S.E.C. Correspondence
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004
Beau Yanoshik
202.739.5676
byanoshik@morganlewis.com
VIA EDGAR
December 1, 2011
Kimberly Browning, Esq.
Division of Investment Management
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
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Re: |
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SPDR® Series Trust (the Registrant); SEC
File Nos. 333-57793 and 811-08839; Post-Effective
Amendment No. 70 to the Registrants Registration
Statement on Form N-1A (Amendment No. 70) |
Dear Ms. Browning:
This letter responds to comments you provided in a telephonic discussion with me on Friday,
November 4, 2011 with respect to Amendment No. 70. Amendment No. 70 was filed on September 16,
2011 and included disclosure with respect to the SPDR® Barclays Capital Investment Grade
Floating Rate ETF (the Fund), a series of the Registrant, as set forth in the Prospectus and
Statement of Additional Information (SAI) filed as part of Amendment No. 70.
Summaries of the comments with respect to the Fund, and responses thereto on behalf of the
Registrant, are provided below. All page references refer to the pages in Amendment No. 70.
Capitalized terms not defined herein should be given the meaning provided in Amendment No. 70.
Prospectus Comments
1. |
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Comment: Please confirm the Funds principal investment strategy is consistent with
the Trusts exemptive order. |
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Response: We hereby confirm that the Funds principal investment strategy
is consistent with the Trusts exemptive relief. Please see File No. 812-13356. |
Kimberly Browning, Esq.
December 1, 2011
Page 2
2. |
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Comment: In The Funds Investment Strategy section, please revise the disclosure
to remove the terms including, and such as. This section should include all principal
strategies. |
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Response: The Adviser confirms that this section includes all principal
strategies. Further, we believe the use of the terms including and such as are,
as currently used, both accurate and appropriate. Consequently, the requested
changes have not been made. |
3. |
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Comment: Please confirm that the Fund does not expect to incur more than 0.01% of
acquired fund fees and expenses. |
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Response: The Adviser confirms that the Fund does not expect to incur more
than 0.01% of acquired fund fees and expenses. |
4. |
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Comment: Please confirm all missing/incomplete information will be included in the
Rule 485(b) filing. Please note that a 485(a) filing should be complete on its face when
filed. |
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Response: The Adviser confirms all missing/incomplete information will be
included in the Rule 485(b) filing. |
5. |
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Comment: Please confirm the Participant Agreement will be filed as an exhibit to the
registration statement. |
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Response: The latest form of the Participant Agreement was filed on August
26, 2009. |
6. |
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Comment: Please confirm all principal investment strategies and risks are included
in The Funds Principal Investment Strategy and Principal Risks of Investing in the Fund
sections. |
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Response: The Adviser confirms all principal investment strategies and
risks are included in The Funds Principal Investment Strategy and Principal
Risks of Investing in the Fund sections. |
7. |
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Comment: Please include a description of the Advisers sell strategy in The Funds
Principal Investment Strategy section. |
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Response: The requested change has not been made. The Fund is an index
fund and we believe potential investors understand that the Fund will purchase and
sell component securities as necessary to track the Index. |
Kimberly Browning, Esq.
December 1, 2011
Page 3
8. |
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Comment: Please move the Concentration discussion included in the Additional Risk
Information to the Funds Principal Risks of Investing in the Fund section in the summary. |
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Response: The Adviser does not consider concentration risk to be a principal
risk of investing in the Fund. To the extent the Fund concentrates its investments
in a specific industry as a result of the composition of the Index, the prospectus
will be supplemented to address the risks of concentrating in such industry. |
9. |
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Comment: Please confirm the Fund issues and redeems shares in creation units of not
less than 25,000 shares and is therefore permitted to exclude any fees charged for the
purchase and redemption of the Funds creation units in the fee table. |
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Response: The Adviser confirms that the Fund issues and redeems shares in
creation units of not less than 25,000 shares. |
10. |
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Comment: Please confirm that employing a sampling
strategy is consistent with the Trusts
exemptive relief. |
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Response: As noted in response to comment 1 above, we confirm that the
Funds principal investment strategy, including employing a sampling
strategy, is consistent with the Trusts exemptive relief. Please see
File No. 812-13356. |
12. |
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Comment: Please include the disclosure below,
currently found in the Additional
Strategies section, in The Funds
Principal Investment Strategy section. |
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As described in the Statement of Additional Information
(SAI), the Fund has adopted a non-fundamental investment
policy to invest at least 80% of its assets in investments
suggested by its name, measured at the time of investment.
The Fund will provide shareholders with at least 60 days
notice prior to any material change in this 80% investment
policy. For purposes of this policy, the term assets means
net assets plus the amount of borrowings for investment
purposes. |
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Response: The requested change has not been made. We believe the
current disclosure meets the requirements of Form N-1A. |
13. |
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Comment: Please revise, in plain English, the
italicized portion of the sentence below to
clarify what is meant by the phrase. |
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The Index is designed to measure the performance of U.S.
dollar-denominated, investment grade floating rate notes. |
Kimberly Browning, Esq.
December 1, 2011
Page 4
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Response: We believe the italicized portion of the
sentence above is currently phrased in plain
English and, therefore, the requested change
has not been made. |
14. |
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Comment: In the Principal Risks of Investing in the Fund section, if
applicable, please include disclosure with respect to junk bonds,
foreign securities and/or emerging market securities. |
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Response: A discussion of Foreign Investment Risk,
which includes disclosure related to
emerging market securities, has been added
to the Principal Risks of Investing in the
Fund section. Because the Fund invests in
investment grade notes, the Adviser does not
consider investments in junk bonds to be a
principal risk of the Fund. |
15. |
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Comment: In The Funds Principal Investment Strategy section, please
include disclosure stating (i) the minimum investment quality to be
included in the Index and (ii) the average credit quality of the
securities in the Index as of a relevant date. |
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Response: In response to part (i) of this comment, the
following sentence has been added as the
third sentence of the third paragraph of
The Funds Principal Investment Strategy
section: |
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In addition, securities in the Index must be rated investment grade
(Baa3, BBB- or BBB- by Moodys Investors Service, Standard & Poors
or Fitch Inc., respectively). |
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In response to part (ii) of this comment, the last sentence of the third paragraph
of The Funds Principal Investment Strategy section now reads as follows: |
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As of October 31, 2011, there were approximately 319 securities in
the Index, the modified adjusted duration of securities in the Index
was approximately 0.13 years and the average credit quality of the
securities in the Index was AA2/AA3. |
16. |
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Comment: In the response letter, please describe how
closely the credit quality and duration of
the Fund and Index will match. |
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Response: Although the degree to which the credit quality and duration
of the Fund and Index will match cannot be stated with specificity,
the Adviser expects the credit quality and duration of the Fund and
Index to be closely aligned. |
17. |
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Comment: Please add disclosure quantifying the Funds
correlation with the Indexs performance. |
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Response: As such disclosure is not required, the requested change has not
been made. |
Kimberly Browning, Esq.
December 1, 2011
Page 5
18. |
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Comment: The Staff notes that the Fund is
non-diversified and includes
Non-Diversification Risk as a principal
risk. Please confirm if the Index is also
non-diversified. |
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Response: The Indexs methodology is silent on diversification and as a
result, the Index may or may not at any given time be non-diversified
depending on its composition. Similarly, the Indexs composition,
either currently or due to changes in the future, could cause the Fund
to hold a portfolio of securities that would result in the Fund being
non-diversified. For this reason, we believe it most appropriate to
consider the Fund as non-diversified and include appropriate risk
disclosure. |
19. |
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Comment: Please add sub-headings to the Additional
Strategies section to differentiate between
Principal Strategies and Non-Principal
Strategies. |
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Response: The requested change has not been made at this time because
it is not consistent with the format used for other Funds in the
Trust. We will, however, consider this change for all Funds in the
Trust in the next annual update. |
20. |
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Comment: Please confirm if investment in derivatives
is a principal investment strategy of the
Fund. If so, please add appropriate
disclosure in The Funds Principal
Investment Strategy and Principal Risks of
Investing in the Fund sections. |
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Response: The Adviser confirms that investment in derivatives is not a
principal investment strategy of the Fund. |
21. |
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Comment: Please confirm if engaging in securities
lending is a principal investment strategy
of the Fund. If so, please add appropriate
disclosure in The Funds Principal
Investment Strategy and Principal Risks of
Investing in the Fund sections. |
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Response: The Adviser confirms engaging in securities lending is not a
principal investment strategy of the Fund. |
22. |
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Comment: Please revise the following sentence from
the Additional Strategies section as
follows: |
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As described in the Statement of Additional Information (SAI), the
Fund has adopted a non-fundamental investment policy to invest at
least 80% of its net assets in investments suggested by its
name, measured at the time of investment. |
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Response: The requested revision has been made |
Kimberly Browning, Esq.
December 1, 2011
Page 6
23. |
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Comment: The Borrowing Money discussion in the Additional Strategies section of
the prospectus states that the Fund may borrow money from a bank . . . but only for temporary
or emergency purposes. The Reverse Repurchase Agreements discussion in the SAI states that
under the 1940 Act, reverse repurchase agreements are considered borrowings and that the
Fund does not expect to engage, under normal circumstances, in reverse repurchase agreements
with respect to more than 33 1/3% of its total assets. Please reconcile these two
statements. |
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Response: We do not believe the two statements are inconsistent. The
prospectus disclosure refers to borrowings from banks, such as a line of credit, for
temporary or emergency purposes. The SAI disclosure refers to investments in
reverse repurchase agreements. We have added the following disclosure to the end of
the Borrowing Money discussion in the Additional Strategies section of the
prospectus: |
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The Fund may also invest in reverse repurchase agreements, which
are considered borrowings under the 1940 Act. Although there is no
limit on the percentage of Fund assets that can be used in
connection with reverse repurchase agreements, the Fund does not
expect to engage, under normal circumstances, in reverse repurchase
agreements with respect to more than 33 1/3% of its total
assets. |
24. |
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Comment: Please change the sub-heading Additional Risk in the
Additional Risk Information section to Non-Principal Risks. |
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Response: The requested change has not been made at
this time because it is not consistent with
the format used for other Funds in the
Trust. We will, however, consider this
change for all Funds in the Trust in the
next annual update. |
SAI Comments
1. |
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Comment: Please confirm all non-principal strategies and risks are included in the
Investment Policies section. |
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Response: The Adviser confirms all non-principal strategies and risks are
included in the Investment Policies section. |
2. |
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Comment: In the Investment Policies section, please distinguish between principal
and non-principal strategies and risks. |
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Response: The requested change has not been made at this time because it is
not consistent with the format used for other Funds in the Trust. We will, however,
consider this change for all Funds in the Trust in the next annual update. |
Kimberly Browning, Esq.
December 1, 2011
Page 7
3. |
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Comment: Please confirm all principal strategies and risks included in the SAI are
also included in the prospectus. |
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Response: The Adviser confirms that all principal strategies and risks
included in the SAI are also included in the prospectus. |
4. |
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Comment: To the extent the Fund does not include a leveraging policy in the SAI,
such a policy should be included in either the prospectus or SAI. |
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Response: We have disclosed all policies required by Item 16(c) of Form
N-1A, which does not include a separate policy on leveraging. We note, however, the
following disclosure currently included in the SAI: |
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LEVERAGING. While the Fund does not anticipate doing so, the Fund
may borrow money in an amount greater than 5% of the value of the
Funds total assets. However, the Fund may not borrow money from a
bank in an amount greater than 33 1/3% of the value of the Funds
total assets. Borrowing for investment purposes is one form of
leverage. Leveraging investments, by purchasing securities with
borrowed money, is a speculative technique that increases investment
risk, but also increases investment opportunity. Because
substantially all of the Funds assets will fluctuate in value,
whereas the interest obligations on borrowings may be fixed, the NAV
of the Fund will increase more when the Funds portfolio assets
increase in value and decrease more when the Funds portfolio assets
decrease in value than would otherwise be the case. Moreover,
interest costs on borrowings may fluctuate with changing market
rates of interest and may partially offset or exceed the returns on
the borrowed funds. |
5. |
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Comment: In the Lending Portfolio Securities discussion, please disclose the split
of the interest or fees earned from securities lending between the Fund and the lending agent. |
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Response: The requested disclosure has not been included. We note that
such disclosure is not required and that information regarding revenues received
from securities lending will be available in the Funds financial statements. |
6. |
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Comment: Please revise the Lending Portfolio Securities discussion to clarify if
the Fund may recall securities loaned to vote proxies on material issues affecting the Fund. |
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Response: The fourth sentence of the Lending Portfolio Securities
discussion has been revised as follow: |
Kimberly Browning, Esq.
December 1, 2011
Page 8
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The Fund receives the value of any interest or cash or non-cash
distributions paid on the loaned securities.
The Fund cannot vote proxies for securities on loan, but
may recall loans to vote proxies if a material issue affecting the
Funds economic interest in the investment is to be voted upon. |
7. |
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Comment: The Staff notes that the fundamental policy regarding borrowing states the
Fund may borrow money 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. Please
confirm that disclosure regarding what the 1940 Act permits with respect to borrowing is
included in the registration statement or, if not, please add applicable disclosure. |
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Response: We note that the following disclosure is currently included in the
prospectus in the Borrowing Money discussion in the Additional Strategies
section: |
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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). The Fund may
also invest in reverse repurchase agreements, which are considered
borrowings under the 1940 Act. Although there is no limit on the
percentage of Fund assets that can be used in connection with
repurchase agreements, the Fund does not expect to engage, under
normal circumstances, in reverse repurchase agreements with respect
to more than 33 1/3% of its total assets. |
8. |
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Comment: Please confirm that investing in credit default swaps is consistent with the
Trusts exemptive order. |
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Response: We hereby confirm that investing in credit default swaps is
consistent with the Trusts exemptive order. Please see File No. 812-13356. |
9. |
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Comment: Please revise the fourth non-fundamental policy as follows: |
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Under normal circumstances, invest less than 80% of its net assets
plus the amount of borrowings for investment purposes in
investment grade floating rate securities. Prior to any change in
the Funds 80% investment policy, the Fund will provide shareholders
with 60 days written notice. |
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Response: The requested revision has been made. |
Kimberly Browning, Esq.
December 1, 2011
Page 9
10. |
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Comment: In the Trustees and Officers discussion
in the Management of the Trust section,
please remove the following sentence: |
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Moreover, references to the qualifications, attributes and skills of
individual Trustees are made pursuant to requirements of the
Securities and Exchange Commission, do not constitute holding out of
the Board or any Trustee as having any special expertise or
experience, and shall not be deemed to impose any greater
responsibility or liability on any such person or on the Board by
reason thereof. |
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Response: The disclosure has been removed. |
***************
The Registrant acknowledges the Commission press release, dated June 24, 2004 (Press Release), in
which the Commission announced that, in connection with any filing upon which comments are provided
to a registrant by the Commission staff, the staff would require a written representation from the
registrant to the effect that the comment process would not be used as a defense by the registrant
in any securities related litigation brought against it. In accordance with the position announced
in the Press Release, and on behalf of the Registrant, Registrant acknowledges that it is
responsible for the adequacy and accuracy of the disclosures in its filings with the Commission and
that it may not assert Commission staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United States. Registrant
further acknowledges that Commission staff comments or changes to disclosures in response to
Commission staff comments in a filing reviewed by the Commission staff do not foreclose the
Commission from taking any action with respect to such filing.
We hope that the foregoing is responsive to each of the comments you provided. Please do not
hesitate to contact the undersigned
at
(202) 739-5676 if you have any questions concerning the
foregoing.
Sincerely,
/s/ Beau Yanoshik
Beau Yanoshik
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cc: |
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Lance C. Dial, Esq.
Ryan M. Louvar, Esq.
W. John McGuire, Esq. |