As filed with the U.S. Securities and Exchange Commission on May 7,
2025
Registration Numbers: 333-57791;
811-08837
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
REGISTRATION STATEMENT
| UNDER
THE SECURITIES ACT OF 1933 |
☒ |
| Post-Effective Amendment No. 55 |
☒ |
and/or
REGISTRATION STATEMENT
| UNDER
THE INVESTMENT COMPANY ACT OF 1940 |
☒ |
| Amendment No. 58 |
☒ |
THE SELECT SECTOR SPDR TRUST
(Exact Name of Registrant as Specified in Charter)
One Iron Street
Boston, Massachusetts 02210
Boston, Massachusetts 02210
(Address of Principal Executive Offices)
(617) 664-3920
(Registrant's Telephone Number)
Andrew J. DeLorme, Esq.
Chief Legal Officer
Chief Legal Officer
c/o SSGA Funds Management, Inc.
One Iron Street
Boston, Massachusetts 02210
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, D.C. 20004
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, D.C. 20004
It is proposed that this filing will become effective:
| ☐ |
immediately upon filing pursuant to Rule 485, paragraph (b) |
| ☐ |
on ___________ 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) |
If appropriate, check the following box:
| ☐ |
This post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
SUBJECT TO COMPLETION. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Prospectus
The Communication Services Select Sector SPDR Premium Income Fund ([
])
The Consumer Discretionary Select Sector SPDR
Premium Income Fund ([ ])
The Consumer Staples Select
Sector SPDR Premium Income Fund ([ ])
The Energy Select
Sector SPDR Premium Income Fund ([ ])
The Financial
Select Sector SPDR Premium Income Fund ([ ])
The Health
Care Select Sector SPDR Premium Income Fund ([ ])
The
Industrial Select Sector SPDR Premium Income Fund ([ ])
The Materials Select Sector SPDR Premium Income Fund ([ ])
The Real Estate Select Sector SPDR Premium Income Fund ([ ])
The Technology Select Sector SPDR Premium Income Fund ([
])
The Utilities Select Sector SPDR Premium Income Fund
([ ])
Principal U.S. Listing Exchange: NYSE Arca, Inc.
[ ], 2025
The U.S. Securities and Exchange Commission has not approved or disapproved these securities or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is
a criminal offense. Shares in the Funds are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other agency of the U.S. Government, nor are Shares deposits or obligations of any bank. It
is possible to lose money by investing in the Funds.
Fund Summaries
The Communication Services Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Communication Services Select Sector SPDR Premium Income Fund (the “Fund”) seeks to provide current income while maintaining prospects for long
term growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund
(“Fund Shares”). You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which
are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
1
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Communication Services companies (either directly or indirectly through an underlying ETF) and investments that
produce premium income. Communication Services companies comprise companies included in the Communication Services sector of the S&P 500 Index, as determined by the Global Industry Classification Standard
(GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Communication Services Select Sector SPDR Fund and (2) selling call options (a type of derivative instrument) on The Communication Services
Select Sector SPDR Fund to generate additional income. The Communication Services Select Sector SPDR Fund seeks to track the performance of the Communication Services Select Sector Index (the “Underlying Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been
identified as Communication Services companies by GICS. The Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the extent the index the
underlying ETF seeks to track concentrates in a particular industry or group of industries. Futures contracts (a type of derivative instrument) may also be used
by the Fund for investment purposes.
With respect to the call option portion of the strategy, the Fund will systematically sell
(write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental income. Listed Options or Flexible Exchange Options (“FLEX Options”)
2
Fund Summaries
[ ]
may be utilized. FLEX Options
are customizable exchange-traded option contracts guaranteed for settlement by the Options Clearing Corporation (the “OCC”). Option terms that can be customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in
exchange for the right to purchase the asset underlying the option at a specified price (the
“strike price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in
the market price of the underlying asset above the strike price of the option.
The Fund seeks to optimize the return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and
volatility, also known as an option's delta. When setting strike prices, the Fund seeks to balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser
will typically “roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as
Communication Services companies by the Global Industry Classification Standard
(GICS®), including securities of companies from the following industries: diversified telecommunication services;
wireless telecommunication services; media; entertainment; and interactive media & services. The Underlying Index is one of eleven Select Sector Indexes developed and maintained in accordance with the following
criteria: (1) each of the component securities in the Underlying Index is a constituent of the S&P 500 Index; and (2) the Underlying Index is calculated by S&P Dow Jones Indices LLC
(“S&P DJI”) based on a proprietary “modified market capitalization” methodology
which means that modifications may be made to the market capitalization weights of single stock concentrations in order to conform to the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was
composed of [ ] stocks.
3
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
4
Fund Summaries
[ ]
Communication Services Sector Risk: The Fund's assets will be
concentrated in the communication services sector, which means the Fund will be more affected by the performance of the communication services sector than a fund that is
more diversified. Communication services companies are particularly vulnerable to the potential obsolescence of products and services due to technological advancement and the innovation of competitors. Companies in the
communication services sector may also be affected by other competitive pressures, such as pricing competition, as well as research and development costs, substantial capital requirements and government regulation.
Additionally, fluctuating domestic and international demand, shifting demographics and often unpredictable changes in consumer tastes can drastically affect a communication services company's profitability. While all
companies may be susceptible to network security breaches, certain companies in the communication services sector may be particular targets of hacking and potential theft of proprietary or consumer information or disruptions in
service, which could have a material adverse effect on their businesses.
Call Writing Strategy Risk: The
Fund's use of call options involves speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount
equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's
underlying asset, an increase in interest rates, a change in the actual or
perceived volatility of the stock market or the underlying asset and the
remaining time to expiration. Additionally, the value of an option does not
5
Fund Summaries
[ ]
increase or
decrease at the same rate as the underlying asset(s). In addition, if the price of the underlying asset of an option is above the strike price of a written call, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset instead of using options. The Fund could experience a loss if its options do not perform as anticipated, or are not correlated with the performance of their
underlying asset or if the Fund is unable to purchase or liquidate a position because of an illiquid secondary market. As an option on an underlying asset held by the Fund nears expiration, they are generally closed out and
replaced by another option with a later expiration (commonly referred to as “rolling the option”). There is no assurance that
the Fund will be able to roll the option or effect a different closing transaction at any particular time or at an acceptable price. The sale of call options by the Fund may create
investment leverage. Frequent selling of call options may result in higher Fund expenses and may result in increased taxable distributions to investors, including potentially increased distributions that are taxable to individuals as ordinary
income.
FLEX Options: The Fund may utilize
FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement obligations, which
could result in substantial loss for the Fund. FLEX Options may be less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable
at the strike price. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options
prior to the expiration date may vary due to factors other than the value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the
actual and perceived volatility of the stock market and underlying asset, and the remaining time to expiration.
Exchange-Traded
Funds Risk: The Fund is subject to substantially the same risks as those associated with the
direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying ETF may trade at a premium or discount to their intrinsic value (i.e., the
6
Fund Summaries
[ ]
market value
may differ from the net asset value of an ETF's shares) for a number of reasons. For example, supply and demand for shares of an underlying ETF or market disruptions may cause the market price of the underlying ETF to
deviate from the value of the underlying ETF's investments, which may be exacerbated in less liquid markets.
Affiliated ETF
Risk: The Fund invests in an affiliated underlying ETF and, as a result, the Fund's
investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser may have an incentive to take into account the effect on an affiliated ETF
in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts
could impact the Fund.
Fluctuation of Net Asset Value, Share Premiums and Discounts Risk: As
with all exchange-traded funds, Fund Shares may be bought and sold in the
secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and there may be times when the market price of the shares is more than the
net asset value per share (premium) or less than the net asset value per share (discount). This risk is heightened in times of market volatility or periods of steep market declines.
Futures Contract Risk: A futures contract is a standardized agreement
that calls for the purchase or sale of a specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures
contracts can create investment leverage and may have significant volatility. It is possible that a futures contract transaction will result in a much greater loss than the principal amount invested, and the Fund may not be able to close
out the futures contract at a favorable time or price. There is no assurance that a liquid secondary market on an exchange will exist for any particular futures contract. In the event no such market exists, it might not be
possible to effect closing transactions, and the Fund will be unable to terminate its exposure to the futures contract. There is also a risk of imperfect correlation between movements in the prices of the futures contract and movements in the
price of the underlying assets. The counterparty to a
7
Fund Summaries
[ ]
futures
contract may be unable or unwilling to make timely settlement payments, return the Fund's margin, or otherwise honor its obligations.
Large-Capitalization Securities
Risk: Returns on investments in securities of large companies could trail the returns on
investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive challenges or to changes in
business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed smaller and mid-sized companies.
Management Risk: The Fund is
actively managed. The Adviser's judgments about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. Any resulting liquidation of the
Fund could cause elevated transaction costs for the Fund and negative tax consequences for
its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of Fund
Shares may be more volatile than the values of shares of more diversified funds.
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the
8
Fund Summaries
[ ]
Fund by showing the variability
of the Fund's returns based on net assets and comparing the Fund's performance to an index. When available, updated performance information may be obtained by calling 1-866-732-8673 or visiting the Fund's website:
www.sectorspdr.com.
Portfolio Management
Investment Adviser
SSGA FM serves as the
investment adviser to the Fund.
Portfolio
Managers
The professionals primarily responsible for the day-to-day management of the Fund are Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich, CFA, is a Managing Director of the Adviser and Co-Head of the Systematic
Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2000.
Raymond Donofrio is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity
Beta Group. He joined the Adviser in 2008.
Purchase
and Sale Information
The Fund will issue (or redeem) Fund Shares to certain institutional investors
(typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or cash.
Individual Fund Shares may only be purchased and sold on the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges, electronic crossing networks and other alternative trading systems
through your broker-dealer at market prices. Because Fund Shares trade at market prices rather than at net asset value (“NAV”), Fund Shares may trade at a price greater than NAV (premium) or less than NAV (discount). When buying or selling Fund Shares in the secondary market, you may incur costs
attributable to the difference between the highest price a buyer is willing to pay to purchase Fund Shares (bid) and the lowest price a seller is
9
Fund Summaries
[ ]
willing to accept for Fund
Shares (ask) (the “bid-ask
spread”). Recent information regarding the Fund's NAV, market price, premiums and discounts, and bid-ask spreads is available at www.sectorspdr.com.
Tax Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend
income and/or capital gains, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary's website for more information.
10
Fund Summaries
The Consumer Discretionary Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Consumer Discretionary Select Sector SPDR Premium Income Fund (the “Fund”) seeks to provide current income while maintaining prospects for long
term growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund
(“Fund Shares”). You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which
are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
11
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Consumer Discretionary companies (either directly or indirectly through an underlying ETF) and investments that
produce premium income. Consumer Discretionary companies comprise companies included in the Consumer Discretionary sector of the S&P 500 Index, as determined by the Global Industry Classification Standard
(GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Consumer Discretionary Select Sector SPDR Fund and (2) selling call options (a type of derivative instrument) on The Consumer Discretionary
Select Sector SPDR Fund to generate additional income. The Consumer Discretionary Select Sector SPDR Fund seeks to track the performance of the Consumer Discretionary Select Sector Index (the “Underlying Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been
identified as Consumer Discretionary companies by GICS. The Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the extent the index the underlying
ETF seeks to track concentrates in a particular industry or group of industries. Futures contracts (a type of derivative instrument) may also be used by the Fund for investment purposes.
With respect to the call option portion of the strategy, the Fund will systematically sell
(write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental income. Listed Options or Flexible Exchange Options (“FLEX Options”)
12
Fund Summaries
[ ]
may be utilized. FLEX Options
are customizable exchange-traded option contracts guaranteed for settlement by the Options Clearing Corporation (the “OCC”). Option terms that can be customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in
exchange for the right to purchase the asset underlying the option at a specified price (the
“strike price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in
the market price of the underlying asset above the strike price of the option.
The Fund seeks to optimize the return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and
volatility, also known as an option's delta. When setting strike prices, the Fund seeks to balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser
will typically “roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as
Consumer Discretionary companies by the Global Industry Classification Standard (GICS®),
including securities of companies from the following industries: specialty retail;
broadline retail; hotels, restaurants and leisure; textiles, apparel and luxury goods; household durables; automobiles; automobile components; distributors; leisure products; and
diversified consumer services. The Underlying Index is one of eleven Select Sector Indexes developed and maintained in accordance with the following criteria: (1) each of the component securities in the Underlying Index is a constituent
of the S&P 500 Index; and (2) the Underlying Index is calculated by S&P Dow Jones Indices LLC (“S&P
DJI”) based on a proprietary
“modified market
capitalization”
methodology which means that modifications may be made to the market capitalization weights of single stock concentrations in order to conform to the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was composed of [ ] stocks.
13
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
14
Fund Summaries
[ ]
Consumer Discretionary Sector Risk: The Fund's assets will be
concentrated in the consumer discretionary sector, which means the Fund will be more affected by the performance of the consumer discretionary sector than a fund that is
more diversified. The success of consumer product manufacturers and retailers is tied closely to the performance of the overall domestic and global economy, interest rates, competition and consumer confidence. Success depends
heavily on disposable household income and consumer spending. Also, companies in the consumer discretionary sector may be subject to severe competition, which may have an adverse impact on their respective profitability.
Changes in demographics and consumer tastes can also affect the demand for, and success of, consumer products and services in the marketplace.
Call Writing Strategy Risk: The Fund's use of call options involves
speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount
equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's
underlying asset, an increase in interest rates, a change in the actual or
perceived volatility of the stock market or the underlying asset and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the underlying asset(s). In addition, if the price of the underlying asset of an option is above the strike price of a written
call, the value of the option, and consequently of the Fund, may decline significantly more than if the Fund invested directly in the underlying asset instead of using options. The Fund could experience a loss if its options
15
Fund Summaries
[ ]
do not
perform as anticipated, or are not correlated with the performance of their underlying asset or if the Fund is unable to purchase or liquidate a position because of an illiquid secondary market. As an option on an underlying asset
held by the Fund nears expiration, they are generally closed out and replaced by another option with a later expiration (commonly referred to as “rolling the
option”). There is no assurance that the Fund will be able to roll the option or effect a different closing transaction at any particular time or
at an acceptable price. The sale of call options by the Fund may create investment leverage. Frequent selling of call options may result in higher Fund expenses and may result in increased taxable distributions to investors,
including potentially increased distributions that are taxable to individuals as ordinary income.
FLEX Options: The Fund may utilize FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement obligations, which could result in substantial loss for the Fund. FLEX Options may be
less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable at the strike price. Prior to the expiration date, the value of the
FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options prior to the expiration date may vary due to factors other than the
value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the actual and perceived volatility of the stock market and underlying asset, and the
remaining time to expiration.
Exchange-Traded Funds Risk: The Fund is subject to substantially the
same risks as those associated with the direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying ETF
may trade at a premium or discount to their intrinsic value (i.e., the market value may differ from the net asset value of an ETF's shares) for a number of
reasons. For example, supply and demand for shares of an underlying ETF or market disruptions may cause the market price of the underlying ETF to deviate from the value of the underlying ETF's investments, which may be exacerbated in
less liquid markets.
16
Fund Summaries
[ ]
Affiliated ETF Risk: The Fund invests in an affiliated underlying ETF
and, as a result, the Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser
may have an incentive to take into account the effect on an affiliated ETF in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although
the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts could impact the Fund.
Fluctuation of Net
Asset Value, Share Premiums and Discounts Risk: As with all exchange-traded funds, Fund
Shares may be bought and sold in the secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and
there may be times when the market price of the shares is more than the net asset value per share (premium) or less than the net asset value per share (discount). This risk is heightened in times of market volatility or periods of steep
market declines.
Futures Contract Risk: A futures contract is a standardized agreement
that calls for the purchase or sale of a specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures
contracts can create investment leverage and may have significant volatility. It is possible that a futures contract transaction will result in a much greater loss than the principal amount invested, and the Fund may not be able to close
out the futures contract at a favorable time or price. There is no assurance that a liquid secondary market on an exchange will exist for any particular futures contract. In the event no such market exists, it might not be
possible to effect closing transactions, and the Fund will be unable to terminate its exposure to the futures contract. There is also a risk of imperfect correlation between movements in the prices of the futures contract and movements in the
price of the underlying assets. The counterparty to a futures contract may be unable or unwilling to make timely settlement payments, return the Fund's margin, or otherwise honor its obligations.
Large-Capitalization Securities
Risk: Returns on investments in securities of large companies could trail the returns on
investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond
17
Fund Summaries
[ ]
as quickly
as smaller and mid-sized companies to competitive challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed
smaller and mid-sized companies.
Management Risk: The Fund is actively managed. The Adviser's judgments
about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. Any resulting liquidation of the
Fund could cause elevated transaction costs for the Fund and negative tax consequences for
its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of Fund
Shares may be more volatile than the values of shares of more diversified funds.
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by showing the variability of the Fund's returns based on net assets and comparing the Fund's performance to an index. When available, updated performance information may be obtained by calling 1-866-732-8673 or visiting the Fund's website: www.sectorspdr.com.
18
Fund Summaries
[ ]
Portfolio Management
Investment Adviser
SSGA FM serves as the investment adviser to the Fund.
Portfolio Managers
The professionals primarily responsible for the day-to-day management of the Fund are Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich, CFA, is a Managing Director of the Adviser and Co-Head of the Systematic
Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2000.
Raymond Donofrio is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity
Beta Group. He joined the Adviser in 2008.
Purchase
and Sale Information
The Fund will issue (or redeem) Fund Shares to certain
institutional investors (typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or cash.
Individual Fund Shares may only be purchased and sold on the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges, electronic crossing networks and other alternative trading systems
through your broker-dealer at market prices. Because Fund Shares trade at market prices rather than at net asset value (“NAV”), Fund Shares may trade at a price greater than NAV (premium) or less than NAV (discount). When buying or selling Fund Shares in the secondary market, you may incur costs
attributable to the difference between the highest price a buyer is willing to pay to purchase Fund Shares (bid) and the lowest price a seller is willing to accept for Fund Shares (ask) (the “bid-ask spread”). Recent information regarding the Fund's NAV, market price, premiums and discounts, and bid-ask spreads is available at www.sectorspdr.com.
19
Fund Summaries
[ ]
Tax Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend income and/or capital gains, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you.
Payments to Broker-Dealers and Other Financial
Intermediaries
If you purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary's website for more information.
20
Fund Summaries
The Consumer Staples Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Consumer Staples Select Sector SPDR Premium Income Fund (the “Fund”)
seeks to provide current income while maintaining prospects for long term
growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund
(“Fund Shares”). You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which
are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
21
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Consumer Staples companies (either directly or indirectly through an underlying ETF) and investments that
produce premium income. Consumer Staples companies comprise companies included in the Consumer Staples sector of the S&P 500 Index, as determined by the Global Industry Classification Standard (GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Consumer Staples Select Sector SPDR Fund and (2) selling call options (a type
of derivative instrument) on The Consumer Staples Select Sector SPDR Fund to generate additional income. The Consumer Staples Select Sector SPDR Fund seeks to track the performance of the Consumer Staples Select Sector Index (the
“Underlying Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been identified
as Consumer Staples companies by GICS. The Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the
extent the index the underlying ETF seeks to track concentrates in a particular industry or group of industries. Futures contracts (a type of derivative instrument)
may also be used by the Fund for investment purposes.
With respect to the call option portion of the strategy, the Fund will systematically sell
(write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental income. Listed Options or Flexible Exchange Options (“FLEX Options”) may be utilized. FLEX Options are customizable exchange-traded option contracts
22
Fund Summaries
[ ]
guaranteed for settlement by the
Options Clearing Corporation (the
“OCC”). Option terms that can be customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in
exchange for the right to purchase the asset underlying the option at a specified price (the
“strike price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in
the market price of the underlying asset above the strike price of the option.
The Fund seeks to optimize the return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and
volatility, also known as an option's delta. When setting strike prices, the Fund seeks to balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser
will typically “roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as
Consumer Staples companies by the Global Industry Classification Standard (GICS®), including securities of companies from the following industries: consumer staples distribution and
retail; household products; food products; beverages; tobacco; and personal care products. The Underlying Index is one of eleven Select Sector Indexes developed and maintained in accordance with the following criteria: (1) each of the component
securities in the Underlying Index is a constituent of the S&P 500 Index; and (2) the Underlying Index is calculated by S&P Dow Jones Indices LLC (“S&P DJI”) based on a proprietary “modified market capitalization” methodology
which means that modifications may be made to the market capitalization weights
of single stock concentrations in order to conform to the requirements of the
Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was composed of [ ] stocks.
23
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
24
Fund Summaries
[ ]
Consumer Staples Sector Risk: The Fund's assets will be concentrated in
the consumer staples sector, which means the Fund will be more affected by
the performance of the consumer staples sector than a fund that is more diversified. Consumer staples companies are subject to government regulation affecting their products which may negatively impact such companies' performance. For
instance, government regulations may affect the permissibility of using various food additives and production methods of companies that make food products, which could affect company profitability. Tobacco
companies may be adversely affected by the adoption of proposed legislation and/or by litigation. Also, the success of food, beverage, household and personal product companies may be strongly affected by consumer interest, marketing
campaigns and other factors affecting supply and demand, including performance of the overall domestic and global economy, interest rates, competition and consumer confidence and spending.
Call Writing Strategy Risk: The Fund's use of call options involves
speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount
equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's
underlying asset, an increase in interest rates, a change in the actual or
perceived volatility of the stock market or the underlying asset and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the underlying asset(s). In addition, if the price of the underlying asset of an option is above the strike price of a written
call, the value of the option, and consequently of the Fund, may
25
Fund Summaries
[ ]
decline
significantly more than if the Fund invested directly in the underlying asset instead of using options. The Fund could experience a loss if its options do not perform as anticipated, or are not correlated with the performance of their
underlying asset or if the Fund is unable to purchase or liquidate a position because of an illiquid secondary market. As an option on an underlying asset held by the Fund nears expiration, they are generally closed out and
replaced by another option with a later expiration (commonly referred to as “rolling the option”). There is no assurance that
the Fund will be able to roll the option or effect a different closing transaction at any particular time or at an acceptable price. The sale of call options by the Fund may create
investment leverage. Frequent selling of call options may result in higher Fund expenses and may result in increased taxable distributions to investors, including potentially increased distributions that are taxable to individuals as ordinary
income.
FLEX Options: The Fund may utilize
FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement obligations, which
could result in substantial loss for the Fund. FLEX Options may be less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable
at the strike price. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options
prior to the expiration date may vary due to factors other than the value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the
actual and perceived volatility of the stock market and underlying asset, and the remaining time to expiration.
Exchange-Traded
Funds Risk: The Fund is subject to substantially the same risks as those associated with the
direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying ETF may trade at a premium or discount to their intrinsic value (i.e., the market value may differ from the net asset value of an ETF's shares) for a number of reasons. For example, supply and demand for shares of an underlying ETF or
market disruptions may cause the market price of the
26
Fund Summaries
[ ]
underlying
ETF to deviate from the value of the underlying ETF's investments, which may be exacerbated in less liquid markets.
Affiliated ETF
Risk: The Fund invests in an affiliated underlying ETF and, as a result, the Fund's
investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser may have an incentive to take into account the effect on an affiliated ETF
in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts
could impact the Fund.
Fluctuation of Net Asset Value, Share Premiums and Discounts Risk: As
with all exchange-traded funds, Fund Shares may be bought and sold in the
secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and there may be times when the market price of the shares is more than the
net asset value per share (premium) or less than the net asset value per share (discount). This risk is heightened in times of market volatility or periods of steep market declines.
Futures Contract Risk: A futures contract is a standardized agreement
that calls for the purchase or sale of a specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures
contracts can create investment leverage and may have significant volatility. It is possible that a futures contract transaction will result in a much greater loss than the principal amount invested, and the Fund may not be able to close
out the futures contract at a favorable time or price. There is no assurance that a liquid secondary market on an exchange will exist for any particular futures contract. In the event no such market exists, it might not be
possible to effect closing transactions, and the Fund will be unable to terminate its exposure to the futures contract. There is also a risk of imperfect correlation between movements in the prices of the futures contract and movements in the
price of the underlying assets. The counterparty to a futures contract may be unable or unwilling to make timely settlement payments, return the Fund's margin, or otherwise honor its obligations.
27
Fund Summaries
[ ]
Large-Capitalization Securities Risk: Returns on investments in
securities of large companies could trail the returns on investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond as quickly as
smaller and mid-sized companies to competitive challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed
smaller and mid-sized companies.
Management Risk: The Fund is actively managed. The Adviser's judgments
about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. Any resulting liquidation of the
Fund could cause elevated transaction costs for the Fund and negative tax consequences for
its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of Fund
Shares may be more volatile than the values of shares of more diversified funds.
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by showing the variability of the Fund's returns based on net assets and
28
Fund Summaries
[ ]
comparing the Fund's performance
to an index. When available, updated performance information may be obtained by calling
1-866-732-8673 or visiting the Fund's
website: www.sectorspdr.com.
Portfolio Management
Investment Adviser
SSGA FM serves as the
investment adviser to the Fund.
Portfolio
Managers
The professionals primarily responsible for the day-to-day management of the Fund are Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich, CFA, is a Managing Director of the Adviser and Co-Head of the Systematic
Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2000.
Raymond Donofrio is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity
Beta Group. He joined the Adviser in 2008.
Purchase
and Sale Information
The Fund will issue (or redeem) Fund Shares to certain institutional investors
(typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or cash.
Individual Fund Shares may only be purchased and sold on the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges, electronic crossing networks and other alternative trading systems
through your broker-dealer at market prices. Because Fund Shares trade at market prices rather than at net asset value (“NAV”), Fund Shares may trade at a price greater than NAV (premium) or less than NAV (discount). When buying or selling Fund Shares in the secondary market, you may incur costs
attributable to the difference between the highest price a buyer is willing to pay to purchase Fund Shares (bid) and the lowest price a seller is willing to accept for Fund Shares (ask) (the “bid-ask spread”). Recent information
29
Fund Summaries
[ ]
regarding the Fund's NAV, market
price, premiums and discounts, and bid-ask spreads is available at www.sectorspdr.com.
Tax
Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend income and/or capital gains, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you.
Payments to Broker-Dealers and Other Financial
Intermediaries
If you purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary's website for more information.
30
Fund Summaries
The Energy Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Energy Select Sector SPDR Premium Income Fund (the “Fund”) seeks to provide current income while maintaining prospects for long term growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund (“Fund
Shares”). You may
pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
31
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Energy companies (either directly or indirectly through an underlying ETF) and investments that produce premium
income. Energy companies comprise companies included in the Energy sector of the S&P 500 Index, as determined by the Global Industry Classification Standard (GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Energy Select Sector SPDR Fund and (2) selling call options (a type of derivative instrument) on The Energy Select
Sector SPDR Fund to generate additional income. The Energy Select Sector SPDR Fund seeks to track the performance of the Energy Select Sector Index (the “Underlying
Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been identified as Energy companies by GICS. The
Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the extent the index the underlying ETF seeks to track concentrates in a particular industry or group of
industries. Futures contracts (a type of derivative instrument) may also be used by the Fund for investment purposes.
With respect to the call option portion of the strategy, the Fund will
systematically sell (write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental
income. Listed Options or Flexible Exchange Options (“FLEX Options”) may be utilized. FLEX Options
are customizable exchange-traded option contracts guaranteed for settlement by the Options Clearing Corporation (the “OCC”).
32
Fund Summaries
[ ]
Option terms that can be
customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in exchange for the right to purchase the asset underlying the option at a specified
price (the “strike
price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in the market price of the underlying asset above the
strike price of the option.
The Fund seeks to optimize the
return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and volatility, also known as an option's delta. When setting strike prices, the Fund seeks to
balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser will typically
“roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as
Energy companies by the Global Industry Classification Standard (GICS®), including securities of companies from the following industries: oil, gas and consumable fuels; and energy
equipment and services. The Underlying Index is one of eleven Select Sector Indexes developed and maintained in accordance with the following criteria: (1) each of the component securities in the Underlying Index is a constituent of the S&P
500 Index; and (2) the Underlying Index is calculated by S&P Dow Jones Indices LLC
(“S&P DJI”) based on a proprietary “modified market
capitalization” methodology which means that modifications may be made to the market capitalization weights of
single stock concentrations in order to conform to the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was
composed of [ ] stocks.
33
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
34
Fund Summaries
[ ]
Energy Sector Risk: The Fund's assets will be concentrated in the
energy sector, which means the Fund will be more affected by the performance
of the energy sector than a fund that is more diversified. Issuers in energy-related industries can be significantly affected by fluctuations in energy prices and supply
and demand of energy fuels. Markets for various energy-related commodities can have significant volatility, and are subject to control or manipulation by large producers or purchasers. Companies in the energy sector may need
to make substantial expenditures, and to incur significant amounts of debt, in order to maintain or expand their reserves. Oil and gas exploration and production can be significantly affected by natural disasters as
well as changes in exchange rates, interest rates, government regulation, world events and economic conditions. These companies may be at risk for environmental damage claims.
Call Writing Strategy Risk: The Fund's use of call options involves
speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount
equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's
underlying asset, an increase in interest rates, a change in the actual or
perceived volatility of the stock market or the underlying asset and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the underlying asset(s). In addition, if the price of the underlying asset of an option is above the strike price of a written
call, the value of the option, and consequently of the Fund, may decline significantly more than if the Fund invested directly in the underlying
35
Fund Summaries
[ ]
asset
instead of using options. The Fund could experience a loss if its options do not perform as anticipated, or are not correlated with the performance of their underlying asset or if the Fund is unable to purchase or liquidate a position
because of an illiquid secondary market. As an option on an underlying asset held by the Fund nears expiration, they are generally closed out and replaced by another option with a later expiration (commonly referred to as
“rolling the option”). There is no assurance that the Fund will be able to roll the option or effect a different closing
transaction at any particular time or at an acceptable price. The sale of call options by the Fund may create investment leverage. Frequent selling of call options may result in higher Fund
expenses and may result in increased taxable distributions to investors, including potentially increased distributions that are taxable to individuals as ordinary income.
FLEX Options: The Fund may utilize FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement obligations, which
could result in substantial loss for the Fund. FLEX Options may be less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable
at the strike price. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options
prior to the expiration date may vary due to factors other than the value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the
actual and perceived volatility of the stock market and underlying asset, and the remaining time to expiration.
Exchange-Traded
Funds Risk: The Fund is subject to substantially the same risks as those associated with the
direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying ETF may trade at a premium or discount to their intrinsic value (i.e., the market value may differ from the net asset value of an ETF's shares) for a number of reasons. For example, supply and demand for shares of an underlying ETF or
market disruptions may cause the market price of the underlying ETF to deviate from the value of the underlying ETF's investments,
36
Fund Summaries
[ ]
which may be exacerbated in less
liquid markets.
Affiliated ETF Risk: The Fund invests in an affiliated underlying ETF
and, as a result, the Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser
may have an incentive to take into account the effect on an affiliated ETF in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although
the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts could impact the Fund.
Fluctuation of Net
Asset Value, Share Premiums and Discounts Risk: As with all exchange-traded funds, Fund
Shares may be bought and sold in the secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and
there may be times when the market price of the shares is more than the net asset value per share (premium) or less than the net asset value per share (discount). This risk is heightened in times of market volatility or periods of steep
market declines.
Futures Contract Risk: A futures contract is a standardized agreement
that calls for the purchase or sale of a specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures
contracts can create investment leverage and may have significant volatility. It is possible that a futures contract transaction will result in a much greater loss than the principal amount invested, and the Fund may not be able to close
out the futures contract at a favorable time or price. There is no assurance that a liquid secondary market on an exchange will exist for any particular futures contract. In the event no such market exists, it might not be
possible to effect closing transactions, and the Fund will be unable to terminate its exposure to the futures contract. There is also a risk of imperfect correlation between movements in the prices of the futures contract and movements in the
price of the underlying assets. The counterparty to a futures contract may be unable or unwilling to make timely settlement payments, return the Fund's margin, or otherwise honor its obligations.
37
Fund Summaries
[ ]
Large-Capitalization Securities Risk: Returns on investments in
securities of large companies could trail the returns on investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond as quickly as
smaller and mid-sized companies to competitive challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed
smaller and mid-sized companies.
Management Risk: The Fund is actively managed. The Adviser's judgments
about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. Any resulting liquidation of the
Fund could cause elevated transaction costs for the Fund and negative tax consequences for
its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of Fund
Shares may be more volatile than the values of shares of more diversified funds.
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by showing the variability of the Fund's returns based on net assets and
38
Fund Summaries
[ ]
comparing the Fund's performance
to an index. When available, updated performance information may be obtained by calling
1-866-732-8673 or visiting the Fund's
website: www.sectorspdr.com.
Portfolio Management
Investment Adviser
SSGA FM serves as the
investment adviser to the Fund.
Portfolio
Managers
The professionals primarily responsible for the day-to-day management of the Fund are Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich, CFA, is a Managing Director of the Adviser and Co-Head of the Systematic
Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2000.
Raymond Donofrio is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity
Beta Group. He joined the Adviser in 2008.
Purchase
and Sale Information
The Fund will issue (or redeem) Fund Shares to certain institutional investors
(typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or cash.
Individual Fund Shares may only be purchased and sold on the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges, electronic crossing networks and other alternative trading systems
through your broker-dealer at market prices. Because Fund Shares trade at market prices rather than at net asset value (“NAV”), Fund Shares may trade at a price greater than NAV (premium) or less than NAV (discount). When buying or selling Fund Shares in the secondary market, you may incur costs
attributable to the difference between the highest price a buyer is willing to pay to purchase Fund Shares (bid) and the lowest price a seller is willing to accept for Fund Shares (ask) (the “bid-ask spread”). Recent information
39
Fund Summaries
[ ]
regarding the Fund's NAV, market
price, premiums and discounts, and bid-ask spreads is available at www.sectorspdr.com.
Tax
Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend income and/or capital gains, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you.
Payments to Broker-Dealers and Other Financial
Intermediaries
If you purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary's website for more information.
40
Fund Summaries
The Financial Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Financial Select Sector SPDR Premium Income Fund (the “Fund”) seeks to provide current income while maintaining prospects for long term growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund (“Fund
Shares”). You may
pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
41
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Financial companies (either directly or indirectly through an underlying ETF) and investments that produce premium
income. Financial companies comprise companies included in the Financial sector of the S&P 500 Index, as determined by the Global Industry Classification Standard (GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Financial Select Sector SPDR Fund and (2) selling call options (a type of derivative instrument) on The Financial
Select Sector SPDR Fund to generate additional income. The Financial Select Sector SPDR Fund seeks to track the performance of the Financial Select Sector Index (the “Underlying
Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been identified as Financial companies by
GICS. The Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the extent the index the underlying ETF seeks to track concentrates in a particular
industry or group of industries. Futures contracts (a type of derivative instrument) may also be
used by the Fund for investment purposes.
With respect to the
call option portion of the strategy, the Fund will systematically sell (write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental
income. Listed Options or Flexible Exchange Options (“FLEX Options”) may be utilized. FLEX Options
are customizable exchange-traded option contracts guaranteed for settlement by the Options Clearing Corporation (the “OCC”).
42
Fund Summaries
[ ]
Option terms that can be
customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in exchange for the right to purchase the asset underlying the option at a specified
price (the “strike
price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in the market price of the underlying asset above the
strike price of the option.
The Fund seeks to optimize the
return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and volatility, also known as an option's delta. When setting strike prices, the Fund seeks to
balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser will typically
“roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as
Financial companies by the Global Industry Classification Standard (GICS®), including securities of companies from the following industries: financial services; insurance; banks; capital
markets; mortgage real estate investment trusts (“REITs”); and consumer finance. The
Underlying Index is one of eleven Select Sector Indexes developed and maintained in accordance with the following criteria: (1) each of the component securities in the Underlying Index is a constituent of the S&P 500 Index; and (2) the
Underlying Index is calculated by S&P Dow Jones Indices LLC (“S&P DJI”) based on a proprietary “modified market capitalization” methodology which means that modifications may be made to the market capitalization weights of single
stock concentrations in order to conform to the requirements of the Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was
composed of [ ] stocks.
43
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
44
Fund Summaries
[ ]
Financial Sector Risk: The Fund's assets will be concentrated in the
financial sector, which means the Fund will be more affected by the performance of the financial sector than a fund that is more diversified. Financial services
companies are subject to extensive governmental regulation, which may limit
both the amounts and types of loans and other financial commitments they can make, the interest rates and fees they can charge, the scope of their activities, the prices they can charge and the amount of capital they must
maintain. Profitability is largely dependent on the availability and cost of capital funds and can fluctuate significantly when interest rates change or due to increased competition. In addition, deterioration of the credit markets
generally may cause an adverse impact in a broad range of markets, including U.S. and international credit and interbank money markets generally, thereby affecting a wide range of financial institutions and markets. Certain events in
the financial sector may cause an unusually high degree of volatility in the financial markets, both domestic and foreign, and cause certain financial services companies to incur large losses. Securities of financial services companies may
experience a dramatic decline in value when such companies experience substantial declines in the valuations of their assets, take action to raise capital (such as the issuance of debt or equity securities), or cease
operations. Credit losses resulting from financial difficulties of borrowers
and financial losses associated with investment activities can negatively impact the sector. Insurance companies may be subject to severe price competition. Adverse
economic, business or political developments could adversely affect financial institutions engaged in mortgage finance or other lending or investing activities directly or indirectly connected to the value of real estate.
Call Writing Strategy Risk: The
Fund's use of call options involves speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a
45
Fund Summaries
[ ]
premium;
however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount equal to or greater than the premium. The value of an option may be
adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's underlying asset, an increase in interest rates, a change in the actual or perceived
volatility of the stock market or the underlying asset and the remaining time to expiration. Additionally, the value of an option does not increase or decrease at the same rate as the underlying asset(s). In addition, if the
price of the underlying asset of an option is above the strike price of a written call, the value of the option, and consequently of the Fund, may decline significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund could experience a loss if its options do not perform as anticipated, or are not correlated with the performance of their underlying asset or if the Fund is unable to purchase or liquidate a position
because of an illiquid secondary market. As an option on an underlying asset held by the Fund nears expiration, they are generally closed out and replaced by another option with a later expiration (commonly referred to as
“rolling the option”). There is no assurance that the Fund will be able to roll the option or effect a different closing
transaction at any particular time or at an acceptable price. The sale of call options by the Fund may create investment leverage. Frequent selling of call options may result in higher Fund
expenses and may result in increased taxable distributions to investors, including potentially increased distributions that are taxable to individuals as ordinary income.
FLEX Options: The Fund may utilize FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement obligations, which
could result in substantial loss for the Fund. FLEX Options may be less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable
at the strike price. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options
prior to the expiration date may vary due to factors
46
Fund Summaries
[ ]
other than
the value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the actual and perceived volatility of the stock market and underlying asset, and the
remaining time to expiration.
Exchange-Traded Funds Risk: The Fund is subject to substantially the
same risks as those associated with the direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying ETF
may trade at a premium or discount to their intrinsic value (i.e., the market value may differ from the net asset value of an ETF's shares) for a number of
reasons. For example, supply and demand for shares of an underlying ETF or market disruptions may cause the market price of the underlying ETF to deviate from the value of the underlying ETF's investments, which may be exacerbated in
less liquid markets.
Affiliated ETF Risk: The Fund invests in an affiliated underlying ETF
and, as a result, the Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser
may have an incentive to take into account the effect on an affiliated ETF in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although
the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts could impact the Fund.
Fluctuation of Net
Asset Value, Share Premiums and Discounts Risk: As with all exchange-traded funds, Fund
Shares may be bought and sold in the secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and
there may be times when the market price of the shares is more than the net asset value per share (premium) or less than the net asset value per share (discount). This risk is heightened in times of market volatility or periods of steep
market declines.
Futures Contract Risk: A futures contract is a standardized agreement
that calls for the purchase or sale of a specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures
contracts can create investment leverage and may have significant volatility. It is possible that a futures contract transaction will result in a much
47
Fund Summaries
[ ]
greater loss
than the principal amount invested, and the Fund may not be able to close out the futures contract at a favorable time or price. There is no assurance that a liquid secondary market on an exchange will exist for any particular
futures contract. In the event no such market exists, it might not be possible to effect closing transactions, and the Fund will be unable to terminate its exposure to the futures contract. There is also a risk of imperfect
correlation between movements in the prices of the futures contract and
movements in the price of the underlying assets. The counterparty to a
futures contract may be unable or unwilling to make timely settlement payments, return the
Fund's margin, or otherwise honor its obligations.
Large-Capitalization Securities Risk: Returns on investments in
securities of large companies could trail the returns on investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond as quickly as
smaller and mid-sized companies to competitive challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed
smaller and mid-sized companies.
Management Risk: The Fund is actively managed. The Adviser's judgments
about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. Any resulting liquidation of the
Fund could cause elevated transaction costs for the Fund and negative tax consequences for
its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
48
Fund Summaries
[ ]
more than if
it invested in a larger number of issuers. The value of Fund Shares may be more volatile than the values of shares of more diversified funds.
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by showing the variability of the Fund's returns based on net assets and comparing the Fund's performance to an index. When available, updated performance information may be obtained by calling 1-866-732-8673 or visiting the Fund's website: www.sectorspdr.com.
Portfolio Management
Investment Adviser
SSGA FM serves as the investment adviser to the Fund.
Portfolio Managers
The professionals primarily responsible for the day-to-day management of the Fund are Emiliano Rabinovich,
Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich,
CFA, is a Managing Director of the Adviser and Co-Head of the Systematic Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta
Group. He joined the Adviser in 2000.
Raymond Donofrio
is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2008.
Purchase and Sale Information
The Fund will issue (or redeem) Fund Shares to certain institutional investors (typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or
cash.
49
Fund Summaries
[ ]
Individual Fund Shares may only
be purchased and sold on the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges,
electronic crossing networks and other alternative trading systems through your broker-dealer at market prices. Because Fund Shares trade at market prices rather than at net asset value (“NAV”), Fund Shares may trade at a price greater than NAV (premium) or less than NAV (discount). When
buying or selling Fund Shares in the secondary market, you may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase Fund Shares (bid) and the lowest price a seller is willing to
accept for Fund Shares (ask) (the “bid-ask spread”). Recent information regarding
the Fund's NAV, market price, premiums and discounts, and bid-ask spreads is available at
www.sectorspdr.com.
Tax Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend
income and/or capital gains, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary's website for more information.
50
Fund Summaries
The Health Care Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Health Care Select Sector SPDR Premium Income Fund (the “Fund”) seeks to provide current income while maintaining prospects for long term growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund (“Fund
Shares”). You may
pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
51
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Health Care companies (either directly or indirectly through an underlying ETF) and investments that produce premium
income. Health Care companies comprise companies included in the Health Care sector of the S&P 500 Index, as determined by the Global Industry Classification Standard (GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Health Care Select Sector SPDR Fund and (2) selling call options (a type of derivative instrument) on
The Health Care Select Sector SPDR Fund to generate additional income. The Health Care Select Sector SPDR Fund seeks to track the performance of the Health Care Select Sector Index (the “Underlying Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been identified as
Health Care companies by GICS. The Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the extent the index the underlying ETF seeks to track
concentrates in a particular industry or group of industries. Futures contracts (a type of derivative instrument) may also be used by the Fund for investment purposes.
With respect to the call option portion of the strategy, the Fund will systematically sell
(write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental income. Listed Options or Flexible Exchange Options (“FLEX Options”) may be utilized. FLEX Options are customizable exchange-traded option contracts
52
Fund Summaries
[ ]
guaranteed for settlement by the
Options Clearing Corporation (the
“OCC”). Option terms that can be customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in
exchange for the right to purchase the asset underlying the option at a specified price (the
“strike price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in
the market price of the underlying asset above the strike price of the option.
The Fund seeks to optimize the return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and
volatility, also known as an option's delta. When setting strike prices, the Fund seeks to balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser
will typically “roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as
Health Care companies by the Global Industry Classification Standard (GICS®), including securities of companies from the following industries: pharmaceuticals; health care equipment
and supplies; health care providers and services; biotechnology; life sciences tools and services; and health care technology. The Underlying Index is one of eleven Select Sector Indexes developed and maintained in accordance with the
following criteria: (1) each of the component securities in the Underlying Index is a constituent of the S&P 500 Index; and (2) the Underlying Index is
calculated by S&P Dow Jones Indices LLC (“S&P DJI”) based on a proprietary “modified market
capitalization” methodology which means that modifications may be made to the market capitalization weights of single stock concentrations in order to conform to the
requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was composed of [ ] stocks.
53
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
54
Fund Summaries
[ ]
Healthcare Sector Risk: The Fund's assets will be concentrated in
the health care sector, which means the Fund will be more affected by the performance of the health care sector than a fund that is more diversified. Companies in
the healthcare sector are subject to extensive government regulation and their profitability can be significantly affected by restrictions on government reimbursement for medical expenses, rising costs of medical products and services,
pricing pressure (including price discounting), limited product lines and an increased emphasis on the delivery of healthcare through outpatient services. Companies in the healthcare sector are heavily dependent on obtaining and
defending patents, which may be time consuming and costly, and the expiration of patents may also adversely affect the profitability of these companies. Healthcare companies are also subject to extensive litigation based on
product liability and similar claims. In addition, their products can become obsolete due to industry innovation, changes in technologies or other market developments. Many new products in the healthcare sector require
significant research and development and may be subject to regulatory approvals, all of which may be time consuming and costly with no guarantee that any product will come to market.
Call Writing Strategy Risk: The Fund's use of call options involves
speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount
equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's
underlying asset, an increase in interest rates, a change in the actual or
perceived volatility of the stock market or the underlying asset and the
55
Fund Summaries
[ ]
remaining
time to expiration. Additionally, the value of an option does not increase or decrease at the same rate as the underlying asset(s). In addition, if the price of the underlying asset of an option is above the strike price of a written
call, the value of the option, and consequently of the Fund, may decline significantly more than if the Fund invested directly in the underlying asset instead of using options. The Fund could experience a loss if its options do not
perform as anticipated, or are not correlated with the performance of their underlying asset or if the Fund is unable to purchase or liquidate a position because of an illiquid secondary market. As an option on an underlying asset
held by the Fund nears expiration, they are generally closed out and replaced by another option with a later expiration (commonly referred to as “rolling the
option”). There is no assurance that the Fund will be able to roll the option or effect a different closing transaction at any particular time or
at an acceptable price. The sale of call options by the Fund may create investment leverage. Frequent selling of call options may result in higher Fund expenses and may result in increased taxable distributions to investors,
including potentially increased distributions that are taxable to individuals as ordinary income.
FLEX Options: The Fund may utilize FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement obligations, which could result in substantial loss for the Fund. FLEX Options may be
less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable at the strike price. Prior to the expiration date, the value of the
FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options prior to the expiration date may vary due to factors other than the
value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the actual and perceived volatility of the stock market and underlying asset, and the
remaining time to expiration.
Exchange-Traded Funds Risk: The Fund is subject to substantially the
same risks as those associated with the direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying
56
Fund Summaries
[ ]
ETF may
trade at a premium or discount to their intrinsic value (i.e., the market value may differ from the net asset value of an ETF's shares) for a number of
reasons. For example, supply and demand for shares of an underlying ETF or market disruptions may cause the market price of the underlying ETF to deviate from the value of the underlying ETF's investments, which may be exacerbated in
less liquid markets.
Affiliated ETF Risk: The Fund invests in an affiliated underlying ETF
and, as a result, the Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser
may have an incentive to take into account the effect on an affiliated ETF in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although
the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts could impact the Fund.
Fluctuation of Net
Asset Value, Share Premiums and Discounts Risk: As with all exchange-traded funds, Fund
Shares may be bought and sold in the secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and
there may be times when the market price of the shares is more than the net asset value per share (premium) or less than the net asset value per share (discount). This risk is heightened in times of market volatility or periods of steep
market declines.
Futures Contract Risk: A futures contract is a standardized agreement
that calls for the purchase or sale of a specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures
contracts can create investment leverage and may have significant volatility. It is possible that a futures contract transaction will result in a much greater loss than the principal amount invested, and the Fund may not be able to close
out the futures contract at a favorable time or price. There is no assurance that a liquid secondary market on an exchange will exist for any particular futures contract. In the event no such market exists, it might not be
possible to effect closing transactions, and the Fund will be unable to terminate its exposure to the futures contract. There is also a risk of imperfect correlation between movements in the prices of the futures contract and
57
Fund Summaries
[ ]
movements in
the price of the underlying assets. The counterparty to a futures contract may be unable or unwilling to make timely settlement payments, return the Fund's margin, or otherwise honor its obligations.
Large-Capitalization Securities
Risk: Returns on investments in securities of large companies could trail the returns on
investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive challenges or to changes in
business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed smaller and mid-sized companies.
Management Risk: The Fund is
actively managed. The Adviser's judgments about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. Any resulting liquidation of the
Fund could cause elevated transaction costs for the Fund and negative tax consequences for
its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of Fund
Shares may be more volatile than the values of shares of more diversified funds.
58
Fund Summaries
[ ]
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by showing the variability of the Fund's returns based on net assets and comparing the Fund's performance to an index. When available, updated performance information may be obtained by calling 1-866-732-8673 or visiting the Fund's website: www.sectorspdr.com.
Portfolio Management
Investment Adviser
SSGA FM
serves as the investment adviser to the Fund.
Portfolio
Managers
The professionals primarily responsible for the day-to-day management of
the Fund are Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich, CFA, is a Managing Director of the Adviser and Co-Head of the Systematic Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio
Manager in the Systematic Equity Beta Group. He joined the Adviser in 2000.
Raymond Donofrio is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2008.
Purchase and Sale Information
The Fund will issue (or redeem) Fund Shares to certain institutional investors (typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or
cash.
Individual Fund Shares may only be purchased and sold on
the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges,
electronic crossing networks and other alternative trading systems through your broker-dealer at market prices.
59
Fund Summaries
[ ]
Because Fund Shares trade at
market prices rather than at net asset value (“NAV”), Fund Shares may trade at a
price greater than NAV (premium) or less than NAV (discount). When buying or selling Fund Shares in the secondary market, you may incur costs attributable to the difference between the highest price a buyer is willing to
pay to purchase Fund Shares (bid) and the lowest price a seller is willing to accept for Fund Shares (ask) (the “bid-ask spread”). Recent information regarding the Fund's NAV, market price, premiums and discounts, and bid-ask spreads is available at
www.sectorspdr.com.
Tax Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend
income and/or capital gains, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary's website for more information.
60
Fund Summaries
The Industrial Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Industrial Select Sector SPDR Premium Income Fund (the “Fund”) seeks to provide current income while maintaining prospects for long term growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund (“Fund
Shares”). You may
pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
61
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Industrial companies (either directly or indirectly through an underlying ETF) and investments that produce premium
income. Industrial companies comprise companies included in the Industrial sector of the S&P 500 Index, as determined by the Global Industry Classification Standard (GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Industrial Select Sector SPDR Fund and (2) selling call options (a type of derivative instrument) on The
Industrial Select Sector SPDR Fund to generate additional income. The Industrial Select Sector SPDR Fund seeks to track the performance of the Industrial Select Sector Index (the
“Underlying Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been identified
as Industrial companies by GICS. The Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the
extent the index the underlying ETF seeks to track concentrates in a particular industry or group of industries. Futures contracts (a type of derivative instrument)
may also be used by the Fund for investment purposes.
With respect to the call option portion of the strategy, the Fund will systematically sell
(write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental income. Listed Options or Flexible Exchange Options (“FLEX Options”) may be utilized. FLEX Options are customizable exchange-traded option contracts guaranteed for
settlement by the Options Clearing Corporation (the “OCC”).
62
Fund Summaries
[ ]
Option terms that can be
customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in exchange for the right to purchase the asset underlying the option at a specified
price (the “strike
price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in the market price of the underlying asset above the
strike price of the option.
The Fund seeks to optimize the
return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and volatility, also known as an option's delta. When setting strike prices, the Fund seeks to
balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser will typically
“roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as
Industrial companies by the Global Industry Classification Standard (GICS®), including securities of companies from the following industries: aerospace and defense; industrial conglomerates;
marine transportation; transportation infrastructure; machinery; ground transportation; air freight and logistics; commercial services and supplies; professional services; electrical equipment; construction and engineering; trading companies
and distributors; passenger airlines; and building products. The Underlying Index is one of eleven Select Sector Indexes developed and maintained in accordance with the following criteria: (1) each of the component securities in the
Underlying Index is a constituent of the S&P 500 Index; and (2) the Underlying Index is calculated by S&P Dow Jones Indices LLC (“S&P DJI”) based on a proprietary “modified
market capitalization” methodology which means that modifications may be made to the market capitalization weights of single stock concentrations in order to
conform to the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was composed of [ ] stocks.
63
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
64
Fund Summaries
[ ]
Industrial Sector Risk: The Fund's assets will be concentrated in the
industrial sector, which means the Fund will be more affected by the performance of the industrial sector than a fund that is more diversified. Industrial companies
are affected by supply and demand both for their specific product or service
and for industrial sector products and services in general. Government
regulation, world events, exchange rates and economic conditions,
technological developments and liabilities for environmental damage and
general civil liabilities will likewise affect the performance of these companies. Aerospace and defense companies, a component of the industrial sector, can be
significantly affected by government spending policies because companies involved in this industry rely, to a significant extent, on U.S. and foreign government demand for their products and services. Thus, the financial condition
of, and investor interest in, aerospace and defense companies are heavily influenced by governmental defense spending policies which are typically under pressure from efforts to control the U.S. (and other) government
budgets. Transportation securities, another component of the industrial sector, are cyclical and have occasional sharp price movements which may result from changes in the economy, fuel prices, labor agreements and insurance
costs.
Call Writing Strategy Risk: The
Fund's use of call options involves speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount
equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's
underlying asset, an increase in interest rates, a change in the actual or
65
Fund Summaries
[ ]
perceived
volatility of the stock market or the underlying asset and the remaining time to expiration. Additionally, the value of an option does not increase or decrease at the same rate as the underlying asset(s). In addition, if the
price of the underlying asset of an option is above the strike price of a written call, the value of the option, and consequently of the Fund, may decline significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund could experience a loss if its options do not perform as anticipated, or are not correlated with the performance of their underlying asset or if the Fund is unable to purchase or liquidate a position
because of an illiquid secondary market. As an option on an underlying asset held by the Fund nears expiration, they are generally closed out and replaced by another option with a later expiration (commonly referred to as
“rolling the option”). There is no assurance that the Fund will be able to roll the option or effect a different closing
transaction at any particular time or at an acceptable price. The sale of call options by the Fund may create investment leverage. Frequent selling of call options may result in higher Fund
expenses and may result in increased taxable distributions to investors, including potentially increased distributions that are taxable to individuals as ordinary income.
FLEX Options: The Fund may utilize FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement obligations, which
could result in substantial loss for the Fund. FLEX Options may be less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable
at the strike price. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options
prior to the expiration date may vary due to factors other than the value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the
actual and perceived volatility of the stock market and underlying asset, and the remaining time to expiration.
66
Fund Summaries
[ ]
Exchange-Traded Funds Risk: The Fund is subject to substantially the
same risks as those associated with the direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying ETF
may trade at a premium or discount to their intrinsic value (i.e., the market value may differ from the net asset value of an ETF's shares) for a number of
reasons. For example, supply and demand for shares of an underlying ETF or market disruptions may cause the market price of the underlying ETF to deviate from the value of the underlying ETF's investments, which may be exacerbated in
less liquid markets.
Affiliated ETF Risk: The Fund invests in an affiliated underlying ETF
and, as a result, the Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser
may have an incentive to take into account the effect on an affiliated ETF in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although
the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts could impact the Fund.
Fluctuation of Net
Asset Value, Share Premiums and Discounts Risk: As with all exchange-traded funds, Fund
Shares may be bought and sold in the secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and
there may be times when the market price of the shares is more than the net asset value per share (premium) or less than the net asset value per share (discount). This risk is heightened in times of market volatility or periods of steep
market declines.
Futures Contract Risk: A futures contract is a standardized agreement
that calls for the purchase or sale of a specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures
contracts can create investment leverage and may have significant volatility. It is possible that a futures contract transaction will result in a much greater loss than the principal amount invested, and the Fund may not be able to close
out the futures contract at a favorable time or price. There is no assurance that a liquid secondary market on an exchange will exist for any particular futures contract. In the event no such market exists, it might
67
Fund Summaries
[ ]
not be
possible to effect closing transactions, and the Fund will be unable to terminate its exposure to the futures contract. There is also a risk of imperfect correlation between movements in the prices of the futures contract and movements in the
price of the underlying assets. The counterparty to a futures contract may be unable or unwilling to make timely settlement payments, return the Fund's margin, or otherwise honor its obligations.
Large-Capitalization Securities
Risk: Returns on investments in securities of large companies could trail the returns on
investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive challenges or to changes in
business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed smaller and mid-sized companies.
Management Risk: The Fund is
actively managed. The Adviser's judgments about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. Any resulting liquidation of the
Fund could cause elevated transaction costs for the Fund and negative tax consequences for
its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of Fund
Shares may be more volatile than the values of shares of more diversified funds.
68
Fund Summaries
[ ]
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by showing the variability of the Fund's returns based on net assets and comparing the Fund's performance to an index. When available, updated performance information may be obtained by calling 1-866-732-8673 or visiting the Fund's website: www.sectorspdr.com.
Portfolio Management
Investment Adviser
SSGA FM
serves as the investment adviser to the Fund.
Portfolio
Managers
The professionals primarily responsible for the day-to-day management of
the Fund are Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich, CFA, is a Managing Director of the Adviser and Co-Head of the Systematic Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio
Manager in the Systematic Equity Beta Group. He joined the Adviser in 2000.
Raymond Donofrio is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2008.
Purchase and Sale Information
The Fund will issue (or redeem) Fund Shares to certain institutional investors (typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or
cash.
Individual Fund Shares may only be purchased and sold on
the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges,
electronic crossing networks and other alternative trading systems through your broker-dealer at market prices.
69
Fund Summaries
[ ]
Because Fund Shares trade at
market prices rather than at net asset value (“NAV”), Fund Shares may trade at a
price greater than NAV (premium) or less than NAV (discount). When buying or selling Fund Shares in the secondary market, you may incur costs attributable to the difference between the highest price a buyer is willing to
pay to purchase Fund Shares (bid) and the lowest price a seller is willing to accept for Fund Shares (ask) (the “bid-ask spread”). Recent information regarding the Fund's NAV, market price, premiums and discounts, and bid-ask spreads is available at
www.sectorspdr.com.
Tax Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend
income and/or capital gains, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary's website for more information.
70
Fund Summaries
The Materials Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Materials Select Sector SPDR Premium Income Fund (the “Fund”) seeks to provide current income while maintaining prospects for long term growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund (“Fund
Shares”). You may
pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
71
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Materials companies (either directly or indirectly through an underlying ETF) and investments that produce premium
income. Materials companies comprise companies included in the Materials sector of the S&P 500 Index, as determined by the Global Industry Classification Standard (GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Materials Select Sector SPDR Fund and (2) selling call options (a type of derivative instrument) on The
Materials Select Sector SPDR Fund to generate additional income. The Materials Select Sector SPDR Fund seeks to track the performance of the Materials Select Sector Index (the
“Underlying Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been identified
as Materials companies by GICS. The Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the
extent the index the underlying ETF seeks to track concentrates in a particular industry or group of industries. Futures contracts (a type of derivative instrument)
may also be used by the Fund for investment purposes.
With respect to the call option portion of the strategy, the Fund will systematically sell
(write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental income. Listed Options or Flexible Exchange Options (“FLEX Options”) may be utilized. FLEX Options are customizable exchange-traded option contracts guaranteed for
settlement by the Options Clearing Corporation (the “OCC”).
72
Fund Summaries
[ ]
Option terms that can be
customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in exchange for the right to purchase the asset underlying the option at a specified
price (the “strike
price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in the market price of the underlying asset above the
strike price of the option.
The Fund seeks to optimize the
return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and volatility, also known as an option's delta. When setting strike prices, the Fund seeks to
balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser will typically
“roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as
Materials companies by the Global Industry Classification Standard (GICS®), including securities of companies from the following industries: chemicals; metals and mining; paper and forest
products; containers and packaging; and construction materials. The Underlying Index is one of eleven Select Sector Indexes developed and maintained in accordance with the following criteria: (1) each of the component securities in the
Underlying Index is a constituent of the S&P 500 Index; and (2) the Underlying Index is calculated by S&P Dow Jones Indices LLC (“S&P DJI”) based on a proprietary “modified
market capitalization” methodology which means that modifications may be made to the market capitalization weights of single stock concentrations in order to
conform to the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was composed of [ ] stocks.
73
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
74
Fund Summaries
[ ]
Materials Sector Risk: The Fund's assets will be concentrated in the
materials sector, which means the Fund will be more affected by the performance of the materials sector than a fund that is more diversified. Many materials companies
are significantly affected by the level and volatility of commodity prices, exchange rates, import controls, worldwide competition, environmental policies and consumer demand. At times, worldwide production of industrial materials has
exceeded demand as a result of over-building or economic downturns, leading to poor investment returns or losses. Other risks may include liabilities for environmental damage and general civil liabilities, depletion of
resources, and mandated expenditures for safety and pollution control. The materials sector may also be affected by economic cycles, technical progress, labor relations, and government regulations.
Call Writing Strategy Risk: The
Fund's use of call options involves speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount
equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's
underlying asset, an increase in interest rates, a change in the actual or
perceived volatility of the stock market or the underlying asset and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the underlying asset(s). In addition, if the price of the underlying asset of an option is above the strike price of a written
call, the value of the option, and consequently of the Fund, may decline significantly more than if the Fund invested directly in the underlying asset instead of using options. The Fund could experience a loss if its options
75
Fund Summaries
[ ]
do not
perform as anticipated, or are not correlated with the performance of their underlying asset or if the Fund is unable to purchase or liquidate a position because of an illiquid secondary market. As an option on an underlying asset
held by the Fund nears expiration, they are generally closed out and replaced by another option with a later expiration (commonly referred to as “rolling the
option”). There is no assurance that the Fund will be able to roll the option or effect a different closing transaction at any particular time or
at an acceptable price. The sale of call options by the Fund may create investment leverage. Frequent selling of call options may result in higher Fund expenses and may result in increased taxable distributions to investors,
including potentially increased distributions that are taxable to individuals as ordinary income.
FLEX Options: The Fund may utilize FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement obligations, which could result in substantial loss for the Fund. FLEX Options may be
less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable at the strike price. Prior to the expiration date, the value of the
FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options prior to the expiration date may vary due to factors other than the
value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the actual and perceived volatility of the stock market and underlying asset, and the
remaining time to expiration.
Exchange-Traded Funds Risk: The Fund is subject to substantially the
same risks as those associated with the direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying ETF
may trade at a premium or discount to their intrinsic value (i.e., the market value may differ from the net asset value of an ETF's shares) for a number of
reasons. For example, supply and demand for shares of an underlying ETF or market disruptions may cause the market price of the underlying ETF to deviate from the value of the underlying ETF's investments, which may be exacerbated in
less liquid markets.
76
Fund Summaries
[ ]
Affiliated ETF Risk: The Fund invests in an affiliated underlying ETF
and, as a result, the Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser
may have an incentive to take into account the effect on an affiliated ETF in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although
the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts could impact the Fund.
Fluctuation of Net
Asset Value, Share Premiums and Discounts Risk: As with all exchange-traded funds, Fund
Shares may be bought and sold in the secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and
there may be times when the market price of the shares is more than the net asset value per share (premium) or less than the net asset value per share (discount). This risk is heightened in times of market volatility or periods of steep
market declines.
Futures Contract Risk: A futures contract is a standardized agreement
that calls for the purchase or sale of a specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures
contracts can create investment leverage and may have significant volatility. It is possible that a futures contract transaction will result in a much greater loss than the principal amount invested, and the Fund may not be able to close
out the futures contract at a favorable time or price. There is no assurance that a liquid secondary market on an exchange will exist for any particular futures contract. In the event no such market exists, it might not be
possible to effect closing transactions, and the Fund will be unable to terminate its exposure to the futures contract. There is also a risk of imperfect correlation between movements in the prices of the futures contract and movements in the
price of the underlying assets. The counterparty to a futures contract may be unable or unwilling to make timely settlement payments, return the Fund's margin, or otherwise honor its obligations.
Large-Capitalization Securities
Risk: Returns on investments in securities of large companies could trail the returns on
investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond
77
Fund Summaries
[ ]
as quickly
as smaller and mid-sized companies to competitive challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed
smaller and mid-sized companies.
Management Risk: The Fund is actively managed. The Adviser's judgments
about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. Any resulting liquidation of the
Fund could cause elevated transaction costs for the Fund and negative tax consequences for
its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of Fund
Shares may be more volatile than the values of shares of more diversified funds.
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by showing the variability of the Fund's returns based on net assets and comparing the Fund's performance to an index. When available, updated performance information may be obtained by calling 1-866-732-8673 or visiting the Fund's website: www.sectorspdr.com.
78
Fund Summaries
[ ]
Portfolio Management
Investment Adviser
SSGA FM serves as the investment adviser to the Fund.
Portfolio Managers
The professionals primarily responsible for the day-to-day management of the Fund are Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich, CFA, is a Managing Director of the Adviser and Co-Head of the Systematic
Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2000.
Raymond Donofrio is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity
Beta Group. He joined the Adviser in 2008.
Purchase
and Sale Information
The Fund will issue (or redeem) Fund Shares to certain
institutional investors (typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or cash.
Individual Fund Shares may only be purchased and sold on the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges, electronic crossing networks and other alternative trading systems
through your broker-dealer at market prices. Because Fund Shares trade at market prices rather than at net asset value (“NAV”), Fund Shares may trade at a price greater than NAV (premium) or less than NAV (discount). When buying or selling Fund Shares in the secondary market, you may incur costs
attributable to the difference between the highest price a buyer is willing to pay to purchase Fund Shares (bid) and the lowest price a seller is willing to accept for Fund Shares (ask) (the “bid-ask spread”). Recent information regarding the Fund's NAV, market price, premiums and discounts, and bid-ask spreads is available at www.sectorspdr.com.
79
Fund Summaries
[ ]
Tax Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend income and/or capital gains, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you.
Payments to Broker-Dealers and Other Financial
Intermediaries
If you purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary's website for more information.
80
Fund Summaries
The Real Estate Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Real Estate Select Sector SPDR Premium Income Fund (the “Fund”) seeks to provide current income while maintaining prospects for long term growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund (“Fund
Shares”). You may
pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
81
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Real Estate companies (either directly or indirectly through an underlying ETF) and investments that produce premium
income. Real Estate companies comprise companies included in the Real Estate sector of the S&P 500 Index, as determined by the Global Industry Classification Standard (GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Real Estate Select Sector SPDR Fund and (2) selling call options (a type of derivative instrument)
on The Real Estate Select Sector SPDR Fund to generate additional income. The Real Estate Select Sector SPDR Fund seeks to track the performance of the Real Estate Select Sector Index (the “Underlying Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been identified as
Real Estate companies by GICS. The Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the extent the index the underlying ETF seeks to track
concentrates in a particular industry or group of industries. Futures contracts (a type of derivative instrument) may also be used by the Fund for investment purposes.
With respect to the call option portion of the strategy, the Fund will systematically sell
(write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental income. Listed Options or Flexible Exchange Options (“FLEX Options”) may be utilized. FLEX Options are customizable exchange-traded option contracts
82
Fund Summaries
[ ]
guaranteed for settlement by the
Options Clearing Corporation (the
“OCC”). Option terms that can be customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in
exchange for the right to purchase the asset underlying the option at a specified price (the
“strike price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in
the market price of the underlying asset above the strike price of the option.
The Fund seeks to optimize the return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and
volatility, also known as an option's delta. When setting strike prices, the Fund seeks to balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser
will typically “roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as Real
Estate companies by the Global Industry Classification Standard
(GICS®), including securities of companies from the following industries: real estate management and development;
diversified real estate investment trusts (“REITs”); industrial REITs; hotel and
resort REITs; office REITs; health care REITs; residential REITs; retail REITs; and specialized REITs. The Underlying Index is one of eleven Select Sector Indexes developed and maintained in accordance with the following criteria: (1) each of
the component securities in the Underlying Index is a constituent of the S&P 500 Index; and (2) the Underlying Index is calculated by S&P Dow Jones
Indices LLC (“S&P
DJI”) based on a proprietary
“modified market
capitalization” methodology which means that modifications may be made to the market capitalization weights of
single stock concentrations in order to conform to the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was
composed of [ ] stocks.
83
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
84
Fund Summaries
[ ]
Real Estate Sector Risk: The Fund's assets will be concentrated in the
real estate sector, which means the Fund will be more affected by the performance of the real estate sector than a fund that is more diversified. An investment in a real
property company may be subject to risks similar to those associated with direct ownership of real estate, including, by way of example, the possibility of declines in the value of real estate, losses from casualty or
condemnation, and changes in local and general economic conditions, supply
and demand, interest rates, environmental liability, zoning laws, regulatory
limitations on rents, property taxes, and operating expenses. Some real
property companies have limited diversification because they invest in a
limited number of properties, a narrow geographic area, or a single type of
property.
REIT Risk: REITs are subject to the
risks associated with investing in the securities of real property companies. In particular, REITs may be affected by changes in the values of the underlying properties that they own or operate. Further,
REITs are dependent upon specialized management skills, and their investments may be concentrated in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow
dependency and, as a result, are particularly reliant on the proper functioning of capital markets. A variety of economic and other factors may adversely affect a lessee's ability to meet its obligations to a REIT. In the event of a
default by a lessee, the REIT may experience delays in enforcing its rights as a lessor and may incur substantial costs associated in protecting its investments. In addition, a REIT could fail to qualify for favorable tax or regulatory
treatment.
Call Writing Strategy Risk: The Fund's use of call options involves
speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a
85
Fund Summaries
[ ]
premium;
however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount equal to or greater than the premium. The value of an option may be
adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's underlying asset, an increase in interest rates, a change in the actual or perceived
volatility of the stock market or the underlying asset and the remaining time to expiration. Additionally, the value of an option does not increase or decrease at the same rate as the underlying asset(s). In addition, if the
price of the underlying asset of an option is above the strike price of a written call, the value of the option, and consequently of the Fund, may decline significantly more than if the Fund invested directly in the underlying asset
instead of using options. The Fund could experience a loss if its options do not perform as anticipated, or are not correlated with the performance of their underlying asset or if the Fund is unable to purchase or liquidate a position
because of an illiquid secondary market. As an option on an underlying asset held by the Fund nears expiration, they are generally closed out and replaced by another option with a later expiration (commonly referred to as
“rolling the option”). There is no assurance that the Fund will be able to roll the option or effect a different closing
transaction at any particular time or at an acceptable price. The sale of call options by the Fund may create investment leverage. Frequent selling of call options may result in higher Fund
expenses and may result in increased taxable distributions to investors, including potentially increased distributions that are taxable to individuals as ordinary income.
FLEX Options: The Fund may utilize FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement obligations, which
could result in substantial loss for the Fund. FLEX Options may be less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable
at the strike price. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options
prior to the expiration date may vary due to factors
86
Fund Summaries
[ ]
other than
the value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the actual and perceived volatility of the stock market and underlying asset, and the
remaining time to expiration.
Exchange-Traded Funds Risk: The Fund is subject to substantially the
same risks as those associated with the direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying ETF
may trade at a premium or discount to their intrinsic value (i.e., the market value may differ from the net asset value of an ETF's shares) for a number of
reasons. For example, supply and demand for shares of an underlying ETF or market disruptions may cause the market price of the underlying ETF to deviate from the value of the underlying ETF's investments, which may be exacerbated in
less liquid markets.
Affiliated ETF Risk: The Fund invests in an affiliated underlying ETF
and, as a result, the Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser
may have an incentive to take into account the effect on an affiliated ETF in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although
the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts could impact the Fund.
Fluctuation of Net
Asset Value, Share Premiums and Discounts Risk: As with all exchange-traded funds, Fund
Shares may be bought and sold in the secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and
there may be times when the market price of the shares is more than the net asset value per share (premium) or less than the net asset value per share (discount). This risk is heightened in times of market volatility or periods of steep
market declines.
Futures Contract Risk: A futures contract is a standardized agreement
that calls for the purchase or sale of a specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures
contracts can create investment leverage and may have significant volatility. It is possible that a futures contract transaction will result in a much
87
Fund Summaries
[ ]
greater loss
than the principal amount invested, and the Fund may not be able to close out the futures contract at a favorable time or price. There is no assurance that a liquid secondary market on an exchange will exist for any particular
futures contract. In the event no such market exists, it might not be possible to effect closing transactions, and the Fund will be unable to terminate its exposure to the futures contract. There is also a risk of imperfect
correlation between movements in the prices of the futures contract and
movements in the price of the underlying assets. The counterparty to a
futures contract may be unable or unwilling to make timely settlement payments, return the
Fund's margin, or otherwise honor its obligations.
Large-Capitalization Securities Risk: Returns on investments in
securities of large companies could trail the returns on investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond as quickly as
smaller and mid-sized companies to competitive challenges or to changes in business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed
smaller and mid-sized companies.
Management Risk: The Fund is actively managed. The Adviser's judgments
about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. Any resulting liquidation of the
Fund could cause elevated transaction costs for the Fund and negative tax consequences for
its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
88
Fund Summaries
[ ]
more than if
it invested in a larger number of issuers. The value of Fund Shares may be more volatile than the values of shares of more diversified funds.
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by showing the variability of the Fund's returns based on net assets and comparing the Fund's performance to an index. When available, updated performance information may be obtained by calling 1-866-732-8673 or visiting the Fund's website: www.sectorspdr.com.
Portfolio Management
Investment Adviser
SSGA FM serves as the investment adviser to the Fund.
Portfolio Managers
The professionals primarily responsible for the day-to-day management of the Fund are Emiliano Rabinovich,
Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich,
CFA, is a Managing Director of the Adviser and Co-Head of the Systematic Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta
Group. He joined the Adviser in 2000.
Raymond Donofrio
is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2008.
Purchase and Sale Information
The Fund will issue (or redeem) Fund Shares to certain institutional investors (typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or
cash.
89
Fund Summaries
[ ]
Individual Fund Shares may only
be purchased and sold on the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges,
electronic crossing networks and other alternative trading systems through your broker-dealer at market prices. Because Fund Shares trade at market prices rather than at net asset value (“NAV”), Fund Shares may trade at a price greater than NAV (premium) or less than NAV (discount). When
buying or selling Fund Shares in the secondary market, you may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase Fund Shares (bid) and the lowest price a seller is willing to
accept for Fund Shares (ask) (the “bid-ask spread”). Recent information regarding
the Fund's NAV, market price, premiums and discounts, and bid-ask spreads is available at
www.sectorspdr.com.
Tax Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend
income and/or capital gains, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you. Some
distributions may be treated as a return of capital for tax purposes. Certain capital gain dividends attributable to dividends the Fund receives from U.S. REITs may be taxable to noncorporate shareholders at a rate other than the generally applicable reduced
rates.
Payments to Broker-Dealers and Other Financial Intermediaries
If you
purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary's website for more information.
90
Fund Summaries
The Technology Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Technology Select Sector SPDR Premium Income Fund (the “Fund”) seeks to provide current income while maintaining prospects for long term growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund (“Fund
Shares”). You may
pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
91
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Technology companies (either directly or indirectly through an underlying ETF) and investments that produce premium
income. Technology companies comprise companies included in the Information Technology sector of the S&P 500 Index, as determined by the Global Industry Classification Standard (GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Technology Select Sector SPDR Fund and (2) selling call options (a type of derivative
instrument) on The Technology Select Sector SPDR Fund to generate additional income. The Technology Select Sector SPDR Fund seeks to track the performance of the Technology Select Sector Index (the “Underlying Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been
identified as Information Technology companies by GICS. The Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the extent the index the
underlying ETF seeks to track concentrates in a particular industry or group of industries. Futures contracts (a type of derivative instrument) may also be used
by the Fund for investment purposes.
With respect to the call option portion of the strategy, the Fund will systematically sell
(write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental income. Listed Options or Flexible Exchange Options (“FLEX Options”) may be utilized. FLEX Options are customizable exchange-traded option contracts
92
Fund Summaries
[ ]
guaranteed for settlement by the
Options Clearing Corporation (the
“OCC”). Option terms that can be customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in
exchange for the right to purchase the asset underlying the option at a specified price (the
“strike price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in
the market price of the underlying asset above the strike price of the option.
The Fund seeks to optimize the return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and
volatility, also known as an option's delta. When setting strike prices, the Fund seeks to balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser
will typically “roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as
Information Technology companies by the Global Industry Classification Standard (GICS®),
including securities of companies from the following industries: technology hardware, storage, and peripherals; software; communications equipment; semiconductors and semiconductor
equipment; IT services; and electronic equipment, instruments and components. The Underlying Index is one of eleven Select Sector Indexes developed and maintained in accordance with the following criteria: (1) each of the component
securities in the Underlying Index is a constituent of the S&P 500 Index; and (2) the Underlying Index is calculated by S&P Dow Jones Indices LLC (“S&P DJI”) based on a proprietary “modified market capitalization” methodology
which means that modifications may be made to the market capitalization weights
of single stock concentrations in order to conform to the requirements of the
Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was composed of [ ] stocks.
93
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
94
Fund Summaries
[ ]
Technology Sector Risk: The Fund's assets will be concentrated in
the technology sector, which means the Fund will be more affected by the
performance of the technology sector than a fund that is more diversified.
Market or economic factors impacting technology companies and companies
that rely heavily on technological advances could have a major effect on
the value of the Fund's investments. The value of stocks of technology
companies and companies that rely heavily on technology is particularly
vulnerable to rapid changes in technology product cycles, rapid product
obsolescence, government regulation and competition, both domestically and
internationally, including competition from foreign competitors with lower production costs. Stocks of technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies,
tend to be more volatile than the overall market. Technology companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Additionally,
companies in the technology sector may face dramatic and often unpredictable changes in
growth rates and competition for the services of qualified personnel.
Call Writing Strategy Risk: The Fund's use of call options involves
speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount
equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's
underlying asset, an increase in interest rates, a change in the actual or
perceived volatility of the stock market or the underlying asset and the
remaining time to expiration. Additionally, the value of an option does not
95
Fund Summaries
[ ]
increase or
decrease at the same rate as the underlying asset(s). In addition, if the price of the underlying asset of an option is above the strike price of a written call, the value of the option, and consequently of the Fund, may decline
significantly more than if the Fund invested directly in the underlying asset instead of using options. The Fund could experience a loss if its options do not perform as anticipated, or are not correlated with the performance of their
underlying asset or if the Fund is unable to purchase or liquidate a position because of an illiquid secondary market. As an option on an underlying asset held by the Fund nears expiration, they are generally closed out and
replaced by another option with a later expiration (commonly referred to as “rolling the option”). There is no assurance that
the Fund will be able to roll the option or effect a different closing transaction at any particular time or at an acceptable price. The sale of call options by the Fund may create
investment leverage. Frequent selling of call options may result in higher Fund expenses and may result in increased taxable distributions to investors, including potentially increased distributions that are taxable to individuals as ordinary
income.
FLEX Options: The Fund may utilize
FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement obligations, which
could result in substantial loss for the Fund. FLEX Options may be less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable
at the strike price. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options
prior to the expiration date may vary due to factors other than the value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the
actual and perceived volatility of the stock market and underlying asset, and the remaining time to expiration.
Exchange-Traded
Funds Risk: The Fund is subject to substantially the same risks as those associated with the
direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying ETF may trade at a premium or discount to their intrinsic value (i.e., the
96
Fund Summaries
[ ]
market value
may differ from the net asset value of an ETF's shares) for a number of reasons. For example, supply and demand for shares of an underlying ETF or market disruptions may cause the market price of the underlying ETF to
deviate from the value of the underlying ETF's investments, which may be exacerbated in less liquid markets.
Affiliated ETF
Risk: The Fund invests in an affiliated underlying ETF and, as a result, the Fund's
investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser may have an incentive to take into account the effect on an affiliated ETF
in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts
could impact the Fund.
Fluctuation of Net Asset Value, Share Premiums and Discounts Risk: As
with all exchange-traded funds, Fund Shares may be bought and sold in the
secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and there may be times when the market price of the shares is more than the
net asset value per share (premium) or less than the net asset value per share (discount). This risk is heightened in times of market volatility or periods of steep market declines.
Futures Contract Risk: A futures contract is a standardized agreement
that calls for the purchase or sale of a specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures
contracts can create investment leverage and may have significant volatility. It is possible that a futures contract transaction will result in a much greater loss than the principal amount invested, and the Fund may not be able to close
out the futures contract at a favorable time or price. There is no assurance that a liquid secondary market on an exchange will exist for any particular futures contract. In the event no such market exists, it might not be
possible to effect closing transactions, and the Fund will be unable to terminate its exposure to the futures contract. There is also a risk of imperfect correlation between movements in the prices of the futures contract and movements in the
price of the underlying assets. The counterparty to a
97
Fund Summaries
[ ]
futures
contract may be unable or unwilling to make timely settlement payments, return the Fund's margin, or otherwise honor its obligations.
Large-Capitalization Securities
Risk: Returns on investments in securities of large companies could trail the returns on
investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive challenges or to changes in
business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed smaller and mid-sized companies.
Management Risk: The Fund is
actively managed. The Adviser's judgments about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
certain conditions of the listing exchange. Any resulting liquidation of the
Fund could cause elevated transaction costs for the Fund and negative tax consequences for
its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of Fund
Shares may be more volatile than the values of shares of more diversified funds.
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the
98
Fund Summaries
[ ]
Fund by showing the variability
of the Fund's returns based on net assets and comparing the Fund's performance to an index. When available, updated performance information may be obtained by calling 1-866-732-8673 or visiting the Fund's website:
www.sectorspdr.com.
Portfolio Management
Investment Adviser
SSGA FM serves as the
investment adviser to the Fund.
Portfolio
Managers
The professionals primarily responsible for the day-to-day management of the Fund are Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich, CFA, is a Managing Director of the Adviser and Co-Head of the Systematic
Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2000.
Raymond Donofrio is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity
Beta Group. He joined the Adviser in 2008.
Purchase
and Sale Information
The Fund will issue (or redeem) Fund Shares to certain institutional investors
(typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or cash.
Individual Fund Shares may only be purchased and sold on the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges, electronic crossing networks and other alternative trading systems
through your broker-dealer at market prices. Because Fund Shares trade at market prices rather than at net asset value (“NAV”), Fund Shares may trade at a price greater than NAV (premium) or less than NAV (discount). When buying or selling Fund Shares in the secondary market, you may incur costs
attributable to the difference between the highest price a buyer is willing to pay to purchase Fund Shares (bid) and the lowest price a seller is
99
Fund Summaries
[ ]
willing to accept for Fund
Shares (ask) (the “bid-ask
spread”). Recent information regarding the Fund's NAV, market price, premiums and discounts, and bid-ask spreads is available at www.sectorspdr.com.
Tax Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend
income and/or capital gains, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary's website for more information.
100
Fund Summaries
The Utilities Select Sector SPDR Premium Income Fund
[ ]
| Investment Objective |
| The Utilities Select Sector SPDR Premium Income Fund (the “Fund”) seeks to provide current income while maintaining prospects for long term growth of capital. |
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund (“Fund
Shares”). You may
pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment):
| Management fees |
[X.XX]% |
| Distribution and service (12b-1) fees |
[X.XX]% |
| Other expenses1 |
[X.XX]% |
| Total annual Fund operating expenses |
[X.XX]% |
1
“Other
expenses” are based on estimated amounts for the current fiscal year.
Example:
This Example is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, and then sell or hold all of your Fund Shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Year 1 |
Year 3 |
| $[ ] |
$[ ] |
101
Fund Summaries
[ ]
Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund's performance. The Fund had not commenced operations as of the date of this Prospectus and, as a result, does not yet have a
portfolio turnover rate.
The Fund's Principal Investment
Strategy
SSGA Funds Management, Inc. (the “Adviser” or “SSGA FM”) invests, under normal
circumstances, at least 80% of the Fund's net assets (plus any borrowings for investment purposes) in a combination of securities of Utilities companies (either directly or indirectly through an underlying ETF) and investments that produce premium
income. Utilities companies comprise companies included in the Utilities sector of the S&P 500 Index, as determined by the Global Industry Classification Standard (GICS®). The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in its 80%
investment policy. The Fund seeks to achieve its investment objective by (1) investing in shares of The Utilities Select Sector SPDR Fund and (2) selling call options (a type of derivative instrument) on The Utilities
Select Sector SPDR Fund to generate additional income. The Utilities Select Sector SPDR Fund seeks to track the performance of the Utilities Select Sector Index (the “Underlying
Index”). The Underlying Index includes equity securities of companies in the S&P 500 that have been identified as Utilities companies by
GICS. The Fund will concentrate its investments (i.e., hold more than 25% of its assets), directly or indirectly, in an industry or group of industries to the extent the index the underlying ETF seeks to track concentrates in a particular
industry or group of industries. Futures contracts (a type of derivative instrument) may also be
used by the Fund for investment purposes.
With respect to the
call option portion of the strategy, the Fund will systematically sell (write) call option contracts that have an expiration date of less than one year (typically approximately one to two months), with an objective of generating incremental
income. Listed Options or Flexible Exchange Options (“FLEX Options”) may be utilized. FLEX Options
are customizable exchange-traded option contracts guaranteed for settlement by the Options Clearing Corporation (the “OCC”).
102
Fund Summaries
[ ]
Option terms that can be
customized include exercise price, exercise styles, and expiration dates. When the Fund sells a call option, the purchaser pays the Fund a premium in exchange for the right to purchase the asset underlying the option at a specified
price (the “strike
price”) within a specified time period or at a specified future date. The Fund assumes the risk of an increase in the market price of the underlying asset above the
strike price of the option.
The Fund seeks to optimize the
return from its use of call options by setting strike prices based on the sensitivity of an option's value to changes in price, time, and volatility, also known as an option's delta. When setting strike prices, the Fund seeks to
balance income generated by the options premiums while still providing potential for price appreciation on its underlying equity portfolio. The Adviser will typically
“roll” the short options positions before expiration taking into consideration market and liquidity conditions.
Rolling refers to when an option is closed out before its expiration and replaced by another option on the same underlying asset with a later expiration. The Fund may hold different options with different
strike prices at any given time and the Adviser will monitor each option's delta to determine when to roll into the next contract.
The Underlying Index includes companies that have been identified as
Utilities companies by the Global Industry Classification Standard (GICS®), including securities of companies from the following industries: electric utilities; water utilities;
multi-utilities; independent power and renewable electricity producers; and gas
utilities. The Underlying Index is one of eleven Select Sector Indexes developed
and maintained in accordance with the following criteria: (1) each of the component
securities in the Underlying Index is a constituent of the S&P 500 Index; and (2) the Underlying Index is calculated by S&P Dow Jones Indices LLC (“S&P DJI”) based on a proprietary “modified
market capitalization” methodology which means that modifications may be made to the market capitalization weights of single stock
concentrations in order to conform to the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”). As of [ ], 2025, the Underlying Index was
composed of [ ] stocks.
103
Fund Summaries
[ ]
The Underlying Index is also
sponsored and compiled by S&P DJI. S&P DJI determines the composition of the Underlying Index and relative weightings of the securities in the Index based on the Underlying Index methodology (as the “Index Compilation Agent”). S&P DJI also
publishes information regarding the market value of the Underlying Index (as the “Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser.
Principal Risks of Investing in the Fund
As with all investments, there are certain risks of investing in the Fund. The Fund's exposure
to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying ETFs. Fund Shares will change in value, and you could lose money by investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Market Risk: The Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in
investment in securities markets. Investment markets can be volatile and
prices of investments can change substantially due to various factors including, but not limited to, economic growth or recession, changes in interest rates, inflation,
changes in the actual or perceived creditworthiness of issuers, and general market liquidity. The Fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and
markets. Local, regional or global events such as war, military conflicts, acts of terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, the spread of infectious illness or other
public health issues, or other events could have a significant impact on the Fund and its
investments.
Equity Investing Risk: The market prices of equity securities owned by
the Fund may go up or down, sometimes rapidly or unpredictably. The value
of a security may decline for a number of reasons that may directly relate
to the issuer and also may decline due to general industry or market conditions that are not specifically related to a particular company. In addition, equity markets
tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
104
Fund Summaries
[ ]
Utilities Sector Risk: The Fund's assets will be concentrated in the
utilities sector, which means the Fund will be more affected by the performance of the utilities sector than a fund that is more diversified. Utility companies are
affected by supply and demand, operating costs, government regulation, environmental factors, liabilities for environmental damage and general civil liabilities, and rate caps or rate changes. Although rate changes of a regulated utility
usually fluctuate in approximate correlation with financing costs, due to political and regulatory factors rate changes ordinarily occur only following a delay after the changes in financing costs. This factor will tend to favorably affect
a regulated utility company's earnings and dividends in times of decreasing costs, but conversely, will tend to adversely affect earnings and dividends when costs are rising. The value of regulated utility equity securities may
tend to have an inverse relationship to the movement of interest rates. Certain utility companies have experienced full or partial deregulation in recent years. These utility companies are frequently more similar to industrial
companies in that they are subject to greater competition and have been
permitted by regulators to diversify outside of their original geographic
regions and their traditional lines of business. These opportunities may permit certain utility companies to earn more than their traditional regulated rates of return.
Some companies, however, may be forced to defend their core business and may be less profitable. In addition, natural disasters, terrorist attacks, government intervention or other factors may render a utility company's equipment unusable or
obsolete and negatively impact profitability.
Among the risks that may affect utility companies are the following: risks of increases
in fuel and other operating costs; the high cost of borrowing to finance capital construction during inflationary periods; restrictions on operations and increased costs and delays associated with compliance with environmental
and nuclear safety regulations; and the difficulties involved in obtaining natural gas for resale or fuel for generating electricity at reasonable prices. Other risks include those related to the construction and operation of nuclear
power plants, the effects of energy conservation and the effects of regulatory changes.
Call Writing
Strategy Risk: The Fund's use of call options involves speculation and can lead to losses
because of adverse movements in the price or value of the underlying stock, index, or other asset, which may be magnified by
105
Fund Summaries
[ ]
certain
features of the options. The Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if the Fund were to write (sell) a call option on an index or security
based on the Adviser's expectation that the price of an index or security would fall, but the price were to rise instead, the Fund could be required to sell the underlying asset upon exercise at a price below the current market
price. When selling a call option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is above the strike price by an amount
equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value or yield of the option's
underlying asset, an increase in interest rates, a change in the actual or
perceived volatility of the stock market or the underlying asset and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the underlying asset(s). In addition, if the price of the underlying asset of an option is above the strike price of a written
call, the value of the option, and consequently of the Fund, may decline significantly more than if the Fund invested directly in the underlying asset instead of using options. The Fund could experience a loss if its options do not
perform as anticipated, or are not correlated with the performance of their underlying asset or if the Fund is unable to purchase or liquidate a position because of an illiquid secondary market. As an option on an underlying asset
held by the Fund nears expiration, they are generally closed out and replaced by another option with a later expiration (commonly referred to as “rolling the
option”). There is no assurance that the Fund will be able to roll the option or effect a different closing transaction at any particular time or
at an acceptable price. The sale of call options by the Fund may create investment leverage. Frequent selling of call options may result in higher Fund expenses and may result in increased taxable distributions to investors,
including potentially increased distributions that are taxable to individuals as ordinary income.
FLEX Options: The Fund may utilize FLEX Options guaranteed for settlement by the Options Clearing Corporation (“OCC”). Although unlikely, it is possible the OCC is unable to meet its settlement
106
Fund Summaries
[ ]
obligations,
which could result in substantial loss for the Fund. FLEX Options may be less liquid than more traditional exchange-traded option contracts. Upon expiration, the FLEX Options held by the Fund will be exercisable
at the strike price. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options
prior to the expiration date may vary due to factors other than the value of underlying asset, such as interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options, a change in the
actual and perceived volatility of the stock market and underlying asset, and the remaining time to expiration.
Exchange-Traded
Funds Risk: The Fund is subject to substantially the same risks as those associated with the
direct ownership of the securities represented by an underlying ETF in which it invests. In addition, the shares of an underlying ETF may trade at a premium or discount to their intrinsic value (i.e., the market value may differ from the net asset value of an ETF's shares) for a number of reasons. For example, supply and demand for shares of an underlying ETF or
market disruptions may cause the market price of the underlying ETF to deviate from the value of the underlying ETF's investments, which may be exacerbated in less liquid markets.
Affiliated ETF Risk: The Fund invests in an affiliated underlying ETF
and, as a result, the Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated ETF. In addition, the Adviser
may have an incentive to take into account the effect on an affiliated ETF in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that affiliated ETF. Although
the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts could impact the Fund.
Fluctuation of Net
Asset Value, Share Premiums and Discounts Risk: As with all exchange-traded funds, Fund
Shares may be bought and sold in the secondary market at market prices. The trading prices of Fund Shares in the secondary market may differ from the Fund's daily net asset value per share and
there may be times when the market price of the shares is more than the net asset value per share (premium) or less than the net asset
107
Fund Summaries
[ ]
value per
share (discount). This risk is heightened in times of market volatility or periods of steep market declines.
Futures Contract
Risk: A futures contract is a standardized agreement that calls for the purchase or sale of a
specific asset at a specific price at a specific future time, or cash settlement of the terms of the contract. Transactions in futures contracts can create investment leverage and may have significant volatility.
It is possible that a futures contract transaction will result in a much greater loss than the principal amount invested, and the Fund may not be able to close out the futures contract at a favorable time or price. There is no
assurance that a liquid secondary market on an exchange will exist for any particular futures contract. In the event no such market exists, it might not be possible to effect closing transactions, and the Fund will be unable to terminate
its exposure to the futures contract. There is also a risk of imperfect correlation between movements in the prices of the futures contract and movements in the price of the underlying assets. The counterparty to a futures contract
may be unable or unwilling to make timely settlement payments, return the Fund's margin, or otherwise honor its obligations.
Large-Capitalization
Securities Risk: Returns on investments in securities of large companies could trail the
returns on investments in securities of smaller and mid-sized companies. Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive challenges or to changes in
business, product, financial, or market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed smaller and mid-sized companies.
Management Risk: The Fund is
actively managed. The Adviser's judgments about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may
cause the Fund to incur losses. There can be no assurance that the Adviser's investment techniques and decisions will produce the desired results.
New Fund Risk: The Fund is new and there is no assurance that the Fund
will grow quickly. When the Fund's size is small, the Fund may experience
low trading volume, which could lead to wider bid/ask spreads. In addition,
the Fund may face the risk of being delisted if the Fund does not meet
108
Fund Summaries
[ ]
certain
conditions of the listing exchange. Any resulting liquidation of the Fund could cause elevated transaction costs for the Fund and negative tax consequences for its shareholders.
Non-Diversification Risk: As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent
the Fund invests in a relatively small number of issuers, a decline in the
market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of Fund
Shares may be more volatile than the values of shares of more diversified funds.
Fund Performance
The Fund had not commenced operations as of the date of this Prospectus. Once the Fund has completed a full calendar year of operations, a bar chart and table will be included that will provide some indication of the risks of investing in the Fund by showing the variability of the Fund's returns based on net assets and comparing the Fund's performance to an index. When available, updated performance information may be obtained by calling 1-866-732-8673 or visiting the Fund's website: www.sectorspdr.com.
Portfolio Management
Investment Adviser
SSGA FM serves as the investment adviser to the Fund.
Portfolio Managers
The professionals primarily responsible for the day-to-day management of the Fund are Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio.
Emiliano Rabinovich, CFA, is a Managing Director of the Adviser and Co-Head of the Systematic
Equity Beta Group in the Americas. He joined the Adviser in 2006.
Juan Acevedo is a Vice President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2000.
109
Fund Summaries
[ ]
Raymond Donofrio is a Vice
President of the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He joined the Adviser in 2008.
Purchase and Sale Information
The Fund will issue (or redeem) Fund Shares to certain institutional investors (typically market makers or other broker-dealers) only in large blocks of Fund Shares known as “Creation Units.” Creation Unit transactions are conducted in exchange for the deposit or delivery of in-kind securities and/or
cash.
Individual Fund Shares may only be purchased and sold
on the NYSE Arca, Inc. (the “Exchange”), other national securities exchanges,
electronic crossing networks and other alternative trading systems through your broker-dealer at market prices. Because Fund Shares trade at market prices rather than at net asset value (“NAV”), Fund Shares may trade at a price greater than NAV (premium) or less than NAV (discount). When
buying or selling Fund Shares in the secondary market, you may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase Fund Shares (bid) and the lowest price a seller is willing to
accept for Fund Shares (ask) (the “bid-ask spread”). Recent information regarding
the Fund's NAV, market price, premiums and discounts, and bid-ask spreads is available at
www.sectorspdr.com.
Tax Information
The Fund's distributions are expected to be taxed as ordinary income, qualified dividend
income and/or capital gains, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or individual retirement account. Any withdrawals made from a tax-advantaged arrangement may be taxable to you.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Fund Shares through a broker-dealer or other financial intermediary (such as a bank), the Adviser, the Distributor or their affiliates may pay the financial
intermediary for certain activities related to the Fund, including educational training programs, conferences, the development of technology platforms and reporting systems, or other
services related to the sale or promotion of the Fund. These
110
Fund Summaries
[ ]
payments may create a conflict
of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more
information.
111
Additional Strategies Information
Principal Strategies
Please see each Fund's “The Fund's Principal Investment
Strategy” section under
“Fund
Summaries” for a complete discussion of each Fund's principal investment strategies. A Fund may invest in various types of securities and engage in various investment
techniques which are not the principal focus of the Fund. Some of these are described below under
“Non-Principal
Strategies” and others are not described in this Prospectus. These other securities, techniques and practices, together with
their associated risks, are described in the Statement of Additional Information (the
“SAI”), which you may obtain free of charge by contacting the Distributor (see the back cover of this Prospectus
for the address and phone number).
Each Fund has adopted a non-fundamental investment policy to invest at
least 80% of its net assets, plus the amount of borrowings for investment purposes,
in securities suggested by its name. Each Fund will provide shareholders with at
least 60 days' notice prior to any change in this non-fundamental 80% investment policy.
The Select Sector SPDR Trust's (the “Trust”) Board of Trustees (the “Board”) may change a Fund's investment strategy and other policies without shareholder approval, except as otherwise indicated in this Prospectus or in the SAI.
Non-Principal Strategies
Temporary Defensive Positions. In
certain situations or market conditions, a Fund may temporarily depart from its normal investment policies and strategies provided that the alternative is consistent with the Fund's investment objective and is in the best
interest of the Fund. Temporary defensive positions may include, but are not limited to, cash, cash equivalents, U.S. government securities, repurchase agreements collateralized by such securities, money market funds, and high-quality debt
investments. If a Fund invests for defensive purposes, it may not achieve its investment objective. In addition, the defensive strategy may not work as intended.
Borrowing Money. Each Fund may borrow money from a bank as permitted by the Investment Company Act of 1940, as amended (“1940 Act”), or other governing statute, by the rules thereunder, or by the U.S. Securities and Exchange Commission (“SEC”) or other regulatory agency with authority over the Fund, but only for temporary or emergency purposes. The
1940 Act presently allows a Fund to borrow from any bank (including pledging, mortgaging or hypothecating assets) in an amount up to 33 1/3% of its total assets (not including temporary borrowings not in excess of
5% of its total assets). A Fund may also invest in reverse repurchase agreements or similar financing transactions. Consistent with a rule under the
112
1940 Act, a Fund may treat such
investments as either borrowings or derivatives transactions. To the extent a Fund treats reverse repurchase agreements or similar financing transactions as borrowings, such investments will also be included in the 33 1/3%
limit.
Lending of Securities. Each Fund may lend its portfolio securities in an amount not to exceed 40% of the value of its net assets
via a securities lending program through its securities lending agent, State Street Bank and Trust Company (“State Street” or the “Lending Agent”), to brokers, dealers and other
financial institutions desiring to borrow securities to complete transactions and for other purposes. A securities lending program allows a Fund to receive a portion of the income generated by
lending its securities and investing the respective collateral. A Fund will receive collateral for each loaned security which is at least equal to the market value of that security, marked to market each trading day. To the extent a Fund receives
cash collateral, as of the date of this Prospectus, the Adviser expects to invest such cash collateral in a fund managed by the Adviser that invests in U.S. dollar-denominated, short-term, high quality debt obligations, including the following: a
broad range of money market instruments; certificates of deposit and time deposits of U.S. and foreign banks; commercial paper and other high quality obligations of U.S. or foreign companies; asset-backed securities; mortgage-related
securities; repurchase agreements; and shares of money market funds. With respect to loans that are collateralized by cash, the borrower may 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. In the securities lending program, the borrower generally has the right to vote the loaned securities; however, a Fund may call loans to vote proxies if a material issue affecting the Fund's economic
interest in the investment is to be voted upon. Security loans may be terminated at any time by
a Fund.
Additional Risk
Information
The following section provides information
regarding the principal risks identified under “Principal Risks of Investing in the Fund” in each
Fund Summary along with additional risk information. The Fund's exposure to risks discussed below may be through the Fund's direct investments or indirect through the Fund's investments in the underlying
ETFs.
Principal Risks
The table below
identifies the principal risks of investing in each Fund.
113
The Communication Services Select Sector SPDR
Premium Income Fund ([ ])
The Consumer Discretionary Select Sector SPDR Premium Income Fund ([ ]
The Consumer Staples Select Sector SPDR Premium Income Fund ([ ])
The Energy Select Sector SPDR Premium Income Fund ([ ])
The Financial Select Sector SPDR Premium Income Fund ([ ])
The Health Care Select Sector SPDR Premium Income Fund ([ ])
The Industrial Select Sector SPDR Premium Income Fund ([ ])
The Materials Select Sector SPDR Premium Income Fund ([ ])
The Real Estate Select Sector SPDR Premium Income Fund ([ ])
The Technology Select Sector SPDR Premium Income Fund ([ ])
The Utilities Select Sector SPDR Premium Income Fund ([ ])
The Consumer Discretionary Select Sector SPDR Premium Income Fund ([ ]
The Consumer Staples Select Sector SPDR Premium Income Fund ([ ])
The Energy Select Sector SPDR Premium Income Fund ([ ])
The Financial Select Sector SPDR Premium Income Fund ([ ])
The Health Care Select Sector SPDR Premium Income Fund ([ ])
The Industrial Select Sector SPDR Premium Income Fund ([ ])
The Materials Select Sector SPDR Premium Income Fund ([ ])
The Real Estate Select Sector SPDR Premium Income Fund ([ ])
The Technology Select Sector SPDR Premium Income Fund ([ ])
The Utilities Select Sector SPDR Premium Income Fund ([ ])
| Fund Name |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
| Affiliated ETF Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Communication Services Sector Risk |
x |
|
|
|
|
|
|
|
|
|
|
| Consumer Discretionary Sector Risk |
|
x |
|
|
|
|
|
|
|
|
|
| Consumer Staples Sector Risk |
|
|
x |
|
|
|
|
|
|
|
|
| Counterparty Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Derivatives Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Call Writing Strategy Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| FLEX Options |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Futures Contract Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Energy Sector Risk |
|
|
|
x |
|
|
|
|
|
|
|
| Equity Investing Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Exchange-Traded Funds Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Financial Sector Risk |
|
|
|
|
x |
|
|
|
|
|
|
| Fluctuation of Net Asset Value, Share Premiums
and Discounts Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Health Care Sector Risk |
|
|
|
|
|
x |
|
|
|
|
|
| Industrial Sector Risk |
|
|
|
|
|
|
x |
|
|
|
|
| Large-Capitalization Securities Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Leveraging Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Liquidity Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Management Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Market Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Materials Sector Risk |
|
|
|
|
|
|
|
x |
|
|
|
| New Fund Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Non-Diversification Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
| Real Estate Sector Risk |
|
|
|
|
|
|
|
|
x |
|
|
| REIT Risk |
|
|
|
|
|
|
|
|
x |
|
|
| Technology Sector Risk |
|
|
|
|
|
|
|
|
|
x |
|
114
| Fund Name |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
[ ] |
| Utilities Sector Risk |
|
|
|
|
|
|
|
|
|
|
x |
Affiliated ETF Risk. Each Fund invests in an affiliated ETF and, as a result, the Fund's investment performance and risks are directly related to the investment performance and
risks of the affiliated ETF. In addition, the Adviser may have an incentive to take into account the effect on an affiliated ETF in which a Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in
that affiliated ETF. Although the Adviser takes steps to address the conflicts of interest, it is possible that the conflicts could impact a Fund.
115
Communication
Services Sector Risk. Communication services companies are particularly vulnerable to the
potential obsolescence of products and services due to technological advancement and the innovation of competitors. Companies in the communication services sector may also be affected by other competitive pressures, such
as pricing competition, as well as research and development costs, substantial capital requirements and government regulation. Additionally, fluctuating domestic and international demand, shifting demographics and often unpredictable changes in
consumer tastes can drastically affect a communication services company's profitability. While all companies may be susceptible to network security breaches, certain companies in the communication services sector may be particular targets of
hacking and potential theft of proprietary or consumer information or disruptions in service, which could have a material adverse effect on their businesses.
Consumer Discretionary Sector Risk. The success of consumer product manufacturers and retailers is tied closely to the performance of the
overall global economy, interest rates, competition and consumer confidence. Success depends heavily on disposable household income and consumer spending. Also, companies in the consumer
discretionary sector may be subject to severe competition, which may have an adverse impact on their respective profitability. Changes in demographics and consumer tastes can also affect the demand for, and success of, consumer products and
services in the marketplace.
Consumer
Staples Sector Risk. Consumer staples companies are subject to government regulation affecting
their products which may negatively impact such companies' performance. For instance, government regulations may affect the permissibility of using various food additives and production methods of companies that make
food products, which could affect company profitability. Tobacco companies may be adversely affected by the adoption of proposed legislation and/or by litigation. Also, the success of food, beverage, household and personal products
companies may be strongly affected by consumer interest, marketing campaigns and other factors affecting supply and demand, including performance of the overall domestic and international economy, interest rates, competition and consumer confidence and
spending.
Counterparty Risk. A Fund will be subject to credit risk with respect to the counterparties with which the Fund enters into
derivatives contracts and other transactions such as repurchase agreements or reverse repurchase agreements. A Fund's ability to profit from these types of investments and transactions will depend on the
willingness and ability of its counterparty to perform its obligations. If a counterparty fails to meet its contractual obligations, a Fund may be unable to terminate or realize any gain on the investment or transaction, resulting in a loss to the
Fund. A Fund may experience significant delays in obtaining any recovery in an insolvency, bankruptcy, or other reorganization proceeding involving its counterparty (including recovery of any collateral posted by it) and may obtain
116
only a limited recovery or may
obtain no recovery in such circumstances. If a Fund holds collateral posted by its counterparty, it may be delayed or prevented from realizing on the collateral in the event of a bankruptcy or insolvency proceeding
relating to the counterparty. Under applicable law or contractual provisions, including if a Fund enters into an investment or transaction with a financial institution and such
financial institution (or an affiliate of the financial institution) experiences financial difficulties, then the Fund may in certain situations be prevented or
delayed from exercising its rights to terminate the investment or transaction, or to realize on any collateral and may result in the suspension of payment and delivery obligations of the
parties under such investment or transactions or in another institution being substituted for that financial institution without the consent of the Fund. Further, a Fund may be subject to “bail-in” risk under applicable law whereby, if required by the financial institution's authority, the financial institution's
liabilities could be written down, eliminated or converted into equity or an alternative instrument of ownership. A bail-in of a financial institution may result in a reduction in
value of some or all of its securities and, if a Fund holds such securities or has entered into a transaction with such a financial security when a bail-in occurs,
such Fund may also be similarly impacted.
Derivatives Risk. A derivative is a financial contract the value of which depends on, or is derived from, the value of an underlying asset, interest rate, or index. Derivative
transactions typically involve leverage and may have significant volatility. It is possible that a derivative transaction will result in a loss greater than the
principal amount invested, and a Fund may not be able to close out a derivative
transaction at a favorable time or price. Risks associated with derivative instruments include potential changes in value in response to interest rate changes or other market
developments or as a result of the counterparty's credit quality; the potential for the derivative transaction not to have the effect the Adviser anticipated or
a different or less favorable effect than the Adviser anticipated; the failure of the counterparty to the derivative transaction to perform its obligations under the transaction or
to settle a trade; possible mispricing or improper valuation of the derivative instrument; imperfect correlation in the value of a derivative with the asset, rate, or index underlying the derivative; the risk that a Fund may be required to post
collateral or margin with its counterparty, and will not be able to recover the collateral or margin in the event of the counterparty's insolvency or bankruptcy;
the risk that a Fund will experience losses on its derivatives investments and on
its other portfolio investments, even when the derivatives investments may be
intended in part or entirely to hedge those portfolio investments; the risks specific to the asset underlying the derivative instrument; lack of liquidity for the derivative
instrument, including, without limitation, absence of a secondary trading market;
the potential for reduced returns to a Fund due to losses on the transaction and
117
an increase in volatility; the
potential for the derivative transaction to have the effect of accelerating the recognition of gain; and legal risks arising from the documentation relating to the derivative transaction.
Call Writing Strategy Risk. A Fund's use of call options involves speculation and can lead to losses because of adverse movements in the price or value of the
underlying stock, index, or other asset, which may be magnified by certain features of the options. A Fund's successful use of call options depends on the ability of the Adviser to forecast market movements correctly. For example, if a
Fund were to write (sell) a call option on an index or security based on the Adviser's expectation that the price of the index or security would fall, but the price were to rise instead, a Fund could be required to sell the
underlying asset upon exercise at a price below the current market price. When selling a call option, a Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by a Fund if the price of the
underlying asset is above the strike price by an amount equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be
affected by changes in the value or yield of the option's underlying asset, an increase in interest rates, a change in the actual or perceived volatility of the stock market or the underlying asset and the remaining time to expiration.
Additionally, the value of an option does not increase or decrease at the same rate as the underlying asset(s). In addition, if the price of the underlying asset of an option is above the strike price of a written call, the value of
the option, and consequently of a Fund, may decline significantly more than if a Fund invested directly in the underlying asset instead of using options. A Fund could experience a loss if its options do not perform as anticipated, or
are not correlated with the performance of their underlying asset or if a Fund is unable to purchase or liquidate a position because of an illiquid secondary market. As an option on an underlying asset held by a Fund nears
expiration, they are generally closed out and replaced by another option with a later expiration (referred to as “rolling the option”). There is no assurance that a Fund will be able to roll the option or effect a different closing transaction at any particular time or at an acceptable price. The sale of call
options may create investment leverage. Frequent selling of call options may result in higher Fund expenses and may result in increased taxable distributions to investors, including potentially increased distributions that are taxable to
individuals as ordinary income.
The
continued use of a Fund's call writing strategies will impact the extent that a Fund participates in the positive price returns of the underlying assets and, in turn, a Fund's returns, both during the term of the sold call options and over
longer time periods. If, for example, each month a Fund were to sell 3% out-of-the-money call options (i.e., the strike price is 3% higher than
118
the price of
the underlying asset at the time the call option is written) having a one-month term, a Fund's participation in the positive price returns of the underlying assets will be capped at 3% in any given month. However, over a longer
period (e.g., 5 months), a Fund should not be expected to participate fully in the first 21% (i.e., 5 months x 3%) of the positive price returns of the underlying assets, or a Fund may even lose money, even if the underlying
assets share prices have appreciated by at least that much over such period, if during any month over that period the underlying assets had a return less than 3%. This example illustrates that both a Fund's participation in
the positive price returns of the underlying assets and its returns will depend not only on the share prices of the underlying assets but also on the path that the underlying assets' share prices take over time.
FLEX Options. A Fund may utilize FLEX Options
guaranteed for settlement by the OCC. The FLEX Options traded by a Fund are listed on the Chicago Board Options Exchange. Options positions are marked to market daily.
Although guaranteed for settlement by the OCC, FLEX Options are still subject to counterparty risk with the OCC and may be less liquid than more traditional exchange-traded option contracts. A Fund bears the
risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts. In the unlikely event that the OCC becomes insolvent or is otherwise unable to meet its settlement
obligations, a Fund could suffer significant losses. FLEX Options are subject to the risk that they may be less liquid than certain other securities, such as standardized options. In less liquid markets, termination of
FLEX Options may require the payment of a premium or acceptance of a discounted price and may take longer to complete and/or the liquidation of a large number of options may significantly impact the price
of the options and may adversely impact the value of your investment. Additionally, in connection with the creation and redemption of Fund Shares, to the extent market participants are not willing or able to
enter into FLEX Option transactions with a Fund at prices that reflect the market price of Fund Shares, a Fund's NAV and, in turn the share price of a Fund, could be negatively impacted.
Futures Contract Risk. The risk of loss relating to
the use of futures contracts is potentially unlimited. The ability to establish and close out positions in futures contracts will be subject to the development and maintenance of a liquid market.
There is no assurance that a liquid market on an exchange will exist for any particular futures contract or at any particular time. In the event no such market exists, it might not be possible to effect closing transactions,
and a Fund will be unable to terminate the futures contract. In using futures contracts, a Fund will be reliant on the ability of the Adviser to predict market and price movements correctly; the skills needed to use
119
such futures
contracts successfully are different from those needed for traditional portfolio management. If a Fund uses futures contracts for hedging purposes, there is a risk of imperfect correlation between movements in the prices of
the futures contracts and movements in the securities or index underlying the futures contracts or movements in the prices of the Fund's investments that are the subject of such hedge. The prices of futures contracts, for a
number of reasons, may not correlate perfectly with movements in the securities or index underlying them. For example, participants in the futures markets are subject to margin deposit requirements. Such requirements may cause
investors to take actions with respect to their futures positions that they would not otherwise take. The margin requirements in the futures markets may be less onerous than margin requirements in the securities markets in
general, and as a result those markets may attract more speculators than the securities markets do. Increased participation by speculators in those markets may cause temporary price distortions. Due to the possibility of price
distortion, even a correct forecast of general market trends by the Adviser still may not result in a successful futures activity over a very short time period. The risk of a position in a futures contract may be very large compared to
the relatively low level of margin a Fund is required to deposit. A Fund will typically be required to post margin with its futures commission merchant in connection with its transactions in futures contracts. 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 will incur brokerage fees in connection with its
futures transactions. In the event of an insolvency of the futures commission merchant or a clearing house, a Fund may not be able to recover all (or any) of the margin it has posted with the futures commission merchant, or to
realize the value of any increase in the price of its positions, or it may experience a significant delay in doing so. The Commodity Futures Trading Commission (the “CFTC”), certain foreign regulators, and many futures exchanges have established limits referred to as “position limits” on the maximum net long or net short positions that any person and certain affiliated entities
may hold or control in a particular futures and options contract. In addition, federal position limits apply to swaps that are economically equivalent to futures contracts on certain agricultural, metals and energy commodities. All
positions owned or controlled by the same person or entity, even if in different accounts, must be aggregated for purposes of complying with position limits. It is possible that the positions of different clients managed by the
Adviser may be aggregated for this purpose. Therefore, the trading decisions of the Adviser may have to be modified and positions held by a Fund liquidated in order to avoid exceeding such limits. The modification of investment
decisions or the elimination of open positions, if it occurs, may adversely affect the performance of a Fund. A violation of position
120
limits could
also lead to regulatory action materially adverse to a Fund's investment strategy. The Fund may also be affected by other regimes, including those of the European Union and United Kingdom, and trading venues that impose position
limits on commodity derivative contracts. In addition, exchanges may establish accountability levels applicable to a futures contract instead of position limits, provided that the futures contract is not subject to federal
position limits. An exchange may order a person who holds or controls a position in excess of a position accountability level not to further increase its position, to comply with any prospective limit that exceeds the size of the
position owned or controlled, or to reduce any open position that exceeds the position accountability level if the exchange determines that such action is necessary to maintain an orderly market. Position accountability
levels could adversely affect a Fund's ability to establish and maintain positions in commodity futures contracts to which such levels apply, if the Fund were to trade in such contracts, and a Fund's ability to achieve its investment
objective.
Futures contracts traded on
markets outside the U.S. are not generally subject to the same level of regulation by the CFTC or other U.S. regulatory entities as contracts traded in the U.S., including without limitation as to the execution,
delivery, and clearing of transactions. U.S. regulators neither regulate the
activities of a foreign exchange, nor have the power to compel enforcement
of the rules of the foreign exchange or the laws of the foreign country in
question. Margin and other payments made by a Fund may not be afforded the
same protections as are afforded those payments in the U.S., including in connection with the insolvency of an executing or clearing broker or a clearinghouse or exchange. Certain foreign futures contracts may be less liquid and more volatile than
U.S. contracts.
Energy Sector
Risk. Issuers in energy-related industries can be significantly affected by fluctuations in
energy prices and supply and demand of energy fuels caused by geopolitical events, energy conservation or use of alternative fuel sources, the success of exploration projects, weather or meteorological events, taxes, increased
governmental or environmental regulation, resource depletion, rising interest rates, declines in domestic or foreign production, accidents or catastrophic events, or terrorist threats or attacks, among others. Markets for various energy-related
commodities can have significant volatility, and are subject to control or manipulation by large producers or purchasers. Companies in the energy sector may need to make substantial expenditures, and to incur significant amounts of debt, in order
to maintain or expand their reserves through exploration of new sources of supply, through the development of existing sources, through acquisitions, or through long-term contracts to acquire reserves. Factors adversely affecting
121
producers, refiners,
distributors, or others in the energy sector may affect adversely companies that service or supply those entities, either because demand for those services or products is curtailed, or those services or products come under price pressure.
Equity Investing Risk. The market prices of equity securities owned by a Fund may go up or down, sometimes rapidly or
unpredictably. The value of a security may decline for a number of reasons that may directly relate to the issuer, such as management performance, financial leverage, non-compliance with regulatory requirements,
and reduced demand for the issuer's goods or services. The values of equity securities also may decline due to general industry or market conditions that are not specifically related to a particular company, such as real or perceived adverse
economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates, or adverse investor sentiment generally. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or
extended periods of time.
Exchange-Traded Funds Risk. A Fund is subject to substantially the same risks as those associated with the direct ownership of the
securities or other assets represented by an underlying ETF in which it invests. Also, a Fund bears its proportionate share of the fees and expenses of an underlying ETF in which it invests. In
addition, the shares of an underlying ETF may trade at a premium or discount to their intrinsic value (i.e., the market value may differ from the net asset value of an ETF's shares) for a number of reasons. For example, supply and demand for
shares of an underlying ETF or market disruptions may cause the market price of the underlying ETF to deviate from the value of the underlying ETF's investments, which may be exacerbated in less liquid markets.
Financial Sector Risk. Financial services companies are subject to extensive governmental regulation, which may limit both the
amounts and types of loans and other financial commitments they can make, the interest rates and fees they can charge, the scope of their activities, the prices they can charge and the amount of
capital they must maintain. Profitability is largely dependent on the availability and cost of capital funds and can fluctuate significantly when interest rates
change or due to increased competition. In addition, deterioration of the credit markets generally may cause an adverse impact in a broad range of markets, including U.S. and
international credit and interbank money markets generally, thereby affecting a wide range of financial institutions and markets. Certain events in the financial sector may cause an unusually high degree of volatility in the financial markets,
both domestic and foreign, and cause certain financial services companies to incur large losses. Securities of financial services companies may experience a dramatic decline in value when such companies experience substantial declines in the
valuations of their assets, take action to raise capital (such as the issuance of debt or equity securities), or cease operations. Credit losses resulting from
122
financial difficulties of
borrowers and financial losses associated with investment activities can negatively impact the sector. Insurance companies may be subject to severe price competition. Adverse economic, business or political developments could
adversely affect financial institutions engaged in mortgage finance or other lending or investing activities directly or indirectly connected to the value of real
estate.
Fluctuation of Net Asset Value, Share Premiums and Discounts Risk. The net asset value of Fund Shares will generally fluctuate with changes in the market value of a Fund's
securities holdings. The market prices of Fund Shares will generally fluctuate in accordance with changes in a Fund's net asset value and supply and demand of Fund Shares on the Exchange. It cannot be predicted whether Fund Shares will trade
below, at or above their net asset value. Price differences may be due, in large part, to the fact that supply and demand forces at work in the secondary trading market for Fund Shares will be closely related to, but not identical to, the
same forces influencing the prices of the securities trading individually or in the aggregate at any point in time. The market prices of Fund Shares may deviate significantly from the net asset value of Fund Shares during periods of market
volatility. However, given that Fund Shares can be created and redeemed in Creation Units (unlike shares of many closed-end funds, which frequently trade at appreciable discounts from, and sometimes at premiums to, their net asset value), the
Adviser believes that large discounts or premiums to the net asset value of Fund Shares should not be sustained over long periods. While the creation/redemption feature is designed to make it likely that Fund Shares normally will trade
close to a Fund's net asset value, disruptions to creations and redemptions or market volatility may result in trading prices that differ significantly from such
Fund's net asset value. If an investor purchases Fund Shares at a time when the
market price is at a premium to the net asset value of Fund Shares or sells at a
time when the market price is at a discount to the net asset value of Fund Shares, then the
investor may sustain losses.
Healthcare Sector Risk. Companies in the healthcare
sector are subject to extensive government regulation and their profitability can be significantly affected by restrictions on government reimbursement for medical expenses, rising costs of medical
products and services, pricing pressure (including price discounting), limited product lines and an increased emphasis on the delivery of healthcare through outpatient services. Companies in the healthcare sector are heavily dependent on
obtaining and defending patents, which may be time consuming and costly, and the expiration of patents may also adversely affect the profitability of these companies. Healthcare companies are also subject to extensive litigation based on
product liability and similar claims. In addition, their products can become obsolete due to industry innovation, changes in technologies or other market
123
developments. Many new products
in the healthcare sector require significant research and development and may be subject to regulatory approvals, all of which may be time consuming and costly with no guarantee that any product will come to market.
Industrial Sector Risk. Industrial companies are affected by supply and demand both for their specific product or service and for
industrial sector products and services in general. Government regulation, world events, exchange rates and economic conditions, technological developments and liabilities for environmental damage and
general civil liabilities will likewise affect the performance of these companies. Aerospace and defense companies, a component of the industrial sector, can be significantly affected by government spending policies because companies
involved in this industry rely, to a significant extent, on U.S. and foreign government demand for their products and services. Thus, the financial condition of, and investor interest in, aerospace and defense companies are heavily influenced by
governmental defense spending policies which are typically under pressure from efforts to control the U.S. (and other) government budgets. Transportation securities, another component of the industrial sector, are cyclical and have occasional sharp
price movements which may result from changes in the economy, fuel prices, labor agreements and insurance costs.
Large-Capitalization Securities Risk. Securities issued by large-capitalization companies may present risks not present in smaller companies. For
example, larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive challenges or to changes in business, product, financial, or other
market conditions. Larger companies may not be able to maintain growth at the high rates that may be achieved by well-managed smaller and mid-sized companies, especially during strong economic periods. Returns on investments in securities of
large companies could trail the returns on investments in securities of smaller and mid-sized companies.
Leveraging Risk. Borrowing transactions, reverse repurchase agreements, certain derivatives transactions, securities lending
transactions and other investment transactions such as when-issued, delayed-delivery, or forward commitment transactions may create investment leverage. If a Fund engages in transactions that have a
leveraging effect on the Fund's investment portfolio, the value of the Fund will be potentially more volatile and all other risks will tend to be compounded. This is because leverage generally creates investment risk with respect to a
larger base of assets than a Fund would otherwise have and so magnifies the effect of any increase or decrease in the value of the Fund's underlying assets. The use of leverage is considered to be a speculative investment practice and may result in
losses to a Fund. Certain derivatives have the potential for unlimited
124
loss, regardless of the size of
the initial investment. The use of leverage may cause a Fund to liquidate positions when it may not be advantageous to do so to satisfy repayment, interest payment, or margin obligations or to meet asset coverage
requirements.
Liquidity Risk. Liquidity risk is the risk that a Fund may not be able to dispose of investments readily at a favorable
time or prices (or at all) or at prices approximating those at which a Fund currently values them. For example, certain investments may be subject to restrictions on resale, may trade in the over-the-counter market
or in limited volume, or may not have an active trading market. Illiquid investments may trade at a discount from comparable, more liquid investments and may be subject to wide fluctuations in market value. It may be difficult for a
Fund to value illiquid investments accurately. The market for certain investments may become illiquid under adverse market or economic conditions independent of any specific adverse changes in the conditions of a particular issuer. If the
liquidity of a Fund's holdings deteriorates, it may lead to differences between the market price of Fund Shares and the net asset value of Fund Shares, and could result in the Fund Shares being less liquid. Disposal of illiquid investments may
entail registration expenses and other transaction costs that are higher than those for liquid investments. A Fund may seek to borrow money to meet its obligations (including among other things redemption obligations) if it is unable to dispose
of illiquid investments, resulting in borrowing expenses and possible leveraging of the Fund. In some cases, due to unanticipated levels of illiquidity a Fund may choose to meet its redemption obligations wholly or in part by distributions of assets
in-kind.
Management Risk. Each Fund is actively managed. The Adviser's judgments about the attractiveness, relative value, or
potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may cause a Fund to incur losses. There can be no assurance that the Adviser's investment techniques and
decisions will produce the desired results.
Market Risk. Market prices of investments held by a Fund will go up or down, sometimes rapidly or unpredictably. A Fund's investments are subject to changes in general
economic conditions, general market fluctuations and the risks inherent in investment in securities markets. Investment markets can be volatile, and prices of investments can change substantially due to various factors, including, but not limited to,
economic growth or recession, changes in interest rates, inflation, changes in actual or perceived creditworthiness of issuers and general market liquidity. Even if general economic conditions do not change, the value of an investment in a
Fund could decline if the particular industries, sectors or companies in which the Fund invests do not perform well or are adversely affected by events. Further, legal, political, regulatory and tax changes also may cause fluctuations in markets
and securities prices. Local, regional or global events such as war,
125
military conflicts, acts of
terrorism, trade policy changes or disputes, the threat or actual imposition of tariffs, natural disasters, public health issues, or other events could have a significant impact on a Fund and its investments. Due to the interconnectedness
of economies and financial markets throughout the world, if a Fund invests in securities of issuers located in or with significant exposure to countries experiencing economic and financial difficulties, the value and liquidity of the
Fund's investments may be negatively affected. A widespread outbreak of an infectious illness, such as COVID-19, and efforts to contain its spread, may result in market volatility, inflation, reduced liquidity of certain instruments, disruption
in the trading of certain instruments, and systemic economic weakness. The
foregoing could impact a Fund and its investments and result in disruptions to the services
provided to a Fund by its service providers.
Materials Sector Risk. Many materials companies are
significantly affected by the level and volatility of commodity prices, exchange rates, import controls, worldwide competition, environmental policies and consumer demand. At times, worldwide production of
industrial materials has exceeded demand as a result of over-building or economic downturns, leading to poor investment returns or losses. Other risks may include liabilities for environmental damage and general civil liabilities, depletion of
resources, and mandated expenditures for safety and pollution control. The materials sector may also be affected by economic cycles, technical progress, labor relations, and government regulations.
New Fund Risk. The Fund is new and there is no assurance that the Fund will grow quickly. When the Fund's size is small, the Fund may experience low trading volume, which
could lead to wider bid/ask spreads. In addition, the Fund may face the risk of being delisted if the Fund does not meet certain conditions of the listing exchange. Any resulting liquidation of the Fund could cause elevated transaction costs for the
Fund and negative tax consequences for its shareholders.
Non-Diversification Risk. As a “non-diversified” fund, each Fund may hold a smaller number of portfolio securities than many other funds. To the extent a
Fund invests in a relatively small number of issuers, a decline in the market value of a particular security held by the Fund may affect its value more than if it invested in a larger number of
issuers. The value of Fund Shares may be more volatile than the values of shares of more diversified funds.
Real Estate Sector Risk. There are special risks associated with investment in securities
of companies engaged in real property markets, including without limitation REITs
and real estate operating companies. An investment in a real property company may
be subject to risks similar to those associated with direct ownership of real estate, including, by way of example, the possibility of declines in the value of
real estate, losses from casualty or condemnation, and changes in local and general
economic conditions, supply and demand, interest rates, environmental liability,
zoning laws, regulatory limitations on rents, property taxes, and operating expenses.
126
An investment in a real property
company is subject to additional risks, such as poor performance by the manager of the real property company, adverse changes in tax laws, difficulties in valuing and disposing of real estate, and the effect of general
declines in stock prices. Some real property companies have limited diversification because they invest in a limited number of properties, a narrow geographic area, or a single type of property. Also, the organizational documents of a real
property company may contain provisions that make changes in control of the company difficult and time-consuming. As a shareholder in a real property company, the Fund, and indirectly the Fund's shareholders, would bear their ratable shares of
the real property company's expenses and would at the same time continue to pay their own fees and expenses.
REIT Risk. REITs are subject to the risks associated with investing in the securities of real property companies. In
particular, REITs may be affected by changes in the values of the underlying properties that they own or operate. Further, REITs are dependent upon specialized management skills, and their investments may be concentrated in
relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency and, as a result, are particularly reliant on the proper functioning of capital markets, as well as
defaults by borrowers and self-liquidation. A variety of economic and other factors may adversely affect a lessee's ability to meet its obligations to a REIT. In the event of a default by a lessee, the REIT may experience delays in enforcing its
rights as a lessor and may incur substantial costs associated with protecting its investments. In addition, a REIT could possibly fail to qualify for favorable tax treatment under the Internal Revenue Code, or to maintain its exemptions from
registration under the 1940 Act, which could have adverse consequences for a Fund. Investments in REITs are also subject to the risks affecting equity markets generally.
Technology Sector Risk. Market or economic factors impacting technology companies and companies that rely heavily on technological advances could have a major effect
on the value of a Fund's investments. The value of stocks of technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government
regulation and competition, both domestically and internationally, including competition from foreign competitors with lower production costs. Technology companies may have limited product lines, markets, financial resources or
personnel. Stocks of technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market. Technology companies are heavily dependent on patent
and intellectual property rights, the loss or impairment of which may adversely affect profitability. Additionally, companies in the technology sector may face dramatic and often unpredictable changes in growth rates and competition for the services of
qualified personnel.
127
Utilities
Sector Risk. Utility companies are affected by supply and demand, operating costs, government
regulation, environmental factors, liabilities for environmental damage and general civil liabilities, and rate caps or rate changes. Although rate changes of a regulated utility usually fluctuate in approximate correlation with financing
costs, due to political and regulatory factors, rate changes ordinarily occur only following a delay after the changes in financing costs. This factor will tend to favorably affect a regulated utility company's earnings and dividends in times of
decreasing costs, but conversely, will tend to adversely affect earnings and dividends when costs are rising. The value of regulated utility equity securities
may tend to have an inverse relationship to the movement of interest rates. Certain
utility companies have experienced full or partial deregulation in recent years.
These utility companies are frequently more similar to industrial companies in
that they are subject to greater competition and have been permitted by regulators
to diversify outside of their original geographic regions and their traditional lines of business. These opportunities may permit certain utility companies to earn more than their
traditional regulated rates of return. Some companies, however, may be forced to defend their core business and may be less profitable. In addition, natural disasters, terrorist attacks, government intervention or other factors may render a
utility company's equipment unusable or obsolete and negatively impact profitability.
Among the risks that may affect utility companies are the following: risks of increases in fuel and other operating costs; the high cost of borrowing to finance capital construction
during inflationary periods; restrictions on operations and increased costs and delays associated with compliance with environmental and nuclear safety regulations; and the difficulties involved in obtaining natural gas for resale or fuel
for generating electricity at reasonable prices. Other risks include those related to the construction and operation of nuclear power plants, the effects of energy conservation and the effects of regulatory changes.
Non-Principal Risks
Authorized Participants, Market Makers and Liquidity Providers Concentration Risk. A Fund has a limited number of financial institutions that may act as Authorized
Participants
(“APs”), which are responsible for the creation and redemption activity for a Fund. In addition, there may be a
limited number of market makers and/or liquidity providers in the marketplace. To the extent either of the following events occur, Fund Shares may trade at a material discount to NAV and possibly face delisting: (i)
APs exit the business or otherwise become unable to process creation and/or redemption orders and no other APs step forward to perform these services, or (ii) market makers and/or liquidity providers exit the business or significantly reduce
their business activities and no other entities step forward to perform their functions.
128
Conflicts of
Interest Risk. An investment in a Fund will 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. The Funds 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 or its
affiliates make available to other clients. Because of its financial interest, the Adviser will 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, provided that the Adviser will comply with applicable regulatory requirements.
The Adviser and its affiliates serve as investment adviser to other clients and may make
investment decisions that may be different from those that will be made by the Adviser on behalf of the Funds. For example, the Adviser may provide asset allocation advice to some clients that may include a recommendation to invest in or
redeem from particular issuers while not providing that same recommendation to all clients invested in the same or similar issuers. The Adviser may (subject to applicable law) be simultaneously seeking to purchase (or sell) investments
for a Fund and to sell (or purchase) the same investment for accounts, funds, or structured products for which it serves as asset manager, or for other clients or affiliates. The Adviser and its affiliates may invest for clients in various
securities that are senior, pari passu or junior to, or have interests different from or adverse to, the securities that are owned by a Fund. The
Adviser or its affiliates, in connection with its other business activities, may acquire material nonpublic confidential information that may restrict the Adviser from purchasing securities or selling
securities for itself or its clients (including the Funds) or otherwise using such information for the benefit of its clients or itself.
The foregoing does not purport to be a comprehensive list or complete
explanation of all potential conflicts of interests which may affect a Fund. A Fund may encounter circumstances, or enter into transactions, in which conflicts of interest that are not listed or discussed
above may arise.
Costs of Buying and
Selling Shares. Investors buying or selling Fund Shares in the secondary market will pay
brokerage commissions or other charges imposed by brokers, as determined by that broker. Brokerage commissions are often a fixed amount and may be a significant proportional cost for investors seeking to buy or sell
relatively small amounts of Fund Shares. In addition, secondary
129
market investors will also incur
the cost of the difference between the price that an investor is willing to pay for Fund Shares (the “bid” price) and the price at which an investor is willing to sell Fund Shares (the “ask” price). This difference in bid and ask prices is often referred to as the “spread” or “bid/ask spread.” The bid/ask
spread varies over time for Fund Shares based on trading volume and market liquidity, and is generally lower if Fund Shares have more trading volume and market liquidity and higher if Fund Shares have little trading volume and market
liquidity. Further, increased market volatility may cause increased bid/ask spreads. Due to the costs of buying or selling Fund Shares, including bid/ask spreads, frequent trading of Fund Shares may significantly reduce investment results
and an investment in Fund Shares may not be advisable for investors who anticipate regularly making small investments.
Cybersecurity Risk. With the increased use of technologies such as the Internet and the dependence on computer systems to
perform business and operational functions, funds (such as the Funds) and their service providers (including the Adviser) may be prone to operational and information security risks resulting from
cyber-attacks and/or technological malfunctions. Furthermore, geopolitical tensions may have increased the scale and sophistication of deliberate cybersecurity
attacks, particularly those from nation-states or from entities with nation-state
backing. In general, cyber-attacks are deliberate, but unintentional events may
have similar effects. Cyber-attacks include, among others, stealing or corrupting
data maintained online or digitally, preventing legitimate users from accessing
information or services on a website, releasing confidential information without
authorization, and causing operational disruption. Successful cyber-attacks against, or security breakdowns of, a Fund, the Adviser, a custodian, transfer agent, or other
affiliated or third-party service provider may adversely affect a Fund or its shareholders. For instance, cyber-attacks or technical malfunctions may interfere
with the processing of shareholder or other transactions, affect a Fund's ability
to calculate its NAV, cause the release of private shareholder information or
confidential Fund information, impede trading, cause reputational damage, and
subject a Fund to regulatory fines, penalties or financial losses, reimbursement
or other compensation costs, and additional compliance costs. Cyber-attacks or
technical malfunctions may render records of Fund assets and transactions,
shareholder ownership of Fund Shares, and other data integral to the functioning
of a Fund inaccessible or inaccurate or incomplete. A Fund may also incur substantial costs for cybersecurity risk management in order to prevent cyber incidents in the future. A
Fund and its shareholders could be negatively impacted as a result. While the Adviser has established a business continuity plan and systems designed to minimize the risk of cyber-attacks through the use of technology, processes and controls,
there are inherent limitations in such plan and systems, including the possibility that certain risks have not been identified, given the evolving nature of this threat. The use of artificial intelligence (“AI”) and machine learning could
130
exacerbate these risks or result
in cyber security incidents that implicate personal data. Each Fund relies on third-party service providers for many of its day-to-day operations, and will be subject to the risk that the protections and protocols implemented by
those service providers will be ineffective to protect the Fund from cyber-attack. The Adviser does not control the cybersecurity plans and systems put in place by third-party service providers, and such third-party service providers may have
limited indemnification obligations to the Adviser or the Funds. Similar types of cybersecurity risks or technical malfunctions also are present for issuers of securities in which each Fund invests, which could result in material adverse consequences
for such issuers, and may cause a Fund's investment in such securities to lose value.
Money Market Fund Investment Risk. An investment in a
money market fund is not a deposit of any bank and is not insured or guaranteed by the FDIC or any other government agency. Certain money market funds seek to preserve the value of their shares
at $1.00 per share, although there can be no assurance that they will do so, and it is possible to lose money by investing in such a money market fund. A major or unexpected change in interest rates or a decline in the credit quality
of an issuer or entity providing credit support, an inactive trading market for money market instruments, or adverse market, economic, industry, political, regulatory, geopolitical, and other conditions could cause the share price of such
a money market fund to fall below $1.00. It is possible that such a money market fund will issue and redeem shares at $1.00 per share at times when the fair value of the money market fund's portfolio per share is more or less than $1.00. None of
State Street Corporation, State Street, State Street Global Advisors, Inc. (“SSGA”), SSGA FM or their affiliates
(collectively, the “State Street Entities”) guarantee the value of an
investment in a money market fund at $1.00 per share. Investors should have no expectation of capital support to a money market fund from the State Street Entities. Other money market funds price and transact at a “floating” NAV that will fluctuate along with changes in the market-based value of fund assets. Shares sold utilizing a
floating NAV may be worth more or less than their original purchase price. Recent changes in the regulation of money market funds may affect the operations and structures of money market funds. A money market
fund may be permitted or required to impose redemption fees during times of market stress.
Regulatory Risk. Governmental and regulatory actions may
have unexpected or adverse consequences on particular markets, strategies, or investments, which may adversely impact a Fund and impair how it is managed. Policy and legislative changes in
the United States and in other countries may affect aspects of financial regulation, and may in some instances contribute to decreased liquidity and increased volatility in the financial markets. The impact of these changes on the markets, and
the practical implications for market participants, may not be fully known for some time.
131
Securities
Lending Risk. Each Fund may lend portfolio securities with a value of up to 40% of its net
assets. For these purposes, net assets shall exclude the value of all assets received as collateral for the loan. Such loans may be terminated at any time. Any such loans must be continuously secured by collateral maintained on a current
basis in an amount at least equal to the market value of the securities loaned by a Fund. In a loan transaction, as compensation for lending its securities, a Fund will receive a portion of the dividends or interest accrued on the securities held as
collateral or, in the case of cash collateral, a portion of the income from the investment of such cash. In addition, a Fund will receive the amount of all dividends, interest and other distributions on the loaned securities. However, the borrower
has the right to vote the loaned securities. A Fund will call loans to vote proxies if a material issue affecting the investment is to be voted upon. Should the borrower of the securities fail financially, a Fund may experience delays in
recovering the securities or exercising its rights in the collateral. Loans are made only to borrowers that are deemed by the securities lending agent to be of good financial standing. In a loan transaction, a Fund will also bear the risk of any
decline in value of securities acquired with cash collateral. A Fund will attempt to minimize this risk by limiting the investment of cash collateral to high quality instruments of short maturity. The Adviser will take into account the tax impact to
shareholders of substitute payments for dividends when overseeing a Fund's securities lending activity.
Trading Issues. Although Fund Shares are listed for trading on the Exchange and may be listed or traded on U.S. and
non-U.S. stock exchanges other than the Exchange, there can be no assurance that an active trading market for such Fund Shares will develop or be maintained. Trading in Fund Shares on the Exchange may be halted due
to market conditions or for reasons that, in the view of the Exchange, make trading in Fund Shares inadvisable. In addition, trading in Fund Shares on the Exchange is subject to trading halts caused by extraordinary market volatility
pursuant to Exchange “circuit
breaker” rules. Similar to the shares of operating companies listed on a stock exchange, Fund Shares may be sold short and are
therefore subject to the risk of increased volatility in the trading price of a Fund's shares. While each Fund expects that the ability of Authorized Participants
to create and redeem Fund Shares at net asset value should be effective in reducing
any such volatility, there is no guarantee that it will eliminate the volatility associated with such short sales. There can be no assurance that the requirements of the Exchange
necessary to maintain the listing of a Fund will continue to be met or will remain unchanged or that Fund Shares will trade with any volume, or at all, on any stock exchange.
132
Management
SSGA FM serves as the investment adviser to each Fund pursuant to an investment advisory agreement (“Investment
Advisory Agreement”) between the Trust and the Adviser, and, subject to the oversight of the Board, is responsible for the investment
management of each Fund. The Adviser provides an investment management program for each Fund and manages the investment of each Fund's assets. In addition, the Adviser provides administrative, compliance and general management
services to each Fund. The Adviser is a wholly-owned subsidiary of State Street Global Advisors, Inc., which itself is a wholly-owned subsidiary of State Street Corporation. The Adviser is registered with the U.S. Securities and Exchange
Commission (“SEC”) under the Investment Advisers Act of 1940, as amended. The Adviser and certain other affiliates of State
Street Corporation make up SSGA. SSGA is one of the world's largest institutional money managers and the investment management arm of State Street Corporation. As of [ ], 2025, the
Adviser managed approximately $[ ] trillion in assets and SSGA managed approximately $[ ] trillion in assets. The Adviser's principal business address is One Iron Street, Boston, Massachusetts 02210.
For the services provided to the Funds under the Investment Advisory Agreement, each Fund
expects to pay the Adviser annual fees based on a percentage of the Fund's average daily net assets as set forth below: [ ]
From time to time, the Adviser may waive all or a portion of its
management fee, although it does not currently intend to do so. [The Adviser pays all expenses of each Fund other than the management fee, brokerage expenses, taxes, interest, fees and
expenses of the Independent Trustees (including any Trustee's counsel fees), litigation expenses and other extraordinary expenses.]
A summary of the factors considered by the Board in connection with the
initial approval of the Investment Advisory Agreement for the Funds will be available in the
Funds' Form N-CSR filing with the SEC for the period ended [ ], 2025.
Portfolio Managers.
The Adviser manages the Funds using a team of investment professionals. The team approach is used to create an environment that encourages the flow of investment ideas. The portfolio managers within each team work together in a cohesive manner to develop and enhance techniques that drive the investment process for the respective investment strategy. This approach requires portfolio managers to share a variety of responsibilities, including investment strategy and analysis, while retaining responsibility for the implementation of the strategy within any particular portfolio. The approach also enables the team to draw upon the resources of other groups within SSGA. Each portfolio management team is overseen by SSGA's internal governance.
The Adviser manages the Funds using a team of investment professionals. The team approach is used to create an environment that encourages the flow of investment ideas. The portfolio managers within each team work together in a cohesive manner to develop and enhance techniques that drive the investment process for the respective investment strategy. This approach requires portfolio managers to share a variety of responsibilities, including investment strategy and analysis, while retaining responsibility for the implementation of the strategy within any particular portfolio. The approach also enables the team to draw upon the resources of other groups within SSGA. Each portfolio management team is overseen by SSGA's internal governance.
133
The professionals primarily
responsible for the day-to-day management of the Fund are Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio.
Juan Acevedo
Juan Acevedo is a Vice President of SSGA and the Adviser and a Senior Portfolio Manager in the Systematic Equity Beta Group. He is responsible for managing equity index,
smart beta and tax-efficient quantitative strategies for institutional clients and high net worth individuals. Prior to his current role, Mr. Acevedo was a portfolio manager in SSGA's Implementation Group, where he was responsible for the daily
management of active and passive strategies, with an additional focus on mass construction of separately managed accounts. Mr. Acevedo received a Bachelor of Arts in International Business from Providence College. Additionally, he
received a Master of Science in Investment Management and a Master of Business Administration with a Finance concentration from the Questrom School of Business at Boston University.
Emiliano Rabinovich
Emiliano Rabinovich, CFA, is a Managing Director of SSGA and the Adviser and Co-Head of the Systematic Equity Beta Group in the Americas. Within this group, he is the
strategy leader for their Tax Aware, Smart Beta and ESG products. Mr. Rabinovich manages a varied mix of portfolios that include both traditional indexing as well as a variety of alternative beta mandates. He also manages local and global strategies
and fund structures, which include separately managed accounts, commingled funds, mutual funds and ETFs. Mr. Rabinovich joined SSGA in Montreal in 2006, where he served as the Head of the Indexing team in Canada. He has been working in
the investment management field since 2003. Mr. Rabinovich holds a Bachelor of Arts in Economics from the University of Buenos Aires and a Master of Arts in Economics from the University of CEMA. He has also earned the Chartered
Financial Analyst (CFA) designation and is a member of CFA Society Boston, Inc.
Raymond Donofrio
Raymond Donofrio is a Vice President of SSGA and the Adviser and a Senior Portfolio Manager in
the Systematic Equity Beta Group. Mr. Donofrio is currently responsible for managing various equity index funds, with both domestic and international strategies. Prior to his current role, Mr. Donofrio was an analyst for SSGA's
Strategy and Research Group within the Global ETF Group. He began his career as an associate within the Investment Operations team at SSGA, where he supported the portfolio managers of the Systematic Equity Beta Group, mainly focusing on
international strategies. Mr. Donofrio received his Bachelor of Science in Financial Services from Bryant University and his Master of Business Administration
with a concentration in Finance from Boston University's Questrom School of
Business.
134
Additional information about the
portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of the Funds is available in the SAI.
Administrator, Sub-Administrator, Custodian and Transfer Agent. The Adviser serves as Administrator for each Fund. State Street, part of State Street Corporation, is the
Sub-Administrator for each Fund and the Custodian for each Fund's assets, and serves as Transfer Agent to each Fund.
Lending Agent. State Street is the securities lending agent for each Fund. For its services, the lending agent would
typically receive a portion of the net investment income, if any, earned on the collateral for the securities loaned.
Distributor. State Street Global Advisors Funds Distributors, LLC serves as the Fund's distributor (“SSGA FD” or the “Distributor”) pursuant to the Distribution
Agreement between SSGA FD and the Trust. The Distributor will not distribute Fund
Shares in less than Creation Units, and it does not maintain a secondary market in Fund Shares. The Distributor may enter into selected dealer agreements with other broker-dealers or other qualified financial institutions for the sale of Creation Units of Fund
Shares.
Additional Information. The Board oversees generally the operations of the Funds and the Trust. The Trust enters into contractual arrangements with various parties, including,
among others, the Funds' investment adviser, custodian, transfer agent, and accountants, who provide services to the Funds. Shareholders are not parties to any such contractual arrangements or intended beneficiaries of those contractual
arrangements, and those contractual arrangements are not intended to create in
any shareholder any right to enforce them directly against the service providers or to seek any remedy under them directly against the service providers.
This Prospectus provides information concerning the Trust and the Funds
that you should consider in determining whether to purchase Fund Shares. Neither
this Prospectus nor the related SAI is intended, or should be read, to be or give
rise to an agreement or contract between the Trust or the Funds and any investor,
or to give rise to any rights in any shareholder or other person other than any rights under
federal or state law that may not be waived.
Each
Fund seeks to meet its investment objective in part by investing in an exchange-traded fund which tracks an index that includes equity securities of companies in a corresponding sector (each an “Underlying Index”), as has been identified by GICS (each fund an
“Underlying Select Sector
Fund”, and collectively, the “Underlying Select Sector
Funds”). Each Underlying Select Sector Fund is also a series of the Trust. Each Fund and its corresponding Underlying Select Sector Fund is listed in the
table below:
135
| FUND |
UNDERLYING SELECT SECTOR FUND |
| The Communication Services Select Sector SPDR Premium Income Fund |
The Communication Services Select Sector SPDR Fund |
| The Consumer Discretionary Select Sector SPDR Premium Income Fund |
The Consumer Discretionary Select Sector SPDR Fund |
| The Consumer Staples Select Sector SPDR Premium Income Fund |
The Consumer Staples Select Sector SPDR Fund |
| The Energy Select Sector SPDR Premium Income Fund |
The Energy Select Sector SPDR Fund |
| The Financial Select Sector SPDR Premium Income Fund |
The Financial Select Sector SPDR Fund |
| The Health Care Select Sector SPDR Premium Income Fund |
The Health Care Select Sector SPDR Fund |
| The Industrial Select Sector SPDR Premium Income Fund |
The Industrial Select Sector SPDR Fund |
| The Materials Select Sector SPDR Premium Income Fund |
The Materials Select Sector SPDR Fund |
| The Real Estate Select Sector SPDR Premium Income Fund |
The Real Estate Select Sector SPDR Fund |
| The Technology Select Sector SPDR Premium Income Fund |
The Technology Select Sector SPDR Fund |
| The Utilities Select Sector SPDR Premium Income Fund |
The Utilities Select Sector SPDR Fund |
Index License
S&P Opco, LLC, a subsidiary of S&P DJI and S&P Global (“S&P”), and NYSE Arca, Inc. (either directly or through affiliates) have entered into a license agreement with
respect to each applicable Underlying Index. The Trust has entered into a sublicense agreement with S&P whereby each Underlying Select Sector Fund pays an annual sub-license fee to S&P based on a percentage of the Underlying Select
Sector Fund's total expense ratio for the most recent fiscal year and applied to the Underlying Select Sector Fund's average daily net assets.
Additional Information Concerning Index Construction and
Maintenance
An index compilation agent assigns each constituent stock of the
S&P 500 Index to an Underlying Index in alignment with the stock's GICS (Global Industry Classification Standard) classification. Changes to the S&P 500 Index are made as needed
in response to corporate actions and market developments, with no annual or semi-annual reconstitution. S&P DJI has sole control over the removal of stocks from the S&P 500 Index and the selection of replacement stocks to be added to the S&P 500
Index.
136
Additional Information Concerning
the Role of S&P
The weighting of the stocks included in each Underlying Index are
limited and will likely differ from the weighting of stocks included in any similar S&P 500 sector index that is published and disseminated by S&P DJI because each S&P 500 sector index
uses a float adjusted market capitalization which does not limit the weight of any stocks in the index. S&P DJI acts as “index calculation agent” in connection with the calculation and dissemination of each Underlying Index. S&P DJI and its affiliates do not sponsor, endorse, sell or market Fund Shares or shares of the Underlying Select
Sector Funds.
Neither S&P DJI nor its affiliates make
any representation or warranty, express or implied, to SSGA FM, the owners of Fund Shares or shares of the Underlying Select Sector Funds, or any member of the public regarding the ability of an Underlying Select
Sector Fund to track the performance of the various sectors represented in the stock market. Additionally, S&P DJI and its affiliates do not make any representation or warranty, express or implied, to SSGA FM, the owners of Fund Shares
or shares of the Underlying Select Sector Funds or any member of the public regarding the advisability of investing in securities generally or in Fund Shares or shares of the Underlying Select Sector Funds particularly.
With respect to the Underlying Indexes, S&P DJI's only relationship to the Trust is the
licensing of certain trademarks and trade names of S&P, the S&P 500 Index and the Underlying Indexes which are determined, composed and calculated by S&P DJI. S&P® and S&P 500®
are trademarks of Standard & Poor's Financial Services LLC, an affiliate of S&P DJI; Select Sector® is a trademark of S&P DJI; Dow Jones® is a trademark of Dow Jones Trademark Holdings LLC; and these trademarks have been licensed for use by
S&P DJI and sublicensed for certain purposes by the Trust. S&P DJI and its affiliates have no obligation to take the needs of SSGA FM, the Trust or the owners of Fund Shares or shares of the Underlying Select
Sector Funds into consideration in determining, composing or calculating the S&P 500 or the Underlying Indexes.
Although S&P DJI seeks to obtain and use information from sources
which it considers reliable, S&P DJI and its affiliates do not guarantee the accuracy and/or completeness of the S&P 500 Index, any Underlying Index or any data related thereto.
S&P DJI and its affiliates make no warranty, express or implied, as to results to be obtained by SSGA FM, the Trust, owners of a Fund or an Underlying Select Sector Fund, or any other person or entity from the use of the S&P 500 Index, the
Underlying Indexes or any data related thereto in connection with the rights licensed under the license agreement or for any other use. S&P DJI and its affiliates make no express or implied warranties, and hereby expressly disclaim all
warranties of merchantability or fitness for a particular purpose with respect to the S&P 500 Index, the Underlying Indexes or any data related thereto. Without
137
limiting any of the foregoing,
in no event shall S&P DJI and its affiliates have any liability for any special, punitive, indirect or consequential damages (including lost profits), even if notified of the possibility of such damages.
The Underlying Indexes identified herein are determined, composed and calculated without
regard to any Fund Shares or shares of the Underlying Select Sector Funds or the issuer thereof. S&P DJI is not responsible for, and has not participated in,
the determination of the timing of, prices of, or quantities of any Fund Shares
or shares of the Underlying Select Sector Funds to be issued, or in the determination or calculation of the equation by which Fund Shares or shares of the Underlying Select Sector Funds are
redeemable.
Additional
Purchase and Sale Information
Fund Shares are listed
for secondary trading on the Exchange and individual Fund Shares may only be purchased and sold in the secondary market through a broker-dealer. The secondary markets are closed on weekends and also are generally closed on
the following holidays: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed), Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Exchange may close early on the business day before certain holidays and on the day after Thanksgiving Day. Exchange holiday schedules are subject to change without notice. If you buy or sell Fund Shares in the secondary market,
you will pay the secondary market price for Fund Shares. In addition, you may incur customary brokerage commissions and charges and may pay some or all of the spread between the bid and the offered price in the secondary market on each leg of a round
trip (purchase and sale) transaction.
The trading
prices of Fund Shares will fluctuate continuously throughout trading hours based on market supply and demand rather than the relevant Fund's net asset value, which is calculated at the end of each business day. Fund Shares will trade on
the Exchange at prices that may be above (i.e., at a premium) or below (i.e., at a
discount), to varying degrees, the daily net asset value of Fund Shares. The trading prices of Fund Shares may deviate significantly from the relevant Fund's net asset value during periods of market volatility. Given, however, that Fund Shares
can be issued and redeemed daily in Creation Units, the Adviser believes that large discounts and premiums to net asset value should not be sustained over long periods.
The Exchange will disseminate, every fifteen seconds during the regular
trading day, an indicative optimized portfolio value (“IOPV”) relating to each Fund. The IOPV calculations are estimates of the value of each Fund's net asset value per Fund Share.
Premiums and discounts between the IOPV and the market price may occur. This should not be viewed as a “real-time” update of the net asset
138
value per Fund Share. The IOPV
is based on the current market value of the published basket of portfolio securities and/or cash required to be deposited in exchange for a Creation Unit and does not necessarily reflect the precise composition of the Fund's
actual portfolio at a particular point in time. Moreover, the IOPV is generally determined by using current market quotations and/or price quotations obtained from broker-dealers and other market intermediaries and valuations based on current
market rates. The IOPV may not be calculated in the same manner as the NAV, which (i) is computed only once a day, (ii) unlike the calculation of the IOPV, takes into account Fund expenses, and (iii) may be subject, in accordance with
the requirements of the 1940 Act, to fair valuation at different prices than those used in the calculations of the IOPV. Therefore, the IOPV may not reflect the best possible valuation of the Fund's current portfolio. Neither the Funds nor the Adviser
or any of their affiliates are involved in, or responsible for, the calculation or dissemination of such IOPVs and make no warranty as to their accuracy.
The Funds do not impose any restrictions on the frequency of purchases
and redemptions; however, the Funds reserve the right to reject or limit purchases
at any time as described in the SAI. When considering that no restriction or policy
was necessary, the Board evaluated the risks posed by market timing activities,
such as whether frequent purchases and redemptions would interfere with the
efficient implementation of a Fund's investment strategy, or whether they would
cause a Fund to experience increased transaction costs. The Board considered
that, unlike traditional mutual funds, Fund Shares are issued and redeemed only
in large quantities of shares known as Creation Units, available only from a Fund
directly, and that most trading in a Fund occurs on the Exchange at prevailing
market prices and does not involve the Fund directly. Given this structure, the
Board determined that it is unlikely that (a) market timing would be attempted by
a Fund's shareholders or (b) any attempts to market time a Fund by shareholders would result in negative impact to the Fund or its shareholders.
In addition, certain affiliates of each Fund and the Adviser may purchase
and resell or distribute Fund Shares pursuant to the registration statement of which this
Prospectus is a part.
Distributions
Dividends and Capital Gains. As a Fund shareholder, you
are entitled to your share of the applicable Fund's income and net realized gains on its investments. Each Fund pays out substantially all of its net earnings to its shareholders as “distributions.”
Each Fund typically earns income dividends from stocks, interest from debt securities and securities lending income. These amounts, net of expenses and taxes (if applicable), are
passed along to Fund shareholders as “income dividend
139
distributions.” Each Fund will generally realize short-term capital gains or losses whenever it sells or exchanges assets held for one year or less. Net short-term capital gains
will generally be treated as ordinary income when distributed to shareholders. Each Fund will generally realize long-term capital gains or losses whenever it sells or exchanges assets held for more than one year. Net capital gains (the
excess of a Fund's net long-term capital gains over its net short-term capital losses) are distributed to shareholders as “capital gain distributions.”
Income dividend distributions, if any, are generally distributed to
shareholders monthly, but may vary significantly from period to period.
Net capital gains for each Fund are distributed at least annually. Dividends may be declared and paid more frequently or at any other time to comply with the distribution
requirements of the Internal Revenue Code. In addition, each Fund intends to distribute at least annually amounts representing the full dividend yield net of expenses on the underlying investment securities as if the Fund owned the underlying
investment securities for the entire dividend period. As a result, some portion of each distribution may result in a return of capital. You will be notified regarding the portion of the distribution which represents a return of capital.
Distributions in cash may be reinvested automatically in additional
whole Fund Shares only if the broker through whom you purchased Fund Shares makes such option available. Dividends which are reinvested will nevertheless be taxable to the same extent as if such
dividends had not been reinvested.
Portfolio Holdings Disclosure
The Funds' portfolio holdings disclosure policy is described in the SAI. In addition, the
identities and quantities of the securities held by each Fund are disclosed on the Funds' website.
Additional Tax Information
The following discussion is a summary of some important U.S.
federal income tax considerations generally applicable to an investment in a Fund. Your investment in a Fund may have other tax implications. Please consult your tax advisor about federal,
state, local, foreign or other tax laws applicable to you. Investors, including non-U.S. investors, may wish to consult the SAI tax section for additional
disclosure.
140
Each Fund has elected or will
elect to be a regulated investment company (“RIC”) and intends to qualify each year to be
treated as such. A RIC is generally not subject to tax at the corporate level on income and gains that are distributed to shareholders. However, a Fund's failure to qualify for treatment as a RIC may result
in corporate level taxation, and consequently, a reduction in income available for distribution to shareholders.
In general, your distributions are subject to federal income tax when
they are paid, whether you take them in cash or reinvest them in a Fund. The income
dividends and short-term capital gains distributions you receive from a Fund will
be taxed as either ordinary income or qualified dividend income. Subject to certain
limitations, dividends that are reported by a Fund as qualified dividend income
are taxable to noncorporate shareholders at reduced rates. Any distributions of a
Fund's net capital gains are taxable as long-term capital gain regardless of how long you have owned Fund Shares. Long-term capital gains are generally taxed to noncorporate shareholders at reduced rates. Distributions in excess of a Fund's
current and accumulated earnings and profits are treated as a tax-free return of capital to the extent of your basis in your Fund Shares, and, in general, as capital gain thereafter.
In general, dividends may be reported by a Fund as qualified dividend income if they are
attributable to qualified dividend income received by such Fund, which, in general, includes dividend income from taxable U.S. corporations and certain foreign corporations
(i.e., certain foreign corporations incorporated in a possession of the United States or in certain countries with a comprehensive tax treaty with the United
States, and certain other foreign corporations if the stock with respect to which the dividend is paid is readily tradable on an established securities market
in the United States), provided that the Fund satisfies certain holding period
requirements in respect of the stock of such corporations and has not hedged its
position in the stock in certain ways. A dividend generally will not be treated as qualified dividend income if the dividend is received with respect to any share
of stock held by a Fund for fewer than 61 days during the 121-day period beginning
at the date which is 60 days before the date on which such share becomes
ex-dividend with respect to such dividend or, in the case of certain preferred
stock, for fewer than 91 days during the 181-day period beginning 90 days before
such date. These holding period requirements will also apply to your ownership of
Fund Shares. Holding periods may be suspended for these purposes for stock that is hedged. Additionally, income derived in connection with a Fund's securities
lending activities will not be treated as qualified dividend income.
U.S. individuals with income exceeding specified thresholds are subject to a 3.8% Medicare contribution tax on all or a portion of their “net investment income,” which includes taxable interest, dividends and certain capital gains (generally
141
including capital gain
distributions and capital gains realized upon the sale of Fund Shares). 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.
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 shareholder's net investment
income.
If you lend your Fund Shares pursuant to securities lending arrangements you may lose the
ability to treat Fund dividends (paid while Fund Shares are held by the borrower) as qualified dividend income. You should consult your financial intermediary or tax advisor to discuss your particular circumstances.
Distributions paid in January, but declared by a Fund in October, November or December of the
previous year, payable to shareholders of record in such a month, may be taxable to you in the calendar year in which they were declared. The Funds will inform you of the amount of your ordinary income dividends, qualified dividend
income and capital gain distributions shortly after the close of each calendar year.
A distribution will reduce a Fund's net asset value per Fund Share and may be taxable to you as ordinary income or capital gain even though, from an investment standpoint, the
distribution may constitute a return of capital.
Derivatives and Other Complex Securities. A Fund may invest in complex securities. These investments may be subject to numerous special and complex rules. These rules could
affect whether gains and losses recognized by a Fund are treated as ordinary income or capital gain, accelerate the recognition of income to a Fund and/or defer a Fund's ability to recognize losses. In turn, these rules may affect the
amount, timing or character of the income distributed to you by a Fund. You should consult your personal tax advisor regarding the application of these rules.
Non-U.S. Investors. Ordinary income dividends paid by a Fund to shareholders who are non-resident aliens or foreign entities will generally be subject to a 30% U.S.
withholding tax (other than distributions reported by the Fund as interest-related dividends and short-term capital gain dividends), unless a lower treaty rate
applies or unless such income is effectively connected with a U.S. trade or business. In general, a Fund may report interest-related dividends to the extent of its net income derived
from U.S. source interest, and a Fund may report short-term capital gain dividends to the extent its net short-term capital gain for the taxable year exceeds its net long-term capital loss. Gains on the sale of Fund Shares and dividends that are, in each case, effectively connected with the conduct
of a trade or business within the U.S. will generally be subject to U.S. federal net income taxation at
142
regular income tax rates.
Non-U.S. shareholders that own, directly or indirectly, more than 5% of a Fund's shares are urged to consult their own tax advisors concerning special tax rules that may apply to their investment.
Unless certain non-U.S. entities that hold Fund Shares comply with Internal Revenue Service
(the “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 distributions 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.
Real Estate Investments. Non-U.S. persons are generally subject to U.S. tax on a disposition of a “United States
real property interest” (a
“USRPI”). Gain on such a disposition is generally referred to as “FIRPTA gain.” The Internal Revenue Code provides a look-through rule for distributions of so-called FIRPTA gain by a Fund if certain requirements are met. If the look-through rule applies, certain
distributions attributable to income received by a Fund, e.g., from U.S. REITs,
may be treated as gain from the disposition of a USRPI, causing distributions to
be subject to U.S. withholding taxes, 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 foreign stockholder 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. shareholders.
For tax years before January 1, 2026, a noncorporate taxpayer is generally eligible for a
deduction of up to 20% of the taxpayer's “qualified REIT dividends.” If a Fund receives
dividends (other than capital gain dividends) in respect of U.S. REIT shares, the Fund may report its own dividends as eligible for the 20% deduction, to the extent the Fund's income is derived from such qualified REIT dividends, as reduced by
allocable Fund expenses. In order for a Fund's dividends to be eligible for this deduction when received by a noncorporate shareholder, the Fund must meet certain holding period requirements with respect to the U.S. REIT shares on
which the Fund received the eligible dividends, and the noncorporate shareholder must meet certain holding period requirements with respect to the Fund Shares.
Taxes on Exchange-Listed Share Sales. Any capital gain or loss realized upon a sale of Fund Shares is generally treated as long-term capital gain or loss if Fund Shares have
been held for more than one year and as short-term capital gain or
143
loss if Fund Shares have been
held for one year or less, except that any capital loss on the sale of Fund Shares held for six months or less is treated as long-term capital loss to the extent that capital gain dividends were paid with respect to such Fund
Shares.
Taxes on Creations and Redemptions
of Creation Units. A person who exchanges securities for Creation Units generally will recognize
a gain or loss. The gain or loss will be equal to the difference between the market value of the Creation Units at the time and the exchanger's aggregate basis in the securities surrendered plus any
cash paid for the Creation Units. A person who exchanges Creation Units for securities will generally recognize a gain or loss equal to the difference between the exchanger's basis in the Creation Units and the aggregate market value of the
securities and the amount of cash received. 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. Persons exchanging securities
should consult their own tax advisor with respect to whether wash sale rules apply and when a loss might be deductible.
Under current federal tax laws, any capital gain or loss realized upon a
redemption (or creation) of Creation Units is generally treated as long-term capital gain or loss if the applicable Fund Shares (or securities surrendered) have been held for more than
one year and as a short-term capital gain or loss if the applicable Fund Shares (or securities surrendered) have been held for one year or less.
If you create or redeem Creation Units, you will be sent a confirmation
statement showing how many Fund Shares you purchased or sold and at what price.
The Trust on behalf of each 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 applicable Fund and if, pursuant to Section 351 of the Internal Revenue Code, the applicable Fund would have a basis in the securities different from the market value of the securities on
the date of deposit. The Trust also has the right to require information necessary to determine beneficial share ownership for purposes of the 80% determination. If the Trust 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 applicable Fund, the purchaser (or group of purchasers) will not recognize gain or loss upon the exchange of securities for Creation
Units.
If a Fund redeems Creation Units in cash,
it may bear additional costs and recognize more capital gains than it would if it redeems Creation Units in-kind.
144
Certain
Tax-Exempt Investors. A Fund, if investing in certain limited real estate investments and other
publicly traded partnerships, may be required to pass through certain “excess inclusion income” and other income as
“unrelated business
taxable income”
(“UBTI”). Prior to investing in a Fund, tax-exempt investors sensitive to UBTI should consult their tax advisors
regarding this issue and IRS pronouncements addressing the treatment of such income in the hands of such 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
currently 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 United States.
Certain Potential Tax Reporting Requirements. Under U.S. Treasury regulations, if a shareholder recognizes a loss of $2 million or more for an individual
shareholder or $10 million or more for a corporate shareholder (or certain greater amounts over a combination of years), the shareholder must file with the IRS a disclosure statement on
Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance shareholders of a RIC are not excepted. Significant penalties may be imposed for the failure
to comply with the reporting requirements. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax
advisors to determine the applicability of these regulations in light of their individual circumstances.
Other Tax Issues. A Fund may be subject to tax in certain states where the Fund does business (or is treated as doing
business as a result of its investments). Furthermore, in those states which have income tax laws, the tax treatment of the Funds and of Fund shareholders with respect to distributions by the Funds may differ from federal tax
treatment.
The foregoing discussion summarizes some
of the consequences under current federal income tax law of an investment in the Funds. It is not a substitute for personal tax advice. Consult your personal tax advisor about the potential tax consequences of an investment
in the Funds under all applicable tax laws.
145
General Information
The Trust was organized as a Massachusetts business trust on June 10, 1998.
If shareholders of any Fund are required to vote on any matters, shareholders are
entitled to one vote for each Fund Share they own. Annual meetings of shareholders
will not be held except as required by the 1940 Act and other applicable law. See the SAI for
more information concerning the Trust's form of organization.
Management and Organization
Each Fund is a separate, non-diversified series of the Trust, which is an open-end registered management investment company.
From time to time, a Fund may advertise yield and total return figures.
Yield is a historical measure of dividend income, and total return is a measure of past dividend income (assuming that it has been reinvested) plus capital appreciation. Neither
yield nor total return should be used to predict the future performance of a Fund.
Morgan, Lewis & Bockius LLP serves as counsel to the Trust, including the Funds. [ ] serves as the independent registered public accounting firm and will audit the Funds'
financial statements annually.
Financial Highlights
The Funds had not commenced operations prior to the date of this Prospectus and, therefore, do not have
financial information.
146
Where
to Learn More About the Funds
This Prospectus does not contain
all the information included in the Registration Statement filed with the SEC with respect to Fund Shares. The SAI, the Annual and Semi-Annual Reports to shareholders and Form N-CSR, each of which has been or will be
filed with the SEC, provide more information about the Funds. The Prospectus and SAI may be supplemented from time to time. In the Annual Report, you will find a discussion of the market conditions and investment strategies that
significantly affected each Fund's performance during the Fund's last fiscal year. In Form N-CSR, you will find each Fund's annual and semi-annual financial
statements. The SAI is incorporated herein by reference
(i.e., it is legally part of this Prospectus). These materials may be obtained without charge, upon request, by writing to
the Distributor, State Street Global Advisors Funds Distributors, LLC, One Iron Street, Boston, Massachusetts 02210, by visiting the Funds' website at www.sectorspdr.com or by calling the following
number:
Investor Information: 1-866-SECTOR-ETF
(1-866-732-8673)
The Registration Statement, including
this Prospectus, the SAI, and the exhibits as well as any shareholder reports may be reviewed on the EDGAR Database on the SEC's website (http://www.sec.gov). You may also obtain copies of this and other
information, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov.
Shareholder inquiries may be directed to the Funds in writing to State
Street Global Advisors Funds Distributors, LLC, One Iron Street, Boston, Massachusetts
02210, or by calling the Investor Information number listed above.
No person has been authorized to give any information or to make any representations other than those contained in this Prospectus in connection with the offer of Fund Shares, and, if given or made, the information or representations must not be relied upon as having been authorized by the Trust or the Funds. Neither the delivery of this Prospectus nor any sale of Fund Shares shall under any circumstance imply that the information contained
herein is correct as of any date after the date of this Prospectus.
Dealers effecting transactions in Fund Shares, whether or not participating in this distribution, are generally required to deliver a Prospectus. This is in addition to any obligation of dealers to deliver a Prospectus when acting
as underwriters.
[___SPDR]PRO
The Trust's Investment Company Act Number is
811-08837
SUBJECT
TO COMPLETION. THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND MAY BE CHANGED. THIS STATEMENT OF ADDITIONAL
INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE SELECT SECTOR SPDR® TRUST (THE “TRUST”)
STATEMENT OF ADDITIONAL INFORMATION
[ ], 2025
This Statement of Additional Information (“SAI”) is not a prospectus. With respect to each
of the Trust's series listed below, this SAI should be read in conjunction with the prospectus dated [ ], 2025 (the “Prospectus”), as may be revised from time to
time.
| FUND |
TICKER |
| THE COMMUNICATION SERVICES SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
| THE CONSUMER DISCRETIONARY SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
| THE CONSUMER STAPLES SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
| THE ENERGY SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
| THE FINANCIAL SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
| THE HEALTH CARE SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
| THE INDUSTRIAL SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
| THE MATERIALS SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
| THE REAL ESTATE SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
| THE TECHNOLOGY SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
| THE UTILITIES SELECT SECTOR SPDR PREMIUM INCOME FUND |
[ ] |
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, the Funds' Form N-CSR filing and the Funds' Annual Report to Shareholders (when available) may be obtained without charge by writing to the Trust's Distributor, State Street Global Advisors Funds Distributors, LLC,
at One Iron Street, Boston, Massachusetts 02210, by visiting the Funds' website at https://www.sectorspdr.com or by calling 1-866-732-8673. The Funds had not commenced operations as of the date of this SAI and therefore did not have any
financial information to report for the Funds' [December 31, 2024] fiscal year end.
“S&P®”, “S&P
500®”, “Standard & Poor's Depositary
Receipts®” and “SPDR®” are
trademarks of Standard & Poor's Financial Services LLC, and “Select
Sector®” is a trademark of S&P Dow Jones Indices LLC. Each of these trademarks have been licensed for use in connection with the
listing and trading of the Funds (as defined herein) and the Underlying Select Sector Funds on NYSE Arca, Inc. (the “Exchange”), a national securities exchange.
[__SPDR]SAI
1
TABLE OF
CONTENTS
| 3 | |
| 3 | |
| 11 | |
| 16 | |
| 17 | |
| 18 | |
| 27 | |
| 32 | |
| 33 | |
| 34 | |
| 35 | |
| 39 | |
| 40 | |
| 40 | |
| 47 | |
| 47 | |
| 47 | |
| A-1 | |
| B-1 |
The information contained herein regarding securities markets and The Depository Trust
Company (“DTC”) was obtained from publicly available sources.
2
DISCLAIMERS
The Funds (as defined herein) are not sponsored, endorsed, sold or marketed by S&P DJI or any of its affiliates. S&P DJI and its affiliates make no representation or warranty, express or implied, to the owners of the Funds or any member of the
public regarding the advisability of investing in securities generally.
The shares are not sponsored or marketed by S&P DJI or its respective affiliates.
General Description of the Trust
The Trust is an open-end management investment company registered with the U.S. Securities and Exchange Commission (the
“SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”).The Trust was organized as a Massachusetts business trust on June 10, 1998 and consists of multiple investment series, including the
following: The Communication Services Select Sector SPDR Premium Income Fund; The Consumer Discretionary Select
Sector SPDR Premium Income Fund; The Consumer Staples Select Sector SPDR Premium Income Fund; The Energy Select
Sector SPDR Premium Income Fund; The Financial Select Sector SPDR Premium Income Fund; The Health Care Select Sector SPDR Premium Income Fund; The Industrial Select Sector SPDR
Premium Income Fund; The Materials Select Sector SPDR Premium Income Fund; The Real Estate Select Sector SPDR Premium Income Fund; The Technology Select Sector SPDR Premium Income Fund; and The Utilities Select Sector SPDR Premium Income Fund (each, a “Fund” and collectively, the “Funds”). The establishment date for each Fund was April 9, 2025.
The offering of each Fund's shares
(“Shares”) is registered under the Securities Act of 1933, as amended (the “Securities Act”). The investment objective of each Fund is to provide current income while maintaining prospects for long term growth of
capital. SSGA Funds Management, Inc. (“SSGA FM” or the “Adviser”) manages each Fund.
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 offers and issues Creation Units generally in exchange for a basket of equity securities designated by the Fund
(“Deposit Securities”) together with the deposit of a specified cash payment
(“Cash Component”). The Shares are listed on the Exchange and trade at market prices. These prices may differ from the Shares' net asset
values. The Shares are also redeemable only in Creation Unit aggregations (except upon termination of a Fund), and generally in exchange for portfolio securities and a specified
cash payment (“Cash Redemption
Amount”).
The Trust reserves the right to offer a “cash” option for purchases and redemptions of Creation Units (subject to applicable legal requirements) although it has no
current intention of doing so. Creation Units may be issued in advance of receipt of all Deposit Securities subject to various conditions including a requirement to maintain on
deposit with the Trust cash in an amount 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 SEC applicable to management investment companies offering redeemable
securities.
Investment Policies
Each Fund may directly, or indirectly through investment in an exchange-traded fund (“ETF”), invest in any of the instruments or engage in any of the investment practices described below if such investment or activity is consistent with
the Fund's investment objective and permitted by the Fund's stated investment policies. Please see a Fund's 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. This may have an adverse effect on a Fund's performance or subject a Fund's Shares to
greater price volatility than more diversified investment companies.
3
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 (the
“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 Code may severely limit the investment flexibility of a Fund and may make it less likely that the Fund will
meet its investment objective.
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 forty percent (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 a Fund's 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 may 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 and highly liquid instruments either directly on behalf of each 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 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 a securities lending agent for each 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), “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 Fund's 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.
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 Fund's 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.
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
4
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.
REAL ESTATE INVESTMENT TRUSTS (“REITs”)
The Financial Select Sector SPDR Premium Income Fund may invest a portion of its assets in
mortgage REITS (“Mortgage
REITs”). The Real Estate Select Sector SPDR Premium Income Fund may invest a portion of its assets in
REITs, excluding Mortgage 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 Code, or to maintain their exemptions from registration under the 1940 Act. The above factors may also adversely affect a borrower's or a lessee's
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 banker's 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 Fund's net assets will be invested in illiquid investments, 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.
5
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), repurchase agreements, 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 Moody's or “A-1” by S&P, or if unrated, of comparable quality as determined by the Adviser; (v) non-convertible corporate debt
securities (e.g., bonds and debentures) with remaining maturities at the date of purchase of not more than 397 days and that satisfy any rating requirements set forth in Rule
2a-7 under the 1940 Act; and (vi) short-term U.S. dollar-denominated obligations of foreign banks (including U.S. branches) that, in the opinion of the Adviser, are of comparable quality to obligations of U.S. banks which may be purchased by a
Fund. Any of these instruments may be purchased on a current or a forward-settled basis. Time deposits are non-negotiable deposits maintained in banking institutions for specified periods of time at stated interest rates. Bankers' acceptances
are time drafts drawn on commercial banks by borrowers, usually in connection with international transactions.
INVESTMENT COMPANIES
Each Fund may invest in the securities of other investment companies, including money market funds (including those advised
by the Adviser or otherwise affiliated with the Adviser), subject to applicable limitations under Section 12(d)(1) of the 1940 Act, SEC rules, and the Select Sector SPDR
Fund's investment restrictions.
If a Fund invests in and, thus, is a shareholder of, another investment company, the Fund's shareholders will indirectly
bear the Fund's 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 Fund's own investment adviser and the
other expenses that the Fund bears directly in connection with the Fund's own operations.
EXCHANGE-TRADED FUNDS
Each Fund may invest in other ETFs (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 adviser's 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 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 pro rata
portion of the ETF's 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 ETF's value being more
volatile than the underlying securities or other investments.
FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS
Each Fund may invest in derivatives, including exchange-traded futures on indices, 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).
Futures and Options on Futures: 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
6
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.
Each 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.
Each 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 commodity, security or index and delivery month). If an offsetting purchase price is less than the original sale price, a 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, a 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.
Options: Each 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.
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 Fund's 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.
7
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.
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 regulations adopted by the CFTC and federal banking regulators
(“Margin Rules”), each 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. 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 exchanges or electronic
trading platforms called swap execution facilities (“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 Fund's
transactions on the SEF.
Total Return Swaps: Each 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: Each 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 a 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. 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
8
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 Fund's return.
Currency Swaps: Each Fund may enter into currency swap transactions for investment purposes. Currency swaps are similar to interest rate
swaps, except that they involve multiple currencies. Each 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: Each 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, a 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 a Fund's 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. Each Fund may write (sell) and purchase put and call swaptions. Each 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. Each 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. Each 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 Fund's 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.
Government Regulation: 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. 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 SEFs.
On October 28, 2020, the SEC adopted Rule 18f-4 (the “Derivatives Rule”) under the 1940 Act which
replaced prior SEC and staff guidance with an updated, comprehensive framework for registered funds' use of derivatives. The Derivatives Rule permits a Fund to enter into derivatives transactions and certain other transactions notwithstanding the restrictions
on the issuance of “senior
securities” under Section 18 of the 1940 Act. The Derivatives Rule requires the Funds to trade derivatives and certain other instruments that create future payment or delivery obligations subject to a value-at-risk
(“VaR”) leverage limit, develop and implement a derivatives risk management program and new testing requirements, and
comply with new requirements related to board and SEC reporting. These requirements apply unless a Fund qualifies as a “limited derivatives user,” as defined in the Derivatives Rule. To the extent a Fund uses derivatives, complying with the Derivatives Rule may increase
the cost of a Fund's investments and cost of doing business, which could adversely affect investors. Other 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.
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”). An exclusion from the definition of the term “commodity pool
operator” has been claimed with respect to each series of the Trust in accordance with Rule 4.5 such that registration or regulation as a commodity pool operator under the CEA is not necessary.
9
Restrictions on Trading
in Commodity Interests: 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 the Funds' policies. A 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).
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 futures, options on futures, and cleared swaps transactions), a Fund's counterparty is a clearing house (such as CME, ICE Clear Credit or LCH.Clearnet),
rather than a bank or broker. Since the Funds are not members of a clearing house and only members of a clearing house can participate directly in the clearing house, each 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 derivatives transactions. Each 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 in accordance with their rules. Any such increase or termination could interfere with the ability
of a Fund to pursue its investment strategy. Also, each 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 a Fund's 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 a 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 Fund's 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 Fund's 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, all futures and options on futures and some swap 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 member's 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, and the clearing broker 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 member's 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
10
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 Fund's 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.
ILLIQUID INVESTMENTS
Each Fund may invest in illiquid investments. A Fund may not acquire any illiquid investment if, immediately after the
acquisition, the Fund would have invested more than 15% of its net assets in illiquid investments. An illiquid investment means any investment that a Fund reasonably expects cannot be sold or disposed of in current market conditions in seven
calendar days or less without the sale or disposition significantly changing the market value of the investment. If illiquid investments exceed 15% of a Fund's net assets, certain
remedial actions will be taken as required by Rule 22e-4 under the 1940 Act and the Funds' policies and procedures.
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 Fund 's 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. 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 derivative instruments, may be halted.
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.
11
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 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 price fluctuation limit” or “daily limit” establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's
settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, generally 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 Fund's 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 Fund's counterparty to the transaction is a central derivatives clearing organization, or clearing house, rather than a bank or broker. Because the Funds are not members of a clearing house, and only members of a clearing
house can participate directly in the clearing house, each 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 in accordance with their rules. A Fund is subject to risk if it enters into a derivatives transaction that is required to be cleared (or which
SSGA FM
12
expects to be cleared), and no clearing member is
willing or able to clear the transaction on the Fund's 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 Fund's 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, as applicable to swaps, are relatively 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 Fund's limitation on investments in illiquid investments. 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 Fund's 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.
CYBER SECURITY RISK
With the increased use of technologies such as the Internet and the dependence on computer systems to perform business and
operational functions, investment companies (such as the Funds) and their service providers (including the Adviser) may be prone to operational and information security risks
resulting from cyber-attacks and/or technological malfunctions. In general, cyber-attacks are deliberate, but unintentional events may have similar effects. Cyber-attacks include, among others, stealing or corrupting data maintained online or digitally, preventing legitimate users from
accessing information or services on a website, releasing confidential information without authorization, and causing operational disruption. Successful cyber-attacks against, or security breakdowns of, a Fund, the Adviser, or a custodian,
transfer agent, or other affiliated or third-party service provider may adversely affect a Fund or its shareholders. For instance, cyber-attacks may interfere with the processing of shareholder transactions, affect a Fund's ability to calculate
its NAV, cause the release of private shareholder information or confidential Fund information, impede trading, cause reputational damage, and subject the Fund to regulatory fines, penalties or financial losses, reimbursement or other
compensation costs, and additional compliance costs. Cyber-attacks may render records of Fund assets and transactions, shareholder ownership of Fund Shares, and other data integral to the functioning of the Fund inaccessible or inaccurate or
incomplete. The Funds may also incur substantial costs for cyber security risk management in order to prevent cyber incidents in the future. The Funds and their shareholders could
be negatively impacted as a result. While the Adviser has established business continuity plans and systems designed to minimize the risk of cyber-attacks through the use of
technology, processes and controls, there are inherent limitations in such plans and systems, including the possibility that certain risks have not been identified given the evolving nature of this threat. The Funds rely on third-party service
providers for many of their day-to-day operations, and will be subject to the risk that the protections and protocols implemented by those service providers will be ineffective to protect the Fund from cyber-attack. Similar types of cyber
security risks also are present for issuers of securities in which the Funds invest, which could result in material adverse consequences for such issuers, and may cause a Fund's investment in such securities to lose value.
CONTINUOUS OFFERING
The method by which Creation Units are purchased and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold by each Fund 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
13
its client may be deemed a statutory underwriter
if it takes Creation Units after placing an order with the principal underwriter, breaks them down into individual 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 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 Shares, are generally required to deliver a prospectus or summary prospectus. This is because the prospectus delivery exemption in Section 4(a)(3) of the Securities Act is not available with
respect to 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 Fund's 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.
SSGA or its affiliates (the “Selling
Shareholder”) may purchase Creation Units through a broker-dealer to “seed” (in whole or in part) Funds as they are launched, or may purchase shares from broker-dealers or other investors that have
previously provided “seed” for Funds when they were launched or otherwise in secondary market transactions, and because the Selling Shareholder may be deemed an affiliate of such Funds, the Fund Shares are being registered to permit the
resale of these shares from time to time after purchase. The Funds will not receive any of the proceeds from the resale by the Selling Shareholders of these Fund Shares.
The Selling Shareholder intends to sell all or a portion of the Fund Shares owned by it and offered hereby from time to time
directly or through one or more broker-dealers, and may also hedge such positions. The Fund Shares may be sold on any national securities exchange on which the Fund Shares may be
listed or quoted at the time of sale, in the over-the-counter market or in transactions other than on these exchanges or systems at fixed prices, at prevailing market prices at
the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve cross or block transactions.
The Selling Shareholder may also loan or pledge Fund Shares to broker-dealers that in turn
may sell such Fund Shares, to the extent permitted by applicable law. The Selling Shareholder may also enter into options or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery
to such broker-dealer or other financial institution of Fund Shares, which Fund Shares such broker-dealer or other financial institution may resell.
The Selling Shareholder and any broker-dealer or agents participating in the distribution
of Fund Shares may be deemed to be
“underwriters” within the meaning of Section 2(a)(11) of the Securities Act in connection with such sales. In such event, any commissions
paid to any such broker-dealer or agent and any profit on the resale of the Fund Shares purchased by them may be deemed to be underwriting commissions or discounts under the
Securities Act. The Selling Shareholder who may be deemed an “underwriter” within the meaning of Section
2(a)11) of the Securities Act will be subject to the applicable prospectus delivery requirements of the Securities Act.
EUROPE – RECENT EVENTS
A number of countries in Europe, including Greece, Spain, Ireland, Italy, and Portugal,
have substantial government debt levels. The concern over these debt levels has led to volatility in the European financial markets, which has adversely affected the exchange rate of the euro and may continue to significantly affect every country in Europe. For some countries,
the ability to repay sovereign debt is in question, and default is possible, which could affect their ability to borrow in the future. Several countries have agreed to multi-year
bailout loans from the European Central Bank, the IMF, and other institutions. A default or debt restructuring by any European country can adversely impact holders of that
country's debt and can affect exposures to other European Union (“EU”) countries and their financial companies as
well. These financial difficulties may continue, worsen or spread within or outside Europe. Responses to the financial problems by European governments, central banks and others, including austerity measures and reforms, may not work, may result in social unrest
and may limit future growth and economic recovery or have other unintended consequences.
14
Uncertainties regarding the viability of the EU
have impacted and may continue to impact markets in the United States and around the world. On January 31, 2020, the United Kingdom (“UK”) formally withdrew from the EU (commonly known as
“Brexit”). An agreement between the UK and the EU governing their future trade relationship became effective January 1, 2021, but
that agreement does not include an agreement on financial services, and it is unlikely that such agreement will be concluded. Moreover, the UK government has started a program of
financial services law reform with the ultimate aim of repealing many EU financial services laws that were assimilated into UK law from January 1, 2021, and replacing them with legislation or rules made by the UK government or financial services regulators. Accordingly, uncertainty remains
in certain areas as to the future relationship between the UK and the EU. Brexit has already had a significant impact on the UK, Europe, and global economies, and could continue to
result in volatility and illiquidity, legal, political, economic and regulatory uncertainties and lower economic growth for these economies that could in turn have an adverse
effect on the value of a Fund's investments. Any further exits from the EU, or the possibility of such exits, or the abandonment of the euro, may cause additional market disruption globally and introduce new legal and regulatory
uncertainties.
MARKET TURBULENCE RESULTING FROM INFECTIOUS ILLNESS
A widespread outbreak of an infectious illness, such as COVID-19, may lead to governments and businesses world-wide taking
aggressive measures, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations. As occurred in the
wake of COVID-19, the spread of such an illness may result in the disruption of and delays in the delivery of healthcare services and processes, the cancellation of organized
events and educational institutions, the disruption of production and supply chains, a decline in consumer demand for certain goods and services, and general concern and uncertainty, all of which may contribute to increased volatility in
global markets. COVID-19, and other epidemics and pandemics that may arise in the future, could adversely affect the economies of many nations, the global economy, individual companies, sectors and industries, and capital markets in ways
that cannot be foreseen at the present time. In addition, the impact of infectious diseases in developing or emerging market countries may be greater due to limited health care
resources. Political, economic and social stresses caused by infectious illness also may exacerbate other pre-existing political, social and economic risks in certain countries.
The duration of such an illness and its effects cannot be determined at this time, but the effects could be present for an extended period of time.
RUSSIA SANCTIONS RISK
Sanctions threatened or imposed by a number of jurisdictions, including the United States, the European Union and the United
Kingdom, and other intergovernmental actions that have been or may be undertaken in the future, against Russia, Russian entities or Russian individuals, may result in the
devaluation of Russian currency, a downgrade in the country's credit rating, an immediate freeze of Russian assets, a decline in the value and liquidity of Russian securities,
property or interests, and/or other adverse consequences to the Russian economy or a Fund. The scope and scale of sanctions in place at a particular time may be expanded or otherwise modified in a way that have negative effects on a Fund. Sanctions,
or the threat of new or modified sanctions, could impair the ability of a Fund to buy, sell, hold, receive, deliver or otherwise transact in certain affected securities or other
investment instruments. Sanctions could also result in Russia taking counter measures or other actions in response, which may further impair the value and liquidity of Russian
securities. These sanctions, and the resulting disruption of the Russian economy, may cause volatility in other regional and global markets and may negatively impact the performance of various sectors and industries, as well as companies in
other countries, which could have a negative effect on the performance of a Fund, even if a Fund does not have direct exposure to securities of Russian issuers. As a collective result of the imposition of sanctions, Russian government
countermeasures and the impact that they have had on the trading markets for Russian securities, certain Funds have used, and may in the future use, fair valuation procedures approved by the Fund's Board to value certain Russian
securities, which could result in such securities being deemed to have a zero value.
A reduction in liquidity of certain Fund holdings as a result of sanctions and related actions may cause a Fund to experience increased premiums or discounts to its NAV and/or wider bid-ask spreads. Additionally, if it becomes
impracticable or unlawful for a Fund to hold securities subject to, or otherwise affected by, sanctions, or if deemed appropriate by the Fund's investment adviser, the Fund may prohibit in-kind deposits of the affected securities in
connection with creation transactions and instead require a cash deposit, which may also increase the Fund's transaction costs.
15
Investment Restrictions
The Trust has adopted the following investment restrictions as fundamental policies with
respect to each Fund. These restrictions cannot be changed with respect to a Fund without the approval of the holders of a majority of such Fund's 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 such 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, a Fund may not:
1.
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;
2.
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;
3.
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;
4.
Act as an underwriter
of another issuer's 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 Fund's purchase and
sale of portfolio securities;
5.
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; or
6.
Concentrate its
investments in securities of issuers in the same industry or group of industries, except that a Fund will be concentrated (directly or indirectly) in an industry or group of
industries to the extent the index the corresponding underlying ETF seeks to track concentrates in a particular industry or group of industries.(1)
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. A Fund:
1.
Will not 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 each Fund in accordance with its views.
2.
With respect to The Communication Services Select Sector SPDR Premium Income Fund, invest at
least 80% of its net assets (plus any borrowings for investment purposes) in a combination of securities of Communication Services companies (either directly or indirectly through an underlying ETF) and investments that produce premium income.
The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in this 80% investment policy.
3.
With respect to The
Consumer Discretionary Select Sector SPDR Premium Income Fund, invest at least 80% of its net assets (plus any borrowings for investment purposes) in a combination of securities of
Consumer Discretionary companies (either directly or indirectly through an underlying ETF) and investments that produce premium income. The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in this 80%
investment policy.
4.
With respect to The Consumer Staples Select Sector SPDR Premium Income Fund, invest at least
80% of its net assets (plus any borrowings for investment purposes) in a combination of securities of Consumer Staples companies (either directly or indirectly through an underlying ETF) and investments that produce premium income. The Fund
will provide shareholders with at least sixty (60) days' notice prior to any change in this 80% investment policy.
5.
With respect to The Energy Select Sector SPDR Premium Income Fund, invest at least 80% of its
net assets (plus any borrowings for investment purposes) in a combination of securities of Energy companies (either directly or indirectly through an underlying ETF) and investments that produce premium income. The Fund will provide shareholders with
at least sixty (60) days' notice prior to any change in this 80% investment policy.
(1)
The SEC Staff considers concentration to involve the investment of more than 25% of a fund's
assets in an industry or group of industries.
16
6.
With respect to The
Financial Select Sector SPDR Premium Income Fund, invest at least 80% of its net assets (plus any borrowings for investment purposes) in a combination of securities of Financial
companies (either directly or indirectly through an underlying ETF) and investments that produce premium income. The Fund will provide shareholders with at least sixty (60) days' notice prior to any change in this 80% investment policy.
7.
With respect to The Health Care Select Sector SPDR Premium Income Fund, invest at least 80% of
its net assets (plus any borrowings for investment purposes) in a combination of securities of Health Care companies (either directly or indirectly through an underlying ETF) and investments that produce premium income. The Fund will provide
shareholders with at least sixty (60) days' notice prior to any change in this 80% investment policy.
8.
With respect to The Industrial Select Sector SPDR Premium Income Fund, invest at least 80% of
its net assets (plus any borrowings for investment purposes) in a combination of securities of Industrial companies (either directly or indirectly through an underlying ETF) and investments that produce premium income. The Fund will provide
shareholders with at least sixty (60) days' notice prior to any change in this 80% investment policy.
9.
With respect to The Materials Select Sector SPDR Premium Income Fund, invest at least 80% of
its net assets (plus any borrowings for investment purposes) in a combination of securities of Materials companies (either directly or indirectly through an underlying ETF) and investments that produce premium income. The Fund will provide
shareholders with at least sixty (60) days' notice prior to any change in this 80% investment policy.
10.
With respect to The Real Estate Select Sector SPDR Premium Income Fund, invest at least 80% of
its net assets (plus any borrowings for investment purposes) in a combination of securities of Real Estate companies (either directly or indirectly through an underlying ETF) and investments that produce premium income. The Fund will provide
shareholders with at least sixty (60) days' notice prior to any change in this 80% investment policy.
11.
With respect to The Technology Select Sector SPDR Premium Income Fund, invest at least 80% of
its net assets (plus any borrowings for investment purposes) in a combination of securities of Technology companies (either directly or indirectly through an underlying ETF) and investments that produce premium income. The Fund will provide
shareholders with at least sixty (60) days' notice prior to any change in this 80% investment policy.
12.
With respect to The Utilities Select Sector SPDR Premium Income Fund, invest at least 80% of
its net assets (plus any borrowings for investment purposes) in a combination of securities of Utilities companies (either directly or indirectly through an underlying ETF) and investments that produce premium income. The Fund will provide shareholders
with at least sixty (60) days' notice prior to any change in this 80% investment policy.
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 will be observed continuously.
Exchange Listing and
Trading
A discussion of exchange listing and trading matters associated
with an investment in the Funds 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, the Prospectus.
The Shares of each Fund are approved for listing and trading on the Exchange. 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 the Exchange becomes aware that the Fund is no longer eligible
to operate in reliance on Rule 6c-11 under the 1940 Act; (ii) if the Fund no longer complies with the applicable listing requirements set forth in the Exchange's rules; (iii) if, following the initial twelve-month period after commencement of trading on the
Exchange of the Fund, there are fewer than 50 beneficial holders of the Fund; or (iv) if such other event shall occur or condition exists which, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. The Exchange
will remove the Shares from listing and trading upon termination of a Fund.
The Trust reserves the right to adjust the Share price of a Fund in the future to maintain convenient trading ranges for investors. Any adjustments would be accomplished through stock splits or reverse stock splits, which would have no effect on
the net assets of the Fund or an investor's equity interest in the Fund.
17
As in the case of other publicly traded
securities, brokers' commissions on transactions will be based on negotiated commission rates at customary levels.
Management of the Trust
The following information supplements and should be read in conjunction with the section in
the Prospectus entitled
“MANAGEMENT.”
The Board has responsibility for the oversight of the management, operations and business affairs of the Trust, including
general oversight of its investment activities. The Trustees elect the officers of the Trust who are responsible for administering the day-to-day operations of the Trust and the Funds.
The Trustees and executive officers of the Trust, along with their year of birth, principal
occupations over the past five years, length of time served, total number of portfolios overseen in the fund complex, public and fund directorships held over the past five years and other positions and their affiliations, if any, with the Adviser, are listed below:
TRUSTEES
| Name, Address and Year of Birth |
Position(s) With Trust |
Term
of Office and Length of Time Served
|
Principal Occupation(s) During
Past Five Years |
Number
of Portfolios in Fund Complex
Overseen by Trustee† |
Other
Directorships Held by Trustee
During Past Five Years |
| INDEPENDENT TRUSTEES | |||||
| ASHLEY T. RABUN
c/o The Select Sector
SPDR Trust One Iron Street
Boston, MA 02210 1952 |
Trustee, Chair of the Board; Member of the Audit Committee, Member of the Nominating and Governance Committee |
Term: Indefinite Appointed: October 2015 Elected: October 2021 |
Retired; President and Founder, InvestorReach, Inc., a financial services consulting firm (1996 - 2015). |
22 |
Chairperson of the
Board and Member of the Audit, Nominating and Valuation
Committees, Investment
Managers Series Trust (2007 - present). |
| ALLISON GRANT WILLIAMS c/o The Select Sector SPDR Trust One
Iron Street Boston, MA 02210
1956 |
Trustee; Member of the Audit Committee, Member of the Nominating and Governance Committee |
Term: Indefinite Elected: October 2021 |
Retired; Practice Executive, Global Strategic Relationship Management/Asset Management - Corporate & Institutional Services (C&IS) Division, Northern Trust Corporation (2017 - 2021); and Chief Operating Officer & Chief Administrative Officer, Institutional Investor Group, N.A., C&IS Division, Northern Trust Corporation (2016 - 2017). |
22 |
Leadership Advisory Committee (2019 -
present) and Membership Committee Chair (2021 - present), Art Institute of Chicago; Academic Affairs Chair and Executive
Committee Member (2018 - Present) and Board of Trustees and Investment Committee Member (2012 -
present), Columbia College Chicago. |
| SHEILA HARTNETT-DEVLIN c/o The Select Sector SPDR Trust One
Iron Street Boston, MA 02210
1958 |
Trustee; Member of the Audit Committee, Member of the Nominating and Governance Committee |
Term: Indefinite Elected: October 2021 |
Retired; Senior Vice President and Head of the U.S. Institutional Business, American Century Investments, Inc. (2008 - 2017). |
22 |
Director, Mannington Mills (flooring products) (2005 - present). |
| JAMES JESSEE c/o
The Select Sector SPDR Trust
One Iron Street Boston, MA 02210
1958 |
Trustee; Member of the Audit Committee, Chair of the Nominating and |
Term: Indefinite Elected: October 2021 |
Retired; Strategic Advisor, MFS Investment Management (2018); and Co-Head, Global Distribution and President MFS Fund |
22 |
Director, Waddell & Reed Financial, Inc. (investment
management) (2019 - 2021). |
18
| Name, Address and Year of Birth |
Position(s) With Trust |
Term
of Office and Length of Time Served
|
Principal Occupation(s) During
Past Five Years |
Number
of Portfolios in Fund Complex
Overseen by Trustee† |
Other
Directorships Held by Trustee
During Past Five Years |
| |
Governance Committee |
|
Distributors, Inc. (2011 - 2017). |
|
|
| TERESA POLLEY
c/o The Select Sector
SPDR Trust One Iron Street
Boston, MA 02210 1960 |
Trustee; Chair of the Audit Committee, Member of the Nominating and Governance Committee |
Term: Indefinite Elected: October 2021 |
Retired. Terri Polley Consulting (2019 to 2021); President and Chief Executive Officer of the Financial Accounting Foundation (FAF) (2008 - 2019). |
22 |
Member, Board of
Directors (2023 to present) and Chair, Audit and Risk Committee
(2024 to present), Fairfield County Bank Corporation; Trustee (2018 to present), and Chair, Audit Committee (2021 to present), St. Francis University; Member, Board of
Directors (2020 to present), Girl Scouts of Connecticut. |
| JAMES E. ROSS*
c/o The Select Sector
SPDR Trust One Iron Street
Boston, MA 02210 1965 |
Trustee |
Term: Indefinite Appointed: November 2005 Elected: October 2021 |
President, Winnisquam Capital LLC (December 2022 – present); Non-Executive Chairman, Fusion Acquisition Corp. (June 2020 - September 2021); Non-Executive Chairman, Fusion Acquisition Corp II (February 2020 - present): Retired Chairman and Director, SSGA Funds Management, Inc. (2005 - March 2020); Retired Executive Vice President, State Street Global Advisors (2012 - March 2020); Retired Chief Executive Officer and Manager, State Street Global Advisors Funds Distributors, LLC (May 2017 - March 2020). |
164 |
Investment Managers Series Trust (December 2022 – present); SSGA SPDR ETFs Europe I
plc (Director) (November
2016 – March 2020);
SSGA SPDR ETFs Europe II plc (Director) (November 2016 – March 2020); State
Street Navigator Securities Lending Trust (July 2016 – March 2020); SSGA Funds
(January 2014 – March
2020); SSGA Active Trust (2011 - March 2020); State Street Institutional Investment Trust (February 2007 – March 2020); State
Street Master Funds (February 2007 – March 2020); SPDR Series
Trust (November 2005 -
December 2009; April 2010 - March 2020); SPDR Index Shares
Funds (November 2005 - December 2009; April 2010 - March 2020); Elfun Funds (July 2016 – December 2018). |
19
| Name, Address and Year of Birth |
Position(s) With Trust |
Term
of Office and Length of Time Served
|
Principal Occupation(s) During
Past Five Years |
Number
of Portfolios in Fund Complex
Overseen by Trustee† |
Other
Directorships Held by Trustee
During Past Five Years |
| INTERESTED TRUSTEE | |||||
| JEANNE LAPORTA**
c/o The Select Sector SPDR
Trust One Iron Street
Boston, MA 02210 1965 |
Trustee |
Term Unlimited Served: since November 2024 |
Senior Managing Director and Head of Global Funds Management, State Street Global Advisors (August 2024 – Present); Chief Adminis- trative Officer at ClearAlpha Technologies LP (FinTech startup) (January 2021 – August 2024); Senior Managing Director at State Street Global Advisors (July 2016 – 2021); Manager of State Street Global Advisors Funds Distributors, LLC (May 2017 – 2021); Director of SSGA Funds Management, Inc. (March 2020 - 2021); President of State Street Institutional Funds and State Street Variable Insurance Series Funds, Inc. (April 2014 – March 2020). |
[224] |
Interested Trustee, SPDR Series Trust,
SDPR Index Shares Funds and SSGA Active Trust (November 2024 – present). Interested Trustee/
Director of Elfun Diversified Fund, Elfun Government Money
Market Fund, Elfun Income Fund, Elfun
International Equity Fund, Elfun Tax-Exempt Income Fund, Elfun
Trusts, State Street Navigator Securities Lending Trust, SSGA Funds, State Street Variable Insurance
Series Funds, Inc., State
Street Master Funds, and State Street
Institutional Investment
Trust (January 2025 –
present). Interested Trustee, Elfun Government Money
Market Fund, Elfun Tax-Exempt Income
Fund, Elfun Income Fund, Elfun Diversified Fund, Elfun International Equity Fund, and Elfun Trusts (2016 – 2021). |
†
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 previously served as an Interested Trustee from November 2005 to December 2009 and
from April 2010 to May 2024. He became an Independent Trustee on May 16, 2024.
**
Ms. LaPorta is an Interested Trustee because of her position with the Adviser.
20
OFFICERS
| Name, Address and Year of Birth |
Position(s) With Trust |
Term
of Office and Length of Time Served
|
Principal
Occupation(s) During Past Five Years |
| ANN M. CARPENTER
SSGA Funds Management, Inc.
One Iron Street Boston, MA 02210
1966 |
President and Principal Executive Officer; Deputy Treasurer |
Term: Unlimited Served: since May 2023 (with respect to President and Principal Executive Officer);
Term: Unlimited
Served: since
February 2016
(with respect to
Deputy
Treasurer) |
Chief Operating Officer, SSGA Funds Management, Inc. (April 2005 - present)*; Managing Director, State Street Global Advisors (April 2005 - present).* |
| BRUCE S. ROSENBERG
SSGA Funds Management, Inc.
One Iron Street Boston, MA 02210
1961 |
Treasurer and Principal Financial Officer |
Term: Unlimited Served: since February 2016 |
Managing Director, State Street Global Advisors and SSGA Funds Management, Inc. (July 2015 - present). |
| 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). |
| ANDREW J. DELORME
SSGA Funds Management, Inc.
One Iron Street Boston, MA 02210
1975 |
Chief Legal Officer |
Term: Unlimited Served: since February 2024 |
Managing Director and Managing Counsel, State Street Global Advisors (March 2023 - present); Counsel, K&L Gates (February 2021 - March 2023); Vice President and Senior Counsel, State Street Global Advisors (August 2014 - February 2021). |
| DAVID URMAN SSGA
Funds Management, Inc. One Iron Street
Boston, MA 02210 1985 |
Secretary |
Term: Unlimited Served: since August 2019 |
Vice President and Senior Counsel, State Street Global Advisors (April 2019 - present). |
| DAVID BARR SSGA
Funds Management, Inc. One Iron Street
Boston, MA 02210 1974 |
Assistant Secretary |
Term: Unlimited Served: since November 2020 |
Vice President and Senior Counsel, State Street Global Advisors (October 2019 – present). |
| E. GERARD MAIORANA, JR. SSGA Funds Management, Inc. One Iron Street
Boston, MA 02210 1971 |
Assistant Secretary |
Term: Unlimited Served: since May 2023 |
Assistant Vice President, State Street Global Advisors (July 2014 - present). |
| 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). |
| ARTHUR A. JENSEN
SSGA Funds Management, Inc.
1600 Summer Street Stamford, CT 06905
1966 |
Deputy Treasurer |
Term: Unlimited Served: since August 2017 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (July 2016 - present). |
| DAVID LANCASTER
SSGA Funds Management, Inc.
One Iron Street Boston, MA 02210
1971 |
Assistant Treasurer |
Term: Unlimited Served: since November 2020 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (July 2017 – present*). |
21
| Name, Address and Year of Birth |
Position(s) With Trust |
Term
of Office and Length of Time Served
|
Principal
Occupation(s) During Past Five Years |
| JOHN BETTENCOURT
SSGA Funds Management, Inc.
One Iron Street Boston, MA 02210
1976 |
Assistant Treasurer |
Term: Unlimited Served: since May 2022 |
Vice President, State Street Global Advisors and SSGA Funds Management Inc. (March 2020 – present); Assistant Vice President, State Street Global Advisors (June 2007 – March 2020). |
| VEDRAN VUKOVIC
SSGA Funds Management, Inc.
One Iron Street Boston, MA 02210
1985 |
Assistant Treasurer |
Term: Unlimited Served: since February 2024 |
Vice President, State Street Global Advisors (2023 – present); Assistant Vice President, Brown Brothers Harriman & Co. (2011 – 2023). |
| 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).* |
*
Served in various capacities and/or with various affiliated entities during the noted time
period.
LEADERSHIP STRUCTURE AND BOARD OF TRUSTEES
The Board has general oversight responsibility with respect to the business and affairs of
the Trust. The Board is responsible for overseeing the operations of the Funds in accordance with the provisions of the 1940 Act, other applicable laws and the Trust's Declaration of Trust. The Board is composed of six Independent Trustees and one Interested Trustee. In
accordance with the Board Governance Policies, the Board has appointed an Independent Trustee to serve as Chairman of the Board. Generally, the Board acts by majority vote of all
of the Trustees, including a majority vote of the Independent Trustees if required by applicable law. The Trust's day-to-day operations are managed by the Adviser and other service providers who have been approved by the Board. The Board meets periodically throughout the year to oversee the
Trust's activities, review contractual arrangements with service providers, oversee compliance with regulatory requirements, and review performance. The Board has determined that
its leadership structure is appropriate given the size of the Board, the experience of each Trustee and the number and nature of Funds within the Trust.
The Trustees were selected to serve and continue on the Board based upon their skills, experience, judgment, analytical
ability, diligence, ability to work effectively with other Trustees and a commitment to the interests of shareholders and, with respect to the Independent Trustees, a demonstrated willingness to take an independent and questioning view of management.
Each Trustee also has familiarity with the Funds, the Adviser, the Administrator, the Sub-Administrator and the Distributor, and their operations. The Independent Trustees also
have experience with the special regulatory requirements governing regulated investment companies and the special responsibilities of investment company directors as a result of his or her service as a Trustee of the Trust and/or as a director of other investment companies. In addition to
those qualifications, the following is a brief summary of the specific experience, qualifications or skills that led to the conclusion that, as of the date of this SAI, each person identified below should serve as a Trustee for the Trust.
References to the qualifications, attributes and skills of the Trustees are pursuant to requirements of the SEC, and do not constitute a representation that the Board or any Trustee has any special expertise and do not impose any greater
responsibility or liability on any such person or on the Board by reason thereof. As required by rules the SEC has adopted under the 1940 Act, the Trust's Independent Trustees select and nominate all candidates for Independent Trustee
positions.
Ashley T. Rabun. Ms. Rabun has served as a Trustee of the Trust since October 2015 and has served as Chair of the Board since June 2021.
Ms. Rabun also serves on the Nominating and Governance Committee and the Audit Committee. Since 2007, she has also served as Chairperson of the Board and Member of the Audit
Committee, Valuation Committee and Nominating Committee of Investment Managers Series Trust. From 1996 to 2015, Ms. Rabun served as President and Chief Executive Officer of InvestorReach, Inc., a financial services consulting firm. She served as Partner and
President of Mutual Funds advised by Nicholas Applegate Capital Management from 1992 to 1996. From 1990 to 1992,
Ms. Rabun served as Marketing Director at InterInvest, Inc. Prior thereto, she was employed as a registered representative for several brokerage firms.
22
Allison Grant Williams. Ms. Williams has served as a Trustee of the Trust since October 2021. Ms. Williams also serves on the Nominating and
Governance Committee and the Audit Committee. Ms. Williams previously served as Senior Vice President in the Global Strategic Relationship Management Group at Northern
Trust/Corporate & Institutional Services (C&IS) Division from 2017 to 2021. Prior to that, Ms. Williams served as Chief Operating Officer of Northern Trust's Global Funds Services Group from 2014 to 2017, where she also served as Chief Administrative Officer of Northern Trust's
Institutional Investor Services Group from 2016 to 2017. In addition, Ms. Williams served as Chief Administrative Officer and Chief Marketing Strategy Officer in Northern Trust's
Exchange-Traded Funds Group/Asset Management Division from 2011 to 2014. From 1987 to 2001 Ms. Williams held leadership positions with global asset management firms of UBS and Brinson Partners.
Sheila Hartnett-Devlin. Ms. Hartnett-Devlin has served as a Trustee of the Trust since October 2021. Ms.
Hartnett-Devlin also serves on the Nominating and Governance Committee and the Audit Committee. Ms. Hartnett-Devlin previously served as a Vice President and Client Portfolio Manager from 2008 to 2011 and a Senior Vice President and Head of U.S.
Institutional Business from 2011 to 2017 for American Century Investments, a large investment product provider. From 2005 to 2008, she served as Managing Director and Global Portfolio Manager at Cohen, Klingenstein & Marks, Inc., a small
investment management firm and from 2002 to 2008, as Director at Mercy Investment Services, a ministry of the Sisters of Mercy. Prior to 2002, Ms. Hartnett-Devlin served in several
roles, including Chief Global Equity Strategist for Fiduciary Trust Company International. Ms. Hartnett-Devlin also serves on the board of directors of Mannington Mills since 2005 and is the Chair of the Personnel and Compensation Committee.
James Jessee. Mr. Jesse has served as a Trustee of the Trust since October 2021. He also serves as Chair to the Nominating and
Governance Committee and as a member of the Audit Committee. From 1987 to 2018, Mr. Jessee served in numerous senior leadership roles in the intermediary distribution space at MFS
Investment Management, including as President of MFS Funds Distributors, Inc. and Co-Head of Global Distribution. Prior to 1987, Mr. Jessee served as an insurance wholesaler. From 2019-2021, Mr. Jessee served on the Board of Directors for Waddell and Reed. From 2014-2018, Mr.
Jessee served as a Board Member to the Board of Governors of the Investment Company Institute.
Teresa Polley. Ms. Polley has served as a Trustee of the Trust since October 2021 and has been designated by the Board as an “audit committee financial expert,” as defined in SEC rules. Ms. Polley previously served as President and Chief Executive Officer of the Financial Accounting
Foundation (FAF) from 2008 until her retirement in 2019. As President/CEO of FAF, Ms. Polley advised and collaborated with FAF's governing body and committees on audit, finance,
investments, compensation, governance, and nominations, including appointments to its standard-setting bodies, the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). She is a certified
public accountant licensed by the Commonwealth of Pennsylvania and is an experienced audit committee chair.
James E. Ross. Mr. Ross has served as a Trustee of the Trust since 2005 and served as President from
November 2010 to May 2013. Mr. Ross served in various executive capacities at the Adviser and its affiliates from 2005 until his retirement in 2020. Mr. Ross also serves as a Trustee of SPDR Series Trust, SPDR Index Shares Funds and SSGA Active Trust, for which
SSGA FM serves as investment adviser. Since June 2010, Mr. Ross has chaired the Investment Company Institute's Exchange-Traded Funds Committee. Mr. Ross is also on the Board of
Governors of the Investment Company Institute.
Jeanne LaPorta. Ms. La Porta is a Senior Managing Director of State Street Global Advisors and head of
Global Funds Management. Prior to joining SSGA, she was the Chief Administrative Officer of a Fintech startup and served as a director of their flagship hedge fund. Ms. LaPorta previously worked at State Street Global Advisors from 2016 to 2021 as a Senior Managing Director and at GE Asset Management (GEAM) from 1997 to July 2016 where she held various positions at
GEAM, including Senior Vice President and Commercial Operations Leader, Senior Vice President and Commercial Administrative Officer, Senior Vice President and Deputy General
Counsel and Vice President and Associate General Counsel.
RISK OVERSIGHT
The day-to-day operations of the Funds, including the management of risk, are performed by third party service providers,
such as the Adviser, Distributor, Administrator and Sub-Administrator. The Trustees are responsible for overseeing the Trust's service providers and thus have oversight responsibilities 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 Trust and its service providers employ a variety of processes, procedures and controls to identify certain 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.
23
Not all risks that may affect the Funds can be
identified nor can controls be developed to eliminate or mitigate their occurrence or effects. It may not be practical or cost effective to eliminate or mitigate certain risks, the
processes and controls employed to address certain risks may be limited in their effectiveness, and some risks are simply beyond the reasonable control of the Funds or the Adviser or other service providers. Moreover, it is necessary to bear certain risks
(such as investment-related risks) to achieve a Fund's goals. As a result of the foregoing and other factors, the Funds' ability to manage risk is subject to substantial limitations.
Risk oversight forms part of the Board's general oversight of the Funds and is addressed as
part of various Board and Committee activities. As part of its regular oversight of the Funds, the Board, directly or through a Committee, interacts with and reviews reports from, among others, the Adviser, the Trust's Chief Compliance Officer and the independent
registered public accounting firm, as appropriate, regarding risks faced by the Funds. 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. The Board has met with the Adviser's Chief Risk Officer to review the Adviser's approach to addressing risks. In addition, on an annual basis, in connection with its consideration of whether to
renew the Advisory Agreement, the Board meets with the Adviser to review the services provided. Among other things, the Board regularly considers the Adviser's adherence to the Funds' investment restrictions and compliance with various Fund
policies and procedures and with applicable securities regulations. The Board has appointed a Chief Compliance Officer who oversees the implementation and testing of the Trust's compliance program and reports to the Board regarding compliance
matters for the Trust and its service providers. The Board, with the assistance of the Adviser, reviews investment policies and risks in connection with its review of the Funds'
performance. In addition, as part of the Board's oversight of the Funds' advisory and other service provider agreements, the Board may periodically consider risk management aspects of their operations and the functions for which they are responsible.
The Board has established the following Committees and the membership of each Committee to assist in its oversight functions, including its oversight of the risks the Funds face. Committee membership is identified below. Each Committee
must report its activities to the Board on a regular basis.
Audit Committee: The Board has an Audit Committee consisting of all Trustees who are not “interested persons” (as defined by the 1940 Act) of the Trust. Ms. Polley serves as the Chairman. The primary purpose of the Committee is to assist
the Board in fulfilling certain of its responsibilities. The Audit Committee serves as an independent and objective party to monitor the Funds' accounting policies, financial
reporting and internal control system, as well as the work of the independent registered public accounting firm. The Audit Committee assists Board oversight of (1) the quality and
integrity of the Funds' financial statements and the independent audit thereof; (2) the Funds' accounting and financial reporting processes and internal control over financial reporting; (3) the Funds' compliance with legal and regulatory requirements
that relate to the Funds' accounting and financial reporting, internal control over financial reporting and independent audits; and (4) the qualifications, independence and performance of the Funds' independent registered public accounting
firm. The Audit Committee meets with the Trust's independent auditors to review and approve the scope and results of their professional services; to review the procedures for evaluating the adequacy of the Trust's accounting controls; to
consider the range of audit fees; and to make recommendations to the Board regarding the engagement of the Trust's independent auditors. The Audit Committee met [ ] times during the fiscal year ended [December 31, 2024].
Nominating and Governance Committee: The Board has a Nominating and Governance Committee consisting of all Trustees who are not “interested persons” (as defined by the 1940 Act) of the Trust. Mr. Jessee serves as Chairman. The Nominating and Governance Committee oversees
administration of the Board Governance Policies and will consider proposals for candidates to serve as independent Trustees. Any such proposals should be sent to the Trust in care
of the Nominating and Governance Committee Chairman. The final recommendation of a prospective independent Trustee rests solely with the Nominating and Governance Committee. The Nominating and Governance Committee also periodically reviews
Independent Trustee compensation. The Nominating and Governance Committee met [ ] times during the fiscal year ended [December 31, 2024].
When evaluating a person as a potential nominee to serve as an independent Trustee, the
Committee will generally consider, among other factors: age; education; relevant business experience; geographical factors; whether the person is “independent” and otherwise qualified under applicable laws and regulations to serve as a Trustee; and whether the person is willing to
serve, and willing and able to commit the time necessary for attendance at meetings and the performance of the duties of an independent Trustee. The Committee also meets personally
with the nominees and
24
conducts a reference check. The final decision is
based on a combination of factors, including the strengths and the experience an individual may bring to the Board. The Committee believes the Board generally benefits from
diversity of background, experience and views among its members, and considers this a factor in evaluating the composition of the Board, but has not adopted any specific policy in this regard.
REMUNERATION OF TRUSTEES
The Trust pays each Trustee (other than Ms. LaPorta) an annual retainer plus a per meeting fee for each regularly scheduled
meeting of the Board attended by the Trustee (whether in person or telephonically) and any other telephonic meeting. The Chairman of the Board (who is an Independent Trustee)
receives an additional fee. Audit Committee and Nominating and Governance Committee members receive per meeting fees and the Chairman of the Audit Committee and the Chairman of the Nominating and Governance Committee also receive an additional fee. The Trust may also reimburse
each 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.
The following table sets forth the total fees accrued with
respect to the remuneration of Trustees of the Trust for the fiscal year ended [December 31,
2024]:
| Name of 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 |
| Independent Trustees: | ||||
| Allison Grant Williams |
$[ ]
|
N/A |
N/A |
$[ ]
|
| Sheila Hartnett-Devlin |
$[ ]
|
N/A |
N/A |
$[ ]
|
| James Jessee |
$[ ]
|
N/A |
N/A |
$[ ]
|
| Teresa Polley |
$[ ]
|
N/A |
N/A |
$[ ]
|
| Ashley T. Rabun |
$[ ]
|
N/A |
N/A |
$[ ]
|
| James E. Ross |
$[ ]
|
N/A |
N/A |
$[ ]
|
| R. Charles Tschampion(1) |
$[ ]
|
N/A |
N/A |
$[ ]
|
| Interested Trustee: | ||||
| Jeanne LaPorta(2) |
N/A |
N/A |
N/A |
N/A |
(1)
Effective December 31, 2024, Mr. Tschampion resigned from his position as Trustee and longer
serves as a Trustee to the Trust.
(2)
Not compensated by the Trust due to Ms. LaPorta's position with the Adviser. Ms. LaPorta was
appointed to serve as an Interested Trustee on November 7, 2024.
During the fiscal year ended [December 31, 2024], no officers of the Trust received
compensation in excess of $60,000 from the Trust. Additionally, no Trustee or officer of the Trust is entitled to any pension or retirement benefits from the Trust.
The Trustee fees with respect to the remuneration are allocated among the Funds based on net assets. Because the Funds are new, the Funds did not contribute to Trustee remuneration for the fiscal year ended [December 31, 2024].
OWNERSHIP OF FUND SHARES
As of December 31, 2024, neither the Independent Trustees nor their immediate family
members owned beneficially or of record any securities in the Adviser, principal underwriter of the Funds or any person (other than a registered investment company) directly or indirectly controlling, controlled by, or under common control with the Adviser or principal underwriter
of the Funds.
25
The following table sets forth information
describing the dollar range of equity securities beneficially owned by each Trustee in the Trust as of December 31, 2024:
| 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: |
|
|
|
| Ashley T. Rabun |
None |
None |
None |
| Allison Grant Williams |
The Financial Select Sector SPDR Fund |
$1 - $10,000 |
$1 - $10,000 |
| Sheila Hartnett-Devlin |
The Technology Select Sector SPDR Fund |
Over $100,000 |
Over $100,000 |
| James Jessee |
The Energy Select Sector SPDR Fund |
$10,001 - $50,000 |
$10,001 - $50,000 |
| Teresa Polley |
The Communication Services Select Sector SPDR Fund |
$1 - $10,000 |
$50,001 - $100,000 |
| |
The Consumer Discretionary Select Sector SPDR Fund |
$1 - $10,000 |
|
| |
The Consumer Staples Select Sector SPDR Fund |
$1 - $10,000 |
|
| |
The Energy Select Sector SPDR Fund |
$1 - $10,000 |
|
| |
The Financial Select Sector SPDR Fund |
$1 - $10,000 |
|
| |
The Health Care Select Sector SPDR Fund |
$1 - $10,000 |
|
| |
The Industrial Select Sector SPDR Fund |
$1 - $10,000 |
|
| |
The Materials Select Sector SPDR Fund |
$1 - $10,000 |
|
| James E. Ross |
The Consumer Discretionary Select Sector SPDR Fund |
Over $100,001 |
Over $100,001 |
| |
The Energy Select Sector SPDR Fund |
$10,001 - $50,000 |
|
| |
The Health Care Select Sector SPDR Fund |
$50,001 - $100,000 |
|
| |
The Technology Select Sector SPDR Fund |
$50,001 - $100,000 |
|
| |
The Financial Select Sector SPDR Fund |
$0 - $100,000 |
|
| Interested Trustee: |
|
|
|
| Jeanne LaPorta |
None |
None |
None |
CODES OF ETHICS
The Trust, the Adviser and the Distributor each have adopted a Code of Ethics pursuant to 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 the Trust's registration statement, may be examined at the office of the SEC in Washington, D.C. or on the Internet at the SEC's website at
https://www.sec.gov.
PROXY VOTING POLICIES
The Board has delegated the responsibility to vote proxies on securities held by the
Funds to the Adviser for all Funds, subject to certain exceptions. The Board has retained authority to vote proxies for certain bank and bank holding company securities (“Bank Securities”) that may be held by one or more Funds from time to time. The Board has adopted the Institutional Shareholder Services, Inc.'s
(“ISS”) benchmark proxy voting policy with respect to voting such Bank Securities' proxies. The Board has retained this authority
in order to permit the Adviser to utilize exemptions from limitations arising under the Bank Holding Company Act of 1956, as amended, that might otherwise prevent the Adviser
from acquiring Bank Securities on behalf of a Fund. Each of the Trust's and the Adviser's proxy voting policies, as well as ISS' benchmark proxy voting policy, are attached as an appendix to 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 1-866-732-8673; (2) on the Funds' website
at https://www.sectorspdr.com; and (3) on the SEC's website at https://www.sec.gov.
DISCLOSURE OF PORTFOLIO HOLDINGS POLICY
The Trust has adopted a policy regarding the disclosure of information about the Trust's 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
26
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.
Investment Advisory and Other Services
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 [ ], 2025, the Adviser managed approximately $[ ] trillion in assets. The Adviser's 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 itself is 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. 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 Fund's 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.
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 a Fund, provided that in
either event such continuance also is approved by a majority of the Trustees 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 of the applicable
Fund's outstanding voting securities (as defined in the 1940 Act). The Investment Advisory Agreement is also terminable upon 90 days' notice by the Adviser and will terminate automatically in the event of its assignment (as defined in the 1940
Act).
A summary of the factors considered by the Board of Trustees in connection with the initial approval of the Investment Advisory Agreement for the Fund will be available in the Fund's Form N-CSR filing with the SEC after the Fund commences
operations.
For the services provided to each Fund under the Investment
Advisory Agreement, each Fund pays the Adviser monthly fees based on a percentage of the Fund's average daily net assets as set forth in the Prospectus. With respect to each
Fund, the management fee is reduced by any acquired fund fees and expenses attributable to the Funds' investments in other investment companies. The Adviser pays all expenses of each Fund other than the management fee, brokerage expenses,
taxes, interest, fees and expenses of the Independent Trustees (including any Trustee's counsel fees), litigation expenses and other extraordinary expenses. The Adviser may, from
time to time, waive all or a portion of its fee. The Adviser has agreed to pay all costs associated with the organization of each Fund.
The Funds had not commenced operations as of the date of this SAI and therefore did not pay
fees to the Adviser for the past three fiscal years.
27
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 |
| Emiliano Rabinovich, Juan Acevedo and Raymond Donofrio |
The Communication Services Select Sector SPDR Premium Income Fund The Consumer Discretionary Select Sector SPDR Premium Income Fund The Consumer Staples Select Sector SPDR Premium Income Fund The
Energy Select Sector SPDR Premium Income Fund The Financial Select Sector SPDR Premium
Income Fund The Health Care Select Sector SPDR Premium Income
Fund The Industrial Select Sector SPDR Premium Income Fund The Materials Select Sector SPDR Premium Income Fund The Real Estate Select Sector SPDR Premium Income Fund The
Technology Select Sector SPDR Premium Income Fund
The Utilities Select Sector SPDR Premium Income Fund |
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 Funds 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 [ ],
2025
| 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) |
| Juan Acevedo |
[ ] |
$[ ]
|
[ ] |
$[ ]
|
[ ] |
$[ ]
|
$[ ]
|
| Emiliano Rabinovich |
[ ] |
$[ ]
|
[ ] |
$[ ]
|
[ ] |
$[ ]
|
$[ ]
|
| Raymond Donofrio |
[ ] |
$[ ]
|
[ ] |
$[ ]
|
[ ] |
$[ ]
|
$[ ]
|
*
There are no performance-based fees associated with these accounts.
The Funds had not commenced
operations prior to the date of this SAI and therefore the portfolio managers did not beneficially own any Shares.
Conflicts of Interest. 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 manager's 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 a portfolio manager's responsibility for multiple accounts with similar investment guidelines. Under these circumstances, a potential investment may be suitable for more than
one of the portfolio manager's accounts, but the quantity of the investment available for purchase is less than the aggregate amount the accounts would ideally allocate 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
28
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 fees—the 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, as applicable. Another potential conflict may arise when the portfolio manager has a personal investment in one or more accounts that participate in transactions with other accounts. His or her personal 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. With respect to conflicts arising from personal investments, all employees, including portfolio managers, must comply with personal trading controls established by each of the Adviser's and Trust's Code of Ethics.
Compensation. SSGA's 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, and performance both at the
business and individual level. SSGA's 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, an incentive pool is
allocated to SSGA to reward its employees. The size of the incentive pool for most business units is based on the firm's 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 firm's or business unit's 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 team's 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 index 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 employee's manager, in conjunction with the senior management of the employee's 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
company's success.
•Using rewards to reinforce mission, vision, values and business
strategy.
•Seeking to recognize and preserve the firm's unique culture and team
orientation.
•Providing all employees the opportunity to share in the success of
SSGA.
29
THE ADMINISTRATOR,
SUB-ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
The Administrator: SSGA FM
serves as the administrator to each series of the Trust, pursuant to an Administration Agreement dated June 1, 2015, as amended, between SSGA FM and the Trust (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. For its administration services to the Funds, each Fund pays SSGA FM a fee accrued daily and paid monthly at a rate of 0.0006% of
its average daily net assets.
The Funds had not commenced operations as of the date of this SAI and therefore did not pay fees to SSGA FM pursuant to the
SSGA Administration Agreement for the past three fiscal years.
The Sub-Administrator, Custodian and Transfer Agent: State Street serves as the sub-administrator
to each series of the Trust, pursuant to a Sub-Administration Agreement dated June 1, 2015, as amended (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 SSGA FM. State Street's mailing address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
State Street also serves as Custodian for the Trust's series pursuant to a custodian
agreement (“Custodian
Agreement”). As Custodian, State
Street holds the Funds' assets, calculates the net asset value of each Select Sector SPDR Fund's 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: A
“unitary” fee is paid by each Select Sector SPDR Fund to State Street for custody, sub-administration and transfer agency services
provided to the Select Sector SPDR Funds. The unitary fee is calculated based upon the average daily net assets of the Trust and allocated pro rata to each Select Sector SPDR Fund
based upon the relative net assets of each Select Sector SPDR Fund. The unitary fee is calculated as follows: 0.015% for the first $50 billion of net assets of the Trust, 0.0125% for the next $25 billion of net assets of the Trust, 0.01% for the next $25 billion of net assets
of the Trust, 0.0040% for the next $300 billion of net assets of the Trust, and 0.0025% thereafter. In addition, State Street shall receive global safekeeping and transaction fees, which are calculated on a per-country basis, in-kind creation
(purchase) and redemption transaction fees (as described below) and revenue on certain cash balances. State Street may be reimbursed by the series of the Trust for its out-of-pocket expenses.
Additional Sub-Administration Services: Also under the Sub-Administration Agreement, each Select Sector SPDR Fund pays fees to State Street for: (i) certain
services required in the preparation (including preparing a schedule of quarterly portfolio investments) and filing of Form N-PORT and Form N-CEN with the SEC (“N-PORT Related Services”); (ii) services regarding certain liquidity analytics
(“Liquidity Risk Measurement
Services”) under the Sub-Administration Agreement; and (iii) certain services related to the preparation of tailored shareholder reports (“Tailored Shareholder Report Services”). For N-PORT Related Services, each Select Sector SPDR Fund pays State Street a fee of $10,300 per year. For Liquidity Risk
Measurement Services, each Select Sector SPDR Fund pays State Street a fee of $1,800 per year. For Tailored Shareholder Report Services, each Select Sector SPDR Fund pays State
Street a fee of $1,000 per year.
SECURITIES LENDING ACTIVITIES
The Trust's Board has approved the Funds' participation in a securities lending program. Under the securities lending
program, the Funds have retained State Street to serve as the securities lending agent.
The Funds had not commenced operations as of the date of this SAI and
therefore do not have any securities lending activities to report for the [December 31, 2024] fiscal year end.
THE DISTRIBUTOR
State Street Global Advisors Funds Distributors, LLC serves as 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
30
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.
In addition, as of the date of this SAI, the Adviser and/or Distributor had arrangements whereby they may make payments,
other than for the educational programs and marketing activities described above, to Pershing LLC
(“Pershing”), RBC Capital Markets, LLC (“RBC”), LPL Financial, LLC (“LPL”), and Morgan Stanley Wealth Management, LLC. These amounts, which may be significant, are paid by the Adviser and/or
Distributor from their own resources and not from Fund assets. Pursuant to these arrangements, Pershing, RBC and LPL have agreed to offer 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.
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 reimburse expenses or make payments from their own assets to other persons
in consideration of services, provision of data, 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 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 LICENSE
S&P Opco, LLC, a subsidiary of S&P DJI and S&P Global (“S&P”) and NYSE Arca, Inc. (either directly or through affiliates) have entered into a license agreement with respect to each
Underlying Index. The Trust has entered into a sublicense agreement with S&P whereby each Fund pays an annual sub-license fee to S&P based on a percentage of the Fund's total expense ratio for the most recent fiscal year and applied to the Fund's average daily net assets.
31
Brokerage Transactions
All portfolio transactions are placed on behalf of the Funds by the Adviser. Purchases and
sales of securities on a securities exchange are affected through brokers who charge a commission for their services. Ordinarily commissions are not charged on over-the-counter orders (e.g., fixed income securities) because the Funds pay a spread which is included in
the cost of the security and represents the difference between the dealer's quoted price at which it is willing to sell the security and the dealer's quoted price at which it is
willing to buy the security. When a Fund executes an over-the-counter order with an electronic communications network or an alternative trading system, a commission is charged by
such electronic communications networks and alternative trading systems as they execute such orders on an agency basis. Securities may be purchased from underwriters at prices that include underwriting fees.
In placing a portfolio transaction, the Adviser seeks to achieve best execution. The Adviser's duty to seek best execution requires the Adviser to take reasonable steps to obtain for the client as favorable an overall result as possible for Fund
portfolio transactions under the circumstances, taking into account various factors that are relevant to the particular transaction.
The Adviser refers to and selects from the list of approved trading counterparties maintained by the Adviser's Credit Risk Management team. In selecting a trading counterparty for a particular trade, the Adviser seeks to weigh relevant factors
including, but not limited to the following:
•Prompt and reliable execution;
•The competitiveness of commission rates and spreads, if applicable;
•The financial strength, stability
and/or reputation of the trading counterparty;
•The willingness and ability of the executing trading
counterparty to execute transactions (and commit capital) of size in liquid and illiquid markets without disrupting the market for the security;
•Local laws, regulations or restrictions;
•The ability of the trading counterparty to maintain
confidentiality;
•The availability and capability of execution venues,
including electronic communications networks for trading and execution management systems made available to Adviser;
•Market share;
•Liquidity;
•Price;
•Execution related costs;
•History of execution of orders;
•Likelihood of execution and settlement;
•Order size and nature;
•Clearance and settlement capabilities, especially in high volatility
market environments;
•Availability of lendable
securities;
•Sophistication of the trading counterparty's trading capabilities and infrastructure/facilities;
•The operational efficiency with which transactions are processed and cleared, taking into account the order size and complexity;
•Speed and responsiveness to the Adviser;
•Access to secondary markets;
•Counterparty exposure; and
•Depending upon the circumstances, the Adviser may take other relevant factors into account if the Adviser believes that these are important in taking all sufficient steps to obtain the best possible result for execution of the order.
In selecting a trading counterparty, the price of the transaction and costs related to the
execution of the transaction typically merit a high relative importance, depending on the circumstances. The Adviser does not necessarily select a trading counterparty based upon price and costs but may take other relevant factors into account if it believes that these
are important in taking reasonable steps to obtain the best possible result for a Fund under the circumstances.
32
Consequently, the Adviser may cause a client to
pay a trading counterparty more than another trading counterparty might have charged for the same transaction in recognition of the value and quality of the brokerage services
provided. The following matters may influence the relative importance that the Adviser places upon the relevant factors:
(i)
The nature and characteristics of the order or transaction. For example, size of order, market
impact of order, limits, or other instructions relating to the order;
(ii)
The characteristics of the financial instrument(s) or other assets which are the subject of
that order. For example, whether the order pertains to an equity, fixed income, derivative or convertible instrument;
(iii)
The characteristics
of the execution venues to which that order can be directed, if relevant. For example, availability and capabilities of electronic trading systems;
(iv)
Whether the
transaction is a ‘delivery versus payment' or ‘over-the-counter' transaction. The creditworthiness of the trading counterparty, the amount of existing exposure to a
trading counterparty and trading counterparty settlement capabilities may be given a higher relative importance in the case of ‘over-the-counter' transactions; and/or
(v)
Any other circumstances that the Adviser believes are relevant at the time.
The process by which
trading counterparties are selected to effect transactions is designed to exclude consideration of the sales efforts conducted by broker-dealers in relation to the
Funds.
The Adviser does not currently use the Funds' assets in
connection with third-party soft dollar arrangements. While the Adviser does not currently use “soft” or commission dollars paid by the Funds for
the purchase of third-party research, the Adviser reserves the right to do so in the future.
The Funds will not deal with affiliates in principal transactions unless permitted by exemptive order or applicable rule or regulation.
The Funds had not commenced operations as of the date of this SAI and therefore did not pay brokerage commissions during the past three fiscal years.
Securities of “Regular Broker-Dealers”: The Funds are required to identify any securities of their “regular brokers and dealers” (as such term is defined in the 1940 Act) which they may hold at the close of their 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 Trust's 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 Trust's Shares.
The Funds had not commenced operations as of the date of this SAI and therefore do not have any holdings in Securities of
Regular Broker-Dealers as of December 31, 2024.
The Financial Select
Sector SPDR Premium Income Fund invests in the shares of The Financial Select Sector SPDR Fund. The Financial Select Sector SPDR Fund invests in the shares of some of the Funds'
regular broker-dealers because those issuers are components in the Financial Select Sector Index. In addition, a holding in The Financial Select Sector SPDR Fund or The Financial Select Sector SPDR Premium Income Fund is a security of an issuer affiliated with the
Adviser and State Street.
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.
Book Entry Only System
The following information supplements and should be read in conjunction with the section in the Prospectus entitled “ADDITIONAL PURCHASE AND SALE
INFORMATION.”
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.
33
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.
Control Persons and Principal Holders of Securities
The Funds had not commenced operations prior to the date of this SAI and therefore did not
have any beneficial owners that owned greater than 5% of the outstanding voting securities as of the date of this SAI.
An Authorized Participant (as defined below) may hold of record more than 25% of the
outstanding Shares of a Fund. From time to time, Authorized Participants may be a beneficial and/or legal owner of the Funds, may be affiliated with an index provider, may be deemed to have control of the applicable Fund and may be able to affect the outcome of matters
presented for a vote of the shareholders of the Funds. Authorized Participants may execute an irrevocable proxy granting
34
the Distributor, State Street or an affiliate (the
“Agent”) power to vote or abstain from voting such Authorized Participant's beneficially or legally owned Shares of the applicable
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 applicable Fund.
The Trustees and officers of the Trust, as a group, owned less than 1% of the Trust's
voting securities as of the date of this SAI.
Purchase and Redemption of Creation Units
PURCHASE (CREATION)
The Trust issues and sells Shares of each Fund only in Creation Units on a continuous basis through the Distributor, without
a sales load (but subject to transaction fees), at their NAV per share next determined after receipt, on any Business Day (as defined below), of an order in proper form pursuant to
the terms of the Authorized Participant Agreement (“Participant Agreement”). A “Business Day” with respect to each Fund is generally any day on which the NYSE is open for business.
The consideration for purchase of a Creation Unit of a Fund generally consists of the Deposit Securities and the Cash
Component, computed as described below. Together, the Deposit Securities and the Cash Component constitute the
“Fund Deposit,” which represents the minimum initial and subsequent investment amount for a Creation Unit of any Fund. The Cash Component
is an amount equal to the Dividend Equivalent Payment (as defined below), plus or minus, as the case may be, a Balancing Amount (as defined below). The “Dividend Equivalent Payment” enables each 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. The “Balancing Amount” is an amount equal to the difference between the net asset value of the Shares (per Creation Unit) and the “Deposit Amount” — an amount equal to the sum of the market value of the Deposit Securities and the Dividend Equivalent Payment. If the Balancing Amount is a positive number (i.e., the net asset value per Creation Unit
exceeds the Deposit Amount), the Cash Component shall be increased by such positive amount. If the Balancing Amount is a negative number (i.e., the net asset value per Creation Unit is less than the Deposit Amount), the Cash Component shall
be decreased by such negative amount. If the negative number is greater than the Dividend Equivalent Payment, the creator will be entitled to receive cash in an amount equal to the
differential. The Balancing Amount serves the function of compensating for any differences between the net asset value per Creation Unit and the Deposit Amount.
The Custodian, through the 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 to be included in the current standard Fund Deposit (based on
information at the end of the previous Business Day) for each Fund. Such standard Fund Deposit is subject to any applicable adjustments as described below, in order to effect purchases of Creation Units of a given Fund until such time as the next-announced composition of the Deposit
Securities is made available.
The identity and number of shares of the Deposit Securities required for a Fund Deposit for
each Fund may be changed from time to time with a view to the investment objective of the applicable 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.
In addition, the Trust reserves the right to permit or require the substitution of an
amount of cash — i.e., a “cash in lieu” amount — to be added to
the Cash Component to replace any Deposit Security which may not be available in sufficient quantity for delivery or which may not be eligible for transfer through the Clearing
Process (discussed below), or which may not be eligible for trading by an Authorized Participant (as defined below) or the investor for which it is acting (a “non-standard order”). Brokerage commissions incurred in connection with acquisition of Deposit Securities not eligible for transfer through the systems of DTC and hence not eligible for transfer through the Clearing Process (discussed below) will
be at the expense of the Fund and will affect the value of all Shares; but the Adviser, subject to the approval of the Board, may adjust the transaction fee within the parameters
described above to protect ongoing shareholders. The Trust
35
also reserves the right to include or remove
Deposit Securities from the basket in anticipation of portfolio 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, resulting from certain corporate actions.
PROCEDURES FOR PURCHASE OF CREATION UNITS
To be eligible to place orders with the Distributor, 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 Distributor 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 the 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 all applicable fees and taxes. All Shares of Funds, however created,
will be entered on the records of DTC in the name of Cede & Co. for the account of a DTC Participant.
All orders to purchase Shares directly from the Funds, including non-standard orders, must
be placed for one or more Creation Unit size aggregations of Shares and in the manner set forth in the Participant Agreement and/or applicable order form, which sets forth specific procedures associated with purchases through the Clearing Process and outside the
Clearing Process. Those placing orders through an Authorized Participant should allow sufficient time to permit proper submission of the purchase order by the cut-off time. State Street Global Markets, LLC may assist Authorized Participants in
assembling shares to purchase Creation Units (or upon redemption), for which it may receive commissions or other fees from such Authorized Participants.
Investors should be aware that an Authorized Participant may require orders for purchases of Shares placed with it to be in
the particular form required by the individual Authorized Participant. In addition, the Authorized Participant may request the 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 also be aware that their particular broker may not have executed a
Participant Agreement, and that, therefore, orders to purchase Creation Units of the Funds have to be placed by the investor's broker through an Authorized Participant that has executed a Participant Agreement. At any given time there may
be only a limited number of broker-dealers that have executed a Participant Agreement.
Creation Units 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 of a Fund 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) 115% of the market value of the undelivered Deposit Securities (the “Additional Cash Deposit”), which shall be maintained in a separate non-interest bearing collateral account, in accordance with the terms of the
Participant Agreement. 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 115% of the daily marked to market value of the missing Deposit Securities, in accordance with the terms of the Participant Agreement. The Participant
Agreement will permit the Trust 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 Distributor 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. The delivery of Creation Units so purchased will occur no later than the first Business Day following the day on which the
purchase order is deemed received by the Distributor. 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.
Shortened settlement cycles are expected to be available, through which creation transactions can be settled on the trade date in accordance with instructions provided by the Trust and/or Distributor.
36
ACCEPTANCE OF ORDERS OF CREATION
UNITS
The Trust reserves the right to reject an order for Creation Units in
respect of any Fund at its discretion, including, without limitation, if (a) the order is not in proper form or the Deposit Securities delivered do not consist of the securities
that the Custodian specified; (b) the investor(s), upon obtaining the Shares ordered, would own 80% or more of the currently outstanding Shares of any Fund; (c) the Deposit Securities delivered are not as disseminated through the facilities of the
NSCC for that date by the Custodian, as described above; (d) the acceptance of the Fund Deposit would, in the opinion of counsel, be unlawful; (e) the acceptance or receipt of the order for a Creation Unit would, in the opinion of counsel to the
Trust, be unlawful; or (f) in the event that circumstances outside the control of the Trust, the Custodian, the Transfer Agent, the Distributor 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 Custodian, the Transfer Agent, the Adviser, the Distributor, DTC,
NSCC or any other participant in the creation process, and similar extraordinary events. The Distributor shall communicate to the Authorized Participant its rejection of the order.
The Trust, the Transfer Agent, the Custodian and the Distributor 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 Distributor shall not be liable for the rejection of any purchase order for Creation Units. Given the importance of the ongoing issuance of Creation Units to maintaining a market
price that is at or close to the underlying net asset value of a Fund, the Trust does not intend to suspend acceptance of orders 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 Trust's determination shall be final and binding.
CREATION TRANSACTION FEE
Investors will be required to pay a fixed creation transaction fee of $500 for each Fund
except The Communication Services Select Sector SPDR Premium Income Fund. For The Communication Services Select Sector SPDR Premium Income Fund, the fixed creation transaction fee is $250. An additional charge of up to three (3) times the fixed transaction
fee (expressed as a percentage of the value of the Deposit Securities) may be imposed for (i) creations effected outside the Clearing Process; (ii) non-standard orders; and (iii) cash creations, for a total charge of up to $2,000 for each Fund
except The Communication Services Select Sector SPDR Premium Income Fund, and a total of up to $1,000 for The
Communication Services Select Sector SPDR Premium Income Fund. Investors are responsible for the costs of
transferring the securities constituting the Deposit Securities to the account of the Trust.
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 Distributor 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 securities designated by the Fund that will be applicable (subject to possible amendment or correction) to redemption
requests received in proper form (as defined below) on that day (“Redemption Securities”). Redemption Securities
received on redemption may not be identical to Deposit Securities which are applicable to purchases of Creation Units. The identity and number of shares of the Redemption Securities or the Cash Redemption Amount (defined below) may be changed
from time to time with a view to the investment objective of a Fund.
Unless cash redemptions are available or specified for a Fund, the redemption proceeds for a Creation Unit generally consist of Redemption Securities 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 Redemption
37
Securities (the “Cash Redemption Amount”), less a fixed redemption transaction fee of $500. In the event that the Redemption 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.
REDEMPTION TRANSACTION FEE
A fixed transaction fee of $500 is applicable to each redemption transaction regardless of the number of Creation Units
redeemed in the transaction for each Fund except The Communication Services Select Sector SPDR Premium Income
Fund. For The Communication Services Select Sector SPDR Premium Income Fund, the fixed redemption transaction fee
is $250. An additional charge of up to three (3) times the fixed transaction fee (for a total charge of up to $2,000 for each Fund except The Communication Services Select Sector SPDR Premium Income Fund, and a total of up to $1,000 for The
Communication Services Select Sector SPDR Premium Income Fund) may be charged with respect to (i) transactions effected outside the Clearing Process; (ii) non-standard orders; and
(iii) in the limited circumstances specified in which any cash may be used in lieu of securities to redeem Creation Units.
PROCEDURES FOR REDEMPTION OF CREATION UNITS
Orders to redeem Creation Units must be submitted in proper form to the Distributor prior to the time as set forth in the
Participant Agreement and/or applicable order form. A redemption 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. If the Distributor does not
receive the investor's Shares through DTC's facilities by the times and pursuant to the other terms and conditions set forth in the Participant Agreement, the redemption request shall be rejected.
The Authorized Participant must transmit the request for redemption, in the form required
by the Trust, to the Distributor in accordance with procedures set forth in the Participant Agreement and in accordance with the applicable order form. Investors should be aware that their particular broker may not have executed a Participant Agreement, and that, therefore,
requests to redeem Creation Units may have to be placed by the investor's broker through an Authorized Participant who has executed a Participant Agreement. Investors making a redemption request should be aware that such request must be in the
form specified by such Authorized Participant. Investors making a request to redeem Creation Units should allow sufficient time to permit proper submission of the request by an
Authorized Participant and transfer of the Shares to the Trust's Transfer Agent; such investors should allow for the additional time that may be required to effect redemptions
through their banks, brokers or other financial intermediaries if such intermediaries are not Authorized Participants.
An Authorized Participant submitting a redemption request is deemed to represent to the Trust
that, as of the close of that Business Day, 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.
If it is not possible to effect deliveries of the Redemption Securities, the Trust may in its discretion exercise its option to redeem such Shares in cash, and the redeeming Authorized Participant will be required to receive its redemption proceeds in
cash. In addition, an Authorized Participant may request a redemption in cash which the Fund may, in its sole discretion, permit. In either case, the Authorized Participant will
receive a cash payment equal to the net asset value of its Shares based on the net asset value 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 Trust's brokerage and other transaction costs associated with the disposition of Redemption Securities). The Fund may also, in its sole discretion, upon request of an Authorized Participant, provide such redeemer a
portfolio of securities that differs from the exact composition of the Redemption Securities but does not differ in net asset value.
38
Deliveries of redemption proceeds generally will
be made within one Business Day.
Redemptions of Shares for Redemption
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 Redemption Securities upon redemptions or could not do so without first registering the Redemption 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 Redemption Securities applicable to the redemption of a Creation Unit may be paid an equivalent amount of cash. The
Authorized Participant may request the redeeming Shareholder to complete an order form or to enter into agreements with respect to such matters as compensating cash payment,
beneficial ownership of Shares or delivery instructions.
The right of
redemption may be suspended or the date of payment postponed with respect to any Fund (1) for any period during which the NYSE is closed (other than customary weekend and
holiday closings); (2) for any period during which trading on the NYSE 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 net asset value of the Shares is not reasonably practicable; or (4) in such other circumstance as is permitted by the SEC.
REQUIRED EARLY ACCEPTANCE OF ORDERS
The Trust may, but is not required to, accept orders until 4:00 p.m., Eastern time, or
until the market close (in the event the Exchange closes early). Notwithstanding the foregoing, as described in the Participant Agreement and the applicable order form, Authorized Participants may be notified that the cut-off time for an order may be earlier on a particular
Business Day.
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 of the Trust is computed by dividing the value of the net assets of such 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, administration and distribution 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 the Custodian 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.
In calculating a Fund's net asset value per Share, the Fund's 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) or (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). Each Fund relies
on a third-party service provider for assistance with the daily calculation of the Fund's 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 Fund's NAV. Therefore, each Fund is subject to certain operational risks associated with reliance on its service provider and that service provider's 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 fund's published net asset value per share. Each Fund may use various pricing services, or discontinue the use of any pricing service.
Pursuant to Board approved valuation procedures, the Board has designated the Adviser as the valuation designee for each Fund. These procedures address, among other things, (i) determining (a) when market quotations are not readily
available or reliable and (b) the methodologies to be used for determining the fair value of investments, and (ii) the use and oversight of third-party pricing services for fair valuation. The Adviser is responsible for periodically reviewing the
procedures, and the selected methodologies used, for their continuing appropriateness and accuracy, and making any changes or adjustments to the procedures and methodologies as appropriate.
39
In the event that current market valuations are
not readily available or are deemed unreliable, the Trust's procedures require the Adviser to determine a security's fair value. In determining a fair value, the Adviser 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 and market indices). In these cases, a Fund's 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 arm's-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.
Dividends and Distributions
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 declared and paid monthly for each Fund. 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 to comply with the distribution requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. In addition, the Trust intends to distribute at least annually amounts representing the full dividend yield on the underlying portfolio securities of each Fund, net of expenses of such Fund, as if such Fund owned such
underlying portfolio securities for the entire dividend period. As a result, some portion of each distribution may result in a return of capital for tax purposes for
shareholders.
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.
The Trust makes additional distributions to the extent necessary (i) to distribute the entire annual taxable income of the
Trust, plus any net capital gains and (ii) to avoid imposition of the excise tax imposed by Section 4982 of the Code. 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 status of each Fund as a RIC or to avoid imposition of income or excise taxes on undistributed income.
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.
Taxes
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 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.”
40
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 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 Fund's 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 Fund's 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 Fund's 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 the applicable corporate rate
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 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.
41
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 year's 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 Fund's 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 RIC's 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 SHAREHOLDERS—DISTRIBUTIONS
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 reduced rates. 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 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 treated as 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. Additionally, income derived in connection with a Fund's securities lending activities will, in general, not be treated as qualified dividend income. If 95% or more of a Fund's 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 Code. Dividends received by a Fund from REITs will not be eligible
for that deduction. In order to qualify for the deduction, corporate shareholders must meet the minimum holding period
42
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 Fund's net short-term capital gains will generally be taxable to shareholders as ordinary income. Distributions from a Fund's 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 reduced rates. Certain capital gain dividends attributable to dividends a Fund receives from REITs may be taxable to
noncorporate shareholders at a rate other than the reduced rates generally applicable to long-term capital gains.
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 Fund's 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 shareholder's 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 shareholder's 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 shareholder's Fund Shares.
Under Section 163(j) of the Code, a taxpayer's business interest
expense is generally deductible to the extent of its business interest income plus certain other amounts. If a Fund earns business interest income, it may report a portion of
its dividends as “Section 163(j)
interest dividends,” which its shareholders may be able to treat as business interest income for purposes of Section 163(j) of the Code. The Fund's “Section 163(j) interest dividend” for a tax year
will be limited to the excess of its business interest income over the sum of its business interest expense and other deductions properly allocable to its business interest income. In general, a Fund's shareholders may treat a distribution reported as a
Section 163(j) interest dividend as interest income only to the extent the distribution exceeds the sum of the portions of the distribution reported as other types of tax-favored income. To be eligible to treat a Section 163(j) interest dividend as
interest income, a shareholder may need to meet certain holding period requirements in respect of Fund Shares and must not have hedged its position in Fund Shares in certain ways.
Distributions that are reinvested in additional Fund Shares 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, dividends, interest 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 shareholder's net investment income.
Distributions of ordinary income and capital gains may also be subject to foreign, state and local taxes depending on a shareholder's 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 noncorporate shareholders at reduced rates.
43
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 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 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. No Fund expects 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 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 a Fund
(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 to its
shareholders 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.
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.
For tax years before January 1, 2026, a non-corporate taxpayer is
generally eligible for a deduction of up to 20% of the taxpayer's “qualified REIT dividends.” If a Fund receives a
dividend (other than a capital gain dividend) in respect of any share of U.S. REIT stock, the Fund may report its own dividends as eligible for the 20% deduction, to the extent the
Fund's income is derived from such qualified REIT dividends, as reduced by allocable Fund expenses. In order for a Fund's dividends to be eligible for this deduction when received by a non-corporate shareholder, the Fund must meet certain
holding period requirements with respect to the U.S. REIT shares on which the Fund received the eligible dividends, and the non-corporate shareholder must meet certain holding
period requirements with respect to the Shares.
44
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 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 shareholder's 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 Fund's “qualified net interest income,” or (ii) short-term capital gain dividends, to the extent such dividends are derived from the Fund's “qualified short-term gain,” are generally exempt from this 30% withholding tax. “Qualified net interest income” is a Fund's 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 Fund's 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 a Fund reports the payment as an interest-related dividend or as a short-term capital gain dividend. Non-U.S. shareholders should contact their intermediaries with respect to the application of these rules to their accounts.
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. 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 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 treated as 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 taxes, and requiring non-U.S. investors to file nonresident U.S. income tax returns. Also, FIRPTA 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
45
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 currently 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 exchanger's 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 exchanger's 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 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.
If a Fund redeems Creation Units in cash, it may bear additional costs and recognize more capital gains than it would if it
redeems Creation Units in-kind.
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 Fund's 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 taxpayer's 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.
46
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 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 Other Securities
Each Fund issues Shares of beneficial interest, par value $0.01 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 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 Trust's 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 Fund's 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,
located at 1111 Pennsylvania Avenue NW, Washington, DC 20004, serves as counsel to the Trust. [ ], located at [ ], serves as the independent registered public
accounting firm of the Trust. [ ] performs annual audits of the Funds' financial statements and provides other audit, tax and related services.
Financial Statements
The Funds had not commenced operations as of the date of this SAI and therefore do not have
financial information to report for the Funds' [December 31, 2024] fiscal year end.
47
Appendix A
The Select Sector SPDR®
Trust (the
“Trust”)
PROXY VOTING POLICY AND
PROCEDURES
The Board of Trustees of the Trust has adopted the following
policy and procedures with respect to voting proxies relating to portfolio securities held by the Trust's investment portfolios.
1.
Proxy Voting Policy
The policy of the Trust is to delegate the responsibility for voting proxies
relating to portfolio securities held by the Trust to SSgA Funds Management, Inc., the Trust's investment adviser (the “Adviser”), subject to the Trustees' continuing oversight.
2.
Fiduciary Duty
The right to vote proxies with respect to portfolio securities held by the Trust is an
asset of the Trust. The Adviser acts as a fiduciary of the Trust and must vote proxies in a manner consistent with the best interest of the Trust and its shareholders.
3.
Proxy Voting Procedures
A.
At least annually, the Adviser shall present to the Board its policies, procedures and other
guidelines for voting proxies
(“Policy”). (See attached Schedule A)
In addition, the Adviser shall notify the Trustees of material changes to its Policy promptly and no later than at the next regular meeting of the Board of Trustees after such
amendment is implemented.
B.
At least annually, the Adviser shall present to the Board its policy for managing the
conflicts of interests that may arise through the Adviser's proxy voting activities. In addition, the Adviser shall report any Policy overrides involving portfolio securities held by the Trust to the Trustees at the next regular meeting of the Board of Trustees after
such override(s) occur.
C.
At least annually, the Adviser shall inform the Trustees that a record is available with
respect to each proxy voted with respect to portfolio securities of the Trust during the year. Also see Section 5 below.
4.
Revocation of Authority to Vote
The delegation by the Trustees of the authority to vote proxies relating to portfolio securities of the Trust may be revoked
by the Trustees, in whole or in part, at any time.
5.
Annual Filing of Proxy Voting Record
The Adviser shall provide the required data for each proxy voted with respect to portfolio securities of the Trust to the Trust or its designated service provider in a timely manner and in a format acceptable to be filed in the Trust's annual proxy
voting report on Form N-PX for the twelve-month period ended June 30. Form N-PX is required to be filed not later than August 31 of each year.
6.
Retention and Oversight of Proxy Advisory Firms
A.
In considering whether to retain or continue retaining a particular proxy advisory firm, the
Adviser will ascertain whether the proxy advisory firm has the capacity and competency to adequately analyze proxy issues, act as proxy voting agent as requested, and implement the Policy. In this regard, the Adviser will consider, at least annually,
among other things, the adequacy and quality of the proxy advisory firm's staffing and personnel and the robustness of its policies and procedures regarding its ability to identify
and address any conflicts of interest. The Adviser shall, at least annually, report to the Board regarding the results of this review.
B.
The Adviser will request quarterly and annual reporting from any proxy advisory firm retained
by the Adviser, and hold ad hoc meetings with such proxy advisory firm, in order to determine whether there has been any business changes that might impact the proxy advisory firm's capacity or competency to provide proxy voting advice or services or
changes to the proxy advisory firm's conflicts policies or procedures. The Adviser will also take reasonable steps to investigate any material factual error, notified to the
Adviser by the proxy advisory firm or identified by the Adviser, made by the proxy advisory firm in providing proxy voting services.
A-1
7.
Periodic Sampling
The Adviser will periodically sample proxy votes to review whether they complied with
the Policy. The Adviser shall, at least annually, report to the Board regarding the frequency and results of the sampling performed.
8.
Disclosures
A.
The Trust shall include in its registration statement:
1.
A description of this policy and of the policies and procedures used by the Adviser to
determine how to vote proxies relating to portfolio securities; and
2.
A statement disclosing
that information regarding how the Trust voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon
request, by calling the Trust's toll-free telephone number; or through a specified Internet address; or both; and on the Securities and Exchange Commission's (the
“SEC”) website.
B.
The Trust shall include in its annual and semi-annual reports to shareholders:
1.
A statement disclosing that a description of the policies and procedures used by or on behalf
of the Trust to determine how to vote proxies relating to portfolio securities of the Trust is available without charge, upon request, by calling the Trust's toll-free telephone number; through a specified Internet address, if applicable; and on the
SEC's website; and
2.
A statement disclosing that information regarding how the Trust voted proxies relating to
portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by calling the Trust's toll-free telephone number; or through a specified Internet address; or both; and on the SEC's
website.
9.
Review of Policy
The Trustees shall review this policy to determine its continued sufficiency as necessary from time to
time.
| Adopted: |
May 1, 2006 |
| Amended: |
May 12, 2009 |
| Amended: |
November 9, 2010 |
| Amended: |
February 9, 2016 |
A-2
APPENDIX B
Adviser's Proxy Voting Policies and Procedures
March 2025
Global Proxy Voting and Engagement Policy
State Street Global Advisors is the investment management arm of State Street Corporation, a leading provider of financial
services to institutional investors. As an asset manager, State Street Global Advisors votes its clients' proxies where the client has delegated proxy voting authority to it, and
State Street Global Advisors votes these proxies and engages with companies 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.1
When engaging with and voting proxies with respect to the portfolio companies in which we
invest our clients' assets, we do so on behalf of and in the best interests of the client accounts we manage and do not seek to change or influence control of any such portfolio companies. The State Street Global Advisors Global Proxy Voting and Engagement Policy (the
“Policy”) contains certain policies that State Street Global Advisors will only apply in jurisdictions where permitted by local law
and regulations. State Street Global Advisors will not apply any policies contained herein in any jurisdictions where State Street Global Advisors believes that implementing or
following such policies would be deemed to constitute seeking to change or influence control of a portfolio company.
Introduction
At State Street Global Advisors, we take our fiduciary duties as an asset manager very
seriously. Our primary fiduciary obligation to our clients is to maximize the long-term value of their investments. State Street Global Advisors focuses on risks and opportunities that may impact long-term value creation for our clients. We rely on the elected representatives of
the companies in which we invest — the board of directors — to oversee these firms' strategies. We expect effective independent board oversight of the material risks and opportunities to a firm's business and operations. We believe that
appropriate consideration of these risks and opportunities is an essential component of a firm's long-term business strategy, and expect boards to actively oversee the management of this strategy.
Our Asset Stewardship Program
State Street Global Advisors' Asset Stewardship Team is responsible for developing and implementing this Policy, the implementation of third-party proxy voting guidelines where applicable, case-by-case voting items, issuer engagement
activities, and research and analysis of corporate governance issues and proxy voting items. The Asset Stewardship Team's activities are overseen by our internal governance body, State Street Global Advisors' Global Fiduciary and Conduct
Committee (“GFCC”). The GFCC is responsible for reviewing State Street Global Advisors' stewardship strategy, engagement priorities, the
Policy, and for monitoring the delivery of voting objectives.
In order
to facilitate the execution of our proxy votes, we retain Institutional Shareholder Services Inc.
(“ISS”). We utilize ISS to: (1) act as our proxy voting agent (providing State Street Global Advisors with vote execution and
administration services), (2) assist in applying the Policy, and (3) provide research and analysis relating to general corporate governance issues and specific proxy items. State Street Global Advisors does not follow the voting recommendations of any policy
offered by ISS or any other proxy voting policy provider in implementing the Policy.
All voting decisions and engagement activities for which State Street Global Advisors has been given voting discretion are undertaken in accordance with this Policy, ensuring that the interests of our clients remain the sole consideration when
discharging our stewardship responsibilities. Exceptions to this policy include the use of an independent third party to vote on State Street Corporation (“State Street”) stock and the stock of other State Street affiliated entities, to mitigate a
1
This Policy is applicable to SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other investment advisory affiliates of State Street Corporation.
B-1
conflict of interest of voting on our parent
company or affiliated entities, and other situations where we believe we may be conflicted from voting (for example, stock of a public company for which a State Street director
also serves as a director, or due to an outside business interest). In such cases, delegated third parties exercise vote decisions based on their independent voting policy.
We aim to vote at all shareholder meetings where our clients have given us the authority to vote their shares and where it
is feasible to do so. However, when we deem appropriate, we may refrain from voting at meetings in cases where:
•Power of attorney documentation is required.
•Voting would have a material impact on our ability to trade the
security.
•Voting is not permissible due to sanctions affecting a company or individual.
•Issuer-specific special documentation
is required or various market or issuer certifications are required.
•Certain market limitations would prohibit voting (e.g., partial/split
voting prohibitions or residency restrictions).
•Unless a client directs otherwise in so-called
“share blocking” markets (markets where proxy voters have their securities blocked from trading during the period of the annual
meeting).
Additionally, we are 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.
Voting authority attached to certain securities held by
State Street Global Advisors pooled funds may be delegated to an independent third party as required by regulatory or other requirements. Under such arrangements, voting will be
conducted by the independent third party pursuant to its proxy voting policy and not pursuant to this Policy.
The State Street Global Advisors Proxy Voting Choice
Program
In addition to the option of delegating proxy voting authority
to State Street Global Advisors pursuant to this Policy, clients may alternatively choose to participate in the State Street Global Advisors Proxy Voting Choice Program (the
“Proxy Voting Choice Program”), which empowers clients to direct the proxy voting of shares held by the eligible fund or segregated account they own. Clients that participate in the Proxy Voting Choice Program have the option of selecting a
third-party proxy voting guideline from the policies included in the Proxy Voting Choice Program to apply to the vote of the client's pro rata share of the securities held by the eligible fund or segregated account they own. This Policy does not
apply to shares voted under the Proxy Voting Choice Program.
Securities Not Voted Pursuant to the Policy
Where clients have asked State Street Global Advisors to vote the client's shares on their behalf, including where a pooled
fund fiduciary has delegated the responsibility to vote the fund's securities to State Street Global Advisors, State Street Global Advisors votes those securities in a unified manner, consistent with the principles described in this Policy.
Exceptions to this unified voting policy are: (1) where State Street Global Advisors has made its Proxy Voting Choice Program available to its separately managed account clients and investors within a fund managed by State Street Global
Advisors, in which case a pro rata portion of shares held by the fund or segregated account attributable to clients who choose to participate in the Proxy Voting Choice Program will be voted consistent with the third-party proxy voting
guidelines selected by the clients, (2) where a pooled investment vehicle managed by State Street Global Advisors utilizes a third party proxy voting guideline as set forth in that fund's organizational and/or offering documents, and (3) where
voting authority with respect to certain securities held by State Street Global Advisors pooled funds may be delegated to an independent third party as required by regulatory or other requirements. With respect to such funds and separately
managed accounts utilizing third-party proxy voting guidelines, the terms of the applicable third-party proxy voting guidelines shall apply in place of the Policy described herein and the proxy votes implemented with respect to such a fund
or account may differ from and be contrary to the votes implemented for other portfolios managed by State Street Global Advisors pursuant to this Policy.
Regional Nuances
When voting and engaging with companies, we may consider market-specific nuances that may be relevant to that company. We
expect companies to observe the relevant laws and regulations of their respective markets, as well as country-specific best practice guidelines and corporate governance codes, and
to publicly disclose their level of compliance with the applicable provisions and requirements. Except where specified, this Policy applies globally.
B-2
Our Proxy Voting and Engagement
Principles
State Street Global Advisors' proxy voting and engagement program
focuses on three broad principles:
1.
Effective Board Oversight: We believe that well-governed companies can protect and pursue shareholder interests better and withstand the challenges of
an uncertain economic environment. Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. In order to carry out their
primary responsibilities, directors undertake activities that include setting strategy and providing guidance on strategic matters, selecting the CEO and other senior executives, overseeing executive management, creating a succession plan for the
board and management, and providing effective oversight of material risks and opportunities relevant to their business. Further, good corporate governance necessitates the
existence of effective internal controls and risk management systems, which should be governed by the board.
We view board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. We believe independent directors are crucial to good corporate governance; they help management establish sound corporate governance policies and practices. We believe a sufficiently independent board is key to effectively monitoring management, maintaining appropriate governance practices, and performing oversight functions necessary to protect shareholder interests. We also believe the right mix of skills, independence, diversity, and qualifications among directors provides boards with the knowledge and experience to manage risks and operating structures that are often complex and industry-specific.
We view board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. We believe independent directors are crucial to good corporate governance; they help management establish sound corporate governance policies and practices. We believe a sufficiently independent board is key to effectively monitoring management, maintaining appropriate governance practices, and performing oversight functions necessary to protect shareholder interests. We also believe the right mix of skills, independence, diversity, and qualifications among directors provides boards with the knowledge and experience to manage risks and operating structures that are often complex and industry-specific.
2.
Disclosure: It
is important for shareholders to receive timely and accurate reporting of a company's financial performance and strategy so that they are able to assess both the value and risk of
their investment. In addition to information related to strategy and performance, companies should also provide disclosure relating to their approach to corporate governance and shareholder rights. Such information allows investors to determine whether their economic
interests have been safeguarded by the board and provides insights into the quality of the board's oversight of management. Ultimately, the board of directors is accountable for
the oversight and disclosure of the material risks and opportunities faced by the company.
3.
Shareholder Protection: State Street Global Advisors believes it is in the best interest of shareholders for companies to have appropriate
shareholder rights and accountability mechanisms in place. As a starting place for voting rights, it is necessary for ownership rights to reflect one vote for one share to ensure
that economic interests and proxy voting power are aligned. This share structure best supports the shareholders' right to exercise their proxy vote on matters that are important to the protection of their investment, such as share issuances and other dilutive events,
authorization of strategic transactions, approval of a shareholder rights plan, and changes to the corporate bylaws or charter, among others. In terms of accountability to
shareholders and appropriate checks and balances, we believe there should be annual elections of the full board of directors.
Application of
Principles
These three principles of effective board oversight,
disclosure and shareholder protection apply across all of State Street Global Advisors' proxy voting decisions. When voting at portfolio companies in different markets, State
Street Global Advisors may apply the principles in ways that are specific to a given market based on factors such as availability of data, resources, disclosure practices, and size of holdings in our clients' accounts.
Shareholder Proposals
When voting our clients' proxies, we may be presented with shareholder proposals at portfolio companies that must be
evaluated on a case-by-case basis and in accordance with the principles set forth above. For proposals related to
commonly requested disclosure topics, we have developed the criteria found in Appendix A to assess the effectiveness of disclosure on such topics in connection with these types of proposals.
Engagement
We conduct engagements with individual issuers to communicate the principles set forth in this Policy and to learn more
about companies' strategy, board oversight and disclosure practices. We do not seek to change or influence control of any portfolio company through these engagements. In addition, we encourage issuers to increase 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.
B-3
Section I. Effective Board
Oversight
Director Independence
We believe independent directors are crucial to good corporate governance; they help
management establish sound corporate governance policies and practices. We have developed criteria for determining director independence, which vary by region and/or local jurisdiction. These criteria generally follow relevant listing standards, local regulatory
requirements and/or local market practice standards. Such criteria may include:
•Participation in related-party
transactions or other material business relations with the company
•Employment history with the company
•Status as founder or member of the founding family
•Government representative
•Excessive tenure and preponderance of long-tenured directors
•Relations with significant
shareholders
•Close family ties with any of the company's advisers, directors or senior employees
•Cross-directorships
•Receipt of non-board related compensation from the issuer, its auditors or advisors
•Company's own classification of a
director as non-independent
In some cases, State Street Global
Advisors' criteria may be more rigorous than applicable local or listing requirements.
Majority Independent Board
We believe a sufficiently independent board is key to effectively monitoring management, maintaining appropriate governance
practices, and performing oversight functions necessary to protect shareholder interests.
Separation of Chair/CEO
Our primary focus is to ensure there is strong independent leadership of the board, in accordance with the principles
discussed above. We generally believe the board is best placed to choose the governance structure that is most
appropriate for that company.
Board Committees
We believe that board committees are crucial to robust corporate governance and should be composed of a sufficient number of
independent directors. We use the same criteria for determining committee independence as we do for determining director independence, which varies by region and/or local
jurisdiction. Although we recognize that board structures may vary by jurisdiction, where a board has established an audit committee and/or compensation/remuneration committee, we generally expect the committee to be primarily, and in some cases, fully independent.
Refreshment and Tenure
We believe that average board tenure should generally align with the length of the business cycle of the respective industry
in which a company operates. In assessing excessive tenure, we consider factors such as the preponderance of long tenured directors, board refreshment practices, classified board
structures and the business cycle for the industry in which a company operates.
Director Time Commitments
We believe a company's nominating committee is best placed to determine appropriate time commitments for the company's directors. We consider if a company publicly discloses its director time commitment policy (e.g., within corporate
governance guidelines, proxy statement, annual report, company website, etc.) and if this policy or associated disclosure outlines the factors that the nominating committee
considers to assess director time commitments during the annual policy review process.
B-4
Board Composition
We believe effective board oversight of a company's long-term business strategy
necessitates a diversity of backgrounds, experiences, and perspectives, which may include a range of characteristics such as skills, gender, race, ethnicity, and age. By having a critical mass of diverse perspectives, boards could experience the benefits that may lead to innovative
ideas and foster more robust conversations about a company's strategy.
We recognize that many factors may influence board composition, including board size, geographic location, and local regulations, among others. Further, we believe that a robust nominating and governance process is essential to achieving a
board composition that is designed to facilitate effective, independent oversight of a company's long-term strategy. We believe nominating committees are best placed to determine
the most effective board composition and we encourage companies to ensure that there are sufficient levels of diverse experiences and perspectives represented in the boardroom.
Board Expertise
We believe board members should have adequate skills to provide effective oversight of corporate strategy, operations, and
risks, including sustainability-related 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. We believe nominating committees are best positioned to evaluate the skillset and expertise of both existing and prospective board members. However, we may take such considerations into account in certain
circumstances.
Board Accountability
Oversight of Strategy and Risk
We believe 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. We allow boards to have discretion regarding the ways in which they provide oversight in this area. However, we expect companies to disclose how the board provides oversight of its risk management system and risk identification. Boards should also review existing and emerging risks that evolve in tandem with the changing political and economic landscape or as companies diversify or expand their operations into new areas.
We believe 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. We allow boards to have discretion regarding the ways in which they provide oversight in this area. However, we expect companies to disclose how the board provides oversight of its risk management system and risk identification. Boards should also review existing and emerging risks that evolve in tandem with the changing political and economic landscape or as companies diversify or expand their operations into new areas.
As
responsible stewards, we believe in the importance of effective risk management and oversight of issues that are material to a company. To effectively manage and assess the risk of
our clients' portfolios, we expect our portfolio companies to manage risks and opportunities that are material and industry-specific and that have a demonstrated link to long-term value creation, and to provide high-quality disclosure of this process to shareholders.
When evaluating a board's oversight of risks and opportunities, we assess the following factors, based on disclosures by, and engagements with, portfolio companies:
1.
Oversees Long-term Strategy
–Articulates the material risks and
opportunities and how those risks and opportunities fit into the firm's long-term business strategy
–Regularly assesses the effectiveness of the company's long-term strategy, and management's execution of this strategy
2.
Demonstrates an
Effective Oversight Process
–Describes which committee(s) have oversight over specific risks and
opportunities, as well as which topics are overseen and/or discussed at the full-board level
–Includes risks and opportunities in board and/or committee agendas, and articulates how often specific topics are discussed at the committee and/or full- board level
–Utilizes KPIs or metrics to assess the effectiveness of risk management
processes
–Engages with key stakeholders including employees and investors
3.
Ensures Effective Leadership
–Holds management accountable for progress on
relevant metrics and targets
B-5
–Integrates
necessary skills and perspectives into the board nominating and executive hiring processes, and provides training to directors and executives on topics material to the company's
business or operations
–Conducts a periodic effectiveness review
4.
Ensures Disclosures of Material Information
–Ensures publication of relevant disclosures, including those regarding material topics
Compliance with Corporate Governance Principles
Our minimum expectation is that companies will comply with their respective market governance codes and/or stewardship principles. Issuers are encouraged to provide explanations of their level of compliance with their local market code and why their preferred governance structure (if not compliant with the code) serves shareholders' long-term interests.
Our minimum expectation is that companies will comply with their respective market governance codes and/or stewardship principles. Issuers are encouraged to provide explanations of their level of compliance with their local market code and why their preferred governance structure (if not compliant with the code) serves shareholders' long-term interests.
We will review governance practices at companies in selected indexes for their
adherence to market governance codes and/or stewardship principles.
Proxy Contests
We believe nominating committees that are comprised of independent directors are best placed to assess which individuals are adequately equipped with the skills and expertise to fulfill the duties of board members, and to act as effective fiduciaries.
We believe nominating committees that are comprised of independent directors are best placed to assess which individuals are adequately equipped with the skills and expertise to fulfill the duties of board members, and to act as effective fiduciaries.
While our default position is to support the committees' judgement, we consider the following factors when evaluating
dissident nominees:
•Strategy presented by dissident nominees versus that of current
management, as overseen by the incumbent board
•Effectiveness, quality, and experience
of the management slate
•Material governance failures and the level of
responsiveness to shareholder concerns and market signals by the incumbent board
•Quality of disclosure and engagement practices to support changes to shareholder rights, capital allocation and/or governance structure
•Company performance and, if applicable, the merit of a recovery
plan
•Expertise of board members with respect to company industry and strategy
Board Oversight of Geopolitical Risk
As stewards of our clients' assets, we are aware of the financial risks associated with geopolitical risk, including risks arising from unexpected conflict between or among nations. We expect portfolio companies that may be impacted by geopolitical risk to:
As stewards of our clients' assets, we are aware of the financial risks associated with geopolitical risk, including risks arising from unexpected conflict between or among nations. We expect portfolio companies that may be impacted by geopolitical risk to:
•Manage and
mitigate risks related to operating in impacted markets, which may include financial, sanctions-related, regulatory, and/or reputational risks, among others;
•Strengthen board oversight of these efforts; and
•Describe these efforts in public disclosures.
Compensation and Remuneration
We consider it the board's responsibility to determine the appropriate level of executive compensation. Despite the differences among the possible types of plans and awards, there is a simple underlying philosophy that guides our analysis of executive compensation: we believe that there should be a direct relationship between executive compensation and company performance over the long term.
We consider it the board's responsibility to determine the appropriate level of executive compensation. Despite the differences among the possible types of plans and awards, there is a simple underlying philosophy that guides our analysis of executive compensation: we believe 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, we consider factors such as adequate disclosure of various 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.
For
example, criteria we may consider include the following:
•Overall quantum relative to company performance
•Vesting periods and length of performance targets
•Mix of performance, time and options-based stock units
B-6
•Use of special grants and one-time awards
•Retesting and repricing features
•Disclosure and transparency
Board Meeting Attendance
We expect directors to attend at least 75 percent of board meetings in the last financial year or provide an appropriate explanation for why they were unable to meet this attendance threshold.
We expect directors to attend at least 75 percent of board meetings in the last financial year or provide an appropriate explanation for why they were unable to meet this attendance threshold.
Section II. Disclosure
It is important for shareholders to receive timely and accurate reporting of a company's
financial performance and strategy so that they are able to assess both the value and risk of their investment. In addition to information related to strategy and performance, companies should provide disclosure relating to their approach to corporate governance and shareholder
rights. Such information allows investors to determine whether their financial interests have been protected by the board and provides insights into the board's oversight of
management. Ultimately, the board of directors is accountable for the oversight and disclosure of the material risks and opportunities faced by the company.
Reporting
Financial Statements
We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for investment analysis. We expect external auditors to provide assurance of a company's financial condition.
We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for investment analysis. We expect external auditors to provide assurance of a company's financial condition.
Sustainability-related Disclosures
We believe in the importance of effective risk management and governance of issues that are material to a company. This may include sustainability-related risks and opportunities where a company has identified such risks and opportunities as material to its business. Such disclosure allows shareholders to effectively assess companies' oversight, strategy, and business practices related to these sustainability issues identified as material.
We believe in the importance of effective risk management and governance of issues that are material to a company. This may include sustainability-related risks and opportunities where a company has identified such risks and opportunities as material to its business. Such disclosure allows shareholders to effectively assess companies' oversight, strategy, and business practices related to these sustainability issues identified as material.
We look to companies to provide disclosure on sustainability-related risks and opportunities relevant to their businesses in line with applicable local regulatory requirements and any voluntary standards and frameworks adopted by the company.
Climate-related Disclosures
We believe that managing climate-related risks and opportunities is a key element in maximizing long-term risk-adjusted returns for our clients. As a result, we have a longstanding commitment to enhancing investor-useful disclosure related to this topic.
We believe that managing climate-related risks and opportunities is a key element in maximizing long-term risk-adjusted returns for our clients. As a result, we have a longstanding commitment to enhancing investor-useful disclosure related to this topic.
For
companies that have identified climate risk as material to their business, we expect the company to provide disclosure on climate-related risks and opportunities relevant to their
businesses in line with applicable local regulatory requirements and any voluntary standards and frameworks adopted by the company.
•We encourage the disclosure of Scope 1 and Scope 2 emissions and related targets. However, State Street Global Advisors is not prescriptive in how a company sets its targets. We expect companies that have adopted net zero ambitions to
disclose interim climate targets. In each case, if a company chooses not to disclose any climate targets, we expect the company to provide an explanation of how the company
measures and monitors progress on managing climate-related risks and opportunities.
•We do not expect any company to set Scope 3 targets. We encourage companies to identify and disclose the most
relevant categories of Scope 3 emissions. However, we recognize that Scope 3 emissions estimates have a high
degree of uncertainty. Therefore, if a company determines that categories of Scope 3 emissions are impracticable to estimate, we encourage the company to explain the relevant limitations. We also encourage companies to explain any efforts
to address Scope 3 emissions, such as engagement with suppliers, customers, or other stakeholders across the value chain, where relevant.
Say-on-Climate Proposals
While we generally believe in the importance of effective disclosure of climate-related risks a company has deemed material to its business, we do not endorse annual advisory climate votes. Where management chooses to include a Say-on-Climate vote, we assess the company's climate-related disclosure in accordance with the criteria listed in Appendix A.
While we generally believe in the importance of effective disclosure of climate-related risks a company has deemed material to its business, we do not endorse annual advisory climate votes. Where management chooses to include a Say-on-Climate vote, we assess the company's climate-related disclosure in accordance with the criteria listed in Appendix A.
Board
and Workforce Demographics
We expect disclosure on the composition of both the board and workforce.
We expect disclosure on the composition of both the board and workforce.
B-7
Section III. Shareholder
Protection
Capital
Share Capital Structure
The ability to raise capital is critical for companies to carry out strategy, to grow, and to achieve returns above their cost of capital. The approval of capital raising activities is fundamental to a shareholder's 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. When making such a decision, we believe the company should disclose a comprehensive business rationale that is consistent with corporate strategy and not overly dilutive to its shareholders.
The ability to raise capital is critical for companies to carry out strategy, to grow, and to achieve returns above their cost of capital. The approval of capital raising activities is fundamental to a shareholder's 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. When making such a decision, we believe the company should disclose a comprehensive business rationale that is consistent with corporate strategy and not overly dilutive to its shareholders.
Our approach to share capital structure matters may vary by local market and jurisdiction, due to regional nuances. Such proposals may include:
•Increase in Authorized Common Shares
•Increase in Authorized Preferred Shares
•Unequal Voting Rights
•Share Repurchase Programs
Dividend Payouts (Japan Only)
For Japanese issuers, we are generally supportive of dividend payouts that constitute 30 percent or more of net income; however we consider whether the payment may damage the company's long-term financial health.
For Japanese issuers, we are generally supportive of dividend payouts that constitute 30 percent or more of net income; however we consider whether the payment may damage the company's long-term financial health.
Reorganization, Mergers
and Acquisitions
The reorganization of the structure of a company or mergers often involve proposals relating to reincorporation, restructurings, liquidations, and other major changes to the corporation.
The reorganization of the structure of a company or mergers often involve proposals relating to reincorporation, restructurings, liquidations, and other major changes to the corporation.
We expect proposals to be in the best interests of shareholders, demonstrated by enhancing share value or improving the
effectiveness of the company's operations.
We evaluate mergers and structural reorganizations on a case-by-case basis and expect transactions to maximize shareholder
value. Some of the considerations include 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
•Offers in which the secondary market
price is substantially lower than the net asset value
We also consider
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
•The current market price of the
security exceeds the bid price at the time of voting
Related-Party Transactions
Some companies have a controlled ownership structure and 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, we expect companies to disclose details of the transaction, such as the nature, the value and the purpose of such a transaction. We also believe independent directors should ratify such transactions. Further, we believe companies should 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.
Some companies have a controlled ownership structure and 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, we expect companies to disclose details of the transaction, such as the nature, the value and the purpose of such a transaction. We also believe independent directors should ratify such transactions. Further, we believe companies should 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.
Cross-Shareholdings (Japan Only)
“Cross-shareholdings” are a long-standing feature of the balance sheets of many Japanese companies, but, in our view, can be detrimental for corporate governance practices and ultimately shareholder returns.
“Cross-shareholdings” are a long-standing feature of the balance sheets of many Japanese companies, but, in our view, can be detrimental for corporate governance practices and ultimately shareholder returns.
B-8
Shareholder Rights
Proxy Access
In general, we believe that proxy access is a fundamental right and an accountability mechanism for all long-term shareholders. We consider proposals relating to proxy access on a case-by-case basis and consider a balance between providing long-term shareholders accountability while preserving flexibility for management to design a process that is appropriate for the company's circumstances.
In general, we believe that proxy access is a fundamental right and an accountability mechanism for all long-term shareholders. We consider proposals relating to proxy access on a case-by-case basis and consider a balance between providing long-term shareholders accountability while preserving flexibility for management to design a process that is appropriate for the company's circumstances.
Vote Standards
•Annual Elections: We believe the establishment of annual elections of the board of directors is appropriate. We also consider the overall
level of board independence and the independence of the key committees, as well as the existence of a shareholder rights plan.
•Majority Voting: We believe a majority vote standard based on votes cast for the election
of directors is appropriate.
Shareholder
Meetings
•Special Meetings and Written
Consent: We believe the ability for shareholders to call special meetings, as well as act by written consent is
appropriate. We believe an appropriate threshold for both calling a special meeting and acting by written consent can be 25% of outstanding shares or less.
•Notice Period to Convene a General Meeting: We expect companies to give as much notice as
is practicable when calling a general meeting, generally at least 14 days.
•Virtual/Hybrid Shareholder Meetings: We believe the right to hold shareholder meetings in
a virtual or hybrid format is appropriate with the following best practices:
–Afford virtual attendee shareholders the same rights as would normally be granted to in-person attendee
shareholders
–Commit to time-bound renewal (five years or less) of meeting format
authorization by shareholders
–Provide a written record of all questions
posed during the meeting, and
–Comply with local market laws and regulations
relating to virtual and hybrid shareholder meeting practices
In
evaluating these proposals we also consider the operating environment of the company, including local regulatory developments and specific market circumstances impacting virtual
meeting practices.
Governance Documents &
Miscellaneous Items
Article Amendments
We believe amendments to company bylaws that may negatively impact shareholder rights (such as fee-shifting, forum selection, and exclusion service bylaws) should be put to a shareholder vote.
We believe amendments to company bylaws that may negatively impact shareholder rights (such as fee-shifting, forum selection, and exclusion service bylaws) should be put to a shareholder vote.
We believe a majority voting standard is generally appropriate.
We generally believe companies should have a fixed board size, or designate a range for the board size.
Anti-Takeover Issues
Occasionally, companies add anti-takeover provisions that reduce the chances of a potential acquirer to make an offer, or to reduce the likelihood of a successful offer. We generally believe shareholders should have the right to vote on reasonable offers. Our approach to anti-takeover issues may vary by local market and jurisdiction, due to regional nuances.
Occasionally, companies add anti-takeover provisions that reduce the chances of a potential acquirer to make an offer, or to reduce the likelihood of a successful offer. We generally believe shareholders should have the right to vote on reasonable offers. Our approach to anti-takeover issues may vary by local market and jurisdiction, due to regional nuances.
Accounting and 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 independent non-executive directors designated as members.
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 independent non-executive directors designated as members.
We believe the disclosure and availability of reliable financial statements in a timely
manner is imperative for investment analysis. As a result, board oversight of the internal controls and the independence of the audit process are essential if investors are to rely upon financial statements. It is important for the audit committee to appoint external auditors who are
independent from management as we expect auditors to provide assurance of a company's financial condition.
B-9
State Street Global Advisors believes that a
company's external auditor is an essential feature of an effective and transparent system of external independent assurance. Shareholders should be given the opportunity to vote on
their (re-)appointment at the annual meeting. When appointing external auditors and approving audit fees, we will take into consideration the level of detail in company disclosures.
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.
We believe a company should be able to discharge its auditors in the absence of pending litigation, governmental
investigation, charges or fraud or other indication of significant concern. Further, we believe that auditors should attend the annual meeting of shareholders.
Indemnification and Liability
Generally, we believe directors should be able to limit their liability and/or expand indemnification and liability protection if a director has not acted in bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office.
Generally, we believe directors should be able to limit their liability and/or expand indemnification and liability protection if a director has not acted in bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office.
Section IV. Shareholder Proposals
We believe that company boards do right by investors and are responsible for overseeing strategy and company management.
Towards that end, we generally do not support shareholder proposals that appear to impose changes to business strategy or operations, such as increasing or decreasing investment in
certain products or businesses or phasing out a product or business line or if it is not a topic that the company has deemed to be material in their public disclosure documents.
When
assessing shareholder proposals, we fundamentally consider whether the adoption of the resolution would promote long-term shareholder value in the context of our core governance
principles:
1.
Effective board oversight
2.
Quality disclosure
3.
Shareholder protection
We will consider supporting a shareholder proposal if:
•the request is focused on enhanced
disclosure of the company's governance and/or risk oversight
•the adoption of the request would protect our clients' interests as
minority shareholders; or
•for common proposal topics for which we have
developed assessment criteria, the extent to which the request satisfies the criteria found in Appendix A.
Section V. Engagement
As a fiduciary, State Street Global Advisors takes a comprehensive approach to engaging
with portfolio companies. Our stewardship prioritization process allows us to proactively identify companies for engagement and voting in order to mitigate risks in our client's portfolios. Through engagement, we aim to build long-term relationships with the issuers in
which we invest on behalf of our clients and to address a broad range of topics relating to the promotion of long-term shareholder value creation. We do not seek to change or influence control of any portfolio company through engagement.
Equity Engagements
In general, there are three types of engagements that State Street Global Advisors may hold
on behalf of equity holders:
1.
Engagements with Portfolio Companies in Connection with a Ballot Item or
Other Topic In our Policy: Engagements held with portfolio companies to discuss a ballot item,
event or other established topic found in our Policy. Such engagements generally, but not necessarily, occur during “proxy season.” They may be held at the request of State Street Global Advisors or the portfolio company.
B-10
2.
Off-Season Engagement at the Request of a Portfolio Company: From time- to-time, portfolio companies may seek to engage with State Street Global Advisors in the ‘off-season' to
discuss a particular topic.
3.
Off-Season Proactive Engagement Campaigns: Each year, State Street Global Advisors will identify thematic
engagement campaigns on important topics for which we are seeking more information to potentially inform our
future voting positions.
Fixed Income Engagements
From time-to-time, certain corporate action election events, reclassifications or other changes to the investment terms of debt holdings may occur or an issuer may seek to engage with State Street Global Advisors to discuss matters pertaining to
the debt instruments that State Street Global Advisors holds on behalf of its clients. In such instances, State Street Global Advisors may engage with the issuer to obtain further
information about the matter for purposes of its investment decision making. Such engagements are the responsibility of the Fixed Income portfolio management team, but may be
supported by State Street Global Advisors' Asset Stewardship Team. All election decisions are the responsibility of the relevant portfolio management team.
In addition, State Street Global Advisors may identify themes for engagement campaigns with issuers on topics that it
believes may affect value of its clients' debt investments. State Street Global Advisors may proactively engage with portfolio companies and other issuers on these topics to help inform our views on the subject.
Where such themes align with those relating to equities, such engagements may be carried out jointly on behalf of both equity and fixed income holdings where there is mutual benefit for both asset classes. Such engagements are led by the State
Street Global Advisors Asset Stewardship Team, but may also be attended by the relevant portfolio management teams.
Engaging with Other Investors Soliciting State Street Global Advisors'
Votes in Connection with Contested Shareholder Meetings, Vote-No Campaigns, or Shareholder Proposals
While it may be helpful to speak to other investors that are running proxy contests,
putting forth vote-no campaigns, or proposing shareholder proposals at investee companies, we limit such discussions to investors who have filed necessary documentation with regulators and engage in these discussions at our own discretion.
Our primary purpose of engaging with investors is:
1.
To gain a better understanding of their position or concerns at investee companies.
2.
In proxy contest situations:
–To assess possible director candidates where investors are seeking board representation in proxy contest
situations
–To understand the investor's proposed strategy for the company and investment
time horizon to assess their alignment with State Street Global Advisors' views and interests as a long-term shareholder
Any information about our vote decisions are available in this document and on our website.
All requests for engagement should be sent to GovernanceTeam@ssga.com.
Section VI. Other Matters
Securities on Loan
As a responsible investor and fiduciary, we recognize the importance of balancing the benefits of voting shares and the
incremental lending revenue for the pooled funds that participate in State Street Global Advisors' securities lending program (the “Funds”). Our objective is to recall securities on loan and restrict future lending until after the record date for the respective vote in instances where we believe that a particular vote could have a material impact on the Funds'
long-term financial performance and the benefit of voting shares will outweigh the forgone lending income.
Accordingly, we have set systematic recall and lending restriction criteria for shareholder
meetings involving situations with the highest potential financial implications (such as proxy contests and strategic transactions including mergers and acquisitions, going dark transactions, change of corporate form, or bankruptcy and liquidation). Generally, these criteria for
recall and restriction for lending only apply to certain large cap indices in developed markets.
B-11
State Street Global Advisors monitors the forgone
lending revenue associated with each recall to determine if the impact on the Funds' long-term financial performance and the benefit of voting shares will outweigh the forgone
lending income.
Although our objective is to systematically recall securities
based on the aforementioned criteria, we must receive notice of the vote in sufficient time to recall the shares on or before the record date. When we do not receive timely notice,
we may be unable to recall the shares on or before the record date.
Reporting
We provide transparency for our stewardship activities through our regular client reports and relevant information reported
online. We publish an annual stewardship report that provides details of our stewardship approach, engagement and
voting policies, and activities during the year. The annual stewardship report is complemented by quarterly stewardship activity reports as well as the publication of thought leadership on governance and sustainability on our website. Our
voting record information is available on Vote View, an interactive platform that provides relevant company details, proposal types, resolution descriptions, and records of our votes cast.
Appendix A: Assessment Criteria for Common Disclosure Topics
As outlined above, the pillars of our Asset Stewardship Program rest on effective board oversight, quality disclosure and shareholder protection. We are frequently asked to evaluate proposals on various topics, including requests for enhanced
disclosure.
Where a company receives a proposal on a topic that the company has determined is material to its business, we will assess
the proposal in accordance with the below criteria that we believe represent quality disclosure on commonly requested disclosure topics. In each case, in assessing the proposal
against the applicable criteria, we may review the company's relevant disclosures against industry and market practice (e.g., peer disclosure, relevant frameworks, relevant industry guidance).
Climate Disclosure Criteria
For companies that have identified climate-related risks or opportunities as material to their business, we expect the
company to provide disclosure on climate-related risks and opportunities relevant to their businesses in line with applicable local regulatory requirements and any voluntary standards and frameworks adopted by the company, as described in
the section related to Climate-Related Disclosures above.
Additionally,
where a company is among the highest emitters, we consider whether the company discloses:
•Scenario-planning on relevant risk assessment and strategic planning
processes;
•The company's plans to achieve stated climate-related
targets, if any, including information on timelines and expected emissions reductions; and
•Incorporation of relevant climate
considerations in financial planning and/or capital allocation decisions.
Climate Transition Plan Disclosure Criteria for Companies that have Adopted a Climate Transition Plan
We do not expect or require companies to adopt net zero ambitions or join relevant industry
initiatives. For companies that have adopted a net zero ambition and/or climate transition plan and that receive a related proposal, we assess the proposal against the disclosure criteria set out below. Given that climate related risks present differently across industries, our assessment of the below criteria may vary to account for best practices in specific industries.
General Climate-related Disclosures
•Description of approach to identifying
and assessing climate-related risks and opportunities
•Disclosure of resilience of the company's strategy taking into
consideration a range of climate-related scenarios
•Disclosure of Scope 1, Scope 2, and relevant categories of Scope 3
emissions and any assurance
Ambition
•Disclosure of long-term climate ambitions
Targets
•Disclosure of short- and/or medium-term interim climate
targets
B-12
•Disclosure of alignment of climate targets with
relevant jurisdictional commitments, specific temperature pathways, and/or sectoral decarbonization approaches
Decarbonization Strategy
•Disclosure of plans and actions to support stated climate targets and ambitions
•Disclosure of emissions management efforts within the company's operations and, as applicable, across the value chain
•Disclosure of carbon offsets utilization, if any
•Disclosure of the role of climate solutions (e.g., carbon capture and storage)
•Disclosure of potential social risks
and opportunities related to climate transition plan, if any
Capital Allocation
•Disclosure integration of relevant climate considerations in financial
planning
•Disclosure of total actual and planned capital deployed toward climate transition plan
•Disclosure of approach to assessing and prioritizing investments toward climate transition plan (e.g. marginal abatement cost curves, internal carbon pricing, if any)
Climate Policy Engagement
•Disclosure of position on climate-related topics relevant to the company's
decarbonization strategy
•Disclosure of assessment of stated positions on
relevant climate-related topics versus those of associations and other relevant policy-influencing entities, such as trade associations, industry bodies, or coalitions, to which
the company belongs, and any efforts taken as a result of this review to address potential misalignment.
Climate Governance
•Disclosure of the board's role in overseeing climate transition plan
•Disclosure of management's role in
overseeing climate transition plan
Physical
Risk
•Disclosure of assessment of climate-related physical risks
•Disclosure of approach to managing identified climate-related physical
risks
Stakeholder Engagement
•Disclosure of engagement with relevant internal stakeholders related to climate transition plan (e.g., workforce training, cross-functional collaboration)
•Disclosure of engagement with relevant external
stakeholders related to climate transition plan (e.g., industry collaboration, customer engagement)
Methane Disclosure Criteria
Where a company has determined that methane emissions-related risks or opportunities are
material to its business and has received a related shareholder proposal, we will assess the proposal in accordance with the following disclosure criteria:
•Disclosure of methane emissions detection and monitoring
efforts
•An explanation of efforts to enhance measurement, reporting, and verification
•A description of the company's strategy
to manage methane emissions
•Disclosure of any methane-related metrics and targets utilized
B-13
Nature-Related Disclosures:
Biodiversity, Deforestation and other Land-Use, Water Management, Pollution and Waste
Where a company has determined that one or more nature-related risks and opportunities are
material to its business and has received a related shareholder proposal, we will assess the proposal in accordance with the following disclosure criteria:
•Governance: Board oversight of the material nature-related risks and opportunities
•Risk
Management: Approach to identifying, assessing, monitoring, and mitigating the material nature-related risks
and opportunities
•Strategy: Consideration of material nature-related risks and opportunities in business strategy, resiliency, and
planning
•Metrics and Targets (when
relevant): Metrics used to assess, monitor, and manage nature-related risks and opportunities
Human Capital Management Disclosure Criteria
Where a company has determined that human capital management-related risks or opportunities
are material to its business and has received a related shareholder proposal, we will assess the proposal in accordance with the following disclosure criteria:
•Board Oversight: Methods outlining how the board oversees human capital- related risks and opportunities;
•Strategy: Approaches to human capital management and how these advance the long-term business strategy;
•Compensation: Strategies throughout the organization that aim to attract and retain
employees, and incentivize contribution to an effective human capital strategy;
•Voice: Channels to ensure the concerns and ideas from workers are solicited and acted
upon, and how the workforce is engaged and empowered in the organization; and
•Workforce
Demographics: Role of the board in overseeing workforce demographics efforts
Diversity Equity and Inclusion Disclosure Criteria
Where a company has determined that diversity, equity and inclusion-related risks or opportunities are material to its business and has received a related shareholder proposal, we will assess the proposal in accordance with the following
disclosure criteria:
•Board Oversight: Describe how the board executes its oversight role in risks and opportunities related to diversity, equity and
inclusion
•Strategy: Articulate the role that diversity, equity, and inclusion plays in the company's broader human capital management practices
and long-term strategy, as well as how the company intends to implement that strategy
•Metrics: Provide disclosure on the company's global employee base and board demographics, where permitted
•Board Composition: Articulate the role of diversity of skills, backgrounds, experiences,
and perspectives in the board's nominating process
Pay Equity Disclosure Criteria (United States and United Kingdom Only)
Where a company has determined that pay equity-related risks or opportunities are material to its business and has received a related shareholder proposal, we will assess the proposal in accordance with the following disclosure criteria:
•Disclosure of adjusted pay gaps related to race and gender within the company (disclosure of the unadjusted pay gap is also encouraged, but not expected outside of the United Kingdom market at this time);
•Disclosure of strategy to achieve and
maintain pay equity; and
•Disclosure of the role of the board in overseeing pay strategies as well as diversity-related efforts
B-14
Civil Rights Disclosure Criteria
(United States Only)
Where a company has determined that civil rights-related
risks or opportunities are material to its business and has received a related shareholder proposal, we will assess the proposal in accordance with the following disclosure
criteria:
•Disclosure of risk related to civil rights, including risks associated with products, practices, and services;
•Disclosure of plans to manage and mitigate these risks; and
•Disclosure of
processes at the board for overseeing such risks (e.g., committee responsible, frequency of discussions, etc.).
Human Rights Disclosure Criteria
Where a company has determined that human rights-related risks or opportunities are
material to its business and has received a related shareholder proposal, we will assess the proposal in accordance with the following disclosure criteria:
•Human rights-related risks the company considers more relevant;
•Plans to manage and mitigate these
risks;
•Board oversight of these risks; and
•Assessment of the effectiveness of the human rights risk management
program.
Political Contributions Disclosure Criteria
(United States Only)
For all companies that receive a shareholder
proposal related to political contributions, we will assess the proposal in accordance with the following disclosure criteria:
•Disclosure of all contributions, no matter the dollar value, made by the company, its subsidiaries, and/ or affiliated Political Action Committees (PACs) to individual candidates, PACs, and other political organizations at the state and
federal levels in the US; and
•Disclosure of the role of the board in oversight of political
contributions.
Lobbying Disclosure Criteria (United
States Only)
For all companies that receive a shareholder proposal
related to lobbying disclosure, we will assess the proposal in accordance with the following disclosure criteria:
•Disclosure of membership in United States trade associations (to which payments are above $50,000 per year) and
•Disclosure of the role of the board in overseeing lobbying activities.
Trade Association Alignment Disclosure Criteria
For all companies that receive a shareholder proposal related to trade association alignment, we will assess the proposal in accordance with the following disclosure criteria:
•Disclosure of the board's role in overseeing the
company's participation in the political process, including membership in trade associations or other policy- influencing entities; and
•Whether the company regularly performs a gap analysis of its stated positions on relevant issues versus those of the trade associations or other policy-influencing organizations of which it is a member, and
•Whether the company disclosed a list of
its trade association memberships
Note: We believe that management is
best suited to take positions on the matters related to their company and therefore we do not recommend any specific position. Our support of these types of shareholder proposals,
if any, solely reflect our support for enhanced disclosure on assessing alignment between stated company positions and the positions of associations and other relevant policy-influencing entities to which the company belongs in line with market expectations
and effective risk management.
B-15
About State Street Global
Advisors
For over four decades, State Street Global Advisors has served the
world's governments, institutions, and financial advisors. With a rigorous, risk-aware approach built on research, analysis, and market-tested experience, and as pioneers in index and ETF investing, we are always inventing new ways to invest. As a result, we have become the world's
fourth-largest asset manager* with US $4.72 trillion† under our care.
*
Pensions & Investments Research Center, as of December 31, 2023.
†
This figure is presented as of December 31, 2024 and includes ETF AUM of $1,577.74 billion USD
of which approximately $82.19 billion USD in gold assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the
marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited.
ssga.com
© 2025 State Street Corporation.
All Rights Reserved.
ID2658960
Exp. Date: 03/31/2026
All Rights Reserved.
ID2658960
Exp. Date: 03/31/2026
B-16
PART C
OTHER INFORMATION
OTHER INFORMATION
Item 28.
Exhibits
| (a)(i)(1) |
|
| (2) |
|
| (3) |
|
| (4) |
|
| (5) |
|
| (6) |
Amendment No. 5 to the Declaration of Trust, reflecting the addition of The Communication Services Select Sector
SPDR Premium Income Fund, The Consumer Discretionary Select Sector SPDR Premium Income
Fund, The Consumer Staples Select Sector SPDR Premium Income Fund, The Energy
Select Sector SPDR Premium Income Fund, The Financial Select Sector SPDR
Premium Income Fund, The Health Care Select Sector SPDR Premium Income Fund,
The Industrial Select Sector SPDR Premium Income Fund, The Materials Select Sector SPDR Premium Income Fund, The Real Estate Select Sector SPDR Premium Income Fund, The Technology Select Sector SPDR
Premium Income Fund and The Utilities Select Sector SPDR Premium Income Fund (collectively,
the “Sector Income ETFs”), to be filed by amendment.
|
| (b) |
|
| (c) |
|
| (d)(i)(1) |
|
| (2) |
|
| (3) |
|
| (4) |
Amendment to the Investment Advisory Agreement, to be filed by amendment. |
| (d)(ii) |
Investment Advisory Agreement between the Trust and SSGA Funds Management, Inc., with respect to the Sector
Income ETFs, to be filed by amendment. |
| (d)(iii) |
|
| (e)(i)(1) |
|
| (2) |
| (e)(ii) |
|
| (e)(iii) |
Distribution Agreement between the Trust and State Street Global Advisors Distributors, LLC to be filed by
amendment. |
| (f) |
Not applicable. |
| (g)(i)(1) |
|
| (2) |
|
| (3) |
|
| (4) |
|
| (5) |
Amendment to the Custodian Agreement, reflecting the addition of the Sector Income ETFs, to be filed by
amendment. |
| (h)(i)(1) |
|
| (2) |
|
| (3) |
Amendment to the Administration Agreement, reflecting the addition of the Sector Income ETFs, to be filed by
amendment. |
| (h)(ii)(1) |
|
| (2) |
|
| (3) |
|
| (4) |
Amendment to the Sub-Administration Agreement, reflecting the addition of the Sector Income ETFs, to be filed by
amendment. |
| (h)(iii)(1) |
|
| (2) |
|
| (3) |
|
| (4) |
|
| (5) |
|
| (6) |
Amendment to the Transfer Agency and Service Agreement, reflecting the addition of the Sector Income ETFs, to be
filed by amendment. |
| (h)(iv)(1) |
|
| (2) |
|
| (3) |
|
| (4) |
|
| (5) |
|
| (6) |
|
| (h)(v)(1) |
|
| (2) |
|
| (3) |
|
| (h)(vi) |
|
| (h)(vii) |
|
| (h)(viii) |
|
| (i)(i) |
|
| (i)(ii) |
|
| (i)(iii) |
Opinion and consent of counsel, Morgan, Lewis & Bockius LLP, relating to the Sector Income ETFs, to be filed by
amendment. |
| (j) |
Consent of independent registered public accounting firm to be filed by amendment. |
| (k) |
Not applicable. |
| (l) |
|
| (m)(i)(1) |
|
| (2) |
|
| (3) |
|
| (4) |
|
| (5) |
|
| (6) |
|
| (7) |
|
| (8) |
|
| (9) |
|
| (10) |
|
| (11) |
|
| (m)(ii) |
|
| (m)(iii)(1) |
|
| (2) |
|
| (m)(iv)(1) |
|
| (2) |
|
| (n) |
Not applicable. |
| (o) |
Reserved. |
| (p)(i) |
|
| (p)(ii) |
|
| (p)(iii) |
|
| (p)(iv) |
|
| (p)(v) |
Code of Ethics for State Street Global Advisors Distributors, LLC, to be filed by amendment. |
| (q)(i) |
|
| (q)(ii) |
Item 29.
Persons Controlled By or Under Common Control With Registrant
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 fund’s outstanding shares and such information is incorporated by reference to this Item.
Item
30.
Indemnification
Pursuant to Section 5.3 of the Registrant’s Declaration of Trust and under Section 4.9 of the Registrant’s 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 Registrant’s 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 Registrant’s 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 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 Securities and Exchange Commission 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 has entered into an Indemnification Agreement with each Independent Trustee of the Registrant providing for indemnification of the Independent Trustee by the Registrant consistent with the foregoing and providing procedures for seeking and obtaining indemnification and advancement of expenses.
The Registrant hereby undertakes that it will apply the indemnification provision of its By-Laws in a manner consistent with Release 11330 of the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”), so long as the interpretation of Sections 17(h) and 17(i) of such Act remains in effect.
The Registrant maintains insurance on behalf of any person who is or was a Trustee, officer, employee or agent of Registrant, or who is or was serving at the request of 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 Registrant maintain insurance to indemnify any such person for any act for which Registrant itself is not permitted to indemnify him/her.
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 itself is 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 occupation(s). Unless otherwise noted, the address of each person listed is One Iron Street, Boston, Massachusetts 02210.
| Name |
Principal Occupation |
| Jeanne LaPorta |
Chairperson, Director and President; Executive Vice President of SSGA |
| Sean Driscoll |
Director of SSGA FM; Managing Director of SSGA |
| Shweta Narasimhadevara |
Director of SSGA FM; Senior Managing Director of SSGA |
| Apea Amoa |
Director of SSGA FM; Chief Financial Officer of SSGA |
| Brian Harris |
Chief Compliance Officer of SSGA FM; Managing Director of SSGA |
| Steven Hamm |
Treasurer of SSGA FM; Vice President of SSGA |
| Sean O’Malley, Esq. |
Chief Legal Officer of SSGA FM; General Counsel of SSGA |
| Ann M. Carpenter |
Chief Operating Officer of SSGA FM; Managing Director of SSGA |
| Tim Corbett |
Chief Risk Officer of SSGA FM; Senior Vice President/Senior Managing Director of SSGA |
| Christyann Weltens |
Derivates Risk Manager; Vice President of SSGA |
| David Ireland |
CTA Chief Marketing Officer; Senior Vice President/Senior Managing Director of SSGA |
| David Urman, Esq. |
Clerk of SSGA FM; Vice President and Senior Counsel of SSGA |
See “Management” in the Prospectus and “Management of the
Trust” in the Statement of Additional Information for information regarding the business of SSGA FM. For information regarding broker-dealers and investment
advisers affiliated with SSGA FM, reference is made to SSGA FM’s Form ADV, as amended, filed with the SEC and incorporated herein by reference.
Item
32.
Principal Underwriters
(a)
Until December 1, 2025, ALPS Portfolio Solutions Distributor, Inc. serves as the
distributor for the Registrant and the following investment companies: ALPS ETF Trust, ALPS Variable Investment Trust, Financial Investors Trust, and Select Sector SPDR
Trust.
(b)
To the best of the Registrant’s knowledge, the directors and executive
officers of ALPS Portfolio Solutions Distributor, Inc., are as follows:
| Name* |
Positions and Offices with Underwriter |
Positions with Fund |
| Stephen Kyllo |
President, Chief Operating Officer, Director, Chief Compliance Officer |
None |
| Brian Schell ** |
Vice President & Treasurer |
None |
| Eric Parsons |
Vice President, Controller and Assistant Treasurer |
None |
| Jason White*** |
Secretary |
None |
| Richard C. Noyes |
Senior Vice President, General Counsel, Assistant Secretary |
None |
| Eric Theroff^ |
Assistant Secretary |
None |
| Adam Girard^^ |
Tax Officer |
None |
| Liza Price |
Vice President, Managing Counsel |
None |
| Jed Stahl |
Vice President, Managing Counsel |
None |
| Terence Digan |
Vice President |
None |
| James Stegall |
Vice President |
None |
| Gary Ross |
Senior Vice President |
None |
| Hilary Quinn |
Vice President |
None |
*
Except as otherwise noted, the principal business address for each of the above directors and executive officers is 1290 Broadway, Suite 1100, Denver, Colorado 80203.
**
The
principal business address for Mr. Schell is 100 South Wacker Drive, 19th Floor, Chicago, IL 60606.
***
The
principal business address for Mr. White is 4 Times Square, New York, NY 10036.
^
The principal business address for Mr. Theroff is 1055 Broadway Boulevard, Kansas
City, MO 64105
^^
The principal business address for Mr. Girard is 80 Lamberton Road, Windsor, CT
06095
(a)
SSGA FD, One Iron Street, Boston, Massachusetts 02210, serves as the Trust’s
principal underwriter and also serves as the principal underwriter for the following investment companies: SPDR Index Shares Funds, SPDR Series Trust, 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. SSGA FD also serves as the distributor for the Sector Income ETFs.
(b)
To the best of the Trust’s knowledge, the managers and executive officers of
SSGA FD are as follows:
| Name and Principal Business Address* |
Positions and Offices with Underwriter |
Positions and Offices with the Trust |
| Jeanne LaPorta |
Chairperson and Manager |
Interested Trustee |
| Allison Bonds Mazza |
President and Manager |
None |
| Editha V. Tenorio |
Chief Financial Officer |
None |
| Sean O’Malley |
Chief Legal Officer |
None |
| Mark Trabucco |
Chief Compliance Officer and Anti-Money Laundering Officer |
None |
| Jessica Cross |
Secretary |
None |
| Sean Driscoll |
Manager |
None |
| David Maxham |
Manager |
None |
| Christine Stokes |
Manager |
None |
| John Tucker |
Manager |
None |
*
The principal business address for each of the above managers and executive officers is One Iron Street, Boston, Massachusetts 02210.
(c)
Not applicable.
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 Congress Street, Boston, Massachusetts 02114, respectively.
Not applicable.
Item 35.
Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant, has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston, and the Commonwealth of Massachusetts, on the
7th day of May, 2025.
| THE SELECT SECTOR SPDR® TRUST | |
| | |
| By: |
/s/ Ann M. Carpenter |
| |
Ann M. Carpenter |
| |
President |
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.
| Signature |
Title |
Date |
| /s/ Ashley T. Rabun* |
Trustee |
May 7, 2025 |
| Ashley T. Rabun |
| |
| /s/ Allison Grant Williams* |
Trustee |
May 7, 2025 |
| Allison Grant Williams |
|
|
| /s/ Sheila Hartnett-Devlin* |
Trustee |
May 7, 2025 |
| Sheila Hartnett-Devlin |
|
|
| /s/ James Jessee* |
Trustee |
May 7, 2025 |
| James Jessee |
|
|
| /s/ Teresa Polley* |
Trustee |
May 7, 2025 |
| Teresa Polley |
|
|
| /s/ James E. Ross* |
Trustee |
May 7, 2025 |
| James E. Ross |
|
|
| /s/ Jeanne LaPorta* |
Trustee |
May 7, 2025 |
| Jeanne LaPorta |
|
|
| /s/ Chad C. Hallett |
Treasurer and Principal Financial Officer (fulfills the role of Principal Accounting Officer) |
May 7, 2025 |
| Chad C. Hallett |
| |
| /s/ Ann M. Carpenter |
President and Principal Executive Officer |
May 7, 2025 |
| Ann M. Carpenter |
|
| *By: |
/s/ Edmund Gerard Maiorana, Jr. |
| |
Edmund Gerard Maiorana, Jr. As Attorney-in-Fact Pursuant to Power of Attorney |