Underlying RIC 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 the Fund pursuant to a securities lending or similar arrangement, you may lose the ability to treat dividends paid by the Fund while the Shares are held by the borrower as tax-exempt income. A portion of interest on indebtedness incurred by a shareholder to purchase or carry Shares of the Fund will not be deductible for U.S. federal income tax purposes. If a shareholder
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receives exempt-interest dividends with respect to any Share of the Fund 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 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 the Fund that is attributable to income derived from certain revenue or private activity bonds held by an Underlying RIC 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 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 an Underlying RIC receives income from private activity bonds, a portion of the exempt-interest dividends paid by the Fund, although otherwise exempt from federal income tax, will be taxable to those shareholders subject to the alternative minimum tax regime. The Fund 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.
Although dividends generally will be treated as distributed when paid, any dividend declared by the 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 the 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 the 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, interests, dividends (other than exempt-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 SHAREHOLDERS SALE 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 noncorporate 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 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 distributions to the shareholder of long-term capital gain (including any amounts credited to the shareholder as undistributed capital gains).
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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 an Underlying RIC 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 the Underlying RIC meets certain requirements, which include a requirement that more than 50% of the value of the Underlying RICs total assets at the close of its respective taxable year consists of certain foreign stocks or securities (generally including foreign government securities), then the Underlying RIC should be eligible to file an election with the Internal Revenue Service (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. The Fund may make the same election and pass through to its shareholders their pro rata shares of qualified foreign taxes paid by the Underlying RIC. Pursuant to this election, the Fund would treat those 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 the 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 the Fund does not make this election, the Fund may be entitled to claim a deduction for certain foreign taxes incurred by the Underlying RIC. Under certain circumstances, if the Fund receives a refund of foreign taxes paid in respect of a prior year, the value of Fund Shares could be reduced or any foreign tax credits or deductions passed through to shareholders in respect of the Funds foreign taxes for the current year could be reduced.
Certain investments of an Underlying RIC 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 Underlying RIC ( i.e. , may affect whether gains or losses are ordinary or capital), accelerate recognition of income to the Underlying RIC and defer losses. These rules could therefore affect the character, amount and timing of distributions to shareholders. These provisions also may require the Underlying RIC 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 Underlying RIC 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 Underlying RIC intends to monitor its transactions, intends to make appropriate tax elections, and intends to make appropriate entries in its books and records in order to mitigate the effect of these rules and preserve the Funds qualification for treatment as a RIC.
Certain investments made by an Underlying RIC may be treated as equity in passive foreign investment companies or PFICs for federal income tax purposes. In general, a passive foreign investment company is a foreign corporation (i) that receives at least 75% of its annual gross income from passive sources (such as interest, dividends, certain rents and royalties, or capital gains) or (ii) where at least 50% of its assets (computed based on average fair market value) either produce or are held for the production of passive income. If an Underlying RIC acquires any equity interest (generally including, under Treasury regulations that may be promulgated in the future, not only stock but also an option to acquire stock such as is inherent in a convertible bond) in a PFIC, the Underlying RIC 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 Underlying RIC 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 Underlying RIC 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 Underlying RIC level, an Underlying RIC 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 Underlying RIC. Gains from the sale of stock of PFICs may also be treated as ordinary income. In order for an Underlying RIC 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 Underlying RIC on an annual basis, which it might not agree to do. Under proposed Treasury Regulations, certain income derived by an Underlying RIC for a taxable year from a PFIC with respect to which the Underlying RIC has made a qualified electing fund election would generally constitute qualifying income to the Underlying RIC only to the extent the PFIC makes distributions in respect of that income to the Underlying RIC for that taxable year. The Underlying RICs 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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If a sufficient portion of the interests in a foreign issuer are held or deemed held by an Underlying RIC, independently or together with certain other U.S. persons, that issuer may be treated as a controlled foreign corporation (a CFC) with respect to the Underlying RIC, in which case the Underlying RIC will be required to take into account each year, as ordinary income, its share of certain portions of that issuers income, whether or not such amounts are distributed. An Underlying RIC may have to dispose of its portfolio securities (potentially resulting in the recognition of taxable gain or loss, and potentially under disadvantageous circumstances) to generate cash, or may have to borrow the cash, to meet its distribution requirements and avoid Underlying RIC-level taxes. Under proposed Treasury Regulations, certain income derived by an Underlying RIC from a CFC for a taxable year would generally constitute qualifying income to the Underlying RIC only to the extent the CFC makes distributions in respect of that income to the Underlying RIC for that taxable year. In addition, some Underlying RIC gains on the disposition of interests in such an issuer may be treated as ordinary income. An Underlying RIC may limit and/or manage its holdings in issuers that could be treated as CFCs in order to limit its tax liability or maximize its after-tax return from these investments.
Each Underlying RIC 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. Each Underlying RIC 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 Underlying RIC. 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.
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, the 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 the Fund where, for example, (i) an Underlying RIC 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. 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.
Certain tax-exempt educational institutions will be subject to a 1.4% tax on net investment income. For these purposes, certain dividends and capital gain distributions, and certain gains from the disposition of Shares (among other categories of income), are generally taken into account in computing a shareholders net investment income.
FOREIGN SHAREHOLDERS. Dividends, other than capital gains dividends, exempt-interest dividends, short-term capital gain dividends and interest-related dividends (described below), paid by the 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 the 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 the 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 the 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 the 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 the 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.
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 and, after December 31, 2018, to redemptions and certain capital gain dividends payable to such entities. 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.
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BACKUP WITHHOLDING. The 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 24%. 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).
The 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. The Fund also has the right to require information necessary to determine beneficial Share ownership for purposes of the 80% determination. If the 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, 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 the 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 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
The Fund issues Shares of beneficial interest, par value $.01 per Share. The Board may designate additional funds.
56
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 the Fund, and in the net distributable assets of the 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 the 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 Advisors Funds Distributors, LLC at One Iron Street, Boston, Massachusetts 02210.
COUNSEL AND INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Morgan, Lewis & Bockius LLP, 1111 Pennsylvania Avenue NW, Washington, DC 20004, serves as counsel to the Trust. Ernst & Young LLP, located at 200 Clarendon Street, Boston MA 02116, serves as the independent registered public accounting firm of 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 two Business Days (i.e., days on which the NYSE is open) in the relevant foreign market of the Fund. The ability of the Trust to effect in-kind redemptions within two 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 two 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.
57
Listed below are the dates in calendar year 2018 (the only year for which holidays are known at the time of this SAI filing) 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:
58
Botswana |
Brazil |
Bulgaria |
Burkina Faso |
Canada |
||||
January 1-2 | January 1, 25 | January 1 | January 1 | January 1-2 | ||||
March 30 | February 12-14 | March 5 | April 2 | February 12, 19 | ||||
April 2 | March 30 | April 6, 9 | May 1, 10, 21 | March 30 | ||||
May 1, 10 | May 1, 31 | May 1, 7, 24 | June 11, 15 | May 21 | ||||
July 2, 16-17 | July 9 | September 6, 24 | August 7, 15, 22 | June 25 | ||||
October 1-2 | September 7 | December 24-26 | November 1, 15, 21 | July 2 | ||||
December 25-26 | October 12 | December 25 | August 6 | |||||
November 2, 15, 20 | September 3 | |||||||
December 24-25, 31 | October 8 | |||||||
November 12 | ||||||||
December 25-26 | ||||||||
Chile |
China |
Colombia |
Costa Rica |
Croatia |
||||
January 1 | January 1 | January 1-8 | January 1 | January 1 | ||||
March 30 | February 15-16, 19-21 | March 19, 29-30 | March 29-30 | March 30 | ||||
May 1, 21 | April 5-6, 30 | May 1, 14 | April 11 | April 2 | ||||
July 2, 16 | May 1 | June 4, 11 | May 1 | May 1, 31 | ||||
August 15 | June 18 | July 2, 20 | July 25 | June 22, 25 | ||||
September 17-19 | September 24 | August 7, 20 | August 2, 15 | August 15 | ||||
October 15 | October 1-5 | October 15 | October 15 | October 8 | ||||
November 1-2 | November 5, 12 | December 25 | November 1 | |||||
December 25, 31 | December 25 | December 24-26, 31 | ||||||
Cyprus |
The Czech Republic |
Denmark |
Egypt* |
Estonia |
||||
January 1 | January 1 | January 1 | January 1, 7, 25 | January 1 | ||||
February 19 | March 30 | March 29-30 | April 8-9, 25 | March 30 | ||||
March 30 | April 2 | April 2, 27 | May 1 | April 2 | ||||
April 2, 6, 9-10 | May 1, 8 | May 10-11, 21 | June 17 | May 1, 10 | ||||
May 1, 28 | July 5-6 | June 5 | July 1, 23 | August 20 | ||||
August 15 | September 28 | December 24-26, 31 | August 20-22 | December 24-26, 31 | ||||
October 1 | December 24-26, 31 | September 11 | ||||||
December 24-26 | November 20 | |||||||
* Market closed every Friday |
||||||||
Finland |
France |
Georgia |
Germany |
Ghana |
||||
January 1 | January 1 | January 1-2, 19 | January 1 | January 1 | ||||
March 30 | March 30 | March 8 | March 30 | March 6, 30 | ||||
April 2 | April 2 | April 6, 9 | April 2 | April 2 | ||||
May 1-10 | May 1 | May 9 | May 1, 21 | May 1, 25 | ||||
June 22 | December 24-26, 31 | August 28 | October 3 | June 15 | ||||
December 6, 24-26, 31 | November 23 | December 24-26, 31 | July 2 | |||||
August 22 | ||||||||
September 21 | ||||||||
December 7, 25-26 | ||||||||
Greece |
Guinea-Bissau |
Hong Kong |
Hungary |
Iceland |
||||
January 1 | January 1 | January 1, 27 | January 1 | January 1 | ||||
February 19 | April 2 | February 15-16, 19 | March 15-16, 30 | March 29-30 | ||||
March 30 | May 1, 10, 21 | March 30 | April 2, 30 | April 2, 19 | ||||
April 2, 6, 9 | June 11, 15 | April 2, 5 | May 1, 21 | May 1, 10, 21 | ||||
May 1, 28 | August 7, 15, 22 | May 1, 22 | August 20 | August 6 | ||||
August 15 | November 1, 15, 21 | June 18 | October 22-23 | December 24-26, 31 | ||||
December 24-26 | December 25 | July 2 | November 1-2 | |||||
September 25 | December 24-26, 31 | |||||||
October 1, 17 | ||||||||
December 24-26, 31 |
59
India |
Indonesia |
Ireland |
Israel* |
Italy |
||||
January 26 | January 1 | January 1 | March 1 | January 1 | ||||
February 13, 19 | February 16 | March 19, 30 | April 1-5 | March 30 | ||||
March 2, 29-30 | March 30 | April 2 | May 20 | April 2 | ||||
April 30 | May 1, 10, 29 | May 7, 28 | July 22 | May 1 | ||||
May 1 | June 1, 13-19 | June 4 | September 9-11, 18-19, | August 15 | ||||
August 15, 17, 22 | August 17, 22 | August 6, 27 | 23-27, 30 | December 24-26, 31 | ||||
September 13, 20 | September 11 | October 29 | October 1 | |||||
October 2, 18 | November 20 | December 24-26, 31 | ||||||
November 7-8, 21, 23 | December 24-25, 31 | |||||||
December 25 | ||||||||
* Market closed every Friday |
||||||||
Ivory Coast |
Jamaica |
Japan |
Jordan* |
Kazakhstan |
||||
January 1 | January 1 | January 1-3, 8 | January 1 | January 1-2 | ||||
April 2 | February 14 | February 12 | May 1, 25 | March 8-9, 21-23 | ||||
May 1, 10, 21 | March 30 | March 21 | June 17 | April 30 | ||||
June 11, 15 | April 2 | April 30 | August 21-23 | May 1, 7-9 | ||||
August 7, 15, 22 | May 23 | May 3-4 | September 12 | July 6 | ||||
November 1, 15, 21 | August 1, 6 | July 16 | November 21 | August 21, 30-31 | ||||
December 25 | October 15 | September 17, 24 | December 25 | December 3, 17-18, 31 | ||||
December 25-26 | October 8 | |||||||
November 23 December 24, 31 |
* Market closed every Friday |
|||||||
Kenya |
Kuwait* |
Latvia |
Lithuania |
Luxembourg |
||||
January 1 | January 1 | January 1 | January 1 | January 1 | ||||
March 30 | February 25-26 | March 30 | February 16 | March 30 | ||||
April 2 | April 15 | April 2, 30 | March 30 | April 2 | ||||
May 1 | June 17 | May 1, 4, 10 | April 2 | May 1 | ||||
June 1, 15 | August 20-23 | November 19 | May 1, 10 | December 24-26, 31 | ||||
October 10 | September 11 | December 25-26, 31 | July 6 | |||||
December 12, 25-26 | November 22 | August 15 | ||||||
November 1 | ||||||||
December 24-26 | ||||||||
Malawi |
Malaysia |
Mali |
Mauritius |
Mexico |
||||
January 1, 15 | January 1, 31 | January 1 | January 1-2, 31 | January 1 | ||||
March 5, 30 | February 1, 15-16 | April 2 | February 1, 13, 16 | February 5 | ||||
April 2 | May 1, 29 | May 1, 10, 21 | March 12 | March 19, 29-30 | ||||
May 1, 14 | June 14-15 | June 11, 15 | May 1 | April 2, 30 | ||||
June 15 | August 22, 31 | August 7, 15, 22 | August 15 | May 1 | ||||
July 6 | September 10-11, 17 | November 1, 15, 21 | September 14 | November 2, 19 | ||||
October 15 | November 6, 20 | December 25 | November 2, 7 | December 12, 25 | ||||
December 25-26 | December 25 | December 25 | ||||||
Morocco |
Namibia |
The Netherlands |
New Zealand |
Niger |
||||
January 1, 11 | January 1 | January 1 | January 1-2 | January 1 | ||||
May 1 | March 21, 30 | March 30 | February 6 | April 2 | ||||
June 14, 30 | April 2, 27 | April 2 | March 30 | May 1, 10, 21 | ||||
August 14, 20-22 | May 1, 4, 25 | May 1 | April 2, 25 | June 11, 15 | ||||
September 11 | August 9, 27 | December 24-26, 31 | June 4 | August 7, 15, 22 | ||||
November 6, 20 | September 24 | October 22 | November 15, 21 | |||||
December 10, 17, 25-26 | December 25-26 | December 25 |
60
61
Sweden |
Switzerland |
Taiwan |
Tanzania |
Thailand |
||||
January 1, 5 | January 1-2 | January 1 | January 1, 12 | January 1-2 | ||||
March 29-30 | March 30 | February 13-16, 19-20, 28 | March 30 | March 1 | ||||
April 2 | April 2 | April 4-6 | April 2, 26 | April 6, 13, 16 | ||||
May 1, 9-10 | May 1, 10, 21 | May 1 | May 1 | May 1, 29 | ||||
June 6, 22 | August 1 | June 18 | June 15 | July 27, 30 | ||||
November 2 | December 25-26 | September 24 | August 8, 22 | August 13 | ||||
December 24-26, 31 | October 10 | November 21 | October 15, 23 | |||||
December 31 | December 20, 25-26 | December 5, 10, 31 | ||||||
Togo |
Tunisia |
Turkey |
Uganda |
Ukraine |
||||
January 1 | January 1 | January 1 | January 1, 26 | January 1, 8 | ||||
April 2 | March 20 | April 23 | February 16 | March 8 | ||||
May 1, 10, 21 | April 9 | May 1 | March 8, 30 | April 9 | ||||
June 11, 15 | May 1 | June 14-15 | April 2 | May 1-2, 9, 28 | ||||
August 7, 15, 22 | June 15 | August 20-24, 30 | May 1 | June 28 | ||||
November 1, 15, 21 | July 25 | October 29 | June 15 | August 24 | ||||
December 25 | August 13, 21 | August 21 | October 15 | |||||
September 12 | October 9 | December 25 | ||||||
October 15 | November 30 | |||||||
November 20 | December 25-26 | |||||||
The United Arab Emirates* |
The United Kingdom |
The United States Bond Market |
Uruguay |
Venezuela |
||||
January 1 | January 1 | January 1, 15 | January 1 | January 1 | ||||
June 14 | March 30 | February 19 | February 12-13 | February 12-13 | ||||
August 20-22 | April 2 | March 29*, 30 | March 29-30 | March 19, 29-30 | ||||
September 11 | May 7, 28 | May 25*, 28 | April 23 | April 19 | ||||
November 20 | August 27 | July 3*- 4 | May 1, 21 | May 1, 14 | ||||
December 2-3 | December 24-26, 31 | September 4 | June 19 | June 4 | ||||
October 8 | July 18 | July 2, 5, 24 | ||||||
November 22, 23*, 24* | October 15 | August 20 | ||||||
December 25, 31* | November 2 | September 10 | ||||||
December 25 | October 12 | |||||||
* Market closed every Friday |
* The U.S. bond market has recommended early close. |
November 5 December 24-25, 31 |
||||||
Vietnam |
Zambia |
Zimbabwe |
||||||
January 1 | January 1 | January 1 | ||||||
February 14-16, 19-20 | March 8, 12, 30 | February 21 | ||||||
April 25, 30 | April 2 | March 30 | ||||||
May 1 | May 1, 25 | April 2, 18 | ||||||
September 3 | July 2-3 | May 1, 25 | ||||||
August 6 | August 13-14 | |||||||
October 18, 24 | December 25-26 | |||||||
December 25 |
62
Redemptions. The longest redemption cycle for the Fund is a function of the longest redemption cycle among the countries and regions whose securities comprise the Fund. In the calendar year 2018 (the only year for which holidays are known at the time of this SAI filing), the dates of regular holidays affecting the following securities markets present the worst-case redemption cycles* for the Fund as follows:
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Argentina |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
03/28/18 | 04/05/18 | 8 | ||||
Australia |
03/27/18 | 04/04/18 | 8 | |||
03/28/18 | 04/05/18 | 8 | ||||
03/29/18 | 04/06/18 | 8 | ||||
12/19/18 | 12/27/18 | 8 | ||||
12/20/18 | 12/28/18 | 8 | ||||
12/21/18 | 01/02/19 | 12 | ||||
Bangladesh |
08/16/18 | 08/26/18 | 10 | |||
08/19/18 | 08/27/18 | 8 | ||||
08/20/18 | 08/28/18 | 8 | ||||
Bosnia and Herzegovina |
04/25/18 | 05/03/18 | 8 | |||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
Brazil |
02/07/18 | 02/15/18 | 8 | |||
02/08/18 | 02/16/18 | 8 | ||||
02/09/18 | 02/19/18 | 10 | ||||
China |
02/12/18 | 02/22/18 | 10 | |||
02/13/18 | 02/23/18 | 10 | ||||
02/14/18 | 02/26/18 | 12 | ||||
09/26/18 | 10/08/18 | 12 | ||||
09/27/18 | 10/09/18 | 12 | ||||
09/28/18 | 10/10/18 | 12 | ||||
Indonesia |
06/08/18 | 06/20/18 | 12 | |||
06/11/18 | 06/21/18 | 10 | ||||
06/12/18 | 06/22/18 | 10 | ||||
Israel |
03/28/18 | 04/08/18 | 11 | |||
03/29/18 | 04/09/18 | 11 | ||||
09/17/18 | 10/02/18 | 15 | ||||
09/20/18 | 10/03/18 | 13 | ||||
Japan |
04/27/18 | 05/07/18 | 10 | |||
Kuwait |
08/16/18 | 08/26/18 | 10 | |||
08/19/18 | 08/27/18 | 8 |
63
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Malawi |
01/08/18 | 01/16/18 | 8 | |||
01/09/18 | 01/17/18 | 8 | ||||
01/10/18 | 01/18/18 | 8 | ||||
01/11/18 | 01/19/18 | 8 | ||||
01/12/18 | 01/22/18 | 10 | ||||
02/26/18 | 03/06/18 | 8 | ||||
02/27/18 | 03/07/17 | 8 | ||||
02/28/18 | 03/08/18 | 8 | ||||
03/01/18 | 03/09/18 | 8 | ||||
03/02/18 | 03/12/18 | 10 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/07/18 | 05/15/18 | 8 | ||||
05/08/18 | 05/16/18 | 8 | ||||
05/09/18 | 05/17/18 | 8 | ||||
05/10/18 | 05/18/18 | 8 | ||||
05/11/18 | 05/21/18 | 10 | ||||
06/08/18 | 06/18/18 | 10 | ||||
06/11/18 | 06/19/18 | 8 | ||||
06/12/18 | 06/20/18 | 8 | ||||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/22/18 | 8 | ||||
06/29/18 | 07/09/18 | 10 | ||||
07/02/18 | 07/10/18 | 8 | ||||
07/03/18 | 07/11/18 | 8 | ||||
07/04/18 | 07/12/18 | 8 | ||||
07/05/18 | 07/13/18 | 8 | ||||
10/08/18 | 10/16/18 | 8 | ||||
10/09/18 | 10/17/18 | 8 | ||||
10/10/18 | 10/18/18 | 8 | ||||
10/11/18 | 10/19/18 | 8 | ||||
10/12/18 | 10/22/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 |
64
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Mexico |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
03/28/18 | 04/05/18 | 8 | ||||
Morocco |
08/15/18 | 08/23/18 | 8 | |||
08/16/18 | 08/24/18 | 8 | ||||
08/17/18 | 08/27/18 | 10 | ||||
Namibia |
03/14/18 | 03/22/18 | 8 | |||
03/15/18 | 03/23/18 | 8 | ||||
03/16/18 | 03/26/18 | 10 | ||||
03/19/18 | 03/27/18 | 8 | ||||
03/20/18 | 03/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/25/18 | 05/07/18 | 12 | ||||
04/26/18 | 05/08/18 | 12 | ||||
05/02/18 | 05/10/18 | 8 | ||||
05/03/18 | 05/11/18 | 8 | ||||
05/18/18 | 05/28/18 | 10 | ||||
05/21/18 | 05/29/18 | 8 | ||||
05/22/18 | 05/30/18 | 8 | ||||
05/23/18 | 05/31/18 | 8 | ||||
05/24/18 | 06/01/18 | 8 | ||||
08/02/18 | 08/10/18 | 8 | ||||
08/03/18 | 08/13/18 | 10 | ||||
08/06/18 | 08/14/18 | 8 | ||||
08/07/18 | 08/15/18 | 8 | ||||
08/08/18 | 08/16/18 | 8 | ||||
08/20/18 | 08/28/18 | 8 | ||||
08/21/18 | 08/29/18 | 8 | ||||
08/22/18 | 08/30/18 | 8 | ||||
08/23/18 | 08/31/18 | 8 | ||||
08/24/18 | 09/03/18 | 10 | ||||
09/17/18 | 09/25/18 | 8 | ||||
09/18/18 | 09/26/18 | 8 | ||||
09/19/18 | 09/27/18 | 8 | ||||
09/20/18 | 09/28/18 | 8 |
65
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
09/21/18 | 10/01/18 | 10 | ||||
12/03/18 | 12/11/18 | 8 | ||||
12/04/18 | 12/12/18 | 8 | ||||
12/05/18 | 12/13/18 | 8 | ||||
12/06/18 | 12/14/18 | 8 | ||||
12/07/18 | 12/18/18 | 11 | ||||
12/11/18 | 12/19/18 | 8 | ||||
12/12/18 | 12/20/18 | 8 | ||||
12/13/18 | 12/21/18 | 8 | ||||
12/14/18 | 12/24/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Norway |
03/26/18 | 04/03/18 | 8 | |||
03/27/18 | 04/04/18 | 8 | ||||
Oman |
11/13/18 | 11/21/18 | 8 | |||
11/14/18 | 11/22/18 | 8 | ||||
11/15/18 | 11/25/18 | 10 | ||||
Qatar |
06/12/18 | 06/20/18 | 8 | |||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/24/18 | 10 | ||||
08/15/18 | 08/23/18 | 8 | ||||
08/16/18 | 08/26/18 | 10 | ||||
08/19/18 | 08/27/18 | 8 | ||||
Saudi Arabia |
06/13/18 | 06/24/18 | 11 | |||
06/14/18 | 06/25/18 | 11 | ||||
08/15/18 | 08/26/18 | 11 | ||||
08/16/18 | 08/27/18 | 11 |
66
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Serbia |
12/26/18 | 01/03/19 | 8 | |||
12/27/18 | 01/04/19 | 8 | ||||
12/28/18 | 01/07/19 | 10 | ||||
South Africa |
03/14/18 | 03/22/18 | 8 | |||
03/15/18 | 03/23/18 | 8 | ||||
03/16/18 | 03/26/18 | 10 | ||||
03/19/18 | 03/27/18 | 8 | ||||
03/20/18 | 03/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/25/18 | 05/04/18 | 9 | ||||
04/26/18 | 05/07/18 | 11 | ||||
04/30/18 | 05/08/18 | 8 | ||||
08/02/18 | 08/10/18 | 8 | ||||
08/03/18 | 08/13/18 | 10 | ||||
08/06/18 | 08/14/18 | 8 | ||||
08/07/18 | 08/15/18 | 8 | ||||
08/08/18 | 08/16/18 | 8 | ||||
09/17/18 | 09/25/18 | 8 | ||||
09/18/18 | 09/26/18 | 8 | ||||
09/19/18 | 09/27/18 | 8 | ||||
09/20/18 | 09/28/18 | 8 | ||||
09/21/18 | 10/01/18 | 10 | ||||
12/10/18 | 12/18/18 | 8 | ||||
12/11/18 | 12/19/18 | 8 | ||||
12/12/18 | 12/20/18 | 8 | ||||
12/13/18 | 12/21/18 | 8 | ||||
12/14/18 | 12/24/18 | 10 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Swaziland |
01/02/18 | 01/10/18 | 8 | |||
01/03/18 | 01/11/18 | 8 | ||||
01/04/18 | 1/12/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 |
67
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
03/29/18 | 04/09/18 | 11 | ||||
04/12/18 | 04/20/18 | 8 | ||||
04/13/18 | 04/23/18 | 10 | ||||
04/16/18 | 04/24/18 | 8 | ||||
04/17/18 | 04/26/18 | 9 | ||||
04/18/18 | 04/27/18 | 9 | ||||
04/20/18 | 04/30/18 | 10 | ||||
04/23/18 | 05/02/18 | 9 | ||||
04/24/18 | 05/03/18 | 9 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/03/18 | 05/11/18 | 8 | ||||
05/04/18 | 05/14/18 | 10 | ||||
05/07/18 | 05/15/18 | 8 | ||||
05/08/18 | 05/16/18 | 8 | ||||
05/09/18 | 05/17/18 | 8 | ||||
07/16/18 | 07/24/18 | 8 | ||||
07/17/18 | 07/25/18 | 8 | ||||
07/18/18 | 07/26/18 | 8 | ||||
07/19/18 | 07/27/18 | 8 | ||||
07/20/18 | 07/30/18 | 10 | ||||
08/20/18 | 08/28/18 | 8 | ||||
08/21/18 | 08/29/18 | 8 | ||||
08/22/18 | 08/30/18 | 8 | ||||
08/23/18 | 08/31/18 | 8 | ||||
08/24/18 | 09/03/18 | 10 | ||||
08/30/18 | 09/07/18 | 8 | ||||
08/31/18 | 09/10/18 | 10 | ||||
09/03/18 | 09/11/18 | 8 | ||||
09/04/18 | 09/12/18 | 8 | ||||
09/05/18 | 09/13/18 | 8 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 | ||||
Taiwan |
02/09/18 | 02/21/18 | 12 | |||
02/12/18 | 02/22/18 | 10 | ||||
Tanzania |
12/19/18 | 12/27/18 | 8 | |||
Thailand |
12/26/18 | 01/03/19 | 8 | |||
12/27/18 | 01/04/19 | 8 | ||||
12/28/18 | 01/07/19 | 10 | ||||
Turkey |
08/16/18 | 08/27/18 | 11 | |||
08/17/18 | 08/28/18 | 11 |
68
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Uganda |
01/19/18 | 01/29/18 | 10 | |||
01/22/18 | 01/30/18 | 8 | ||||
01/23/18 | 01/31/18 | 8 | ||||
01/24/18 | 02/01/18 | 8 | ||||
01/25/18 | 02/02/18 | 8 | ||||
02/09/18 | 02/19/18 | 10 | ||||
02/12/18 | 02/20/18 | 8 | ||||
02/13/18 | 02/21/18 | 8 | ||||
02/14/18 | 02/22/18 | 8 | ||||
02/15/18 | 02/23/18 | 8 | ||||
03/01/18 | 03/09/18 | 8 | ||||
03/02/18 | 03/12/18 | 10 | ||||
03/05/18 | 03/13/18 | 8 | ||||
03/06/18 | 03/14/18 | 8 | ||||
03/07/18 | 03/15/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
06/08/18 | 06/18/18 | 10 | ||||
06/11/18 | 06/19/18 | 8 | ||||
06/12/18 | 06/20/18 | 8 | ||||
06/13/18 | 06/21/18 | 8 | ||||
06/14/18 | 06/22/18 | 8 | ||||
08/14/18 | 08/22/18 | 8 | ||||
08/15/18 | 08/23/18 | 8 | ||||
08/16/18 | 08/24/18 | 8 | ||||
08/17/18 | 08/27/18 | 10 | ||||
08/20/18 | 08/28/18 | 8 | ||||
10/02/18 | 10/10/18 | 8 | ||||
10/03/18 | 10/11/18 | 8 | ||||
10/04/18 | 10/12/18 | 8 | ||||
10/05/18 | 10/15/18 | 10 | ||||
10/08/18 | 10/16/18 | 8 | ||||
11/23/18 | 12/03/18 | 10 | ||||
11/26/18 | 12/04/18 | 8 | ||||
11/27/18 | 12/05/18 | 8 | ||||
11/28/18 | 12/06/18 | 8 | ||||
11/29/18 | 12/07/18 | 8 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 10 |
69
2018 | ||||||
Country |
Trade
Date |
Settlement
Date |
Number of
Days to Settle |
|||
Vietnam |
02/09/18 | 02/21/18 | 12 | |||
02/12/18 | 02/22/18 | 10 | ||||
02/13/18 | 02/23/18 | 10 | ||||
Zimbabwe |
02/14/18 | 02/22/18 | 8 | |||
02/15/18 | 02/23/18 | 8 | ||||
02/16/18 | 02/26/18 | 10 | ||||
02/19/18 | 02/27/18 | 8 | ||||
02/20/18 | 02/28/18 | 8 | ||||
03/23/18 | 04/03/18 | 11 | ||||
03/26/18 | 04/04/18 | 9 | ||||
03/27/18 | 04/05/18 | 9 | ||||
03/28/18 | 04/06/18 | 9 | ||||
03/29/18 | 04/09/18 | 11 | ||||
04/11/18 | 04/19/18 | 8 | ||||
04/12/18 | 04/20/18 | 8 | ||||
04/13/18 | 04/23/18 | 10 | ||||
04/16/18 | 04/24/18 | 8 | ||||
04/17/18 | 04/25/18 | 8 | ||||
04/24/18 | 05/02/18 | 8 | ||||
04/25/18 | 05/03/18 | 8 | ||||
04/26/18 | 05/04/18 | 8 | ||||
04/27/18 | 05/07/18 | 10 | ||||
04/30/18 | 05/08/18 | 8 | ||||
05/18/18 | 05/28/18 | 10 | ||||
05/21/18 | 05/29/18 | 8 | ||||
05/22/18 | 05/30/18 | 8 | ||||
05/23/18 | 05/31/18 | 8 | ||||
05/24/18 | 06/01/18 | 8 | ||||
08/06/18 | 08/15/18 | 9 | ||||
08/07/18 | 08/16/18 | 9 | ||||
08/08/18 | 08/17/18 | 9 | ||||
08/09/18 | 08/20/18 | 11 | ||||
08/10/18 | 08/21/18 | 11 | ||||
12/18/18 | 12/27/18 | 9 | ||||
12/19/18 | 12/28/18 | 9 | ||||
12/20/18 | 12/31/18 | 11 | ||||
12/21/18 | 01/02/19 | 12 | ||||
12/24/18 | 01/03/19 | 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. |
70
The financial statements and financial highlights of the Fund for the fiscal year ended June 30, 2018, 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.
71
March 2018
Global Proxy Voting and Engagement Principles
State Street Global Advisors (SSGA), one of the industrys largest institutional asset managers, is the investment management arm of State Street Corporation, a leading provider of financial services to institutional investors. As an investment manager, SSGA has discretionary proxy voting authority over most of its client accounts, and SSGA 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 this document i .
A-1
Global Proxy Voting and Engagement Principles
State Street Global Advisors (SSGA) maintains Proxy Voting and Engagement Guidelines for select markets, including: Australia, the EU, Japan, New Zealand , North America (Canada and the US), the UK and emerging markets. International markets that do not have specific guidelines are reviewed and voted consistent with our Global Proxy Voting and Engagement Principles; however, SSGA also endeavors to show sensitivity to local market practices when voting in these various markets.
SSGAs Approach to Proxy Voting and Issuer Engagement
At SSGA, 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 guidelines, analyzing corporate governance issues on a case-by-case basis at the company level, and exercising our voting rightsall to maximize shareholder value.
SSGAs 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 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, depending on the product or strategy, the fiduciary responsibilities of share ownership and voting for which SSGA 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 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 also evaluates the various factors that play into the corporate governance framework of a country, including but not limited to, 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. SSGA understands that regulatory requirements and investor expectations relating to governance practices and engagement activities differ from country-to-country. As a result, SSGA engages with issuers, regulators, or both, depending on the market. SSGA 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.
To help mitigate company specific risk, the SSGA Asset Stewardship 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 conducts issuer specific engagements with companies covering various corporate governance and sustainability related topics.
The SSGA Asset Stewardship 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 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 believes issuer engagement can take many forms and be triggered under numerous circumstances. The following methods represent how SSGA defines engagement methods:
Active
SSGA 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 will actively seek direct dialogue with the board and management of companies we have identified through our
State Street Global Advisors | A-2 |
Global Proxy Voting and Engagement Principles
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.
Reactive
Reactive engagement is initiated by the issuers. SSGA 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 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 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 as requiring active engagement, such as shareholder conference calls.
Proxy Voting Procedure
Oversight
The SSGA Asset Stewardship 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 (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 (IC). The IC reviews and approves amendments to the Guidelines. The PRC reports to the IC, and may refer certain significant proxy items to that committee.
Proxy Voting Process
In order to facilitate SSGAs proxy voting process, SSGA retains Institutional Shareholder Services Inc. (ISS), a firm with expertise in proxy voting and corporate governance. SSGA utilizes ISSs services in three ways: (1) as SSGAs proxy voting agent (providing SSGA 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 Asset Stewardship 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 Asset Stewardship 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 Asset Stewardship Team may refer significant issues to the PRC for a determination of the proxy vote. In addition, in determining whether to refer a proxy vote to the PRC, the Asset Stewardship Team will consider whether a material conflict of interest exists between the interests of our client and those of SSGA or its affiliates (as explained in greater detail in our Conflict Mitigation Guidelines).
SSGA votes in all markets where it is feasible; however, SSGA 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 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 Conflict Mitigation Guidelines.
State Street Global Advisors | A-3 |
Global Proxy Voting and Engagement Principles
Proxy Voting and Engagement Principles
Directors and Boards
The election of directors is one of the most important fiduciary duties SSGA performs as a shareholder. SSGA believes that well-governed companies can protect and pursue shareholder interests better and withstand the challenges of an uncertain economic environment. As such, SSGA 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 SSGAs 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 SSGAs engagement process, SSGA routinely discusses the importance of these responsibilities with the boards of issuers.
SSGA believes the quality of a board is a measure of director independence, director succession planning, board diversity, evaluations and refreshment and company governance practices. In voting to elect nominees, SSGA considers many factors. SSGA 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 also believes the right mix of skills, independence, diversity 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 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 believes audit committees should have independent directors as members, and SSGA 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 believes the company should have a well explained business rationale that is consistent with corporate strategy and not overly dilutive to its shareholders.
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, liquidations, and other major changes to the corporation.
Proposals that are in the best interests of shareholders, demonstrated by enhancing share value or improving the effectiveness of the companys operations, will be supported. In evaluating mergers and acquisitions, SSGA considers the adequacy of the consideration and the impact of the corporate governance provisions to shareholders. In all cases, SSGA 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 does not support proposals that reduce shareholders rights, entrench management or reduce the likelihood of shareholders right to vote on reasonable offers.
Compensation
SSGA 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 SSGAs analysis of executive compensation; SSGA 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 considers factors such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer
State Street Global Advisors | A-4 |
Global Proxy Voting and Engagement Principles
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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA may also consider executive compensation practices when re-electing members of the remuneration committee.
SSGA 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.
Environmental and Social Issues
As a fiduciary, SSGA 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 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. SSGAs 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 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 does not seek involvement in the day-to-day operations of an organization, SSGA recognizes the need for conscientious oversight and input into management decisions that may affect a companys value. SSGA 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.
Fixed Income Stewardship
The two elements of SSGAs fixed income stewardship program are:
Proxy Voting:
While matters that come up for a vote at bondholder meetings vary by jurisdiction, examples of common proxy voting resolutions at bondholder meetings include:
| Approving amendments to debt covenants and/or terms of issuance; |
| Authorizing procedural matters such as filing of required documents/other formalities; |
| Approving debt restructuring plans; |
| Abstaining from challenging the bankruptcy trustees; |
| Authorizing repurchase of issued debt security; |
| Approving the placement of unissued debt securities under the control of directors; and, |
| Approve spin-off/absorption proposals. |
Given the nature of the items that come up for vote at bondholder meetings, SSGA takes a case-by-case approach to voting bondholder resolutions. Where necessary, SSGA will engage with issuers on voting matters prior to arriving at voting decisions. All voting decisions will be made in the best interest of our clients.
Issuer Engagement:
SSGA recognizes that debt holders have limited leverage with companies on a day-to-day basis. However, we believe that given the size of our holdings in corporate debt, SSGA can meaningfully influence ESG practices of companies through issuer engagement. Our guidelines for engagement with fixed income issuers broadly follow the engagement guidelines for our equity holdings as described above.
Securities on Loan
For funds where SSGA acts as trustee, SSGA may recall securities in instances where SSGA believes that a particular vote will have a material impact on the fund(s). Several factors shape this process. First, SSGA must receive notice of the vote in sufficient time to recall the shares on or before the record date. In many cases, SSGA does not receive timely
State Street Global Advisors | A-5 |
Global Proxy Voting and Engagement Principles
notice, and is unable to recall the shares on or before the record date. Second, SSGA, exercising its discretion may recall shares if it believes the benefit of voting shares will outweigh the foregone lending income. This determination requires SSGA, 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 relationship manager.
State Street Global Advisors | A-6 |
Global Proxy Voting and Engagement Principles
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For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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. 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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9001-INST-7541 0317 Exp. Date: 03/31/2018
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These Global Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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March 2018
Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
State Street Corporation has a comprehensive standalone Conflicts of Interest Policy and other policies that address a range of conflicts of interests identified. In addition, State Street Global Advisors (SSGA), the asset management business of State Street Corporation, maintains a conflicts register that identifies key conflicts and describes systems in place to mitigate the conflicts. This guidance i 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 and engagement activities.
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Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
Managing Conflicts of Interest Related to Proxy Voting
State Street Global Advisors (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), State Street Global Advisors, 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 Asset Stewardship team. Members of the Asset Stewardship 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 Asset Stewardship 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 our investment strategy; |
| Prohibiting members of SSGAs Asset Stewardship 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 Asset Stewardship team, Global Proxy Review Committee (PRC) and Investment Committee (IC) of any personal conflict of interest (e.g., familial relationship with company management, serves as a director on the board of a listed company) to the Head of the Asset Stewardship 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 Proxy Voting and Engagement Guidelines (Guidelines); and |
| Reporting of voting guideline 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 guidance is not in the best interests of its clients, the Head of the Asset Stewardship team will determine whether a Material Relationship exists. If so, the matter is referred to the PRC. The 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 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 IC for further evaluation or (iii) retain an independent fiduciary to determine the appropriate vote.
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Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA ), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9008-INST-7553 0317 Exp. Date: 03/31/2018
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These Managing Conflicts of Interest Arising From State Street Global Advisors Proxy Voting and Engagement Activity Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
North America (United States & Canada)
State Street Global Advisors (SSGA) North America Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in the US and Canada. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidance.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) North America 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 of companies listed on stock exchanges in the US and Canada (North America). 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 and 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 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 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 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 North America, SSGA 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. Further, as a founding member of the Investor Stewardship Group (ISG), SSGA proactively monitors companies adherence to the Corporate Governance Principles for US listed companies. Consistent with the comply or explain expectations established by the principles, SSGA encourages companies to proactively disclose their level of compliance with the principles. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active investment teams; collaborating on issuer engagements and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in North America.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with the US Investor Stewardship Group Principles. 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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
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Proxy Voting and Engagement Guidelines
shareholder interests. Further, SSGA expects boards of Russell 3000 and TSX listed companies to have at least one female board member .
Director related proposals 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 considers numerous factors.
Director Elections
SSGAs director election guideline focuses on companies governance profile to identify if a company demonstrates appropriate governance practices or if it exhibits negative governance practices. Factors SSGA considers when evaluating governance practices include, but are not limited to the following:
| Shareholder rights; |
| Board independence; and |
| Board structure. |
If a company demonstrates appropriate governance practices, SSGA 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 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 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. |
In the U.S. market 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 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 may withhold votes from directors based on the following:
| When overall average board tenure is excessive. In assessing excessive tenure, SSGA 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 not been responsive to a shareholder proposal which received a majority shareholder support at the last annual or special meeting; consideration maybe given if 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 bylaws that negatively impact SSGAs shareholder rights (such as fee-shifting, forum selection and exclusion service bylaws) 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. |
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Proxy Voting and Engagement Guidelines
Director Related Proposals
SSGA 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 generally votes against the following director related proposals:
| Requirements that candidates for directorships own large amounts of stock before being eligible to be elected; |
| 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 will generally support a majority vote standard based on votes cast for the election of directors.
SSGA 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 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 does not support cumulative voting structures for the election of directors.
Separation Chair/CEO
SSGA 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
In general, SSGA believes that proxy access is a fundamental right and an accountability mechanism for all long-term shareholders. SSGA will consider proposals relating to Proxy Access on a case-by-case basis. SSGA will support shareholder proposals that set parameters to empower long-term shareholders while providing management the flexibility to design a process that is appropriate for the companys circumstances.
SSGA will review the terms of all other proposals and will support those proposals that have been introduced in the spirit of enhancing shareholder rights.
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 governance structure; |
| Shareholder rights; and |
| Board performance. |
Age/Term Limits
Generally, SSGA 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 will support directors compensation, provided the amounts are not excessive relative to other
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issuers in the market or industry. In making our determination, we review whether the compensation is overly dilutive to existing shareholders.
Indemnification
Generally, SSGA 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 generally supports annual elections for the board of directors.
Confidential Voting
SSGA will support confidential voting.
Board Size
SSGA 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 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 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 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 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 supports share increases for general corporate purposes up to 100% of current authorized stock.
SSGA supports increases for specific corporate purposes up to 100% of the specific need plus 50% of current authorized common stock for US and Canadian firms.
When applying the thresholds, SSGA will also consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Increase in Authorized Preferred Shares
SSGA votes on a case-by-case basis on proposals to increase the number of preferred shares.
Generally, SSGA 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 will support proposals to create declawed blank check preferred stock (stock that cannot be used as a takeover defense). However, SSGA 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 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 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.
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Proxy Voting and Engagement Guidelines
However, SSGA 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, 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 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 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 anti-takeover 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.
Shareholder Rights Plans
US: SSGA will support mandates requiring shareholder approval of a shareholder rights plans (poison pill) and repeals of various anti-takeover related provisions.
In general, SSGA will vote against the adoption or renewal of a US issuers shareholder rights plan (poison pill).
SSGA 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).
Canada: SSGA analyzes proposals for shareholder approval of a shareholder rights plans (poison pill) on a case-by-case basis taking into consideration numerous factors, including but not limited to, whether it conforms to new generation rights plans and the scope of the plan.
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Proxy Voting and Engagement Guidelines
Special Meetings
SSGA 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 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 will vote for management proposals related to special meetings.
Written Consent
SSGA 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 will vote management proposals on written consent on a case-by-case basis.
SuperMajority
SSGA will generally vote against amendments to bylaws requiring super-majority shareholder votes to pass or repeal certain provisions. SSGA 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.
Advisory Vote on Executive Compensation and Frequency
SSGA 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 supports management proposals on executive compensation where there is a strong relationship between executive pay and performance over a five-year period. SSGA 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.
In Canada , where advisory votes on executive compensation are not commonplace, SSGA will rely primarily on engagement to evaluate compensation plans.
Employee Equity Award Plans
SSGA considers numerous criteria when examining equity award proposals. Generally, SSGA 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 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 five to eight percent are generally not supported.
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Proxy Voting and Engagement Guidelines
Repricing SSGA 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 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 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 will support the proposal to amend the plan.
Employee Stock Option Plans
SSGA generally votes for stock purchase plans with an exercise price of not less than 85% of fair market value. However, SSGA takes market practice into consideration.
Compensation Related Items
SSGA 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 will generally vote against the following proposals:
| Retirement bonuses for non-executive directors and auditors. |
Miscellaneous/Routine Items
SSGA 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; |
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Proxy Voting and Engagement Guidelines
| 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 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 a 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. |
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 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 overall strategy, operations and business activities. SSGAs 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.
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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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Proxy Voting and Engagement Guidelines
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155. 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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9007-INST-7552 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
Australia and New Zealand
State Street Global Advisors (SSGA) Australia & New Zealand Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in Australia and New Zealand. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) Australia and New Zealand 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 and 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 considers market specific nuances in the manner that we believe will best protect and promote the long-term economic value of client investments. SSGA 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 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 Australia and New Zealand, SSGA expects all companies at a minimum to comply with the ASX Corporate Governance Principles and proactively monitors companies adherence to the principles. Consistent with the comply or explain expectations established by the principles, SSGA encourages companies to proactively disclose their level of compliance with the principles. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader. 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.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration and accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and Asia-Pacific (APAC) investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in the region.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI). 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA believes independent directors are crucial to good corporate governance and help management establish sound
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Proxy Voting and Engagement Guidelines
ESG policies and practices. A sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests. SSGA expects boards of ASX-300 and New Zealand listed companies to be comprised of at least a majority of independent directors. Further, SSGA expects boards of ASX-300 listed companies to have at least one female board member . At all other Australian listed companies, SSGA expects boards to be comprised of at least one-third independent directors.
SSGAs broad criteria for director independence in Australia and New Zealand 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 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 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 supports the annual election of directors and encourages Australian and New Zealand companies to adopt this practice.
While SSGA is generally supportive of having the roles of chairman and CEO separated in the Australia and New Zealand markets, SSGA assesses the division of responsibilities between chairman and CEO on a case-by-case basis, giving consideration to factors such as company-specific circumstances, overall level of independence on the board and general corporate governance standards in the company. Similarly, SSGA will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA 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 and breach of fiduciary responsibilities).
SSGA 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. ASX Corporate Governance Principles requires 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 holds Australian and New Zealand 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 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 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 believes that executive pay should be determined by the board of directors and SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. ASX Corporate Governance Principles requires 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 vote in the event of a second strike, SSGA 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 voting guidelines accommodate local market practice.
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Proxy Voting and Engagement Guidelines
Indemnification and limitations on liability
Generally, SSGA 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 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 to re-appoint at the annual meeting. When appointing external auditors and approving audit fees, SSGA 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 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 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 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 without pre-emption rights, SSGA may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 generally supports a proposal to repurchase shares, unless the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, and the timeframe for the repurchase. SSGA may vote against share repurchase requests that allow share repurchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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, liquidations, and other major changes to the corporation. Proposals that are in the best interests of 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 will generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to the following:
| Offer premium; |
| Strategic rationale; |
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Proxy Voting and Engagement Guidelines
| 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 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 opposes anti-takeover 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 SSGAs 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 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 may oppose remuneration reports where there seems to be a misalignment between pay and shareholders interests and where incentive policies and schemes have a re-test option or feature. SSGA 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 Incentive Plans
SSGA 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 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 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 will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 encourages companies to be transparent about the environmental and social risks and opportunities they face and
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Proxy Voting and Engagement Guidelines
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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
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Proxy Voting and Engagement Guidelines
ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9002-INST-7542 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
Europe
State Street Global Advisors (SSGA) European Proxy Voting and Engagement Guidelines i cover different corporate governance frameworks and practices in European markets excluding the United Kingdom and Ireland. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) 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 and 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 European markets, SSGA 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 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 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 European companies, SSGA also considers guidance issued by the European Commission and country-specific governance codes and proactively monitors companies adherence to applicable guidance and requirements. Consistent with the diverse comply or explain expectations established by guidance and codes, SSGA encourages companies to proactively disclose their level of compliance with applicable guidance and requirements. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset
Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in European markets.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI). 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/reelection of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of STOXX Europe 600 listed companies to have at least one female board member.
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SSGAs 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. |
While, overall board independence requirements and board structures differ from market to market, SSGA considers voting against directors it deems nonindependent if overall board independence is below one third or overall independence is below fifty-percent after excluding employee-representatives and/or directors elected in accordance with local laws who are not elected by shareholders. SSGA 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 may 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 also considers the number of outside board directorships a non-executive can undertake, attendance at board meetings, and cross-directorships. In addition, SSGA 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 may vote against article/bylaw changes that seek to extend director terms. In addition, in certain markets, SSGA may vote against directors if their director terms extend beyond four years.
SSGA 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. SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA may vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA 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 may vote against the entire slate.
SSGA 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 and breach of fiduciary responsibilities).
Indemnification and Limitations on Liability
Generally, SSGA 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, with 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.
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Appointment of External Auditors
SSGA 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 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 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 may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA 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.
Shareholder Rights and Capital Related Issues
In some European markets, differential voting rights continue to exist. SSGA supports the one share one vote policy and favors a share structure where all shares have equal voting rights. SSGA 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 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 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 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 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 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 may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 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 timeframe for the repurchase. SSGA may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 expects
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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 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.
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 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 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 |
AntiTakeover Measures
European markets have diverse regulations concerning the use of share issuances as takeover defenses with legal
restrictions lacking in some markets. SSGA 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 opposes unlimited share issuance authorizations as they may be used as anti-takeover devices, and they have the potential for substantial voting and earnings dilution. SSGA 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 opposes anti-takeover 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 SSGAs 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 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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA 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 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 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.
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NonExecutive Director Pay
In European markets, authorities seeking shareholder approval for non-executive directors fees are generally not controversial. SSGA 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 will evaluate on a company-by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9003-INST-7544 0317 Exp. Date: 03/31/2018
i |
These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Japan
State Street Global Advisors (SSGA) Japan Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in Japan. These guidelines complement and should be read in conjunction with SSGAs overarching Global Proxy Voting and Engagement Guidelines, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) 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 and 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 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 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 also considers guidance issued by the Corporate Law Subcommittee of the Legislative Council within the Ministry of Justice as well as private study groups.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law, remuneration, and environmental and social issues. SSGA 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 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 SSGAs active investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA is also a member of various investor associations that seek to address broader corporate governance related policy issues in Japan.
SSGA is a signatory to the United Nations Principles of Responsible Investment (UNPRI) and is compliant with Japans Stewardship Code and Corporate Governance 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of TOPIX 500 listed companies to have at least one female board member.
Japanese companies have the option of having a traditional board of directors with statutory auditors, a board with a committee structure, or a hybrid board with board level audit committee. SSGA will generally support companies that seek shareholder approval to adopt a committee or hybrid board 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
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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 will support the election of statutory auditors, unless the outside statutory auditor nominee is regarded as non-independent based on SSGA 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 wrongdoing and breach of fiduciary responsibilities).
For companies with a statutory auditor structure there is no legal requirement that boards have outside directors, however, SSGA believes there should be a transparent process of independent and external monitoring of management on behalf of shareholders.
| SSGA believes that boards of TOPIX 500 companies should have at least three independent directors or be at least one-third independent, whichever requires fewer independent directors, otherwise, SSGA may oppose the top executive who is responsible for the director nomination process; and |
| For controlled, non-TOPIX 500 companies with a statutory auditor structure or hybrid structure, SSGA may oppose the top executive, if the board does not have at least two independent directors. |
| For non-controlled, non-TOPIX 500 companies with a statutory auditor structure or hybrid structure, SSGA may oppose the top executive, if the board does not have at least two outside directors. |
For companies with a committee structure or a hybrid board structure, SSGA also takes into consideration the overall independence level of the committees. In determining director independence, SSGA 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 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 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 believes limitations and indemnification are necessary to attract and retain qualified directors.
Audit Related Items
SSGA 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 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 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 supports the one share one vote policy and favors a share structure where all shares have equal voting rights. SSGA supports proposals to abolish voting caps or multiple voting rights and will oppose measures to introduce these types of restrictions on shareholder rights.
SSGA 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 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 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 will support capitalization changes that eliminate other classes of stock and/or unequal voting rights.
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Increase in Authorized Capital
SSGA 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 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 will consider the nature of the specific need, such as mergers and acquisitions and stock splits.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 will oppose an amendment to articles allowing the repurchase of shares at the boards discretion. SSGA 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 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 timeframe for the repurchase. SSGA 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 evaluates mergers and structural reorganizations on a case-by-case basis. SSGA 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 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 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.
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 the adoption or renewal of a Japanese issuers shareholder rights plans (poison pill), SSGA considers the following conditions: (i) release of proxy circular with details of the proposal with adequate notice in
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advance of meeting, (ii) minimum trigger, flip-in or flip-over of 20%, (iii) maximum term of three years, (iv) sufficient number of independent directors, (v) presence of an independent committee, (vi) annual election of directors, (vii) no other protective or entrenchment features. Additionally, SSGA considers the total duration a shareholder rights plan has been in effect.
In evaluating an amendment to a shareholder rights plan (poison pill), in addition to the conditions above, SSGA will also evaluate and consider supporting proposals where the terms of the new plans are more favorable to shareholders ability to accept unsolicited offers.
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, 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 will generally support proposed increases to the ceiling if the company discloses the rationale for the increase. SSGA 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 believes that existing shareholder approval of the bonus should be considered best practice. As a result, SSGA 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 supports these payments unless the recipient is an outsider or in instances where the amount is not disclosed.
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 cannot calculate the dilution level and, therefore, SSGA may oppose such plans for poor disclosure. SSGA 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 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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.
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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 views proposals to expand and diversify the companys business activities as routine and non-contentious. SSGA 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 relationship manager.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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
© 2017 State Street Corporation. All Rights Reserved.
ID9004-INST-7547 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
United Kingdom and Ireland
State Street Global Advisors (SSGA), United Kingdom and Ireland Proxy Voting and Engagement Guidelines i outline our expectations of companies listed on stock exchanges in the United Kingdom and Ireland. These guidelines complement and should be read in conjunction with SSGAs Global Proxy Voting and Engagement Principles, which provide a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
State Street Global Advisors (SSGA) United Kingdom (UK) and Ireland 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 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 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 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 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 and proactively monitors companies adherence to the Code. Consistent with the comply or explain expectations established by the Code, SSGA encourages companies to proactively disclose their level of compliance with the Code. In instances of non-compliance when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, SSGA may vote against the independent board leader.
SSGAs Proxy Voting and Engagement Philosophy
In our view, corporate governance and sustainability issues are an integral part of the investment process. Asset Stewardship Team consists of investment professionals with expertise in corporate governance and company law,
remuneration, accounting as well as environmental and social issues. SSGA 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 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 SSGAs active fundamental and EMEA investment teams; collaborating on issuer engagement and providing input on company specific fundamentals. SSGA 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 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 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 views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices.SSGA votes for the election/re-election of directors on a case-by-case basis after considering various factors including board quality, general market practice and availability of information on director skills and expertise. In principle, SSGA 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. Further, SSGA expects boards of FTSE-350 listed companies to have at least one female board member.
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SSGAs 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; |
| Family ties with any of the companys advisers, directors or senior employees; and |
| If the company classifies the director as non-independent. |
When considering the election or re-election of a director, SSGA 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 monitors other factors that may influence the independence of a non-executive director, such as performance related pay, cross-directorships and significant shareholdings. SSGA supports the annual election of directors.
While SSGA is generally supportive of having the roles of chairman and CEO separated in the UK market, SSGA 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 will monitor for circumstances where a combined chairman/CEO is appointed or where a former CEO becomes chairman.
SSGA 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 and breach of fiduciary responsibilities).
SSGA 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. SSGA expects companies to have in place remuneration committees to provide independent oversight over executive pay. SSGA will vote against nominees who are executive members of audit or remuneration committees.
In its analysis of boards, SSGA 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 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 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, with 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 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 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 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 may consider auditor tenure when evaluating the audit process.
Limit Legal Liability of External Auditors
SSGA 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 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 may vote against if such authorities are greater than 20% of the issued share capital. SSGA 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 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 timeframe for the repurchase. SSGA may vote against share re-purchase requests that allow share re-purchases during a takeover period.
Dividends
SSGA generally supports dividend payouts that constitute 30% or more of net income. SSGA 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 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 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 opposes anti-takeover 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 SSGAs analysis of executive paythere should be a direct relationship between remuneration and company performance over the long term.
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Proxy Voting and Engagement Guidelines
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration policies and reports, SSGA 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 may oppose remuneration reports where pay seems misaligned with shareholders interests. SSGA 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 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 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 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 will evaluate on a company- by-company basis any non-cash or performance related pay to non-executive directors.
Risk Management
SSGA 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 allows boards discretion over how they provide oversight in this area. However, SSGA 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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.
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SSGA 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 overall strategy, operations and business activities. SSGAs 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 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 concerns.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Proxy Voting and Engagement Guidelines
Rest of the World
State Street Global Advisors (SSGA) Rest of the World Proxy Voting and Engagement Guidelines i cover different corporate governance frameworks and practices in international markets not covered under specific country/regional guidelines. These guidelines complement and should be read in conjunction with SSGAs overarching Global Proxy Voting and Engagement Principles which provides a detailed explanation of SSGAs approach to voting and engaging with companies, and SSGAs Conflict Mitigation Guidelines.
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Proxy Voting and Engagement Guidelines
At State Street Global Advisors (SSGA), we recognize that countries in international markets not covered under specific country/regional guidelines are disparate in their corporate governance frameworks and practices. Concurrent with developing a company specific voting and engagement program, SSGA also evaluates the various factors that play into the corporate governance framework of a country. These factors include but are not limited to: (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 judiciary. 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, SSGAs proxy voting guidelines are designed to identify and address specific governance concerns in each market.
SSGAs Proxy Voting and Engagement Philosophy in Emerging Markets
SSGAs 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 SSGAs 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 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 SSGA Asset Stewardship 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 SSGAs proxy voting and engagement philosophy in emerging markets.
SSGAs 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
SSGA 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 performs in emerging market companies.
SSGA 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 expects companies to meet minimum overall board indepdence standards as defined in a corporate governance code or market practice. Therfore, in several countries, SSGA will vote against select non-independent directors if overall board indepdence levels do not meet market standards.
SSGAs 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. |
In some countries, market practice calls for the establishment of a board level audit committee. In such cases, SSGA believes companies should have an audit committee that is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence
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Proxy Voting and Engagement Guidelines
as well as their effectiveness and resource levels. Based on our desire to enhance the quality of financial and accounting oversight provided by independent directors, SSGA expects that listed companies have an audit committee that is constituted of a majority of independent directors.
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 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 encourages boards to appoint an audit committee composed of a majority of independent auditors.
Appointment of External Auditors
SSGA 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-appointment at the annual meeting. SSGA believes that it is imperative for audit committees to select outside auditors who are independent from management.
Shareholder Rights and Capital Related Issues
SSGA 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 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 Transcations
Most companies in emerging markets have a controlled ownership structure that often include complex cross-shareholdings 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 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 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 expects companies to clearly state the business purpose for the program and a definitive number of shares to be repurchased.
Mergers and Acquisitions
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, 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 evaluates mergers and structural reorganizations on a case-by-case basis. SSGA 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 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. |
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.
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Proxy Voting and Engagement Guidelines
Remuneration
SSGA considers it to be the boards responsibility to set appropriate levels of executive remuneration. Despite the differences among the types of plans and the awards possible, there is a simple underlying philosophy that guides SSGAs analysis of executive remuneration; 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 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 considers the financial and economic implications of environmental and social issues first and foremost. In this regard, SSGA 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 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 overall strategy, operations and business activities. SSGAs 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 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, SSGAs guidelines consider several factors including historical dividend payouts, pending litigation, governmental investigations, charges of fraud or other indication of significant concerns.
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ssga.com
For Public Use
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 Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA), with a capital of GBP 71650000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 - R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 - 20121 Milano, Italy ● Telephone: 39 02 32066 100 ● Facsimile: 39 02 32066 155.
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: +617 786 3000.
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.
© 2017 State Street Corporation. All Rights Reserved.
ID9005-INST-7548 0317 Exp. Date: 03/31/2018
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These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc. (SSGA FM). SSGA FM is an SEC-registered investment adviser. SSGA FM, State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. |
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Standard & Poors, a division of The McGraw-Hill Companies, Inc. (S&P), Corporate Long-Term Issue Ratings:
AAA An obligation rated AAA has the highest rating assigned by S&P. The obligors capacity to meet its financial commitment on the obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only to a small degree. The obligors capacity to meet its financial commitment on the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligors capacity to meet its financial commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB, B, CCC, CC, and C Obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligors capacity or willingness to meet its financial commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C A C rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the C rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instruments terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.
D An obligation rated D is in payment default. The D rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of similar action if payments on an obligation are jeopardized. An obligations rating is lowered to D upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.
Plus (+) or Minus (-) The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
NR This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy.
B-1
Moodys Investors Service, Inc.s (Moodys) Long-Term Obligation Ratings:
Aaa Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.
Aa Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Baa Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.
Ba Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.
B Obligations rated B are considered speculative and are subject to high credit risk.
Caa Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.
Ca Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
Modifiers: Moodys appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
Fitch Ratings Ltd.s (Fitch) Corporate Finance Obligations Long-Term Ratings:
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A High credit quality. A ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB Speculative. BB ratings indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.
B Highly speculative. B ratings indicate that material credit risk is present. For performing obligations, default risk is commensurate with the issuer being rated with an Issuer Default Risk (IDR) in the ranges BB to C. For issuers with an IDR below B, the overall credit risk of this obligation is moderated by the expected level of recoveries should a default occur. For issuers with an IDR above B, the overall credit risk of this obligation is exacerbated by the expected low level of recoveries should a default occur. For non-performing obligations, the obligation or issuer is in default, or has deferred payment, but the rated obligation is expected to have extremely high recovery rates consistent with a Recovery Rating of RR1 (outstanding recovery prospects given default).
CCC Substantial credit risk. CCC ratings indicate that substantial credit risk is present. For performing obligations, default risk is commensurate with an IDR in the ranges B to C. For issuers with an IDR below CCC, the overall credit risk of this obligation is moderated by the expected level of recoveries should a default occur. For issuers with an IDR
B-2
above CCC, the overall credit risk of this obligation is exacerbated by the expected low level of recoveries should a default occur. For non-performing obligations, the obligation or issuer is in default, or has deferred payment, but the rated obligation is expected to have a superior recovery rate consistent with a Recovery Rating of RR2 (superior recovery prospects given default).
CC Very high levels of credit risk. CC ratings indicate very high levels of credit risk. For performing obligations, default risk is commensurate with an IDR in the ranges B to C. For issuers with an IDR below CC, the overall credit risk of this obligation is moderated by the expected level of recoveries should a default occur. For issuers with an IDR above CC, the overall credit risk of this obligation is exacerbated by the expected low level of recoveries should a default occur. For non-performing obligations, the obligation or issuer is in default, or has deferred payment, but the rated obligation is expected to have a good recovery rate consistent with a Recovery Rating of RR3 (good recovery prospects given default).
C Exceptionally high levels of credit risk. C indicates exceptionally high levels of credit risk. For performing obligations, default risk is commensurate with an IDR in the ranges B to C. The overall credit risk of this obligation is exacerbated by the expected low level of recoveries should a default occur. For non-performing obligations, the obligation or issuer is in default, or has deferred payment, and the rated obligation is expected to have an average, below-average or poor recovery rate consistent with a Recovery Rating of RR4 (average recovery prospects given default), RR5 (below average recovery prospects given default) or RR6 (poor recovery prospects given default).
Defaulted obligations typically are not assigned D ratings, but are instead rated in the B to C rating categories, depending upon their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
Plus (+) or Minus (-) The modifiers + or - may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA obligation rating category, or to corporate finance obligation ratings in the categories below B.
emr The subscript emr is appended to a rating to denote embedded market risk which is beyond the scope of the rating. The designation is intended to make clear that the rating solely addresses the counterparty risk of the issuing bank. It is not meant to indicate any limitation in the analysis of the counterparty risk, which in all other respects follows published Fitch criteria for analyzing the issuing financial institution. Fitch does not rate these instruments where the principal is to any degree subject to market risk.
S&Ps Short-Term Issue Credit Ratings:
A-1 A short-term obligation rated A-1 is rated in the highest category by S&P. The obligors capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligors capacity to meet its financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligors capacity to meet its financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having significant speculative characteristics. Ratings of B-1, B-2, and B-3 may be assigned to indicate finer distinctions within the B category. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
B-1 A short-term obligation rated B-1 is regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
B-3
B-2 A short-term obligation rated B-2 is regarded as having significant speculative characteristics, and the obligor has an average speculative-grade capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
B-3 A short-term obligation rated B-3 is regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
C A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation.
D A short-term obligation rated D is in payment default. The D rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
Dual Ratings S&P assigns dual ratings to all debt issues that have a put option or demand feature as part of their structure. The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term rating symbols are used for bonds to denote the long-term maturity and the short-term rating symbols for the put option (for example, AAA/A-1+). With U.S. municipal short-term demand debt, note rating symbols are used with the short-term issue credit rating symbols (for example, SP-1+/A-1+).
Moodys Short-Term Obligation Ratings:
P-1 Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2 Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3 Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
Note: Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced by the senior-most long-term rating of the issuer, its guarantor or support-provider.
Fitchs Short-Term Obligation Ratings:
F1 Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added + to denote any exceptionally strong credit feature.
F2 Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments.
F3 Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.
B Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
C High short-term default risk. Default is a real possibility.
RD Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only.
D Default. Indicates a broad-based default event for an entity, or the default of a specific short-term obligation.
B-4
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 November 12, 2015, are incorporated herein by reference to Exhibit (b) of Post-Effective Amendment No. 152 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on November 23, 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, dated September 1, 2003, between the Trust and SSGA Funds Management, Inc. (SSGA FM) 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), dated October 22, 2018, to the Amended and Restated Investment Advisory Agreement, dated September 1, 2003, between the Trust and SSGA FM, is filed herewith. | |
(d)(ii) |
Fee Waiver Letter Agreement, dated October 31, 2018, between the Trust and SSGA FM, with respect to the SPDR ICE BofAML Crossover Corporate Bond ETF, SPDR Nuveen Bloomberg Barclays Municipal Bond ETF and SPDR S&P 500 Fossil Fuel Reserves Free ETF, is filed herewith. | |
(d)(iii) |
Sub-Advisory Agreement, dated November 20, 2014, between SSGA FM and Nuveen Asset Management (NAM) is incorporated herein by reference to Exhibit (d)(vii) of Post-Effective Amendment No. 200 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on August 28, 2017. | |
(d)(iv) |
Sub-Advisory Agreement, dated May 19, 2010, between SSGA FM and State Street Global Advisors LTD (SSGA LTD) 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. | |
(e)(i)(1) |
Amended and Restated Distribution Agreement, dated May 1, 2017, between the Trust and State Street Global Advisors Funds Distributors, LLC (SSGA FD) is incorporated herein by reference to Exhibit (e)(i)(1) of Post-Effective Amendment No. 200 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on August 28, 2017. |
1
(e)(i)(2) |
Amended Annex I (Schedule of Series), dated October 22, 2018, to the Amended and Restated Distribution Agreement, dated May 1, 2017, between the Trust and SSGA FD, 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, dated October 22, 2018, to the Custodian Agreement, dated September 22, 2000, between the Trust and State Street Bank and Trust Company, is filed herewith. | |
(h)(i)(1) |
Administration Agreement, dated June 1, 2015, between the Trust and SSGA FM is incorporated herein by reference to Exhibit (h)(i)(1) of Post-Effective Amendment No. 146 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on October 28, 2015. | |
(h)(i)(2) |
Amended Schedule A (Schedule of Series), dated October 22, 2018, to the Administration Agreement, dated June 1, 2015, between the Trust and SSGA FM, is filed herewith. | |
(h)(ii)(1) |
Master Sub-Administration Agreement, dated June 1, 2015, between SSGA FM and State Street Bank and Trust Company is incorporated herein by reference to Exhibit (h)(ii)(1) of Post-Effective Amendment No. 146 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on October 28, 2015. | |
(h)(ii)(2) |
Amendment, dated June 29, 2018, to the Master Sub-Administration Agreement, dated June 1, 2015, between SSGA FM and State Street Bank and Trust Company is filed herewith. | |
(h)(ii)(3) |
Amended Schedule A (Schedule of Series), dated October 22, 2018, to the Master Sub-Administration Agreement, dated June 1, 2015, between SSGA FM and State Street Bank and Trust Company, is filed herewith. | |
(h)(iii) |
Transfer Agency and Service 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 the Transfer Agency and Service 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), dated October 22, 2018, to the Transfer Agency and Service Agreement, dated September 22, 2000, between the Trust and State Street Bank and Trust Company, is filed herewith. |
2
(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)(1) |
Master Amended and Restated Securities Lending Authorization Agreement, dated January 6, 2017, between the Trust and State Street Bank and Trust Company, is incorporated herein by reference to Exhibit (h)(viii)(1) of Post-Effective Amendment No. 209 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on August 29, 2018. | |
(h)(viii)(2) |
Amended Schedule B (Schedule of Series) to the Master Amended and Restated Securities Lending Authorization Agreement dated January 6, 2017 between the Trust and State Street Bank and Trust Company, to be filed by amendment. | |
(i)(i) |
Opinion and Consent of Morgan, Lewis & Bockius LLP is incorporated herein by reference to Exhibit (i) of Post-Effective Amendment No. 146 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on October 28, 2015. | |
(i)(ii) |
Opinion and Consent of Morgan, Lewis & Bockius LLP is incorporated herein by reference to Exhibit (i) of Post-Effective Amendment No. 152 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on November 23, 2015. | |
(i)(iii) |
Opinion and Consent of Morgan, Lewis & Bockius LLP is incorporated herein by reference to Exhibit (i) of Post-Effective Amendment No. 153 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on November 25, 2015. | |
(i)(iv) |
Opinion and Consent of Morgan, Lewis & Bockius LLP is incorporated herein by reference to Exhibit (i) of Post-Effective Amendment No. 164 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on January 12, 2016. | |
(i)(v) |
Opinion and Consent of Morgan, Lewis & Bockius LLP is incorporated herein by reference to Exhibit (i) of Post-Effective Amendment No. 172 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on March 4, 2016. | |
(i)(vi) |
Opinion and Consent of Morgan, Lewis & Bockius LLP is incorporated herein by reference to Exhibit (i) of Post-Effective Amendment No. 183 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on May 31, 2016. | |
(i)(vii) |
Opinion and Consent of Morgan, Lewis & Bockius LLP is incorporated herein by reference to Exhibit (i) of Post-Effective Amendment No. 187 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on June 24, 2016. | |
(i)(viii) |
Opinion and Consent of Morgan, Lewis & Bockius LLP is incorporated herein by reference to Exhibit (i) of Post-Effective Amendment No. 206 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on December 21, 2017. | |
(i)(ix) |
Opinion and Consent of Morgan, Lewis & Bockius LLP is incorporated herein by reference to Exhibit (i)(ix) of Post-Effective Amendment No. 210 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on October 19, 2018. | |
(j) |
Consent of independent registered public accountants is filed herewith. |
3
(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) |
Not applicable. | |
(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 December 8, 2017 (which also applies to applicable reporting personnel of SSGA FD), is incorporated herein by reference to Exhibit (p)(ii) of Post-Effective Amendment No. 208 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on August 7, 2018. | |
(p)(iii) |
Code of Ethics of NAM, dated July 1, 2018, is filed herewith. | |
(p)(iv) |
Code of Ethics of SSGA LTD 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. | |
(p)(v) |
Code of Ethics for the Independent Trustees, dated November 12, 2015, is incorporated herein by reference to Exhibit (p)(v) of Post-Effective Amendment No. 159 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on December 17, 2015. | |
(q) |
Power of Attorney for Mses. Boatman, Richer, Sponem and Needham and Messrs. Churchill, Nesvet, Ross, Verboncoeur and Rosenberg, dated August 23, 2018, is incorporated herein by reference to Exhibit (q) of Post-Effective Amendment No. 209 to the Registrants Registration Statement on Form N-1A, as filed with the SEC on August 29, 2018. |
Item 29. |
Persons Controlled By or Under Common Control With Registrant |
The Board of Trustees of the Trust is the same as the Boards of Trustees of 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 SPDR Index Shares Funds, SSGA Master Trust and SSGA Active Trust. Additionally, the Trusts investment adviser, SSGA FM, also serves as investment adviser to each series of 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.
4
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, as amended (the 1940 Act), so long as the interpretation of Sections 17(h) and 17(i) thereunder 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.
5
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 FM serves as the investment adviser for each series of the Trust. SSGA FM is a wholly-owned subsidiary of State Street Global Advisors, Inc., which is itself a wholly-owned subsidiary of State Street Corporation. SSGA FM and other advisory affiliates of State Street Corporation make up State Street Global Advisors (SSGA), the investment management arm of State Street Corporation. The principal address of SSGA FM is One Iron Street, Boston, Massachusetts 02210. SSGA FM is an investment adviser registered under the Investment Advisers Act of 1940.
Below is a list of the directors and principal executive officers of SSGA FM and their principal occupations. Unless otherwise noted, the address of each person listed is One Iron Street, Boston, Massachusetts 02210.
Name |
Principal Occupations |
|
James E. Ross | Chairman and Director of SSGA FM; Executive Vice President of SSGA | |
Ellen Needham | Director and President of SSGA FM; Senior Managing Director of SSGA | |
Barry Smith | Director and CTA - Chief Marketing Officer of SSGA FM; Senior Managing Director of SSGA | |
Lori Heinel | Director of SSGA FM; Executive Vice President of SSGA | |
Steven Lipiner | Director of SSGA FM; Senior Managing Director and Chief Financial Officer of SSGA | |
Chris Baker | Chief Compliance Officer of SSGA FM; Managing Director and Chief Compliance Officer of SSGA; prior to February 2018, Managing Director and Senior Compliance Officer for Alternative Investment Solutions, Sector Solutions, and Global Marketing at State Street Corporation | |
Bo Trevino | Treasurer of SSGA FM; Vice President of SSGA | |
Sean OMalley, Esq. | Chief Legal Officer of SSGA FM; Senior Vice President and Deputy General Counsel of SSGA | |
Ann Carpenter | Chief Operating Officer of SSGA FM; Managing Director of SSGA | |
Greg Hartch | Chief Risk Officer of SSGA FM; Senior Vice President of SSGA | |
Joshua Weinberg, Esq. | Clerk of SSGA FM; Managing Director and Managing Counsel of SSGA | |
Dan Furman, Esq. | Assistant Clerk of SSGA FM; Managing Director and Managing Counsel of SSGA | |
Leanne Dunn, Esq. | Assistant Clerk of SSGA FM; Managing Director and Senior Counsel of SSGA | |
Mike Pastore, Esq. | Assistant Clerk of SSGA FM; Managing Director and Senior Counsel of SSGA |
NAM serves as the investment sub-adviser for the SPDR Nuveen Bloomberg Barclays Municipal Bond ETF, SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF and SPDR Nuveen S&P High Yield Municipal Bond ETF. SSGA LTD, an affiliate of SSGA FM, serves as the investment sub-adviser for the SPDR Bloomberg Barclays International Corporate Bond ETF and SPDR Bloomberg Barclays Emerging Markets Local Bond ETF.
6
NUVEEN ASSET MANAGEMENT, LLC:
Name | Status | |
Nuveen Fund Advisors, LLC | Managing Member | |
William T. Huffman | President | |
Stuart J. Cohen | Managing Director and Head of Legal | |
Diane S. Meggs | Chief Compliance Officer | |
Austin Penn Wachter | Controller |
Item 32. |
Principal Underwriters |
(a) |
SSGA FD, One Iron Street, Boston, Massachusetts 02210, 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, SSGA Funds, State Street Institutional Funds, State Street Variable Insurance Series Funds, Inc., Elfun Diversified Fund, Elfun Tax Exempt Income Fund, Elfun Income Fund, Elfun International Equity Fund, Elfun Government Money Market Fund and Elfun Trusts. |
(b) |
To the best of the Trusts knowledge, the directors and executive officers of SSGA FD are as follows: |
NAME AND PRINCIPAL BUSINESS ADDRESS* |
POSITION AND OFFICES WITH UNDERWRITER |
POSITION AND OFFICES
WITH THE TRUST |
||
James E. Ross |
Chief Executive Officer
and Director |
Trustee | ||
Gregory B. Hartch | Director | None | ||
Jeanne M. LaPorta | Director | None | ||
Steven Lipiner | Director | None | ||
Katherine S. McKinley | Director | None | ||
Ellen M. Needham | Director | President | ||
John Tucker | Director | None | ||
M. Patrick Donovan |
Chief Compliance Officer and
Anti-Money Laundering Officer |
None | ||
David Maxham | Chief Financial Officer | None | ||
Sean P. OMalley, Esq. | Chief Legal Officer | None |
* |
The principal business address for each of the above directors and executive officers is One Iron Street, Boston, MA 02210. |
(c) |
Not applicable. |
7
Item 33. |
Location Of Accounts and Records |
All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the offices of SSGA FM and/or State Street Bank and Trust Company, with offices located at One Iron Street, Boston, Massachusetts 02210 and One Lincoln Street, Boston, Massachusetts 02111, respectively.
Item 34. |
Management Services |
Not applicable.
Item 35. |
Undertakings |
Not applicable.
8
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, and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunder duly authorized, in the City of Boston and the Commonwealth of Massachusetts on the 29 th day of October, 2018.
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* |
Trustee | October 29, 2018 | ||
Bonny E. Boatman | ||||
/s/ Dwight D. Churchill* |
Trustee | October 29, 2018 | ||
Dwight D. Churchill | ||||
/s/ Frank Nesvet* |
Trustee | October 29, 2018 | ||
Frank Nesvet | ||||
/s/ Clare S. Richer* |
Trustee | October 29, 2018 | ||
Clare S. Richer | ||||
/s/ Sandra G. Sponem* |
Trustee | October 29, 2018 | ||
Sandra G. Sponem | ||||
/s/ Carl G. Verboncoeur* |
Trustee | October 29, 2018 | ||
Carl G. Verboncoeur | ||||
/s/ James E. Ross* |
Trustee | October 29, 2018 | ||
James E. Ross | ||||
/s/ Ellen M. Needham Ellen M. Needham |
President and Principal Executive Officer | October 29, 2018 | ||
/s/ Bruce S. Rosenberg Bruce S. Rosenberg |
Treasurer and Principal Financial Officer | October 29, 2018 |
*By: |
/s/ Jesse D. Hallee |
|
Jesse D. Hallee | ||
As Attorney-in-Fact Pursuant to Power of Attorney |
EXHIBIT LIST
Item 28
(d)(i)(2) |
Revised Exhibit A to the Advisory Agreement | |
(d)(ii) |
Fee Waiver Letter Agreement | |
(e)(i)(2) |
Amended Annex I to the Distribution Agreement | |
(g)(iii) |
Amended Schedule of Series to the Custodian Agreement | |
(h)(i)(2) |
Amended Schedule A to the Administration Agreement | |
(h)(ii)(2) |
Amendment to the Master Sub-Administration Agreement | |
(h)(ii)(3) |
Amended Schedule A to the Master Sub-Administration Agreement | |
(h)(v) |
Amended Annex A to the Transfer Agency and Service Agreement | |
(j) |
Consent of independent registered public accountant | |
(p)(iii) |
Code of Ethics of Nuveen Asset Management |
Exhibit (d)(i)(2)
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, amounts payable pursuant to any plan adopted in accordance with Rule 12b-1, 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 Portfolio Total Stock Market ETF |
0.03 | % | ||
SPDR Portfolio Large Cap ETF |
0.03 | % | ||
SPDR Portfolio S&P 500 Growth ETF |
0.04 | % | ||
SPDR Portfolio S&P 500 Value ETF |
0.04 | % | ||
SPDR Portfolio Mid Cap ETF |
0.05 | % | ||
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 NYSE 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 Bloomberg Barclays 1-3 Month T-Bill ETF |
0.1345 | % |
1
SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
0.10 | % | ||
SPDR Portfolio Long Term Treasury ETF |
0.06 | % | ||
SPDR Bloomberg Barclays TIPS ETF |
0.15 | % | ||
SPDR Portfolio Aggregate Bond ETF |
0.04 | % | ||
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF |
0.30 | % | ||
SPDR Bloomberg Barclays International Treasury Bond ETF |
0.35 | % | ||
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
0.20 | % | ||
SPDR Bloomberg Barclays High Yield Bond ETF |
0.40 | % | ||
SPDR FTSE International Government Inflation-Protected Bond ETF |
0.50 | % | ||
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF |
0.35 | % | ||
SPDR Portfolio Intermediate Term Corporate Bond ETF |
0.07 | % | ||
SPDR Portfolio Long Term Corporate Bond ETF |
0.07 | % | ||
SPDR Bloomberg Barclays Convertible Securities ETF |
0.40 | % | ||
SPDR Bloomberg Barclays Mortgage Backed Bond ETF |
0.06 | % | ||
SPDR Wells Fargo Preferred Stock ETF |
0.45 | % | ||
SPDR Portfolio Short Term Corporate Bond ETF |
0.07 | % | ||
SPDR Bloomberg Barclays International Corporate Bond ETF |
0.50 | % | ||
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF |
0.40 | % | ||
SPDR Bloomberg Barclays Corporate Bond ETF |
0.06 | % | ||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
0.35 | % | ||
SPDR Portfolio Short Term Treasury ETF |
0.06 | % | ||
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
0.15 | % | ||
SPDR Bloomberg Barclays Short Term High Yield Bond ETF |
0.40 | % | ||
SPDR ICE BofAML 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 SSGA US Large Cap Low Volatility Index ETF |
0.12 | % | ||
SPDR SSGA US Small Cap Low Volatility Index ETF |
0.12 | % | ||
SPDR Bloomberg Barclays 1-10 Year TIPS ETF |
0.15 | % | ||
SPDR Portfolio Small Cap ETF |
0.05 | % | ||
SPDR S&P 500 Buyback ETF |
0.35 | % | ||
SPDR MSCI USA StrategicFactors ETF |
0.15 | % | ||
SPDR Portfolio S&P 500 High Dividend ETF |
0.07 | % | ||
SPDR S&P 500 Fossil Fuel Reserves Free ETF |
0.25 | % | ||
SPDR Russell 1000 Yield Focus ETF |
0.20 | % | ||
SPDR Russell 1000 Momentum Focus ETF |
0.20 | % | ||
SPDR Russell 1000 Low Volatility Focus ETF |
0.20 | % | ||
SPDR FactSet Innovative Technology ETF |
0.45 | % | ||
SPDR SSGA Gender Diversity Index ETF |
0.20 | % | ||
SPDR S&P Technology Hardware ETF |
0.35 | % | ||
SPDR S&P Internet ETF |
0.35 | % | ||
SPDR Kensho Intelligent Structures ETF |
0.45 | % | ||
SPDR Kensho Smart Mobility ETF |
0.45 | % | ||
SPDR Kensho Future Security ETF |
0.45 | % | ||
SPDR Kensho Clean Power ETF |
0.45 | % | ||
SPDR Kensho Final Frontiers ETF |
0.45 | % | ||
SPDR Kensho New Economies Composite ETF |
0.20 | % |
2
As consideration for the Advisers services to the following Fund, the Adviser shall receive from the 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 unitary fee to be paid shall be reduced by any acquired fund fees and expenses attributable to the Funds investments in other investment companies. The Adviser will pay all of the expenses of the Fund except for the advisory fee, amounts payable pursuant to any plan adopted in accordance with Rule 12b-1, brokerage expenses, taxes, interest, fees and expenses of the Independent Trustees (including any Trustees counsel fees), litigation expenses and other extraordinary expenses.
Fund |
Annual % of average
daily net assets |
|||
SPDR Dorsey Wright Fixed Income Allocation ETF |
0.60 | % |
Dated: October 22, 2018
3
[SSGA Letterhead]
Exhibit (d)(ii)
October 31, 2018
Mr. Bruce Rosenberg
Treasurer
SPDR Series Trust
c/o SSGA Funds Management, Inc.
One Lincoln Street
Boston, Massachusetts 02111
RE: Fee Waiver and/or Expense Reimbursement Arrangement Agreements
Dear Mr. Rosenberg:
SSGA Funds Management, Inc. (SSGA FM), as the investment adviser to each series (each a Fund and collectively, the Funds) of the SPDR Series Trust (the Trust), agrees:
A. with respect to each Fund listed in the table below, to waive its management fee and/or reimburse certain expenses, so that each Funds net annual operating expenses, before application of any fees and expenses not paid by SSGA FM pursuant to the Amended and Restated Investment Advisory Agreement between the Trust and SSGA FM, dated September 1, 2003 (the Investment Advisory Agreement), if any, are limited to the following percentage of average daily net assets on an annual basis for the applicable duration referenced (each an Expiration Date):
Fund Name |
Current
|
Expense
Limitation |
Effective
Date |
Expiration
Date |
||||||||||||
SPDR ICE BofAML Crossover Corporate Bond ETF |
0.40 | % | 0.30 | % | 10/31/2018 | 10/31/2019 | ||||||||||
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF |
0.30 | % | 0.23 | % | 10/31/2018 | 10/31/2019 | ||||||||||
SPDR S&P 500 Fossil Fuel Reserves Free ETF |
0.25 | % | 0.20 | % | 10/31/2018 | 10/31/2019 |
B. to waive its management fee and/or reimburse certain expenses, for each Fund in the Trust, in an amount equal to any acquired fund fees and expenses (AFFEs), excluding AFFEs derived from a Funds holdings in acquired funds for cash management purpose, if any, until October 31, 2019 (the Expiration Date).
***
Each of the above stated fee waivers and/or expense reimbursements (each a Fee Waiver, collectively the Fee Waivers) set forth in Sections (A) and (B): (i) supersedes any prior Fee Waiver for the applicable Fund, (ii) is subject to the terms and conditions of the Investment Advisory Agreement, (iii) does not provide for the recoupment by SSGA FM of any amounts waived or reimbursed, and (iv) may only be terminated during the relevant period with the approval of the Funds Board of Trustees.
SSGA FM and the Funds Officers are authorized to take such actions as they deem necessary and appropriate to continue each of the above stated Fee Waivers for additional periods, including of one or more years, after the Expiration Date of each Fee Waiver.
If these arrangements are acceptable to you, please sign below to indicate your acceptance and agreement and return a copy of this letter to me.
Sincerely, |
SSGA FUNDS MANAGEMENT, INC. |
/s/ Ellen M. Needham |
By: Ellen M. Needham |
Director and President |
Accepted and Agreed: |
SPDR SERIES TRUST, |
ON BEHALF OF EACH SERIES OF THE TRUST |
/s/ Bruce Rosenberg |
By: Bruce Rosenberg |
Treasurer |
Exhibit (e)(i)(2)
Annex I
To the Distribution Agreement by and between
SPDR Series Trust and State Street Global Advisors Funds Distributors, LLC
ETF |
Trading
Symbol |
Listing
Exchange |
||
SPDR Portfolio Total Stock Market ETF |
SPTM | NYSE Arca, Inc. | ||
SPDR Portfolio Large Cap ETF |
SPLG | NYSE Arca, Inc. | ||
SPDR Portfolio S&P 500 Growth ETF |
SPYG | NYSE Arca, Inc. | ||
SPDR Portfolio S&P 500 Value ETF |
SPYV | NYSE Arca, Inc. | ||
SPDR Portfolio Mid Cap ETF |
SPMD | NYSE Arca, Inc. | ||
SPDR S&P 400 Mid Cap Growth ETF |
MDYG | NYSE Arca, Inc. | ||
SPDR S&P 400 Mid Cap Value ETF |
MDYV | NYSE Arca, Inc. | ||
SPDR S&P 600 Small Cap ETF |
SLY | NYSE Arca, Inc. | ||
SPDR S&P 600 Small Cap Growth ETF |
SLYG | NYSE Arca, Inc. | ||
SPDR S&P 600 Small Cap Value ETF |
SLYV | NYSE Arca, Inc. | ||
SPDR Global Dow ETF |
DGT | NYSE Arca, Inc. | ||
SPDR Dow Jones REIT ETF |
RWR | NYSE Arca, Inc. | ||
SPDR S&P ® Bank ETF |
KBE | NYSE Arca, Inc. | ||
SPDR S&P Capital Markets ETF |
KCE | NYSE Arca, Inc. | ||
SPDR S&P Insurance ETF |
KIE | NYSE Arca, Inc. | ||
SPDR NYSE Technology ETF |
XNTK | NYSE Arca, Inc. | ||
SPDR S&P Dividend ETF |
SDY | NYSE Arca, Inc. | ||
SPDR S&P Aerospace & Defense ETF |
XAR | NYSE Arca, Inc. | ||
SPDR S&P Biotech ETF |
XBI | NYSE Arca, Inc. | ||
SPDR S&P Health Care Equipment ETF |
XHE | NYSE Arca, Inc. | ||
SPDR S&P Health Care Services ETF |
XHS | NYSE Arca, Inc. | ||
SPDR S&P Homebuilders ETF |
XHB | NYSE Arca, Inc. | ||
SPDR S&P Metals & Mining ETF |
XME | NYSE Arca, Inc. | ||
SPDR S&P Oil & Gas Equipment & Services ETF |
XES | NYSE Arca, Inc. | ||
SPDR S&P Oil & Gas Exploration & Production ETF |
XOP | NYSE Arca, Inc. | ||
SPDR S&P Pharmaceuticals ETF |
XPH | NYSE Arca, Inc. | ||
SPDR S&P Retail ETF |
XRT | NYSE Arca, Inc. | ||
SPDR S&P Semiconductor ETF |
XSD | NYSE Arca, Inc. | ||
SPDR S&P Software & Services ETF |
XSW | NYSE Arca, Inc. | ||
SPDR S&P Telecom ETF |
XTL | NYSE Arca, Inc. | ||
SPDR S&P Transportation ETF |
XTN | NYSE Arca, Inc. | ||
SPDR S&P Regional Banking ETF |
KRE | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF |
BIL | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
ITE | NYSE Arca, Inc. | ||
SPDR Portfolio Long Term Treasury ETF |
SPTL | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays TIPS ETF |
IPE | NYSE Arca, Inc. | ||
SPDR Portfolio Aggregate Bond ETF |
SPAB | NYSE Arca, Inc. | ||
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF |
TFI | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays International Treasury Bond ETF |
BWX | NYSE Arca, Inc. | ||
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
SHM | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays High Yield Bond ETF |
JNK | NYSE Arca, Inc. | ||
SPDR FTSE International Government Inflation-Protected Bond ETF |
WIP | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF |
BWZ | NYSE Arca, Inc. | ||
SPDR Portfolio Intermediate Term Corporate Bond ETF |
SPIB | NYSE Arca, Inc. | ||
SPDR Portfolio Long Term Corporate Bond ETF |
SPLB | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays Convertible Securities ETF |
CWB | NYSE Arca, Inc. |
SPDR Bloomberg Barclays Mortgage Backed Bond ETF |
MBG | NYSE Arca, Inc. | ||
SPDR Wells Fargo Preferred Stock ETF |
PSK | NYSE Arca, Inc. | ||
SPDR Portfolio Short Term Corporate Bond ETF |
SPSB | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays International Corporate Bond ETF |
IBND | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF |
EBND | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays Corporate Bond ETF |
CBND | NYSE Arca, Inc. | ||
SPDR Nuveen S&P High Yield Municipal Bond ETF |
HYMB | NYSE Arca, Inc. | ||
SPDR Portfolio Short Term Treasury ETF |
SPTS | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
FLRN | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays Short Term High Yield Bond ETF |
SJNK | NYSE Arca, Inc. | ||
SPDR ICE BofAML Crossover Corporate Bond ETF |
CJNK | NYSE Arca, Inc. | ||
SPDR S&P 1500 Value Tilt ETF |
VLU | NYSE Arca, Inc. | ||
SPDR S&P 1500 Momentum Tilt ETF |
MMTM | NYSE Arca, Inc. | ||
SPDR SSGA US Large Cap Low Volatility Index ETF |
LGLV | NYSE Arca, Inc. | ||
SPDR SSGA US Small Cap Low Volatility Index ETF |
SMLV | NYSE Arca, Inc. | ||
SPDR Bloomberg Barclays 1-10 Year TIPS ETF |
TIPX | NYSE Arca, Inc. | ||
SPDR Portfolio Small Cap ETF |
SPSM | NYSE Arca, Inc. | ||
SPDR S&P 500 Buyback ETF |
SPYB | NYSE Arca, Inc. | ||
SPDR MSCI USA StrategicFactors ETF |
QUS | NYSE Arca, Inc. | ||
SPDR Portfolio S&P 500 High Dividend ETF |
SPYD | NYSE Arca, Inc. | ||
SPDR S&P 500 Fossil Fuel Reserves Free ETF |
SPYX | NYSE Arca, Inc. | ||
SPDR Russell 1000 Yield Focus ETF |
ONEY | NYSE Arca, Inc. | ||
SPDR Russell 1000 Momentum Focus ETF |
ONEO | NYSE Arca, Inc. | ||
SPDR Russell 1000 Low Volatility Focus ETF |
ONEV | NYSE Arca, Inc. | ||
SPDR FactSet Innovative Technology ETF |
XITK | NYSE Arca, Inc. | ||
SPDR SSGA Gender Diversity Index ETF |
SHE | NYSE Arca, Inc. | ||
SPDR Dorsey Wright Fixed Income Allocation ETF |
DWFI |
NASDAQ Stock
Market LLC |
||
SPDR S&P Technology Hardware ETF |
XTH | NYSE Arca, Inc. | ||
SPDR S&P Internet ETF |
XWEB | NYSE Arca, Inc. | ||
SPDR Kensho Intelligent Structures ETF |
XKII | NYSE Arca, Inc. | ||
SPDR Kensho Smart Mobility ETF |
XKST | NYSE Arca, Inc. | ||
SPDR Kensho Future Security ETF |
XKFS | NYSE Arca, Inc. | ||
SPDR Kensho Clean Power ETF |
XKCP | NYSE Arca, Inc. | ||
SPDR Kensho Final Frontiers ETF |
XKFF | NYSE Arca, Inc. | ||
SPDR Kensho New Economies Composite ETF |
KOMP | NYSE Arca, Inc. | ||
Effective With SEC, But Not Operational |
||||
SPDR S&P Commercial Paper ETF |
CPZ | |||
SPDR S&P Agency Bond ETF |
||||
SPDR Bloomberg Barclays Corporate Industrial Bond ETF |
||||
SPDR Bloomberg Barclays Corporate Financial Bond ETF |
||||
SPDR Bloomberg Barclays Corporate Utilities Bond ETF |
||||
SPDR Bloomberg Barclays CMBS ETF |
||||
SPDR Bloomberg Barclays Global Convertible Securities ETF |
GCWB | |||
SPDR Bloomberg Barclays Breakeven Inflation ETF |
||||
SPDR S&P Commercial Paper ex-Financials ETF |
||||
SPDR S&P Food & Beverage ETF |
Dated October 22, 2018
Exhibit (g)(iii)
SCHEDULE OF SERIES PORTFOLIOS OF SPDR ® SERIES TRUST
Dated: October 22, 2018
Fund Name |
SPDR Portfolio Total Stock Market ETF |
SPDR Portfolio Large Cap ETF |
SPDR Portfolio S&P 500 Growth ETF |
SPDR Portfolio S&P 500 Value ETF |
SPDR Portfolio Mid Cap 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 NYSE 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 Bloomberg Barclays 1-3 Month T-Bill ETF |
SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
SPDR Portfolio Long Term Treasury ETF |
SPDR Bloomberg Barclays TIPS ETF |
SPDR Portfolio Aggregate Bond ETF |
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF |
SPDR Bloomberg Barclays International Treasury Bond ETF |
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
SPDR Bloomberg Barclays High Yield Bond ETF |
SPDR FTSE International Government Inflation-Protected Bond ETF |
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF |
SPDR Portfolio Intermediate Term Corporate Bond ETF |
SPDR Portfolio Long Term Corporate Bond ETF |
SPDR Bloomberg Barclays Convertible Securities ETF |
SPDR Bloomberg Barclays Mortgage Backed Bond ETF |
SPDR Wells Fargo Preferred Stock ETF |
SPDR Portfolio Short Term Corporate Bond ETF |
SPDR Bloomberg Barclays International Corporate Bond ETF |
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF |
SPDR Bloomberg Barclays Corporate Bond ETF |
SPDR Nuveen S&P High Yield Municipal Bond ETF |
SPDR Portfolio Short Term Treasury ETF |
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
SPDR Bloomberg Barclays Short Term High Yield Bond ETF |
SPDR ICE BofAML Crossover Corporate Bond ETF |
SPDR S&P 1500 Value Tilt ETF |
SPDR S&P 1500 Momentum Tilt ETF |
SPDR SSGA US Large Cap Low Volatility Index ETF |
SPDR SSGA US Small Cap Low Volatility Index ETF |
SPDR Bloomberg Barclays 1-10 Year TIPS ETF |
SPDR Portfolio Small Cap ETF |
SPDR S&P 500 Buyback ETF |
SPDR MSCI USA StrategicFactors ETF |
SPDR Portfolio S&P 500 High Dividend ETF |
SPDR S&P 500 Fossil Fuel Reserves Free ETF |
SPDR Russell 1000 Yield Focus ETF |
SPDR Russell 1000 Momentum Focus ETF |
SPDR Russell 1000 Low Volatility Focus ETF |
SPDR FactSet Innovative Technology ETF |
SPDR SSGA Gender Diversity Index ETF |
SPDR Dorsey Wright Fixed Income Allocation ETF |
SPDR S&P Technology Hardware ETF |
SPDR S&P Internet ETF |
SPDR Kensho Intelligent Structures ETF |
SPDR Kensho Smart Mobility ETF |
SPDR Kensho Future Security ETF |
SPDR Kensho Clean Power ETF |
SPDR Kensho Final Frontiers ETF |
SPDR Kensho New Economies Composite ETF |
Exhibit (h)(i)(2)
ADMINISTRATION AGREEMENT
SCHEDULE A
Listing of Funds
SPDR Series Trust
OPERATIONAL ETFS
SPDR Portfolio Total Stock Market ETF
SPDR Portfolio Large Cap ETF
SPDR Portfolio Small Cap ETF
SPDR Portfolio S&P 500 Growth ETF
SPDR Portfolio S&P 500 Value ETF
SPDR Portfolio Mid Cap 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 NYSE 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 SSGA US Large Cap Low Volatility Index ETF
SPDR SSGA US Small Cap Low Volatility Index ETF
SPDR Wells Fargo Preferred Stock ETF
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF
SPDR Bloomberg Barclays TIPS ETF
SPDR Bloomberg Barclays 1-10 Year TIPS ETF
SPDR Portfolio Short Term Treasury ETF
SPDR Bloomberg Barclays Intermediate Term Treasury ETF
SPDR Portfolio Long Term Treasury ETF
SPDR Portfolio Short Term Corporate Bond ETF
SPDR Portfolio Intermediate Term Corporate Bond ETF
SPDR Portfolio Long Term Corporate Bond ETF
SPDR Bloomberg Barclays Corporate Bond ETF
SPDR Bloomberg Barclays Convertible Securities ETF
SPDR Bloomberg Barclays Mortgage Backed Bond ETF
SPDR Portfolio Aggregate Bond ETF
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF
SPDR Nuveen S&P High Yield Municipal Bond ETF
SPDR FTSE International Government Inflation-Protected Bond ETF
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF
SPDR Bloomberg Barclays International Treasury Bond ETF
SPDR Bloomberg Barclays International Corporate Bond ETF
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF
SPDR Bloomberg Barclays High Yield Bond ETF
SPDR Bloomberg Barclays Short Term High Yield Bond ETF
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF
SPDR ICE BofAML Crossover Corporate Bond ETF
SPDR S&P 500 Buyback ETF
SPDR MSCI USA StrategicFactors ETF
SPDR Portfolio S&P 500 High Dividend ETF
SPDR S&P 500 Fossil Fuel Reserves Free ETF
SPDR Russell 1000 Yield Focus ETF
SPDR Russell 1000 Momentum Focus ETF
SPDR Russell 1000 Low Volatility Focus ETF
SPDR FactSet Innovative Technology ETF
SPDR SSGA Gender Diversity Index ETF
SPDR Dorsey Wright Fixed Income Allocation ETF
SPDR S&P Technology Hardware ETF
SPDR S&P Internet ETF
SPDR Kensho Intelligent Structures ETF
SPDR Kensho Smart Mobility ETF
SPDR Kensho Future Security ETF
SPDR Kensho Clean Power ETF
SPDR Kensho Final Frontiers ETF
SPDR Kensho New Economies Composite ETF
SHELF ETFS
SPDR S&P Food & Beverage ETF
SPDR S&P Commercial Paper ETF
SPDR S&P Agency Bond ETF
SPDR Bloomberg Barclays Corporate Bond ETF
SPDR Bloomberg Barclays Corporate Industrial Bond ETF
SPDR Bloomberg Barclays Corporate Financial Bond ETF
SPDR Bloomberg Barclays Corporate Utilities Bond ETF
SPDR Bloomberg Barclays CMBS ETF
SPDR Bloomberg Barclays Global Convertible Securities ETF
SPDR Bloomberg Barclays Breakeven Inflation ETF
SPDR S&P Commercial Paper ex-Financials ETF
[REDACTED]
As of October 22, 2018
Exhibit (h)(ii)(2)
EXECUTION COPY
AMENDMENT TO MASTER SUB-ADMINISTRATION AGREEMENT
This Amendment to the Master Sub-Administration Agreement is made as of June 29, 2018 (the Amendment) 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), and shall be effective as set forth in Section 2 below. Capitalized terms used in this Amendment without definition shall have the respective meanings ascribed to such terms in the Agreement (as defined below).
WHEREAS, the Sub-Administrator and the Administrator entered into a Master Sub-Administration Agreement dated as of June 1, 2015 (as amended, supplemented, restated or otherwise modified from time to time, the Agreement); and
WHEREAS, the parties hereto wish to amend the Agreement as set forth below.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree to amend the Agreement, pursuant to the terms thereof, as follows:
1. |
The Agreement is hereby amended as follows: |
A. The language set forth in Section 5 of the Agreement is hereby amended and restated as new Schedule B1 to the Agreement.
B. Paragraphs e. and f. of such new Schedule B1 are hereby amended and restated as follows:
e. Prepare for the review by designated officer(s) of the Trust financial information regarding the Funds that will be included in the Funds semi-annual and annual shareholder reports, and other quarterly reports (as mutually agreed upon), including tax footnote disclosures where applicable;
f. Prepare for the review by designated officer(s) of the Trust financial information required by Form N-1A, proxy statements and such other reports, forms or filings as may be mutually agreed upon;
C. A new Section 5 is hereby added to the Agreement as follows:
The Sub-Administrator shall provide the services as listed in this Section and on Schedule B, subject to the authorization and direction of the Administrator and, in each case where appropriate, the review and comment by the Trusts independent accountants and legal counsel and in accordance with procedures which may be established from time to time between the Sub-Administrator and the Administrator.
The Sub-Administrator shall perform such other services for the Administrator that are mutually agreed to by the parties from time to time, for which the Administrator will pay such fees as may be mutually agreed upon, including the Sub-Administrators reasonable out-of-pocket expenses. The provision of such services shall be subject to the terms and conditions of this Agreement.
The Sub-Administrator shall provide the office facilities and the personnel determined by it to perform the services contemplated herein.
D. The third paragraph of Section 6 is hereby amended and restated as follows:
The Administrator and/or the Trust, as the case may be will bear all expenses that are incurred in its and the Trusts operations and not specifically assumed by the Sub-Administrator. For the avoidance of doubt, the Trust and Administrator 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 or Form N-PORT (as applicable), Form N-PX, Form N-MFP, Form N-SAR or Form N-CEN (as applicable), 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 the Administrator 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 or Form N-PORT (as applicable), Form N-PX, Form N-MFP and Form N-SAR or Form N-CEN (as applicable), 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.
-2-
E. A new paragraph is hereby added to Section 7 of the Agreement immediately following the first paragraph as follows:
Pursuant to other agreements now or at any time in effect between the Administrator or any Trust (or any of the Trusts investment manager or investment advisor, on its behalf) and the Sub-Administrator or its affiliates (the Other State Street Agreements) in any capacity other than as Sub-Administrator hereunder (in such other capacities, State Street), State Street may be in possession of certain information and data relating to the Trust and/or the Funds that is necessary to provide the Services, including Form N-PORT-Related Services. The Administrator hereby acknowledges and agrees that this Section 7 of the Agreement serves as its consent and instruction, or Proper Instruction, as the case may be, for itself and on behalf of the Trust and each Fund under and pursuant to such Other State Street Agreements for State Street to provide or otherwise make available (including via platforms such as my.statestreet.com) to the Sub-Administrator, Trust and Fund information such as net asset values and information relating to the net assets of the Trust and Funds, holdings and liquidity reports, market value and other information and data related to the Trust and the Funds for purposes of the Sub-Administrator fulfilling its obligations under this Agreement.
F Existing Schedule B is hereby renamed Schedule B4.
G. A new Schedule B is hereby added to the Agreement as set forth in Exhibit 1 to this Amendment.
H. A new Schedule B6 and Annex I thereto are hereby added to the Agreement as set forth in Exhibit 1 to this Amendment.
2. |
The provisions of this Amendment (and the terms of the Agreement as modified hereby) shall be or become effective as follows: |
A. |
Sections 1.A., 1.C., 1.D., 1.E., 1.F., 1.G. and 1.H. of this Amendment and the preparation and onboarding activities related to the Services, including those set forth in Section II of Schedule B6, shall be effective as of the date of this Amendment as set forth above. |
B. |
Section 1.B. and the data aggregation, preparation of data sets and recordkeeping activities of the Services (as defined in Schedule B6) shall become effective as of the first day of the first month in which the Trust is required by applicable law (including any rules and regulations promulgated thereunder and in accordance with any interpretive releases issued by the U.S. Securities and Exchange Commission) to aggregate data and maintain records consistent with Form N-PORT (currently anticipated to be June 2018). |
C. |
The filing obligations of the Services shall become effective as of the first day of the first month in which the Trust is required by applicable law (including any rules and regulations promulgated thereunder and in accordance with any interpretive releases issued by the U.S. Securities and Exchange Commission) to file Form N-PORT (currently anticipated to be April 2019). |
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3. |
Notwithstanding the first two sentences of Section 13 of the Agreement, the Administrator agrees to be bound to receive from the Sub-Administrator the Form N-PORT Support Services and N-CEN and the other services as described in Schedule B6 attached hereto for twelve (12)) months following the date of this Amendment. The parties further agree that the foregoing commitment will be deemed the term for the Form N-PORT and Form N-CEN Support Services and that following the expiration of such term, the Renewal Term provisions of Section 13 will apply to the Form N-PORT and Form N-CEN Support Services in the same way as such provisions apply to all other services under the Agreement. |
4. |
Except as specifically amended hereby, all other terms and conditions of the Agreement shall remain in full force and effect. This Amendment, including Exhibit 1, is incorporated in its entirety into the Agreement, and this Amendment and said Agreement shall be read and interpreted together as the Agreement. |
5. |
This Amendment 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. |
6. |
This Amendment may be executed in separate counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same instrument. Counterparts may be executed in either original or electronically transmitted form (e.g., faxes or emailed portable document format (PDF) form), and the parties hereby adopt as original any signatures received via electronically transmitted form. |
[ Remainder of page intentionally left blank ]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their officers designated below as of the date first written above.
SSGA FUNDS MANAGEMENT, INC. |
By: |
/s/ Bruce Rosenberg |
|
Name: | Bruce Rosenberg | |
Title: | Managing Director |
STATE STREET BANK AND TRUST COMPANY | ||
By: |
/s/ Andrew Erickson |
|
Name: | Andrew Erickson | |
Title: | Executive Vice President |
EXHIBIT 1
MASTER SUB-ADMINISTRATION AGREEMENT
SCHEDULE B
LIST OF SERVICES
I. |
Fund Administration Services as described in Schedule B1 attached hereto; |
II. |
[Reserved]; |
III. |
[Reserved]; |
IV. |
[Reserved;] |
V. |
[Reserved]; and |
VI. |
Form N-PORT and Form N-CEN Support Services as described in Schedule B6 attached hereto. |
Schedule B6
Form N-PORT (the Form N-PORT Services) and Form N-CEN (the Form N-CEN Services) Support Services (collectively, the Form N-PORT and Form N-CEN Support Services), Liquidity Risk Measurement Services and Quarterly Portfolio of Investments Services (collectively, with the Form N-PORT and Form N-CEN Support Services, and for purposes of this Schedule B6, the Services)
I. |
The Services . |
(a) |
Standard N-PORT and N-CEN Reporting Solution (Data and Filing) : |
|
Subject to the receipt of all required data, documentation, assumptions, information and assistance from the Administrator (including from any third parties with whom the Administrator will need to coordinate in order to produce such data, documentation, and information), the Sub-Administrator will use required data, documentation, assumptions, information and assistance from the Administrator, the Sub-Administrators internal systems and, in the case of Administrators not sub-administered by the Sub-Administrator or its affiliates, third party administrators, sub-administrators or other data providers, including but not limited to Third Party Data (as defined below) (collectively, the Required Data), to perform necessary data aggregations (including any applicable aggregation of risk metrics) and calculations and prepare, as applicable: (i) a monthly draft Form N-PORT standard template for review and approval by the Administrator and (ii) annual updates of Form N-CEN for review and approval by the Administrator. |
|
The Administrator acknowledges and agrees that it will be responsible for reviewing and approving each such draft N-PORT template and N-CEN update. |
|
Following review and final approval by the Administrator of each such draft Form N-PORT template and N-CEN update, and at the direction of and on behalf of the Administrator, the Sub-Administrator will (i) produce an .XML formatted file of the completed Form N-PORT and Form N-CEN and maintain a record thereof in accordance with this Agreement and (ii) when required, electronically submit such filing to the SEC. |
The Form N-PORT Services will be provided to the Trust and each Fund of the Trust as set forth in the attached Annex 1 , which shall be executed by the Sub-Administrator and the Administrator. The Form N-CEN Services will be provided to the Trust as set forth in the attached Annex 1 . Annex 1 may be updated from time to time upon the written request of the Administrator and by virtue of an updated Annex 1 that is signed by both parties.
(b) |
Quarterly Portfolio of Investments Services : |
|
Subject to the receipt of all Required Data, and as a component of the Form N-PORT and Form N-CEN Support Services, the Sub-Administrator will use such Required Data from the Funds, the Sub-Administrators internal systems and other data providers to prepare a draft portfolio of investments (the Portfolio of Investments), compliant with GAAP as of the Trusts first and third fiscal quarter-ends. |
|
Following review and final approval by the Administrator of each such draft Portfolio of Investments, and at the direction of the Administrator and on behalf the Trust, the Sub-Administrator will attach each Portfolio of Investments to the first and third fiscal quarter-end N-PORT filing that is submitted electronically to the SEC. |
(c) |
Liquidity Risk Measurement Services : |
The Sub-Administrator will provide the following liquidity risk measurement services (Liquidity Risk Measurement Services) to the Trust:
|
As applicable, the Sub-Administrator will provide the Trust and each Fund with Liquidity Risk Measurement Services that will provide calculation of security level exposure, characteristics, liquidity analytics, including days to liquidate, liquidity scores, fixed income cost to liquidate, stress testing and redemption flow analysis. Liquidity analytics will be calculated daily, weekly, or monthly (as per written agreement between the Sub-Administrator and the Administrator) and, as applicable, aggregated monthly for purposes of inclusion in the Sub-Administrators standard N-PORT filing template. Services also will include the Sub-Administrators standard liquidity Trust profile report and online access to the Sub-Administrators dynamic risk reporting tools via my.statestreet.com which will enable the Administrator to analyze and generate risk reporting. |
The Liquidity Risk Measurement Services will be provided to the Trust and each Fund as set forth in the attached Annex 1 , which shall be executed by the Sub-Administrator and the Administrator. Annex 1 may be updated from time to time upon the written request of the Administrator and by virtue of an updated Annex 1 that is signed by both parties.
II. |
Administrator Duties, Representations and Covenants in Connection with the Services . |
The provision of the Services to the Administrator by the Sub-Administrator is subject to the following terms and conditions:
1. The parties acknowledge and agree on the following matters:
The Services depend, directly or indirectly, on: (i) Required Data and (ii) information concerning the Administrator, the Trust, the Funds or their affiliates or any pooled vehicle, security or other investment or portfolio regarding which the Administrator or its affiliates provide services or is otherwise associated (Administrator Entities) that is generated or aggregated by the Sub-Administrator or its affiliates in connection with services performed on the Administrators
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behalf or otherwise prepared by the Sub-Administrator (State Street Data, together with Required Data and Third Party Data (as defined below), Services-Related Data). The Sub-Administrators obligations, responsibilities and liabilities with respect to any State Street Data used in connection with other services received by the Administrator shall be as provided in such respective other agreements between the Sub-Administrator or its affiliates and the Administrator relating to such other services (e.g., administration and/or custody services, etc.) from which the State Street Data is derived or sourced (Other Administrator Agreements). Nothing in this Agreement or any service schedule(s) shall limit or modify the Sub-Administrators or its affiliates obligations to the Administrator under the Other Administrator Agreements.
In connection with the provision of the Services by the Sub-Administrator, the Administrator acknowledges and agrees that it will be responsible for providing the Sub-Administrator with any information requested by the Sub-Administrator as necessary to perform the Services, including, but not limited to, the following:
(A) Arranging for the regular provision of all Required Data (including State Street Data, where applicable) and related information to the Sub-Administrator, in formats compatible with Sub-Administrator-provided data templates including, without limitation, Required Data and the information and assumptions required by the Sub-Administrator in connection with a Trust reporting profile and onboarding checklist, as it, or the information or assumptions required, may be revised at any time by the Sub-Administrator, in its discretion (collectively, the Onboarding Checklist) and such other forms and templates as may be used by the Sub-Administrator for such purposes from time to time, for the Trust and Funds with respect to which services are provided under this Agreement, including but not limited to those to be reported on Form N-PORT and Form N-CEN (as determined by the Administrator), including, without limitation, arranging for the provision of data from the Administrator, its affiliates, third party administrators, prime brokers, custodians, and other relevant parties. If and to the extent that Required Data is already accessible to the Sub-Administrator (or any of its affiliates) in its capacity as administrator to one or more Administrators, the Sub-Administrator and the Administrator will agree on the scope of the information to be extracted from the Sub-Administrators or any of its affiliates systems for purposes of the Sub-Administrators provision of the Services subject to the discretion of the Sub-Administrator, and the Sub-Administrator is hereby expressly authorized to use any such information as necessary in connection with providing the Services hereunder; and
(B) Providing all required information and assumptions not otherwise included in Administrator data and assumptions provided pursuant to Section 1(A) above, including but not limited to the Required Data, as may be required in order for the Sub-Administrator to provide the Services.
The following are examples of certain types of information that the Administrator is likely to be required to provide pursuant to Sections 1(A) and 1(B) above, and the Administrator hereby acknowledges and understands that the following categories of information are merely
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illustrative examples, are by no means an exhaustive list of all such required information, and are subject to change as a result of any amendments to Form N-PORT and Form N-CEN or any changes in requirements relating to the provision of Liquidity Risk Measurement Services:
|
SEC filing classification of the Trust (i.e., small or large filer); |
|
Identification of any data sourced from third parties; |
|
Identification of any securities reported as Miscellaneous; and |
|
Any Explanatory Notes included in N-PORT Section E. |
2. The Administrator acknowledges that it has provided, or prior to the commencement of Services will have provided, to the Sub-Administrator all material assumptions used by the Administrator or that are expected to be used by the Administrator in connection with the completion of Form N-PORT and Form N-CEN and the provision of the Services and that it has approved, or prior to the commencement of Services will have provided, all material assumptions used by the Sub-Administrator in the provision of the Services prior to the first use of the Services. The Administrator will also be responsible for promptly notifying the Sub-Administrator of any changes in any such material assumptions previously notified to the Sub-Administrator by the Administrator or otherwise previously approved by the Administrator in connection with the Sub-Administrators provision of the Services. The Administrator acknowledges that the completion of Form N-PORT and Form N-CEN and the provision of the Services and the data required thereby, requires the use of material assumptions in connection with many different categories of information and data, and the use and/or reporting thereof, including, but not limited to the following:
|
Investment classification of positions; |
|
Assumptions necessary in converting data extracts; |
|
General operational and process assumptions used by the Sub-Administrator in performing the Services; and |
|
Assumptions specific to the Trust and the Funds. |
The Administrator hereby acknowledges and understands that the foregoing categories of information that may involve the use of material assumptions are merely illustrative examples of certain subject matter areas in relation to which the Administrator (and/or the Sub-Administrator on its behalf in connection with the Services) may rely on various material assumptions, and are by no means an exhaustive list of all such subject matter areas.
3. The Administrator acknowledges and agrees on the following matters:
(A) The Administrator has independently reviewed the Services (including, without limitation, the assumptions, market data, securities prices, securities valuations, tests and calculations used in the Services), and it has determined that the Services are suitable for its and the Trusts purposes. None of the Sub-Administrator or its affiliates, nor their respective
-4-
officers, directors, employees, representatives, agents or service providers (collectively, including the Sub-Administrator, State Street Parties) make any express or implied warranties or representations with respect to the Services or otherwise.
(B) The Administrator assumes full responsibility for complying with all securities, tax, commodities and other laws, rules and regulations applicable to it, the Trust and the Funds. The Sub-Administrator is not providing, and the Services do not constitute, legal, tax, investment, or regulatory advice, or accounting or auditing services advice. Unless otherwise agreed to in writing by the parties to this Agreement, the Services are of general application and the Sub-Administrator is not providing any customization, guidance, or recommendations. Where the Administrator uses Services to comply with any law, regulation, agreement, or other Administrator obligation applicable to it, the Trust or the Funds, the Sub-Administrator makes no representation that any Service complies with such law, regulation, agreement, or other obligation, and the Sub-Administrator has no obligation of compliance with respect thereto.
(C) The Administrator may use the Services and any reports, charts, graphs, data, analyses and other results generated by the Sub-Administrator in connection with the Services and provided by the Sub-Administrator to the Administrator (Materials; provided, that the term Materials as used in this Schedule B6 shall not include the Trust or Funds underlying data unmodified by the Services or the as-filed versions of the Form N-PORT, Form N-CEN and Portfolio of Investments filings) as follows: (a) for the internal business purposes of the Administrator, the Trust or the relevant Fund relating to the applicable Service or (b) for submission to the U.S. Securities and Exchange Commission, as required, of a Form N-PORT filing and a Form N-CEN update, including any Portfolio of Investments, if applicable. The Administrator may also redistribute the Materials, or an excerpted portion thereof, to the Trusts board, investment managers, investment advisers, agents, clients, investors or participants, as applicable, that have a reasonable interest in the Materials in connection with their relationship with the Trust (each a Permitted Person); provided, however, (i) neither the Administrator nor Trust may charge a fee, profit, or otherwise benefit from the redistribution of Materials to Permitted Persons, (ii) data provided by third party sources such as but not limited to market or index data (Third Party Data) contained in the Materials may not be redistributed other than Third Party Data that is embedded in the calculations presented in the Materials and not otherwise identifiable as Third Party Data, except to the extent the Administrator has separate license rights with respect to the use of such Third Party Data, or (iii) neither the Administrator nor Trust may use the Services or Materials in any way to compete or enable any third party to compete with the Sub-Administrator. No Permitted Person shall have any further rights of use or redistribution with respect to, or any ownership rights in, the Materials or any excerpted portion thereof.
Except as expressly provided in this Section 3(C), the Administrator, the Trust, the Funds, any of their affiliates, or any of their respective officers, directors, employees, investment managers, investment advisers, agents or any other third party, including any client of, or investor or participant in the relevant Fund or any Permitted Persons (collectively, including the Trust, Administrator Parties), may not directly or indirectly, sell, rent, lease, license or sublicense,
-5-
transmit, transfer, distribute or redistribute, disclose display, or provide, or otherwise make available or permit access to, all or any part of the Services or the Materials (including any State Street Data or Third Party Data contained therein, except with respect to Third Party Data to the extent the Administrator has separate license rights with respect to the use of such Third Party Data). Without limitation, Administrator Parties shall not themselves nor permit any other person to in whole or in part (i) modify, enhance, create derivative works, reverse engineer, decompile, decompose or disassemble the Services or the Materials; (ii) make copies of documents provided through the Services, the Materials or portions thereof; (iii) secure any source code used in the Services, or attempt to use any portions of the Services in any form other than machine readable object code; (iv) commercially exploit or otherwise use the Services or the Materials for the benefit of any third party in a service bureau or software-as-a-service environment (or similar structure), or otherwise use the Services or the Materials to perform services for any third party, including for, to, or with consultants and independent contractors; or (v) attempt any of the foregoing or otherwise use the Services or the Materials for any purpose other than as expressly authorized under this Agreement.
(D) The Administrator shall limit the access and use of the Services and the Materials by any Administrator Parties to a need-to-know basis and, in connection with its obligations under this Agreement, the Administrator shall be responsible and liable for all acts and omissions of any Administrator Parties.
(E) The Services, the Materials (other than Third Party Data) and all confidential information of the Sub-Administrator (as confidential information is defined in the Agreement and other than Third Party Data and Required Data), are the sole property of the Sub-Administrator. Neither the Administrator nor Trust has any rights or interests with respect to all or any part of the Services, the Materials or the Sub-Administrators confidential information, other than its use and redistribution rights expressly set forth in Section 3(C) herein. The Administrator for itself and on behalf of the Trust and the Funds, automatically and irrevocably assigns to the Sub-Administrator any right, title or interest that it, the Trust or the Funds has, or may be deemed to have, in the Services, the Materials or the Sub-Administrators confidential information, including, for the avoidance of doubt and without limitation, any Administrator Party feedback, ideas, concepts, comments, suggestions, techniques or know-how shared with the Sub-Administrator (collectively, Feedback) and the State Street Parties shall be entitled to incorporate any Feedback in the Services or the Materials or to otherwise use such Feedback for its own commercial benefit without obligation to compensate the Administrator, the Trust or the Funds.
(F) The Sub-Administrator may rely on Services-Related Data used in connection with the Services without independent verification. Services-Related Data used in the Services may not be available or may contain errors, and the Services may not be complete or accurate as a result.
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(G) The parties hereby acknowledge and agree that Section 9 of the Agreement applies to the provision of the Services under this Schedule B6.
[Remainder of Page Intentionally Left Blank]
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ANNEX I
SSGA FUNDS
Further to the Amendment dated June 29, 2018, to that certain Master Sub-Administration Agreement dated as of June 1, 2005 (the Agreement), between SSGA Funds Management, Inc. (the Administrator) and State Street Bank and Trust Company (the Sub-Administrator), the Administrator and the Sub-Administrator mutually agree to update this Annex 1 by adding/removing Funds as applicable:
Liquidity Risk Measurement Services |
FREQUENCY | |||
SSGA Master/Active Trust |
Daily. | |||
SPDR DoubleLine Emerging Markets Fixed Income ETF |
||||
SPDR DoubleLine Short Duration Total Return Tactical ETF |
||||
State Street Disciplined Global Equity Portfolio |
||||
SPDR MFS Systematic Core Equity ETF |
||||
SPDR DoubleLine Total Return Tactical ETF |
||||
SPDR MFS Systematic Growth Equity ETF |
||||
SPDR MFS Systematic Value Equity ETF |
||||
SPDR SSGA Multi-Asset Real Return ETF |
||||
SPDR SSGA Income Allocation ETF |
||||
SPDR SSGA Ultra Short Term Bond ETF |
||||
SPDR SSGA Global Allocation ETF |
||||
Blackstone/GSO Senior Loan Portfolio |
||||
SPDR Blackstone / GSO Senior Loan ETF |
||||
SPDR Index/Series Shares Funds |
Daily. | |||
SPDR S&P 1500 Value Tilt ETF |
||||
SPDR S&P 1500 Momentum Tilt ETF |
||||
SPDR SSGA US Large Cap Low Volatility Index ETF |
||||
SPDR SSGA US Small Cap Low Volatility Index ETF |
||||
SPDR Portfolio Small Cap ETF |
||||
SPDR Portfolio S&P 500 High Dividend ETF |
||||
SPDR(R) MSCI ACWI EX-US ETF |
||||
SPDR(R) Dow Jones Global Real Estate ETF |
||||
SPDR (R) S&P (R) International Dividend ETF |
||||
SPDR(R) S&P(R) Global Natural Resources ETF |
||||
SPDR(R) S&P Global Infrastructure Etf |
||||
SPDR(R) Portfolio Developed World ex-US ETF |
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SPDR(R) Portfolio Emerging Markets Etf |
SPDR(R) S&P(R) Emerging Asia Pacific Etf |
SPDR(R) S&P(R) CHINA ETF |
SPDR(R) S&P(R) International Small Cap ETF |
SPDR(R) S&P(R) Emerging Markets Small Cap Etf |
SPDR(R) S&P(R) Emerging Markets Dividend ETF |
SPDR(R) Dow Jones International Real Estate ETF |
SPDR S&P North American Natural Resources ETF |
SPDR S&P Global Dividend ETF |
SPDR S&P 500(R) Buyback ETF |
SPDR(R) NYSE Technology ETF |
SPDR(R) S & P 600 Small Cap Growth ETF |
SPDR(R) S & P 600 Small Cap Value ETF |
SPDR(R) Portfolio S&P 500 Growth ETF |
SPDR(R) Portfolio S&P 500 Value ETF |
SPDR(R) Dow Jones REIT ETF |
SPDR(R) Global Dow ETF |
SPDR(R) Portfolio Total Stock Market ETF |
SPDR(R) S&P(R) Homebuilders ETF |
SPDR(R) S&P(R) Biotech ETF |
SPDR(R) S&P(R) Semiconductor ETF |
SPDR(R) Wells Fargo Preferred Stock ETF |
SPDR(R) S&P(R) Aerospace & Defense ETF |
SPDR(R) S&P(R) Health Care Equipment ETF |
SPDR(R) S&P(R) Health Care Services ETF |
SPDR(R) S&P(R) Software & Services ETF |
SPDR(R) S&P(R) Oil & Gas Equipment & Services ETF |
SPDR(R) S&P(R) Oil & Gas Exploration & Production ETF |
SPDR(R) S&P(R) Pharmaceuticals ETF |
SPDR(R) S&P(R) Retail ETF |
SPDR(R) S&P(R) Telecom ETF |
SPDR(R) S&P(R) Transportation ETF |
SPDR(R) S&P Regional Banking ETF |
SPDR(R) S&P(R) Metals & Mining ETF |
SPDR(R) Portfolio Large Cap ETF |
SPDR(R) Portfolio Mid Cap ETF |
SPDR(R) S & P 400 Mid Cap Value ETF |
SPDR(R) S & P 400 Mid Cap Growth ETF |
SPDR(R) S & P 600 Small Cap ETF |
SPDR(R) S&P Bank ETF |
SPDR(R) S&P Insurance ETF |
SPDR(R) S&P Capital Markets ETF |
SPDR(R) S&P(R) Dividend ETF |
SPDR(R) Bloomberg Barclays 1-3 Month T-Bill ETF |
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SPDR(R) Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
SPDR(R) Bloomberg Barclays Intermediate Term Treasury ETF |
SPDR(R) Portfolio Long Term Treasury ETF |
SPDR(R) Bloomberg Barclays TIPS ETF |
SPDR(R) Bloomberg Barclays High Yield Bond ETF |
SPDR(R) Portfolio Aggregate Bond ETF |
SPDR(R) Bloomberg Barclays International Treasury Bond ETF |
SPDR(R) FTSE International Government Inflation-Protected Bond ETF |
SPDR(R) Nuveen Bloomberg Barclays Municipal Bond ETF |
SPDR(R) Bloomberg Barclays Emerging Markets Local Bond ETF |
SPDR(R) Bloomberg Barclays Mortgage Backed Bond ETF |
SPDR(R) Portfolio Intermediate Term Corporate Bond ETF |
SPDR(R) Portfolio Long Term Corporate Bond ETF |
SPDR(R) Bloomberg Barclays Convertible Securities ETF |
SPDR(R) Bloomberg Barclays Short Term International Treasury Bond ETF |
SPDR(R) Portfolio Short Term Corporate Bond ETF |
SPDR(R) Nuveen S&P(R) High Yield Municipal Bond ETF |
SPDR(R) Bloomberg Barclays International Corporate Bond ETF |
SPDR Bloomberg Barclays Issuer Scored Corporate Bond ETF |
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
SPDR(R) Portfolio Short Term Treasury ETF |
SPDR Bloomberg Barclays Short Term High Yield Bond ETF |
SPDR Bloomberg Barclays 1-10 Year TIPS ETF |
SPDR ICE BofAML Crossover Corporate Bond ETF |
SPDR Russell 1000 Yield Focus ETF |
SPDR Russell 1000 Momentum Focus ETF |
SPDR Russell 1000 Low Volatility Focus ETF |
SPDR FactSet Innovative Technology ETF |
SPDR SSGA Gender Diversity Index ETF |
SPDR Dorsey Wright Fixed Income Allocation ETF |
SPDR S&P Technology Hardware ETF |
SPDR S&P Internet ETF |
SPDR Kensho Intelligent Structures ETF |
SPDR Kensho Smart Mobility ETF |
SPDR Kensho Future Security ETF |
SPDR S&P 500 Fossil Fuel Reserves Free ETF |
SPDR(R) MSCI ACWI IMI ETF |
SPDR MSCI EAFE Fossil Fuel Reserves Free ETF |
SPDR MSCI Emerging Markets Fossil Fuel Reserves Free ETF |
SPDR MSCI EAFE StrategicFactors ETF |
SPDR MSCI Emerging Markets StrategicFactors ETF |
SPDR MSCI World StrategicFactors ETF |
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SPDR MSCI Canada StrategicFactors ETF |
||
SPDR MSCI Germany StrategicFactors ETF |
||
SPDR MSCI Japan StrategicFactors ETF |
||
SPDR MSCI United Kingdom StrategicFactors ETF |
||
SPDR MSCI China A Shares IMI ETF |
||
SPDR MSCI ACWI Low Carbon Target ETF |
||
SPDR MSCI USA Strategic Factors ETF |
||
SPDR(R) STOXX Europe 50(R) ETF |
||
SPDR(R) EURO STOXX 50(R) ETF |
||
SPDR EURO STOXX Small Cap ETF |
||
SSGA Funds |
Daily. | |
SSGA S&P 500 Index Fund |
||
SSGA Dynamic Small Cap Fund |
||
State Street Disciplined Emerging Markets Equity Fund |
||
SSGA International Stock Selection Fund |
||
State Street Master Funds and State Street Institutional Investment |
Daily. | |
Trust State Street Equity 500 Index Fund |
||
State Street Equity 500 Index II Portfolio |
||
State Street Global Equity ex-U.S. Index Portfolio |
||
State Street Aggregate Bond Index Portfolio |
||
State Street Small/Mid Cap Equity Index Portfolio |
||
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 Disciplined Global Equity Fund |
||
State Street Hedged International Developed Equity Index Fund |
||
State Street Small/Mid Cap Equity Index Fund |
||
State Street Emerging Markets Equity Index Fund |
||
State Street Disciplined International Equity Fund |
||
State Street Disciplined U.S. Equity Fund |
||
State Street International Value Spotlight Fund |
||
State Street Global Value Spotlight Fund |
||
State Street Asia Pacific Value Spotlight Fund |
||
State Street European Value Spotlight Fund |
||
State Street U.S. Value Spotlight Fund |
||
State Street Global Equity ex-U.S. Index Fund |
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State Street Aggregate Bond Index Fund |
||
State Street Equity 500 Index Portfolio |
||
State Street International Developed Equity Index Portfolio |
||
State Street Navigator Securities Lending Trust |
Daily. | |
State Street Navigator Securities Lending Portfolio I |
FORM N-PORT SERVICES AND QUARTERLY PORTFOLIO OF INVESTMENTS SERVICES |
Service Type: |
|
SSGA Master/Active Trust |
Standard N-PORT | |
SPDR DoubleLine Emerging Markets Fixed Income ETF |
Reporting Solution | |
SPDR DoubleLine Short Duration Total Return Tactical ETF |
(Data and Filing) | |
State Street Disciplined Global Equity Portfolio |
and Quarterly Portfolio | |
SPDR MFS Systematic Core Equity ETF |
of Investments Services | |
SPDR DoubleLine Total Return Tactical ETF |
||
SPDR MFS Systematic Growth Equity ETF |
||
SPDR MFS Systematic Value Equity ETF |
||
SPDR SSGA Multi-Asset Real Return ETF |
||
SPDR SSGA Income Allocation ETF |
||
SPDR SSGA Ultra Short Term Bond ETF |
||
SPDR SSGA Global Allocation ETF |
||
Blackstone/GSO Senior Loan Portfolio |
||
SPDR Blackstone / GSO Senior Loan ETF |
||
SPDR Index/Series Shares Funds |
Standard N-PORT | |
SPDR S&P 1500 Value Tilt ETF |
Reporting Solution | |
SPDR S&P 1500 Momentum Tilt ETF |
(Data and Filing) | |
SPDR SSGA US Large Cap Low Volatility Index ETF |
and Quarterly Portfolio | |
SPDR SSGA US Small Cap Low Volatility Index ETF |
of Investments Services | |
SPDR Portfolio Small Cap ETF |
||
SPDR Portfolio S&P 500 High Dividend ETF |
||
SPDR(R) MSCI ACWI EX-US ETF |
||
SPDR(R) Dow Jones Global Real Estate ETF |
||
SPDR (R) S&P (R) International Dividend ETF |
||
SPDR(R) S&P(R) Global Natural Resources ETF |
||
SPDR(R) S&P Global Infrastructure ETF |
||
SPDR(R) S&P(R) World ex-US ETF |
||
SPDR(R) S&P(R) Emerging Markets ETF |
||
Spdr(R) S&P(R) Emerging Asia Pacific ETF |
||
SPDR(R) S&P(R) China ETF |
||
SPDR(R) Portfolio Developed World ex-US ETF |
-12-
SPDR(R) Portfolio Emerging Markets ETF |
||
SPDR(R) S&P(R) Emerging Markets Dividend ETF |
||
SPDR(R) Dow Jones International Real Estate ETF |
||
SPDR S&P North American Natural Resources ETF |
||
SPDR S&P Global Dividend ETF |
||
SPDR S&P 500(R) Buyback ETF |
||
SPDR(R) NYSE Technology ETF |
||
SPDR(R) S & P 600 Small Cap Growth ETF |
||
SPDR(R) S & P 600 Small Cap Value ETF |
||
SPDR(R) Portfolio S&P 500 Growth ETF |
||
SPDR(R) Portfolio S&P 500 Value ETF |
||
SPDR(R) Dow Jones REIT ETF |
||
SPDR(R) Global Dow ETF |
||
SPDR(R) Portfolio Total Stock Market ETF |
||
SPDR(R) S&P(R) Homebuilders ETF |
||
SPDR(R) S&P(R) Biotech ETF |
||
SPDR(R) S&P(R) Semiconductor ETF |
||
SPDR(R) Wells Fargo Preferred Stock ETF |
||
SPDR(R) S&P(R) Aerospace & Defense ETF |
||
SPDR(R) S&P(R) Health Care Equipment ETF |
||
SPDR(R) S&P(R) Health Care Services ETF |
||
SPDR(R) S&P(R) Software & Services ETF |
||
SPDR(R) S&P(R) Oil & Gas Equipment & Services ETF |
||
SPDR(R) S&P(R) Oil & Gas Exploration & Production ETF |
||
SPDR(R) S&P(R) Pharmaceuticals ETF |
||
SPDR(R) S&P(R) Retail ETF |
||
SPDR(R) S&P(R) Telecom ETF |
||
SPDR(R) S&P(R) Transportation ETF |
||
SPDR(R) S&P Regional Banking(SM) ETF |
||
SPDR(R) S&P(R) Metals & Mining ETF |
||
SPDR(R) Portfolio Large Cap ETF |
||
SPDR(R) Portfolio Mid Cap ETF |
||
SPDR(R) S & P 400 Mid Cap Value ETF |
||
SPDR(R) S & P 400 Mid Cap Growth ETF |
||
SPDR(R) S & P 600 Small Cap ETF |
||
SPDR(R) S&P Bank ETF |
||
SPDR(R) S&P Insurance ETF |
||
SPDR(R) S&P Capital Markets ETF |
||
SPDR(R) S&P(R) Dividend ETF |
||
SPDR(R) Bloomberg Barclays 1-3 Month T-Bill ETF |
||
SPDR(R) Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
||
SPDR(R) Bloomberg Barclays Intermediate Term Treasury ETF |
||
SPDR(R) Portfolio Long Term Treasury ETF |
-13-
SPDR(R) Bloomberg Barclays TIPS ETF |
SPDR(R) Bloomberg Barclays High Yield Bond ETF |
SPDR(R) Portfolio Aggregate Bond ETF |
SPDR(R) Bloomberg Barclays International Treasury Bond ETF |
SPDR(R) FTSE International Government Inflation-Protected Bond ETF |
SPDR(R) Nuveen Bloomberg Barclays Municipal Bond ETF |
SPDR(R) Bloomberg Barclays Emerging Markets Local Bond ETF |
SPDR(R) Bloomberg Barclays Mortgage Backed Bond ETF |
SPDR(R) Portfolio Intermediate Term Corporate Bond ETF |
SPDR(R) Portfolio Long Term Corporate Bond ETF |
SPDR(R) Bloomberg Barclays Convertible Securities ETF |
SPDR(R) Bloomberg Barclays Short Term International Treasury Bond ETF |
SPDR(R) Portfolio Short Term Corporate Bond ETF |
SPDR(R) Nuveen S&P(R) High Yield Municipal Bond ETF |
SPDR(R) Bloomberg Barclays International Corporate Bond ETF |
SPDR Bloomberg Barclays Issuer Scored Corporate Bond ETF |
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
SPDR(R) Portfolio Short Term Treasury ETF |
SPDR Bloomberg Barclays Short Term High Yield Bond ETF |
SPDR Bloomberg Barclays 1-10 Year TIPS ETF |
SPDR ICE BofAML Crossover Corporate Bond ETF |
SPDR Russell 1000 Yield Focus ETF |
SPDR Russell 1000 Momentum Focus ETF |
SPDR Russell 1000 Low Volatility Focus ETF |
SPDR FactSet Innovative Technology ETF |
SPDR SSGA Gender Diversity Index ETF |
SPDR Dorsey Wright Fixed Income Allocation ETF |
SPDR S&P Technology Hardware ETF |
SPDR S&P Internet ETF |
SPDR Kensho Intelligent Structures ETF |
SPDR Kensho Smart Mobility ETF |
SPDR Kensho Future Security ETF |
SPDR S&P 500 Fossil Fuel Reserves Free ETF |
SPDR(R) MSCI ACWI IMI ETF |
SPDR MSCI EAFE Fossil Fuel Reserves Free ETF |
SPDR MSCI Emerging Markets Fossil Fuel Reserves Free ETF |
SPDR MSCI EAFE Strategic Factors ETF |
SPDR MSCI Emerging Markets StrategicFactors ETF |
SPDR MSCI World StrategicFactors ETF |
SPDR MSCI Canada StrategicFactors ETF |
SPDR MSCI Germany StrategicFactors ETF |
-14-
SPDR MSCI Japan StrategicFactors ETF |
||
SPDR MSCI United Kingdom StrategicFactors ETF |
||
SPDR MSCI China A Shares IMI ETF |
||
SPDR MSCI ACWI Low Carbon Target ETF |
||
SPDR MSCI USA Strategic Factors ETF |
||
SPDR(R) STOXX Europe 50(R) ETF |
||
SPDR(R) EURO STOXX 50(R) ETF |
||
SPDR EURO STOXX Small Cap ETF |
||
SSGA Funds SSGA S&P 500 Index Fund SSGA Dynamic Small Cap Fund State Street Disciplined Emerging Markets Equity Fund SSGA International Stock Selection Fund |
Standard N-PORT Reporting Solution (Data and Filing) and Quarterly Portfolio of Investments Services |
|
State Street Master Funds and State Street Institutional Investment Trust
State Street Equity 500 Index Fund State Street Equity 500 Index II Portfolio |
Standard N-PORT Reporting Solution (Data and Filing) and Quarterly Portfolio of Investments Services |
|
State Street Global Equity ex-U.S. Index Portfolio |
||
State Street Aggregate Bond Index Portfolio |
||
State Street Small/Mid Cap Equity Index Portfolio |
||
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 Disciplined Global Equity Fund |
||
State Street Hedged International Developed Equity Index Fund |
||
State Street Small/Mid Cap Equity Index Fund |
||
State Street Emerging Markets Equity Index Fund |
||
State Street Disciplined International Equity Fund |
||
State Street Disciplined U.S. Equity Fund |
||
State Street International Value Spotlight Fund |
||
State Street Global Value Spotlight Fund |
||
State Street Asia Pacific Value Spotlight Fund |
||
State Street European Value Spotlight Fund |
||
State Street U.S. Value Spotlight Fund |
-15-
FORM N-CEN SERVICES |
||
SSGA Master/Active Trust |
||
SPDR Index/Series Shares Funds |
||
SSGA Funds |
||
State Street Master Funds and State Street Institutional Investment Trust), including State Street 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 Institutional Liquid Reserves Fund State Street Institutional U.S. Government Money Market Fund State Street Institutional Treasury Money Market Fund State Street Institutional Treasury Plus Money Market Fund State Street Treasury Obligations Money Market Fund |
||
State Street Navigator Securities Lending Trust, including State Street Navigator Securities Lending Portfolio |
-16-
IN WITNESS WHEREOF, the undersigned, by their authorized representatives, have executed this Annex 1 as of the last signature date set forth below.
SSGA FUNDS MANAGEMENT, INC. | STATE STREET BANK AND TRUST COMPANY | |||||||||||
By: |
/s/ Bruce Rosenberg |
By: |
/s/ Andrew Erickson |
|||||||||
Name: | Bruce Rosenberg | Name: | Andrew Erickson | |||||||||
Title: | Managing Director | Title: | Executive Vice President | |||||||||
Address: | One Lincoln Street | Address: | One Lincoln Street | |||||||||
Boston, MA | Boston, MA 02111 | |||||||||||
Date: | 6/30/18 | Date: | 7/3/18 |
-17-
Exhibit (h)(ii)(3)
MASTER SUB-ADMINISTRATION AGREEMENT
SCHEDULE A
Listing of Fund(s)
SPDR Series Trust
OPERATIONAL ETFS
SPDR Portfolio Total Stock Market ETF
SPDR Portfolio Large Cap ETF
SPDR Portfolio Small Cap ETF
SPDR Portfolio S&P 500 Growth ETF
SPDR Portfolio S&P 500 Value ETF
SPDR Portfolio Mid Cap 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 NYSE 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 SSGA US Large Cap Low Volatility Index ETF
SPDR SSGA US Small Cap Low Volatility Index ETF
SPDR Wells Fargo Preferred Stock ETF
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF
1
SPDR Bloomberg Barclays TIPS ETF
SPDR Bloomberg Barclays 1-10 Year TIPS ETF
SPDR Portfolio Short Term Treasury ETF
SPDR Bloomberg Barclays Intermediate Term Treasury ETF
SPDR Portfolio Long Term Treasury ETF
SPDR Portfolio Short Term Corporate Bond ETF
SPDR Portfolio Intermediate Term Corporate Bond ETF
SPDR Portfolio Long Term Corporate Bond ETF
SPDR Bloomberg Barclays Corporate Bond ETF
SPDR Bloomberg Barclays Convertible Securities ETF
SPDR Bloomberg Barclays Mortgage Backed Bond ETF
SPDR Portfolio Aggregate Bond ETF
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF
SPDR Nuveen S&P High Yield Municipal Bond ETF
SPDR FTSE International Government Inflation-Protected Bond ETF
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF
SPDR Bloomberg Barclays International Treasury Bond ETF
SPDR Bloomberg Barclays International Corporate Bond ETF
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF
SPDR Bloomberg Barclays High Yield Bond ETF
SPDR Bloomberg Barclays Short Term High Yield Bond ETF
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF
SPDR ICE BofAML Crossover Corporate Bond ETF
SPDR S&P 500 Buyback ETF
SPDR MSCI USA StrategicFactors ETF
SPDR Portfolio S&P 500 High Dividend ETF
SPDR S&P 500 Fossil Fuel Reserves Free ETF
SPDR Russell 1000 Yield Focus ETF
SPDR Russell 1000 Momentum Focus ETF
SPDR Russell 1000 Low Volatility Focus ETF
SPDR FactSet Innovative Technology ETF
SPDR SSGA Gender Diversity Index ETF
SPDR Dorsey Wright Fixed Income Allocation ETF
SPDR S&P Technology Hardware ETF
SPDR S&P Internet ETF
SPDR Kensho Intelligent Structures ETF
SPDR Kensho Smart Mobility ETF
SPDR Kensho Future Security ETF
SPDR Kensho Clean Power ETF
SPDR Kensho Final Frontiers ETF
SPDR Kensho New Economies Composite ETF
SHELF ETFS
SPDR S&P Food & Beverage ETF
SPDR S&P Commercial Paper ETF
SPDR S&P Agency Bond ETF
SPDR Bloomberg Barclays Corporate Industrial Bond ETF
SPDR Bloomberg Barclays Corporate Financial Bond ETF
SPDR Bloomberg Barclays Corporate Utilities Bond ETF
SPDR Bloomberg Barclays CMBS ETF
SPDR Bloomberg Barclays Global Convertible Securities ETF
SPDR Bloomberg Barclays Breakeven Inflation ETF
SPDR S&P Commercial Paper ex-Financials ETF
[REDACTED]
As of October 22, 2018
3
Exhibit (h)(v)
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 Portfolio Total Stock Market ETF |
SPTM | |
SPDR Portfolio Large Cap ETF |
SPLG | |
SPDR Portfolio S&P 500 Growth ETF |
SPYG | |
SPDR Portfolio S&P 500 Value ETF |
SPYV | |
SPDR Portfolio Mid Cap ETF |
SPMD | |
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 NYSE Technology ETF |
XNTK | |
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 Bloomberg Barclays 1-3 Month T-Bill ETF |
BIL | |
SPDR Bloomberg Barclays Intermediate Term Treasury ETF |
ITE | |
SPDR Portfolio Long Term Treasury ETF |
SPTL | |
SPDR Bloomberg Barclays TIPS ETF |
IPE | |
SPDR Portfolio Aggregate Bond ETF |
SPAB | |
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF |
TFI | |
SPDR Bloomberg Barclays International Treasury Bond ETF |
BWX |
1
SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF |
SHM | |
SPDR Bloomberg Barclays High Yield Bond ETF |
JNK | |
SPDR FTSE International Government Inflation-Protected Bond ETF |
WIP | |
SPDR Bloomberg Barclays Short Term International Treasury Bond ETF |
BWZ | |
SPDR Portfolio Intermediate Term Corporate Bond ETF |
SPIB | |
SPDR Portfolio Long Term Corporate Bond ETF |
SPLB | |
SPDR Bloomberg Barclays Convertible Securities ETF |
CWB | |
SPDR Bloomberg Barclays Mortgage Backed Bond ETF |
MBG | |
SPDR Wells Fargo Preferred Stock ETF |
PSK | |
SPDR Portfolio Short Term Corporate Bond ETF |
SPSB | |
SPDR Bloomberg Barclays International Corporate Bond ETF |
IBND | |
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF |
EBND | |
SPDR Bloomberg Barclays Corporate Bond ETF |
CBND | |
SPDR Nuveen S&P High Yield Municipal Bond ETF |
HYMB | |
SPDR Portfolio Short Term Treasury ETF |
SPTS | |
SPDR Bloomberg Barclays Investment Grade Floating Rate ETF |
FLRN | |
SPDR Bloomberg Barclays Short Term High Yield Bond ETF |
SJNK | |
SPDR ICE BofAML Crossover Corporate Bond ETF |
XOVR | |
SPDR S&P 1500 Value Tilt ETF |
VLU | |
SPDR S&P 1500 Momentum Tilt ETF |
MMTM | |
SPDR SSGA US Large Cap Low Volatility Index ETF |
LGLV | |
SPDR SSGA US Small Cap Low Volatility Index ETF |
SMLV | |
SPDR Bloomberg Barclays 1-10 Year TIPS ETF |
TIPX | |
SPDR Portfolio Small Cap ETF |
SPSM | |
SPDR S&P 500 Buyback ETF |
SPYB | |
SPDR MSCI USA StrategicFactors ETF |
QUS | |
SPDR Portfolio S&P 500 High Dividend ETF |
SPYD | |
SPDR S&P 500 Fossil Fuel Reserves Free ETF |
SPYX | |
SPDR Russell 1000 Yield Focus ETF |
ONEY | |
SPDR Russell 1000 Momentum Focus ETF |
ONEO | |
SPDR Russell 1000 Low Volatility Focus ETF |
ONEV | |
SPDR FactSet Innovative Technology ETF |
XITK | |
SPDR SSGA Gender Diversity Index ETF |
SHE | |
SPDR Dorsey Wright Fixed Income Allocation ETF |
DWFI | |
SPDR S&P Technology Hardware ETF |
XTH | |
SPDR S&P Internet ETF |
XWEB | |
SPDR Kensho Intelligent Structures ETF |
XKII | |
SPDR Kensho Smart Mobility ETF |
XKST | |
SPDR Kensho Future Security ETF |
XKFS | |
SPDR Kensho Clean Power ETF |
XKCP | |
SPDR Kensho Final Frontiers ETF |
XKFF | |
SPDR Kensho New Economies Composite ETF |
KOMP |
Dated: October 22, 2018
2
Exhibit (j)
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. 211 to the Registration Statement (Form N-1A, No. 333-57793) of SPDR ® Series Trust.
We also consent to the incorporation by reference into the Statements of Additional Information of our reports, dated August 29, 2018, with respect to the financial statements SPDR Portfolio Short Term Treasury ETF, SPDR Portfolio Long Term Treasury ETF, SPDR Portfolio Short Term Corporate Bond ETF, SPDR Portfolio Intermediate Term Corporate Bond ETF, SPDR Portfolio Long Term Corporate Bond ETF, SPDR Portfolio Aggregate Bond ETF, SPDR Nuveen Bloomberg Barclays Municipal Bond ETF, SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF, SPDR Kensho Intelligent Structures ETF, SPDR Kensho Smart Mobility ETF and SPDR Kensho Future Security ETF (eleven of the Funds constituting SPDR® Series Trust), and our reports, dated August 30, 2018, with respect to the financial statements SPDR S&P Aerospace & Defense ETF, SPDR S&P Bank ETF, SPDR S&P Homebuilders ETF, SPDR S&P Oil & Gas Exploration & Production ETF and SPDR S&P Regional Banking ETF (five of the Funds constituting SPDR ® Series Trust), and our reports, dated August 31, 2018, with respect to the financial statements SPDR Bloomberg Barclays 1-3 Month T-Bill ETF, SPDR Bloomberg Barclays TIPS ETF, SPDR Bloomberg Barclays 1-10 Year TIPS ETF, SPDR Bloomberg Barclays Intermediate Term Treasury ETF, SPDR Bloomberg Barclays Issuer Scored Corporate Bond ETF, SPDR Bloomberg Barclays Convertible Securities ETF, SPDR Bloomberg Barclays Mortgage Backed Bond ETF, SPDR Nuveen S&P High Yield Municipal Bond ETF, SPDR Citi International Government Inflation-Protected Bond ETF, SPDR Bloomberg Barclays Short Term International Treasury Bond ETF, SPDR Bloomberg Barclays International Treasury Bond ETF, SPDR Bloomberg Barclays International Corporate Bond ETF, SPDR Bloomberg Barclays Emerging Markets Local Bond ETF, SPDR Bloomberg Barclays High Yield Bond ETF, SPDR Bloomberg Barclays Short Term High Yield Bond ETF, SPDR Bloomberg Barclays Investment Grade Floating Rate ETF, SPDR ICE BofAML Crossover Corporate Bond ETF, SPDR Dow Jones REIT ETF, SPDR Global Dow ETF, SPDR NYSE Technology ETF, SPDR MSCI USA StrategicFactors ETF, SPDR Portfolio Large Cap ETF, SPDR SSGA US Large Cap Low Volatility Index ETF, SPDR Portfolio Small Cap ETF, SPDR SSGA US Small Cap Low Volatility Index ETF, SPDR Portfolio Total Stock Market ETF, SPDR Portfolio Mid Cap ETF, SPDR S&P 1500 Momentum Tilt ETF, SPDR S&P 1500 Value Tilt ETF, SPDR S&P 400 Mid Cap Growth ETF, SPDR S&P 400 Mid Cap Value ETF, SPDR S&P 500 Buyback ETF, SPDR Portfolio S&P 500 Growth ETF, SPDR Portfolio S&P 500 Value ETF, SPDR Portfolio S&P 500 High Dividend 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 S&P Biotech ETF, SPDR S&P Capital Markets ETF, SPDR S&P Dividend ETF, SPDR S&P Health Care Equipment ETF, SPDR S&P Health Care Services ETF, SPDR S&P Insurance ETF, SPDR S&P Metals & Mining ETF, SPDR S&P Oil & Gas Equipment & Services 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 Wells Fargo Preferred Stock ETF, SPDR S&P 500 Fossil Fuel Reserves Free ETF, SPDR Russell 1000 Low Volatility Focus ETF, SPDR Russell 1000 Momentum Focus ETF, SPDR Russell 1000 Yield Focus ETF, SPDR FactSet Innovative Technology ETF, SPDR SSGA Gender Diversity Index ETF, SPDR S&P Internet ETF, SPDR S&P Technology Hardware ETF and SPDR Dorsey Wright Fixed Income Allocation ETF (sixty-two of the Funds constituting SPDR® Series Trust), included in the June 30, 2018 Annual Reports of SPDR® Series Trust.
/s/ Ernst & Young LLP
Boston, Massachusetts
October 24, 2018
Exhibit (p)(iii)
Nuveen Compliance | 1 July 2018 |
Code of Ethics
SUMMARY AND SCOPE
What the Code is about
Helping to ensure that Nuveen personnel place the interests of Nuveen clients ahead of their own personal interests.
Who the Code applies to and what the implications are
This Code applies to individuals in the following categories:
| Nuveen Employees based in the U.S. or Canada (except employees of Gresham Investment Management LLC, Westchester Group Investment Management, Inc., and any employees of Greenwood Resources, Inc. who are based outside of Portland, Oregon). |
| Employees of any U.S.-registered investment adviser who are based outside the U.S. (except employees of Gresham Investment Management LLC, or Greenwood Resources, Inc.). |
| Consultants, interns and temporary workers based in the U.S. or Canada whose contract length is 90 days or more. |
| Any TIAA employees designated as Access Persons by the TIAA-CREF Funds Chief Compliance Officer or the Nuveen Ethics Office. |
In addition, the independent directors and trustees of the TIAA-CREF Funds Complex and Nuveen sponsored or branded funds are not covered by this Code but have their pre-clearance, reporting and other obligations set forth in their own separate policies.
For individuals who are subject to the Code, there are two designations with different implications: Access Person and Investment Person.
ACCESS PERSON
All Nuveen Employees who are subject to the Code are considered Access Persons, since they have, or could have, access to non-public information about securities transactions and other investments, holdings, or recommendations for Affiliate-Advised Accounts or Portfolios.
Key characteristics of this designation. An individual may be considered an Access Person of multiple advisers affiliated with Nuveen, or of only one. If your regular duties
give you access to non-public information, or you are an officer of a Nuveen or TIAA-CREF sponsored or branded fund, your personal trading is generally monitored only against the trading activity of the specific adviser(s) or Affiliated Funds with which you are involved. For other employees, personal trading is typically monitored against the trading activities of all advisers affiliated with Nuveen. You will generally not be permitted to execute transactions in a security on any day when an Affiliate-Advised Account or Portfolio managed by the adviser(s) that you are monitored against has a pending buy or sell order for that security.
INVESTMENT PERSON
An Access Person who meets any of the following criteria will in addition be considered an Investment Person:
| The Access Person is a Portfolio Manager, Research Analyst or Research Assistant, or they otherwise participate in making recommendations or decisions concerning the purchase or sale of securities in any Affiliate-Advised Account or Portfolio. |
| The Access Person has been designated an Investment Person by the Nuveen Ethics Office. |
Key characteristics of this designation. The vast majority of Investment Persons are employees of Nuveens affiliated investment advisers.
An Investment Person is prohibited from transacting in securities during the period starting 7 calendar days before, and ending 7 calendar days after, any trade in an Affiliate-Advised Account or Portfolio for which he/she has responsibility. In addition, an Investment Persons personal transactions will be reviewed for conflicts in the period starting 7 calendar days before, and ending 7 calendar days after, all trades by their associated investment adviser. In some cases, the Investment Person may be required to reverse a trade and/or forfeit an appropriate portion of any profit as determined by the Nuveen Ethics Office. These consequences can apply whether or not the trade was pre-cleared.
The personal trading of Investment Persons is generally only monitored against the trading activity of the specific adviser for which they have been designated an Investment Person.
Code of Ethics |
Page 2 of 8 |
Important to understand
Some of our affiliated investment advisers may have policies of their own that impose additional rules on the same topics covered in this Code. Check with your manager or local/designated Chief Compliance Officer (CCO) if you have questions.
Personal trading is a privilege, not a right. Nuveen Employees are expected to follow the law and adhere to the highest standards of behaviorincluding with respect to personal trading. Any violation of the Code could have severe adverse effects on you, your co-workers, and Nuveen. You may be held personally liable for your conduct and be subject to fines, regulatory sanctions, and even criminal penalties. Because Nuveen can restrict your trading or take actions such as forcing you to hold a position or to disgorge profits, personal trading carries risks beyond normal market risks.
Some requirements in this Code apply to Household Members. Each Household Member (see Terms with Special Meanings at right) is subject to the same restrictions and requirements that apply to his/her related Nuveen Employee.
The Code does not address every ethical issue that might arise. If you have any doubt at all after consulting the Code, contact the Nuveen Ethics Office for direction.
The Code applies to appearance as well as substance. Always consider how any action might appear to an outside observer (such as a client or regulator).
You are expected to follow the Code both in letter and in spirit. Literal compliance, such as pre-clearing a transaction, does not necessarily protect you from liability for conduct that violates the spirit of the Code. If you have questions about how to comply with this Code, consult the Nuveen Ethics Office.
WHO TO CONTACT
| Nuveen Ethics Office (Americas): |
nuveenethicsoffice@nuveen.com
| Nuveen Ethics Office (Americas) Hotline: |
1-800-842-2733 extension 22-5599
TERMS WITH SPECIAL MEANINGS
Within this policy, these terms are defined as follows:
Affiliate-Advised Account or Portfolio Any Affiliated Fund, or any portfolio or client account advised or sub- advised by Nuveen.
Affiliated Fund Any TIAA-CREF or Nuveen branded or sponsored open-end fund, closed-end fund, or Exchange Traded Fund (ETF), and any third-party fund advised or sub-advised by Nuveen.
Automatic Investment Plan Any program, such as a dividend reinvestment plan (DRIP), under which investment account purchases or withdrawals occur according to a predetermined schedule and allocation.
Beneficial Ownership Any interest by which you or any Household Memberdirectly or indirectlyderives a monetary benefit from purchasing, selling, or owning a security or account, or exercises investment discretion.
You have Beneficial Ownership of securities held in accounts in your own name, or any Household Members name, and in all other accounts over which you or any Household Member exercises or may exercise investment decision-making powers, or other influence or control, including trust, partnership, estate, and corporate accounts or other joint ownership or pooling arrangements.
Code This Code of Ethics.
Domestic Partner An individual who is neither a relative of or legally married to a Nuveen Employee, but shares a residence and is in a mutual commitment similar to marriage with such Nuveen Employee.
Federal Securities Laws The applicable portions of any of the following laws, as amended, and of any rules adopted under them by the Securities and Exchange Commission or the Department of the Treasury:
| Securities Act of 1933. |
| Securities Exchange Act of 1934. |
| Investment Company Act of 1940. |
| Investment Advisers Act of 1940. |
| Sarbanes-Oxley Act of 2002. |
| Title V of the Gramm-Leach-Bliley Act. |
| The Bank Secrecy Act. |
Household Member Any of the following who reside, or are expected to reside for at least 90 days a year, in the same household as a Nuveen Employee:
Spouse or Domestic Partner.
Sibling.
Child, stepchild, grandchild. |
Parent, stepparent, grandparent.
In-laws, (mother, father, son, daughter, brother, sister). |
|
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TERMS WITH SPECIAL MEANINGS (continued)
Independent Director Any director or trustee of an Affiliated Fund who is not an interested person within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended.
Managed Account Any account in which you or a Household Member has Beneficial Ownership and for which you have delegated full investment discretion in writing to a third-party broker or investment manager.
Nuveen Nuveen, LLC and all of its direct or indirect subsidiaries.
Nuveen Employee Any full- or part-time employee of Nuveen, and any consultants, interns or temporary workers designated by the Nuveen Ethics Office.
Reportable Account Any account for which you or a Household Member has Beneficial Ownership AND in which securities can be bought or held. This includes, among others:
| All Managed Accounts. |
| Any Nuveen 401(k) plan account. |
| Any 401(k) plan account from a previous employer that permits transactions in any Reportable Security. |
| Any direct holding in an Affiliated Fund. |
| Any retirement account or health savings account (HSA) that permits the purchase of any Reportable Security, and any 529 college savings plan that permits the purchase of Affiliated Funds. |
The following are NOT considered Reportable Accounts:
| Charitable giving accounts. |
| Any 401(k) plan account or any other account held directly with a mutual fund complex or mutual fund-only platform in which open-end, non-Affiliated Funds are the only possible investment. |
| Any cash management account with a broker in which a Reportable Security cannot be purchased or sold. |
Reportable Security Any security EXCEPT:
| Direct obligations of the U.S. government (indirect obligations, such as Fannie Mae and Freddie Mac securities, are reportable). |
| Certificates of deposit, bankers acceptances, commercial paper, and high quality short-term debt (including repurchase agreements). |
| Money market funds. |
| Open-end funds that are not Affiliated Funds. |
Reportable Transaction Any transaction involving a Reportable Security EXCEPT:
| Transactions in Managed Accounts. |
| Transactions occurring under an Automatic Investment Plan. |
GENERAL RESTRICTIONS AND REQUIREMENTS
BASIC PRINCIPLES
1. |
Never abuse a clients trust, rights, or interests. |
This means you must never do any of the following:
| Engage in any plan or action, or use any device, that would defraud or deceive a client. |
| Make any material statements of fact that are incorrect or misleading, either as to what they include or omit. |
| Engage in any manipulative practice. |
| Use your position (including any knowledge or access to opportunities you have gained by virtue of your position) to personal advantage or to a clients disadvantage. This would include, for example, front-running or tailgating (trading directly before or after the execution of a large client trade order), or any attempt to influence a clients trading to enhance the value of your personal holdings. |
| Conduct personal trading in any way that could be inconsistent with your fiduciary duties to a client (even if it does not technically violate the Code). |
2. |
Handle conflicts of interest appropriately. This applies not only to actual conflicts of interest, but also to any situation that might appear to an outside observer to be improper or a breach of fiduciary duty. |
3. |
Keep confidential information confidential. |
Always properly safeguard any confidential information you obtain in the course of your work. This includes confidential information related to any of the following:
| Any Affiliate-Advised Account or Portfolio and any other financial product offered or serviced by Nuveen. |
| New products, product changes, or business initiatives. |
| Past, current, and prospective clients, including their identities, investments, and account activity. |
Keeping information confidential means using discretion in disclosing information as well as guarding against unlawful or inappropriate access by others. This includes:
| Making sure no confidential information is visible on your computer screen and desk when you are not there. |
| Not sharing passwords with others. |
| Using caution when discussing business in any location where your conversation could be overheard. Confidential information may be released only as required by law or as permitted under the applicable privacy policy(ies). Consult the Nuveen Ethics Office or your local/designated CCO before releasing any confidential information. |
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4. |
Handle Material Non-Public Information properly. Follow all of the terms described in Material Non-Public Information below. Be aware that any failure to handle such information properly is a serious offense and may lead to disciplinary action from Nuveen as well as serious civil or criminal liability. |
5. |
Comply with Federal Securities Laws. |
Any violation of these laws is punishable as a violation of the Code.
6. |
Never do anything indirectly that, if done directly, would violate the Code. Such actions will be considered the equivalent of direct Code violations. |
7. |
Promptly alert the Nuveen Ethics Office or your local/designated CCO of any actual or suspected wrongdoing. Examples of wrongdoing include violations of the Federal Securities Laws, misuse of corporate assets, misuse of confidential information, or other violations of the Code. If you prefer to report confidentially, call the TIAA Confidential Helpline at 1-877-774-6492. Note that failure to report suspected wrongdoing in a timely fashion is itself a violation of the Code. |
PRE-CLEARANCE AND
HOLDING REQUIREMENTS
8. |
Pre-clear any trade in Reportable Securities, including certain Affiliated Funds (see box on next page for additional information). |
If your trade requires pre-clearance, request approval through the Protegent PTA system (PTA) before you or any Household Member places an order to buy or sell any Reportable Security. Any approval you receive expires at the end of the day it was granted; however, you may place after-hours trades in international markets until 11:59 PM local time on that day. When requesting pre-clearance, follow this process:
| Request pre-clearance on the same day you want to trade, during standard U.S. trading hours (9:30 AM to 4:00 PM ET). Be sure your pre-clearance request is accurate as to security and direction of trade. |
| Wait for approval to be displayed before trading. If you receive approval, you may only trade that same day, and only within the scope of approval. If you do not receive approval, do not trade. |
| Place day orders only. Do not place good-til-canceled orders. You may place orders for an after-hours trading session or in foreign markets using that days pre-clearance approval, but you must not place any order that could remain open into the next days trading session. |
9. |
Hold positions in securities that are subject to pre-clearance for 60 calendar days, or be prepared to forfeit any gains. Several things to note: |
| You may be required to surrender any gains realized (net of commissions) through a violation of this rule. |
| The 60-day holding requirement is tested on a last- in-first-out basis, across all of your holdings (not just within individual accounts). |
| The 60-day holding requirement extends to any options or other transactions that may have the same effect as a purchase or sale, and to all Reportable Securitiesexcept for ETFs and open-end Affiliated Funds. Nuveen-branded or sponsored closed-end funds are subject to the 60-day holding requirement. |
| You may sell the security on the 60th day after purchase, provided you secure pre-clearance or an exemption applies. |
| You may re-purchase a security immediately after executing a sale of that same security, which will trigger a new 60 calendar day holding period. |
| You may close a position at a loss at any time, provided pre-clearance has been obtained or an exemption applies. |
10. |
Comply with trading restrictions described in the prospectuses for all Affiliated Funds. This includes restrictions on frequent trading in shares of any open-end Affiliated Fund. |
11. |
Pre-clear any transaction in a Managed Account that involves your influence. You must also immediately consult with the Nuveen Ethics Office to discuss whether the account in question can properly remain classified as a Managed Account. |
12. |
Obtain approval before investing in a private placement (such as a private equity investment, hedge fund, or limited partnership) and before selling or redeeming a private placement that is branded, sponsored, advised or sub-advised by Nuveen. This includes transactions in any private funds advised or sub-advised by Nuveen. Approval is required even if the investment is made in a Managed Account. Approval is not needed for additional capital calls following the initial investment. |
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WHAT NEEDS TO BE PRE-CLEARED
Pre-clearance required
| All actively initiated trades in Reportable Securities, except those listed here under No pre-clearance required. Be aware that pre-clearance can be withdrawn even after it has been granted, and even after you have traded, if Nuveen later becomes aware of Affiliate- Advised Account |
No pre-clearance required
| Shares of any open-end mutual fund (including Affiliated Funds). |
| Any ETF. |
| CDs and commercial paper. |
| Securities acquired or disposed of through actions outside your control or issued pro rata to all holders of the same class of investment, such as automatic dividend reinvestments, stock splits, mergers, spin-offs, or rights subscriptions. |
| Sales pursuant to a bona fide tender offer. |
| Trades made through an Automatic Investment Plan that has been disclosed to the Nuveen Ethics Office in advance. |
or Portfolio trades whose existence would have resulted in denial of pre-clearance. In these cases you may be required to reverse a trade and/or forfeit an appropriate portion of any profit, as determined by the Nuveen Ethics Office. |
| Note that ETFs are Reportable Securities but do not need to be pre-cleared. |
| Trades in a Managed Account (except that you must pre-clear any trades that involve your influence, any initial purchases of private placements, purchases in any equity IPO, and any sales or redemptions of private placements that are branded, sponsored, advised or sub-advised by Nuveen). |
| Foreign currencies, including futures. |
| Commodity instruments. |
| Index options and index futures. |
| Direct investments in cryptocurrencies. |
OTHER RESTRICTIONS
13. |
Never knowingly trade any security being traded or considered for trade by any Affiliate-Advised Account or Portfolio. This applies to employee transactions in securities that are exempt from pre-clearance, and includes equivalent or related securities. |
For example, if a companys common stock is being traded, you may face restrictions on trading any of the companys debt, preferred, or foreign equivalent securities, and from trading or exercising any options based on the companys securities.
14. |
Always prioritize client trades over personal trades. Your fiduciary duties to the client are far more important than your personal trading, which is a privilege and not a right. Never delay or in any way alter the timing or terms of a client trade for your personal benefit. |
15. |
Do not engage in trading that involves single stock futures, naked short sales or naked options on individual securities. Options are permitted only to generate income or for hedging purposes (that is, the sale of covered calls or the purchase of puts that are offset by existing long positions), with the following exceptions: |
| You may buy or sell naked long-term options (those with an expiration of 1 year or more from the date of purchase), subject to the 60-day holding period. |
| You may hedge with puts or shorts against the box, however, you must first hold the underlying position for 60 days (except for covered calls, which may be written at the same time as the underlying security). |
16. |
Never participate in an investment club or similar entity. |
17. |
Do not engage in excessive or inappropriate trading activity. Never let personal trading interfere with your professional duties. The Nuveen Ethics Office and/or your local/designated CCO, in consultation with your manager, will determine what constitutes excessive or inappropriate trading. |
18. |
Never purchase an IPO without advance approval. Equity IPO participation is generally prohibited, but approval may be granted in special circumstances, such as when: |
| You already have equity in the company and are offered shares. |
| You are a policy holder or depositor in a company that is demutualizing. |
| A family member has been offered shares as an employee. |
You must obtain approval to purchase an equity IPO even if the investment is made in a Managed Account. You may receive approval for initial offerings of fixed income securities, convertible securities, preferred securities, open- and closed-end funds, commodity pools, and any secondary equity offerings.
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MATERIAL NON-PUBLIC INFORMATION
What is Material Non-Public Information?
Material Non-Public Information is defined as information regarding any security, securities-based derivatives or issuer of a security that is both material and non-public. Information is material if both of the following are true:
| A reasonable investor would likely consider it important when making an investment decision. |
| Public release of the information would likely affect the price of a security. |
Information is generally non-public if it has not been distributed through a widely used public medium, such as a press release or a report, filing or other periodic communication.
Restrictions and requirements
| Any time you think you might have, or may be about to, come into possession of Material Non-Public Information (whether in connection with your position at Nuveen or not), alert the Nuveen Ethics Office. Alternatively, you may alert your local/designated CCO or Legal office, who in turn must promptly notify the Nuveen Ethics Office. Follow the instructions you are given. |
| Until you receive further instructions from the Nuveen Ethics Office, your local/designated CCO, or Legal, do not take any action in relation to the information, including trading or recommending the relevant securities or communicating the information to anyone else. |
| Never make decisions on your own regarding potential Material Non-Public Information, including whether such information is actually Material Non-Public Information or what steps should be taken. |
| If the Nuveen Ethics Office, your local/designated CCO and/or Legal determine that you have Material Non- Public Information: |
| Do not buy, sell, gift, or otherwise dispose of the issuers securities, whether on behalf of an Affiliate-Advised Account or Portfolio, yourself, or anyone else. |
| Do not in any way recommend, encourage, or influence others to transact in the issuers securities, even if you do not specifically disclose or reference the Material Non- Public Information. |
| Do not communicate the Material Non-Public Information to anyone, whether inside or outside Nuveen, except in discussions with the Nuveen Ethics Office and Legal and as expressly permitted by any confidentiality agreement or supplemental policies and procedures of your business unit. |
REPORTING REQUIREMENTS
UPON BECOMING A NUVEEN EMPLOYEE
19. |
Within 10 calendar days of starting at Nuveen, acknowledge receipt of the Code. This includes certifying that you have read the Code, understand it, recognize that you are subject to it, have complied with all of its applicable requirements, and have submitted all Code-required reports. |
20. |
Within 10 calendar days of starting at Nuveen, report all of your Reportable Accounts and holdings in Reportable Securities . Use PTA for this reporting. Include current information (no older than 45 calendar days before your first day of employment) on all Reportable Securities. For each security, provide the security name and type, a ticker symbol or CUSIP, the number of shares or units held, and principal amount (dollar value). For each Reportable Account, provide information about the broker, dealer, or bank through which the account is held and the type of account. For each Reportable Account, submit a copy of the most recent statement. |
Note that there are separate procedures for Managed Accounts, as described below in item 23.
21. |
Within 10 calendar days of starting at Nuveen, report all current investments in private placements (limited offerings). Limited offerings are Reportable Securities. |
22. |
Within 30 calendar days of starting at Nuveen, move or close any Reportable Account that is not at an approved firm. This does not include 401(k) Reportable Accounts . The list of approved firms is maintained by the Ethics Office and may be accessed on PTA. |
Under very limited circumstances, it may be possible to obtain a waiver to keep a Reportable Account at a non- approved firm. Examples include:
| An account owned by a Household Member who works at another financial firm with comparable restrictions. |
| An account that holds securities that cannot be transferred. |
| An account that cannot be moved because of a trust agreement. |
To apply for an exception, contact the Nuveen Ethics Office. For any account granted an exception, arrange for the Nuveen Ethics Office to receive duplicates of all
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periodic statements. If a firm cannot provide duplicate statements directly to the Nuveen Ethics Office, you must take responsibility for providing them yourself. In all cases, if your accounts are not held at an approved firm, you must manually enter all executed transactions in PTA within 5 days of execution.
At the discretion of the Nuveen Ethics Office, some consultants and temporary workers may not be required to move or close Reportable Accounts.
WHEN OPENING ANY NEW REPORTABLE ACCOUNT (INCLUDING A MANAGED ACCOUNT)
23. |
Get pre-approval for any new Managed Account before any trading activity commences. Using the appropriate form (available from the Nuveen Ethics Office), provide representations that support the classification of the account as a Managed Account. For an account to be classified as a Managed Account, the account owner must have no direct or indirect influence or control over the securities in the account. The form must be signed by the accounts broker or investment manager and by all account owners. You may be asked periodically to confirm these representations. |
Note that if the Managed Account is not maintained at an approved firm, you are also responsible for providing duplicate statements for the Managed Account to the Ethics Office, if requested.
24. |
Report any new Reportable Account (other than a Managed Account) that is opened with an approved firm. Do this within 10 calendar days of the date you or a Household Member opens the account or an account becomes a Reportable Account through marriage, cohabitation, divorce, death, or another event. |
EVERY QUARTER
25. |
Within 30 calendar days of the end of each calendar quarter, verify in PTA that all Reportable Transactions made during that quarter have been reported. PTA will display all transactions of yours for which it has received notice. For any Reportable Transactions not displayed, or displayed inaccurately, you are responsible for making any necessary revisions in PTA to complete your certification. |
For each Reportable Transaction, you must provide, as applicable, the transaction date, security name and type, ticker symbol or CUSIP, interest rate (coupon) and maturity date, number of shares, price at which the transaction was effected, principal amount (dollar value), the nature of the trade (buy or sell), and the name of the broker, dealer, or bank that effected the transaction. It is very important that you carefully review and verify the transactions and related details displayed on PTA, checking for accuracy and completeness. Once again, if you find any errors or omissions, correct or add to your list of transactions in PTA.
EVERY YEAR
26. |
Within 45 calendar days of the end of each calendar year, acknowledge receipt of the most recent version of the Code and certify in PTA as to your Annual Holdings and Accounts Report. |
The report must contain the information described in item 20 above, and include your certification that you have reported all Reportable Accounts, and all holdings in Reportable Securities at year end.
If any of your holdings in Reportable Securities are not displayed in PTA or are displayed inaccurately, you are responsible for making any necessary revisions in PTA to complete your certification.
In addition, you must affirm each year through PTA that each Managed Account is properly classified as a Managed Account, for yourself and on behalf of any Household Member. This separate certification does not require broker or investment manager involvement.
You also must acknowledge any amendments to the Code that occur during the course of the year.
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ADDITIONAL RULES FOR SECTION 16 PERSONS
| Section 16 Persons are insiders, or people with responsibility for policy decisions or portfolio transactions. If you are unsure of your status as a Section 16 Person, please contact Legal or the Nuveen Ethics Office. |
| Pre-clear (through PTA) any transactions in closed-end funds of which you are a Section 16 Person. Your request will be reviewed by Legal. |
| When selling for a gain any securities you buy that are issued by the entity of which you are a Section 16 Person, make sure it is at least 6 months after your most recent purchase of that security. This rule extends to any options or other transactions that may have the same effect as a purchase or sale, and is tested on a last-in- first-out basis. You may be required to surrender any gains realized through a violation of this rule. Note that for any fund of which you are a Section 16 Person, no exception from preclearance is available. |
| Promptly email details of all executed transactions in these securities to the appropriate contact in Legal. |
Section 16 Persons should refer to the Nuveen Funds Section 16 Policy and Procedures for additional information.
CODE ADMINISTRATION
Training
You will be required to participate in training on the Code when joining Nuveen as well as periodically during the time you are subject to the Code.
Exceptions
The Code exists to prevent violations of law. The Nuveen Ethics Office may, under certain circumstances, grant waivers from a Code requirement. No waivers or exceptions that would violate any law will be granted.
Monitoring
The Nuveen Ethics Office is responsible for monitoring transactions and holdings for any violations of this Code.
Consequences of violation
Any individual who violates the Code is subject to penalty. Penalties could include, among other possibilities, a written warning, restriction of trading privileges, disgorgement of trading profits, fines, and suspension or termination of employment.
Applicable rules
The Code has been adopted in recognition of Nuveens fiduciary obligations to clients and in accordance with various provisions of Rule 204A-1 under the Investment Advisers Act of 1940 and Rule 17j-1 under the Investment Company Act of 1940. This Code is also adopted by the Affiliated Funds advised by Nuveen Fund Advisors, LLC, TIAA-CREF Investment Management, LLC and Teachers Advisors, LLC under Rule 17j-1.
Some elements of the Code also constitute part of Nuveens response to Financial Industry Regulatory Authority (FINRA) requirements that apply to registered personnel of Nuveen Securities, LLC.