Prospectus
March 1,
2026
SSGA
Active Trust
State
Street®
Bridgewater® All
Weather® ETF
(ALLW)
Principal
U.S. Listing Exchange: The Nasdaq Stock Market LLC
The U.S.
Securities and Exchange Commission and the U.S. Commodity Futures Trading
Commission have 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 Fund 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 Fund.
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Management
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and service (12b-1) fees |
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Total
annual Fund operating expenses |
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Year
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Year
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Year
5 |
Year
10 |
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Principal
Risks of Investing in the Fund
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3
4
5
6
7
Portfolio
Management
Investment
Adviser and Sub-Adviser
SSGA FM serves as
the investment adviser to the Fund. Bridgewater serves as investment sub-adviser
to the Fund, subject to supervision by the Adviser and oversight by the SSGA
Active Trust's Board of Trustees. To the extent that a reference in this
Prospectus refers to the Adviser, with respect to the Fund, such reference
should also be read to refer to Bridgewater, where the context requires with
respect to its obligations and the terms of the sub-advisory agreement.
Bridgewater does not oversee the day-to-day investment activities of the Fund
and is not a party to any direct contractual agreement with the
Fund.
Portfolio
Managers
The professionals
primarily responsible for the day-to-day management of the Fund are Michael
Martel, Marc Touchette, Geoff Preston and James Kramer. Karen Karniol-Tambour
and Christopher Ward are primarily responsible for generation of the model
portfolio.
Michael Martel is a
Managing Director of the Adviser and Head of Portfolio Management in the
Americas for the Investment Solutions Group. He joined the Adviser in
1994.
Marc Touchette, CFA,
is a Vice President of the Adviser and a Senior Portfolio Manager within the
Investment Solutions Group. He joined the Adviser in 2004.
Geoff Preston is a
Vice President of the Adviser and a Senior Portfolio Manager within the
Investment Solutions Group. He joined the Adviser in 2016.
James Kramer is a
Vice President of the Adviser and a Senior Portfolio Manager in the Fixed Income
Beta Solutions Team. He joined the Adviser in 1996.
Karen
Karniol-Tambour is the Co-Chief Investment Officer of Bridgewater. She joined
Bridgewater in 2006.
Christopher Ward is
a Senior Investment Associate on the Total Portfolio Strategies team. He joined
Bridgewater in 2009.
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 a designated portfolio of in-kind securities and/or cash.
Creation Unit transactions may be conducted in exchange for cash only, which may
cause the Fund to recognize capital gains and to pay out higher annual capital
gain distributions to shareholders than if such transactions had been conducted
in-kind.
Individual Fund
Shares may only be purchased and sold on The Nasdaq Stock Market LLC (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 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.statestreet.com/im.
Tax
Information
The Fund's
distributions are expected to be taxed as ordinary 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 or its 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.
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Additional
Strategies Information
Principal
Strategies
Please see “The
Fund's Principal Investment Strategy” section under “Fund Summary” above for a
discussion of the Fund's principal investment strategy. The Fund may invest in
various types of securities and engage in various investment techniques which
are not the principal focus of the Fund and therefore are not described in this
Prospectus. These securities, techniques and practices, together with their
risks, are described in the Statement of Additional Information (the “SAI”)
which you may obtain free of charge by contacting shareholder services (see the
back cover of this Prospectus for the address and phone number).
The Board of
Trustees (the “Board”) of SSGA Active Trust (the “Trust”) may change the Fund's
investment objective, investment strategy and other policies without shareholder
approval, except as otherwise noted in this Prospectus or in the
SAI.
Non-Principal
Strategies
Temporary
Defensive Positions. The Sub-Adviser
does not currently intend to materially adjust the model portfolio's degree of
leverage or asset allocation in a defensive manner for the sole purpose of
reducing market risk, including during extreme recessionary or depressionary
economic environments; the Sub-Adviser will therefore not seek to exclude or
reduce allocations to certain asset classes that have historically suffered
great losses, or introduce or increase allocations to asset classes that have
historically retained their value, during such economic environments. However,
in response to actual or perceived adverse market, economic, political, or other
conditions, the Fund may (but will not necessarily), without notice, depart from
its principal investment strategies by temporarily investing for defensive
purposes. 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 the Fund invests for defensive purposes, it may not achieve its
investment objective. In addition, the defensive strategy may not work as
intended.
Borrowing
Money.
The Fund may borrow money from a bank as permitted by the 1940 Act, or other
governing statutes, 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 the 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 or similar financing
transactions. Consistent with a rule under the 1940 Act, the Fund may treat such
investments as either borrowings or derivatives transactions. To the extent the
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. The 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 the Fund to receive a portion of the income generated by lending its
securities and investing the respective collateral. The 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 the 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. The Fund is
compensated by the difference between the amount earned on the reinvestment of
cash collateral and the fee paid to the borrower. In the case of collateral
other than cash, the Fund is compensated by a fee paid by the borrower equal to
a percentage of the market value of the loaned securities. In the securities
lending program, the borrower generally has the right to vote the loaned
securities; however, the 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 the
Fund.
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Additional
Risk Information
The following
section provides information regarding the principal risks identified under
“Principal Risks of Investing in the Fund” in the Fund Summary along with
additional risk information.
Principal
Risks
Below
Investment-Grade Securities Risk. Securities rated
below investment-grade and unrated securities of comparable credit quality
(commonly known as “high-yield” or “junk” bonds) lack strong investment-grade
characteristics, are considered predominantly speculative with respect to the
issuer's continuing ability to make principal and interest payments, and are
subject to greater levels of credit, liquidity and market risk than higher-rated
securities. They can involve a substantially greater risk of default than
higher-rated securities, and their values can decline significantly over short
periods of time. Issuers of lower-quality debt securities may have substantially
greater risk of insolvency or bankruptcy than issuers of higher-quality debt
securities. In the event the issuer of a debt security held by the Fund defaults
on its payments or becomes insolvent or bankrupt, the Fund may not receive the
return it was promised on the investment and could lose its entire investment.
The lower ratings of junk bonds reflect a greater possibility that actual or
perceived adverse changes in the financial condition of the issuer or in general
economic conditions, or an unanticipated rise in interest rates, may impair the
ability of the issuer to make payments of interest and principal. If this were
to occur, the values of such securities held by the Fund may fall substantially
and the Fund could lose some or all of the value of its investment.
Lower-quality debt securities tend to be more sensitive to adverse news about
the issuer, or the market or economy in general, than higher quality debt
securities. The market for lower quality debt securities can be less liquid than
for higher quality debt securities, especially during periods of recession or
general market decline, which could make it difficult at times for the Fund to
sell certain securities at prices used in calculating the Fund's NAV. These
securities may have significant volatility.
Call/Prepayment
Risk.
Call/prepayment risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Fund earlier than expected or required.
This may occur, for example, when there is a decline in interest rates, and an
issuer of bonds or preferred stock redeems the bonds or stock in order to
replace them with obligations on which it is required to pay a lower interest or
dividend rate. It may also occur when there is an unanticipated increase in the
rate at which mortgages or other receivables underlying mortgage- or
asset-backed securities held by the Fund are prepaid. In any such case, the Fund
may be forced to invest the prepaid amounts in lower-yielding investments,
resulting in a decline in the Fund's income.
Cash
Position Risk. If the Fund holds
a significant portion of its assets in cash or cash equivalents, the Fund may
underperform other funds that do not hold cash and cash equivalents for
investment purposes and/or to collateralize derivatives instruments. In
addition, the Fund is subject to the credit risk of the depository institution
at which the cash is held and any related fees.
Cash
Transaction Risk. To the extent the
Fund sells portfolio securities to meet some or all of a redemption request with
cash, the Fund may incur taxable gains or losses that it might not have incurred
had it made redemptions entirely in-kind. As a result, the Fund may pay out
higher annual capital gain distributions than if the in-kind redemption process
was used.
Commodities
and Commodity-Linked Derivatives Risk. The Fund may invest
in commodities and commodity-linked derivatives. Investments linked to the
prices of commodities may be considered speculative. Commodity prices can have
significant volatility, and exposure to commodities can cause the NAV of Fund
Shares to decline or fluctuate in a rapid and unpredictable manner. A liquid
secondary market may not exist for certain commodity investments, which may make
it difficult for the Fund to sell them at a desirable price or at the price at
which it is carrying them. The value of commodities and commodity-linked
derivative instruments typically is based upon the price movements of a physical
commodity or an economic variable linked to such price movements. Therefore, the
value of commodities and commodity-linked derivative instruments may be affected
by, for example, changes in overall market movements, economic conditions,
changes in interest rates, or factors affecting a particular commodity or
industry, such as production, supply, demand, drought, floods, weather,
political, economic and regulatory developments. These factors may impair the
ability of the Fund to sell its portfolio holdings quickly or for full value.
Commodity-linked derivatives are subject to the risk that the counterparty to
the transaction may default or otherwise fail to perform.
In addition to the
factors set forth above, the Fund is subject to the risks related to the
underlying commodities:
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Agricultural
Commodities Risk. The price and
availability of agricultural commodities are affected by many factors, including
but not limited to: farmer planting decisions; weather conditions, including
hurricanes, tornadoes, storms and droughts; changes in global supply and demand
for agriculture products; the price and quantity of imports and exports of
agricultural commodities; general economic and market factors; political
conditions, including embargoes and war, affecting agricultural production,
imports and exports; and technological advances in agricultural
production.
Agricultural
commodity production is subject to government regulation that may materially
affect operations. Governmental policies related to taxes, tariffs, duties,
subsidies, incentives, acreage control, and import and export restrictions on
agricultural commodities and commodity products, can influence the planting of
certain crops, the location and size of crop production, the volume and types of
imports and exports, and industry profitability. Additionally, commodity
production is affected by laws and regulations relating to, but not limited to,
the sourcing, transporting, storing and processing of agricultural raw materials
as well as the transporting, storing and distributing of related agricultural
products. Agricultural commodity producers also may need to comply with various
environmental laws and regulations, such as those regulating the use of certain
pesticides, and local laws that regulate the production of genetically modified
crops. In addition, international trade disputes can adversely affect
agricultural commodity trade flows by limiting or disrupting trade between
countries or regions.
Energy
Commodities Risk. Energy markets can
be significantly affected by fluctuations in energy prices and supply and demand
of energy fuels. The prices of energy commodities, such as crude oil, heating
oil and natural gas, are subject to frequent, and often substantial, price
fluctuations. Energy commodities have had significant price swings in recent
years. In particular, the prices of natural gas and crude oil have been
extremely volatile, and volatility is expected to continue. Such fluctuations
can be the result of changes in global supply and demand for oil and natural
gas; political conditions, including embargoes and war, affecting oil producing
activities; the price and quantity of imports and exports of oil and natural
gas; the level of global oil and natural gas exploration, inventories,
production or pricing; weather conditions; technological advances effecting
energy consumption; and the price and availability of alternative fuels. Energy
companies may also be impacted by government regulations related to
environmental protection, health and safety, and potential civil liabilities
such as environmental damage claims.
Metals
Commodities Risk. Price movements in
metals commodities may fluctuate substantially over short periods of time and
may rise and fall in response to many factors, including: a sudden shift in
political conditions in the world's leading metal producing countries; an
increase in the hedging of precious metals; changes in global supply and demand
for industrial and precious metals; the price and quantity of imports and
exports of industrial and precious metals; and technological advances in the
processing and mining of industrial and precious metals. The prices of precious
metals may be influenced by macroeconomic conditions, including confidence in
the global monetary system and the relative strength of various currencies, as
well as demand in the industrial and jewelry sectors. Political events also
influence the prices of precious metals. Prices are also influenced by supplies
of precious metals, which may be affected by sales by central banks and
governmental agencies that hold large amounts of these metals, particularly
gold. The prices of commodities comprising the industrial metals are subject to
a number of factors that can cause price fluctuations, including changes in the
level of industrial activity; disruptions in mining, storing, and refining the
metals; adjustments to inventory; variations in production costs; and regulatory
compliance costs. A change in economic conditions, such as a recession, can
adversely affect the price of metals.
None of these
factors can be controlled in managing the Fund. Even if current and correct
information about all factors are known or thought to be known, prices still may
not behave as predicted.
Commodity-Linked
Derivative Tax Risk. To qualify for the
favorable U.S. federal income tax treatment accorded to RICs, the Fund must,
among other things, derive in each taxable year at least 90% of its gross income
from certain prescribed sources. The Fund generally intends to invest in
commodity-linked derivative instruments indirectly through the Subsidiary. The
Fund's investment in the Subsidiary is expected to provide the Fund with
exposure to the commodities markets within the limitations of the federal tax
requirements of the Code for qualification as a RIC. The Adviser intends to
conduct the Fund's investments in the Subsidiary in a manner consistent with the
terms and conditions of the regulations promulgated by the U.S. Treasury, and
will monitor the Fund's investments in the Subsidiary to ensure that no more
than 25% of the Fund's total assets are invested in
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the Subsidiary. The
Fund may also obtain exposure to the commodities markets by directly entering
into commodity-linked derivative instruments, such as listed futures contracts
and swaps. Income from certain commodity-linked derivative instruments in which
the Fund invests might not be considered qualifying income under the 90% test
noted above. To the extent the Fund makes a direct investment in
commodity-linked derivative instruments, it will seek to restrict the resulting
income from such instruments so that, when combined with its other
non-qualifying income, the Fund's non-qualifying income is less than 10% of its
gross income. However, the Fund may generate more non-qualifying income than
anticipated, may not be able to generate qualifying income in a particular
taxable year at levels sufficient to meet the 90% test noted above, or may not
be able to accurately predict the non-qualifying income from these investments.
Failure to comply with this restriction would have significant negative tax
consequences to Fund shareholders.
Counterparty
Risk.
The 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. The 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, the Fund may be unable
to terminate or realize any gain on the investment or transaction, resulting in
a loss to the Fund. The 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 only a limited recovery or may obtain no recovery in such
circumstances. If the 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 the 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, the 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 the Fund holds such securities or has entered into a
transaction with such a financial security when a bail-in occurs, the Fund may
also be similarly impacted.
Credit
Risk.
Credit risk is the risk that an issuer, guarantor or liquidity provider of a
fixed-income security held by the Fund may be unable or unwilling, or may be
perceived (whether by market participants, ratings agencies, pricing services or
otherwise) as unable or unwilling, to make timely principal and/or interest
payments, or to otherwise honor its obligations. It includes the risk that the
security will be downgraded by a credit rating agency; generally, lower credit
quality issuers present higher credit risks. An actual or perceived decline in
creditworthiness of an issuer of a fixed-income security held by the Fund may
result in a decrease in the value of the security. It is possible that the
ability of an issuer to meet its obligations will decline substantially during
the period when the Fund owns securities of the issuer or that the issuer will
default on its obligations or that the obligations of the issuer will be limited
or restructured.
The credit rating
assigned to any particular investment does not necessarily reflect the issuer's
current financial condition and does not reflect an assessment of an
investment's volatility or liquidity. Securities rated in the lowest category of
investment-grade are considered to have speculative characteristics. If a
security held by the Fund loses its rating or its rating is downgraded, the Fund
may nonetheless continue to hold the security in the discretion of the Adviser.
In the case of asset-backed or mortgage-related securities, changes in the
actual or perceived ability of the obligors on the underlying assets or
mortgages to make payments of interest and/or principal may affect the values of
those securities.
Currency
Risk.
Investments in issuers in different countries are often denominated in
currencies other than the U.S. dollar. Changes in the values of those currencies
relative to the U.S. dollar may have a positive or negative effect on the values
of the Fund's investments denominated in those currencies. The values of other
currencies relative to the U.S. dollar may fluctuate in response to, among other
factors, interest rate changes, intervention (or failure to intervene) by
national governments, central banks, or supranational entities such as the
International Monetary Fund, the imposition of currency controls, and other
political or regulatory developments. Currency values can decrease significantly
both in the short term and over the long term in response to these and other
developments. Continuing
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uncertainty as to
the status of the Euro and the Economic and Monetary Union of the European Union
(the “EMU”) has created significant volatility in currency and financial markets
generally. Any partial or complete dissolution of the EMU, or any continued
uncertainty as to its status, could have significant adverse effects on currency
and financial markets, and on the values of the Fund's portfolio investments.
Debt
Securities Risk. The values of debt
securities may increase or decrease as a result of the following: market
fluctuations, changes in interest rates, actual or perceived inability or
unwillingness of issuers, guarantors or liquidity providers to make scheduled
principal or interest payments or illiquidity in debt securities markets. To the
extent that interest rates rise, certain underlying obligations may be paid off
substantially slower than originally anticipated and the value of those
securities may fall sharply. A rising interest rate environment may cause the
value of the Fund's fixed income securities to decrease, a decline
in the Fund's income and yield, an adverse impact on the liquidity of
the Fund's fixed income securities, and increased volatility of the fixed income
markets. During periods when interest rates are at low levels, the Fund's yield
can be low, and the Fund may have a negative yield (i.e., it may lose money on
an operating basis). To the extent that interest rates fall, certain underlying
obligations may be paid off substantially faster than originally anticipated. If
the principal on a debt obligation is prepaid before expected, the prepayments
of principal may have to be reinvested in obligations paying interest at lower
rates. During periods of falling interest rates, the income received by the Fund
may decline. Changes in interest rates will likely have a greater effect on the
values of debt securities of longer durations. Returns on investments in debt
securities could trail the returns on other investment options, including
investments in equity securities. High levels of inflation and/or a
significantly changing interest rate environment can lead to heightened levels
of volatility and reduced liquidity.
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 the 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 the 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 the 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 the Fund due to losses on the transaction and 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.
Forward
Contracts Risk. A forward contract
is a private, customizable agreement to buy or sell a specified security or
instrument at a future date at a price set at the time of the contract. Forward
contracts settle at the end of the agreement and trade over-the-counter. A
forward currency contract is an agreement to buy or sell a specific currency at
a future date at a price set at the time of the contract. A non-deliverable
forward currency contract is a contract where there is no physical settlement of
two currencies at maturity. Instead, a net cash settlement will be made by one
party to the other based on the movement of the currencies. The risks of forward
contracts include, but are not limited to: (1) the success of the Adviser's
ability to predict movements in the prices of individual currencies or
securities, fluctuations in markets and movements in interest rates; (2)
imperfect or no correlation between the changes in market value of the
currencies or securities and the prices of such contracts; and (3) the risk that
the counterparty will default on its obligations.
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 secondary market. There is no assurance
that a liquid secondary 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 the Fund will be
unable to terminate the futures contract. In using futures contracts,
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the Fund will be
reliant on the ability of the Adviser to predict market and price movements
correctly; the skills needed to use such futures contracts successfully are
different from those needed for traditional portfolio management. If the 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 the Fund is required
to deposit. The 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. The 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, the 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”) and the various exchanges have established limits
referred to as “speculative 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 contract. In addition, federal position limits
apply to swaps that are economically equivalent to futures contracts that are
subject to CFTC-set speculative limits. 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 and/or Sub-Adviser or the positions in
the model portfolio provided by the Sub-Adviser may be aggregated for this
purpose. Therefore, the trading decisions of the Adviser and/or Sub-Adviser may
have to be modified and positions held by the 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 the Fund. A violation of position limits could also lead to
regulatory action materially adverse to the Fund's investment strategy. 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 the 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 the Fund's ability to achieve its
investment objective.
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. 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 the 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.
Swaps
Risk. A
swap is a two-party contract that generally obligates the parties to exchange
payments based on a specified reference security, basket of securities, security
index or index component. Swaps generally can involve greater risks than direct
investment in securities because swaps may be leveraged and are subject to
counterparty risk (e.g., the risk of a
counterparty's defaulting on the obligation or bankruptcy), credit risk and
pricing risk (i.e.,
14
swaps may be
difficult to value). Swaps may also be considered illiquid. It may not be
possible for the Fund to liquidate a swap position at an advantageous time or
price, which may result in significant losses.
Emerging
Markets Risk. Investments in
emerging markets are generally subject to a greater risk of loss than
investments in developed markets. This may be due to, among other things, the
possibility of greater market volatility, lower trading volume and liquidity,
greater risk of expropriation, nationalization, and social, political and
economic instability, greater reliance on a few industries, international trade
or revenue from particular commodities, less developed accounting, legal and
regulatory systems, increased potential for market manipulation, higher levels
of inflation, deflation or currency devaluation, greater risk of market
shutdown, and more significant governmental limitations on investment policy as
compared to those typically found in a developed market. There may be
limited legal rights and remedies for investors in companies domiciled in
emerging markets. In addition, issuers (including governments) in emerging
market countries may have less financial stability than in other countries. The
securities of emerging market companies may trade less frequently and in smaller
volumes than more widely held securities. Market disruptions or substantial
market corrections may limit very significantly the liquidity of securities of
certain companies in a particular country or geographic region, or of all
companies in the country or region. The Fund may be unable to liquidate its
positions in such securities at any time, or at a favorable price, in order to
meet the Fund's obligations. There is also the potential for unfavorable action
such as embargoes and acts of war. As a result, there will tend to be an
increased risk of price volatility in investments in emerging market countries,
which may be magnified by currency fluctuations relative to the U.S. dollar.
Settlement and asset custody practices for transactions in emerging markets may
differ from those in developed markets. Such differences may include possible
delays in settlement and certain settlement practices, such as delivery of
securities prior to receipt of payment, which increase the likelihood of a
“failed settlement.” Failed settlements can result in losses. For these and
other reasons, investments in emerging markets are often considered
speculative.
China. The economy of
China differs, often unfavorably, from the U.S. economy in such respects as
structure, general development, government involvement, wealth distribution,
rate of inflation, growth rate, allocation of resources and capital
reinvestment, among others. Under China's political and economic system, the
central government has historically exercised substantial control over virtually
every sector of the Chinese economy through administrative regulation and/or
state ownership. Since 1978, the Chinese government has been, and is expected to
continue, reforming its economic policies, which has resulted in less direct
central and local government control over the business and production activities
of Chinese enterprises and companies. Notwithstanding the economic reforms
instituted by the Chinese government and the Chinese Communist Party, actions of
the Chinese central and local government authorities continue to have a
substantial effect on economic conditions in China, which could affect the
public and private sector companies in which the Fund invests. In the past, the
Chinese government has from time to time taken actions that influence the prices
at which certain goods may be sold, encourage companies to invest or concentrate
in particular industries, induce mergers between companies in certain industries
and induce private companies to publicly offer their securities to increase or
continue the rate of economic growth, control the rate of inflation or otherwise
regulate economic expansion. It may do so in the future as well. The Chinese
government may also intervene or seek to control the operations, structure, or
ownership of Chinese companies, including with respect to foreign investors of
such companies. Such actions and a variety of other centrally planned or
determined activities by the Chinese government could have a significant adverse
effect on economic conditions in China, the economic prospects for, and the
market prices and liquidity of, the securities of Chinese companies and the
payments of dividends and interest by Chinese companies. In addition,
expropriation, including nationalization, confiscatory taxation, political,
economic or social instability or other developments could adversely affect and
significantly diminish the values of the Chinese companies in which the Fund
invests. The Chinese economy and financial markets have experienced high levels
of growth in recent years; any actual or perceived reduction or curtailment in
those levels of growth in the future would likely have a substantial adverse
impact on the values of Chinese companies. These factors and others could
negatively affect the value and liquidity of the Fund. The Fund may invest in
shares of Chinese companies traded on stock markets in Mainland China or Hong
Kong. These stock markets have recently experienced high levels of volatility,
which may continue in the future. The Hong Kong stock market may behave
differently from the Mainland China stock market and there may be little to no
correlation between the performance of the Hong Kong stock market and the
Mainland China stock market.
15
The Fund may gain
investment exposure to certain Chinese companies through variable interest
entity (“VIE”) structures. Such investments are subject to the investment risks
associated with the Chinese-based company. The VIE structure enables foreign
investors, such as the Fund, to obtain investment exposure to a Chinese company
in situations in which the Chinese government has limited or prohibited
non-Chinese ownership of such company. The VIE structure does not involve direct
equity ownership in a China-based company, but rather involves claims to the
China-based company's profits and control of the assets that belong to the
China-based company through contractual arrangements. Intervention by the
Chinese government with respect to the VIE structure could significantly affect
the Chinese operating company's performance and thus, the value of the Fund's
investment through a VIE structure, as well as the enforceability of the
contractual arrangements of the VIE structure. In the event of such an
occurrence, the Fund, as a foreign investor, may have little or no legal
recourse. In addition to the risk of government intervention, investments
through a VIE structure are subject to the risk that the China-based company (or
its officers, directors, or Chinese equity owners) may breach the contractual
arrangements, or Chinese law changes in a way that adversely affects the
enforceability of the arrangements, or the contracts are otherwise not
enforceable under Chinese law, in which case the Fund may suffer significant
losses on its investments through a VIE structure with little or no recourse
available.
From time to time,
certain of the companies invested in by the Fund may invest may operate in, or
have dealings with, countries subject to sanctions or embargoes imposed by the
U.S. government and the United Nations and/or in countries identified by the
U.S. government as state sponsors of terrorism. One or more of these companies
may be subject to constraints under U.S. law or regulations which could
negatively affect the company's performance. Additionally, one or more of these
companies may suffer damage to its reputation if it is identified as a company
which invests or deals with countries which are identified by the U.S.
government as state sponsors of terrorism or subject to sanctions. As an
investor in such companies, the Fund will be indirectly subject to these
risks.
Investments
in China A Shares. The Fund may
invest directly, or indirectly through its investment in an ETP, in China A
Shares (or “A Shares”) through the license the Adviser has been
granted under the QFII and RQFII program. In addition, if the Fund invests
through the Stock Connect program, it will be subject to the limits that
may be imposed by the Stock Connect program. Restrictions may be imposed on the
repatriation of principal, gains and income that may affect the Fund's
ability to satisfy redemption requests. Moreover, because the Fund will not
be able to invest directly in A Shares in excess of the foreign shareholding
limits or beyond the limits that may be imposed by Stock Connect, the size
of the Fund's direct investments in A Shares may be limited.
Currently, there are
two stock exchanges in Mainland China, the Shanghai Stock Exchange (“SSE”) and
the Shenzhen Stock Exchange (“SZSE”). The SSE and SZSE are supervised by
the CSRC and are highly automated with trading and settlement executed
electronically. The SSE and SZSE are smaller, less liquid, and more volatile
than the major securities markets in the United States.
The SSE commenced
trading on December 19, 1990, and the SZSE commenced trading on July 3, 1991.
The SSE and SZSE divide listed shares into two classes: A Shares and B
Shares. Companies whose shares are traded on the SSE and SZSE that are
incorporated in Mainland China may issue both A Shares and B Shares. In China,
the A Shares and B Shares of an issuer may only trade on one exchange. A
Shares and B Shares may both be listed on either the SSE or the SZSE. Both
classes represent an ownership interest comparable to a share of common
stock and all shares are entitled to substantially the same rights and
benefits associated with ownership (with the exception of some companies
listed on the newly established Sci-Tech Innovation Board in the SSE, which
adopt differentiated voting rights arrangements under dual-class share
structures). A Shares are traded on the SSE and SZSE in RMB.
As of the end of
October 2023, the CSRC had granted licenses to 794 QFIs in total. While the
introduction of the Stock Connect program makes it possible for foreign
investors, such as the Fund, to trade A Shares, restrictions continue to
exist on the number of A Shares available to foreign investors. As a result,
capital cannot flow as freely in the A Shares market as it could if such
restrictions did not exist. Therefore, it is possible that in the event of a
market disruption, the liquidity of the A Shares market and trading prices
of A Shares could be more severely affected than the liquidity and trading
prices of markets where securities are freely tradable and capital
16
therefore flows more
freely. The Fund cannot predict the nature or duration of such a market
disruption or the impact that it may have on the A Shares market and the
short-term and long-term prospects of its investments in the A Shares market.
The Chinese
government has in the past taken actions that benefited holders of A Shares, but
the Chinese government may not take similar action in the future. In
addition, there is no guarantee that the Adviser's RQFII license will not
be revoked by the CSRC at some point in the future. The Fund cannot predict what
would occur if the Adviser's RQFII license were to be revoked, although
such an occurrence would likely have a material adverse effect on the
Fund.
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, 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 Products Risk. The Fund is
subject to substantially the same risks as those associated with the direct
ownership of the securities or other assets represented by the ETPs in which the
Fund invests. The shares of certain ETPs may trade at a premium or discount to
their NAVs. 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.
Extension
Risk.
During periods of rising interest rates, the average life of certain types of
securities may be extended because of slower-than-expected principal payments.
This may increase the period of time during which an investment earns a
below-market interest rate, increase the security's duration and reduce the
value of the security. Extension risk may be heightened during periods of
adverse economic conditions generally, as payment rates decline due to higher
unemployment levels and other factors.
Fluctuation
of Net Asset Value, Share Premiums and Discounts Risk. The NAV of Fund
Shares will generally fluctuate with changes in the market value of the Fund's
securities holdings. The market prices of Fund Shares will generally fluctuate
in accordance with changes in the Fund's NAV and supply and demand of Fund
Shares on the Exchange. It cannot be predicted whether Fund Shares will trade
below, at or above their NAV. 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 NAV 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 NAV), the Adviser believes
that large discounts or premiums to the NAV 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 the Fund's NAV,
disruptions to creations and redemptions or market volatility may result in
trading prices that differ significantly from the Fund's NAV. If an investor
purchases Fund Shares at a time when the market price is at a premium to the NAV
of Fund Shares or sells at a time when the market price is at a discount to the
NAV of Fund Shares, then the investor may sustain losses.
Geographic
Focus Risk. The performance of
a fund that invests significantly in one or more countries or geographic regions
will be closely tied to market, currency, economic, political, environmental, or
regulatory conditions and developments in the countries or regions in which the
fund invests, and may be more volatile than the performance of a fund that does
not invest significantly in such countries or regions.
Income
Risk.
The Fund's income may decline due to falling interest rates or other factors.
Issuers of securities held by the Fund may call or redeem the securities during
periods of falling interest rates, and the Fund would likely be required to
reinvest in securities paying lower interest rates. If an obligation held by the
Fund is prepaid, the Fund may have to reinvest the prepayment in other
obligations paying income at lower rates. A reduction in the income earned by
the Fund may limit the Fund's ability to achieve its
objective.
17
Inflation-Indexed
Securities Risk. The principal
amount of an inflation-indexed security typically increases with inflation and
decreases with deflation, as measured by a specified index. It is possible that,
in a period of declining inflation rates, the Fund could receive at maturity
less than the initial principal amount of an inflation-indexed security.
Although the holders of TIPS receive no less than the par value of the security
at maturity, if the Fund purchases TIPS in the secondary market whose principal
values have previously been adjusted upward and there is a period of subsequent
declining inflation rates, the Fund may receive at maturity less than it
invested. Depending on the changes in inflation rates during the period the Fund
holds an inflation-indexed security, the Fund may earn less on the security than
on a conventional bond. Changes in the values of inflation-indexed securities
may be difficult to predict, and it is possible that an investment in such
securities will have an effect different from that anticipated by the Adviser.
The principal amounts of inflation-indexed securities are typically only
adjusted periodically, and changes in the values of the securities may only
approximately reflect changes in inflation rates and may occur substantially
after the changes in inflation rates in question occur.
Interest
Rate Risk. Interest rate risk
is the risk that the securities held by the Fund will decline in value because
of increases in market interest rates. Duration is a measure used to determine
the sensitivity of a security's price to changes in interest rates. Debt
securities with longer durations tend to be more sensitive to changes in
interest rates, usually making them more volatile than debt securities with
shorter durations. For example, the value of a security with a duration of five
years would be expected to decrease by 5% for every 1% increase in interest
rates. Falling interest rates also create the potential for a decline in the
Fund's income and yield. Interest-only and principal-only securities are
especially sensitive to interest rate changes, which can affect not only their
prices but can also change the income flows and repayment assumptions about
those investments. Variable and floating rate securities also generally increase
or decrease in value in response to changes in interest rates, although
generally to a lesser degree than fixed-rate securities. A substantial increase
in interest rates may also have an adverse impact on the liquidity of a
security, especially those with longer durations. Interest rate changes can be
sudden and unpredictable, and are influenced by a number of factors, including
government policy, monetary policy, inflation expectations, perceptions of risk,
and supply and demand for bonds. Changes in government or central bank policy,
including changes in tax policy or changes in a central bank's implementation of
specific policy goals, may have a substantial impact on interest rates. This
could lead to heightened levels of interest rate, volatility and liquidity risks
for the fixed income markets generally and could have a substantial and
immediate effect on the values of the Fund's investments. There can be no
guarantee that any particular government or central bank policy will be
continued, discontinued or changed, nor that any such policy will have the
desired effect on interest rates.
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 the 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 the 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 the Fund. Certain derivatives have the potential for
unlimited loss, regardless of the size of the initial investment. The use of
leverage may cause the 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.
Limited
Track Record Risk. The Fund has a
limited track record 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.
18
Liquidity
Risk.
Liquidity risk is the risk that the 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 the 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 the 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 the Fund's holdings
deteriorates, it may lead to differences between the market price of Fund Shares
and the NAV 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. The
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.
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.
Market
Risk.
Market prices of investments held by the Fund will go up or down, sometimes
rapidly or unpredictably. 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 actual or perceived creditworthiness of issuers and
general market liquidity. Even if general economic conditions do not change, the
value of an investment in the 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, 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 the Fund and its investments. Due to the
interconnectedness of economies and financial markets throughout the world, if
the 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 the Fund
and its investments and result in disruptions to the services provided to the
Fund by its service providers.
Mid-Capitalization
Securities Risk. The securities of
mid-capitalization companies may be more volatile and may involve more risk than
the securities of larger companies. These companies may have limited product
lines, markets or financial resources, may lack the competitive strength of
larger companies, and may depend on a few key employees. In addition, these
companies may have been recently organized and may have little or no track
record of success. The securities of mid-sized companies may trade less
frequently and in smaller volumes than more widely held securities. The prices
of these securities may fluctuate more sharply than those of other securities,
and the Fund may experience some difficulty in establishing or closing out
positions in these securities at prevailing market prices. There may be less
publicly available information about the issuers of these securities or less
market interest in these securities than in the case of larger companies, both
of which can cause significant price volatility. Some securities of mid-sized
issuers may be illiquid or may be restricted as to resale. Returns on
investments in securities of mid-capitalization companies could trail the
returns on investments in securities of larger or smaller
companies.
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
19
share is more or
less than $1.00. None of State Street Corporation, State Street, 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.
Non-U.S.
Securities Risk. Non-U.S.
securities (including depositary receipts) are subject to political, regulatory,
and economic risks not present in domestic investments. There may be less
information publicly available about a non-U.S. entity than about a U.S. entity,
and many non-U.S. entities are not subject to accounting, auditing, legal and
financial report standards comparable to those in the United States. Further,
such entities and/or their securities may be subject to risks associated with
currency controls; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and settling
portfolio transactions or in receiving payment of dividends. To the extent
underlying securities held by the Fund trade on foreign exchanges that are
closed when the exchange on which the Fund's shares trade is open, there may be
deviations between the current price of an underlying security and the last
quoted price for the underlying security on the closed foreign market. These
deviations could result in the Fund experiencing premiums or discounts greater
than those of ETFs that invest in domestic securities. Securities traded on
foreign markets may be less liquid (harder to sell) than securities traded
domestically. Foreign governments may impose restrictions on the repatriation of
capital to the U.S. In addition, to the extent that the Fund buys securities
denominated in a foreign currency, there are special risks such as changes in
currency exchange rates and the risk that a foreign government could regulate
foreign exchange transactions. In addition, to the extent investments are made
in a limited number of countries, events in those countries will have a more
significant impact on the Fund. Certain countries may institute negative
interest rates on certain fixed-income securities, and similar interest rate
conditions may be experienced in other regions. Investments in fixed-income
securities with very low or negative interest rates may magnify the Fund's
susceptibility to interest rate risk and diminish yield and performance, and
such investments may be subject to heightened volatility and reduced
liquidity.
Portfolio
Turnover Risk. The Fund may
engage in frequent trading of its portfolio securities. Fund turnover generally
involves a number of direct and indirect costs and expenses to the Fund,
including, for example, brokerage commissions, dealer mark-ups and bid/asked
spreads, and transaction costs on the sale of securities and reinvestment in
other securities. The costs related to increased portfolio turnover have the
effect of reducing the Fund's investment return, and the sale of securities by
the Fund may result in the realization of taxable capital gains, including
short-term capital gains.
Reinvestment
Risk.
Income from the Fund may decline when the Fund invests the proceeds from
investment income, sales of portfolio securities or matured, traded or called
debt obligations. For instance, during periods of declining interest rates, an
issuer of debt obligations may exercise an option to redeem securities prior to
maturity, forcing the Fund to reinvest the proceeds in lower-yielding
securities. A decline in income received by the Fund from its investments is
likely to have a negative effect on the yield and total return of the Fund
Shares.
Settlement
Risk.
Markets in different countries have different clearance and settlement
procedures and in certain markets there have been times when settlements have
been unable to keep pace with the volume of transactions. Delays in settlement
may increase credit risk to the Fund, limit the ability of the Fund to reinvest
the proceeds of a sale of securities, hinder the ability of the Fund to lend its
portfolio securities, and potentially subject the Fund to penalties for its
failure to deliver to on-purchasers of securities whose delivery to the Fund was
delayed. Delays in the settlement of securities purchased by the Fund may limit
the ability of the Fund to sell those securities at times and prices it
considers desirable, and may subject the Fund to losses and costs due to its own
inability to settle with subsequent purchasers of the securities from it. The
Fund may be required to borrow monies it had otherwise expected to receive in
connection with the settlement of securities sold by it, in order to meet its
obligations to others.
Small-Capitalization
Securities Risk. The securities of
small-capitalization companies may be more volatile and may involve more risk
than the securities of larger companies. These companies may have limited
product lines, markets or financial resources, may lack the competitive strength
of larger companies, and may depend on a few key employees.
20
In addition, these
companies may have been recently organized and may have little or no track
record of success. The securities of smaller companies may trade less frequently
and in smaller volumes than more widely held securities. The prices of these
securities may fluctuate more sharply than those of other securities, and the
Fund may experience some difficulty in establishing or closing out positions in
these securities at prevailing market prices. There may be less publicly
available information about the issuers of these securities or less market
interest in these securities than in the case of larger companies, both of which
can cause significant price volatility. Some securities of smaller issuers may
be illiquid or may be restricted as to resale. The Fund may be unable to
liquidate its positions in such securities at any time, or at a favorable price,
in order to meet the Fund's obligations. Returns on investments in securities of
small-capitalization companies could trail the returns on investments in
securities of larger companies.
Sovereign
Debt Obligations Risk. Investments in
debt securities issued by governments or by government agencies and
instrumentalities involve the risk that the governmental entities responsible
for repayment may be unable or unwilling to pay interest and repay principal
when due. A governmental entity's willingness or ability to pay interest and
repay principal in a timely manner may be affected by a variety of factors,
including its cash flow, the size of its reserves, its access to foreign
exchange, the relative size of its debt service burden to its economy as a
whole, and political constraints. A governmental entity may default on its
obligations or may require renegotiation or reschedule of debt payments. Any
restructuring of a sovereign debt obligation held by the Fund will likely have a
significant adverse effect on the value of the obligation. In the event of
default of sovereign debt, the Fund may be unable to pursue legal action against
the sovereign issuer or to realize on collateral securing the debt. The
sovereign debt of certain non-U.S. governments, including their sub-divisions
and instrumentalities, is rated below investment-grade. Sovereign debt risk may
be greater for debt securities issued or guaranteed by emerging and/or frontier
countries.
Subsidiary
Investment Risk. The Fund may
invest up to 25% of its total assets in the Subsidiary without violating tax
diversification rules applicable to RICs. By investing in the Subsidiary, the
Fund is indirectly exposed to the risks associated with the Subsidiary's
investments. The Subsidiary is not registered under 1940 Act and is therefore
not subject to all of the investor protections of the 1940 Act. Thus, the Fund,
as an investor in the Subsidiary, will not have all of the protections offered
to investors in registered investment companies. In addition, changes in the
laws of the United States and/or the Cayman Islands could result in the
inability the Fund to operate as intended and could negatively affect the Fund
and its shareholders.
U.S.
Government Securities Risk. U.S. government
securities, such as Treasury bills, notes and bonds and mortgage-backed
securities guaranteed by the Government National Mortgage Association (“Ginnie
Mae”), are supported by the full faith and credit of the United States; others
are supported by the right of the issuer to borrow from the U.S. Treasury;
others are supported by the discretionary authority of the U.S. government to
purchase the agency's obligations; and still others are supported only by the
credit of the issuing agency, instrumentality, or enterprise. Although U.S.
government-sponsored enterprises such as the Federal Home Loan Mortgage
Corporation (“Freddie Mac”) and the Federal National Mortgage Association
(“Fannie Mae”) may be chartered or sponsored by Congress, they are not funded by
Congressional appropriations, and their securities are not issued by the U.S.
Treasury nor supported by the full faith and credit of the U.S. government.
There is no assurance that the U.S. government would provide financial support
to its agencies and instrumentalities if not required to do so. In addition,
certain governmental entities have been subject to regulatory scrutiny regarding
their accounting policies and practices and other concerns that may result in
legislation, changes in regulatory oversight and/or other consequences that
could adversely affect the credit quality, availability, or investment character
of securities issued by these entities. The value and liquidity of U.S.
government securities may be affected adversely by changes in the ratings of
those securities. Securities issued by the U.S. Treasury historically have been
considered to present minimal credit risk. The downgrade in the long-term U.S.
credit rating by at least two major rating agencies has introduced greater
uncertainty about the ability of the U.S. to repay its obligations. Further
credit rating downgrades or a U.S. credit default could decrease the value and
increase the volatility of the Fund's investments.
U.S.
Treasury Obligations Risk. U.S. Treasury
obligations may differ from other securities in their interest rates,
maturities, times of issuance and other characteristics. Similar to other
issuers, changes to the financial condition or credit rating of the U.S.
government may cause the value of the Fund's U.S. Treasury obligations to
decline. The total public debt of the United States as a percentage of gross
domestic product grew rapidly after the financial crisis of 2008 and has
remained at a historically high level. Although high debt levels do not
necessarily indicate or cause economic problems, they may create certain
systemic risks if sound debt management practices are not implemented. A high
national debt level may increase market pressures to meet government funding
needs, which may drive debt
21
cost higher and
cause a country to sell additional debt, thereby increasing refinancing risk. A
high national debt also raises concerns that a government will not be able to
make principal or interest payments when they are due. In the worst case,
unsustainable debt levels can cause a decline in the value of the dollar (which
may lead to inflation), and can prevent the U.S. government from implementing
effective countercyclical fiscal policy in economic downturns. On August 5,
2011, Standard & Poor's Ratings Services downgraded U.S. Treasury securities
from AAA rating to AA+ rating. Standard & Poor's Ratings Services stated
that its decision was prompted by its view on the rising public debt burden and
its perception of greater policymaking uncertainty. Fitch also downgraded its
rating of U.S. Treasury securities from AAA to AA+ on August 1, 2023, citing
increasing government debt and erosion in confidence regarding governance of
fiscal matters as a result of repeated political standoffs related to debt limit
approvals. Most recently, on May 16, 2025, Moody's downgraded U.S. long-term
issuer and senior unsecured ratings from Aaa to Aa1 to reflect over a
decade-long increase in government debt, as well as interest payment ratios
higher than those of similarly rated countries. A downgrade of the ratings of
U.S. government debt obligations, which are often used as a benchmark for other
borrowing arrangements, could result in higher interest rates for individual and
corporate borrowers, cause disruptions in the international bond markets and
have a substantial negative effect on the U.S. economy. Any additional
downgrades of U.S. Treasury securities from ratings agencies may cause the value
of the Fund's U.S. Treasury obligations to decline. In recent years, impasses in
Congress regarding the federal budget have caused temporary Federal government
shutdowns. While Congress has temporarily suspended the debt limit from time to
time, the risks that the U.S. government will not adopt a long-term budget or
deficit reduction plan, of one or more additional Federal government shutdowns
or of future failures to not increase the Federal government's debt limit, may
affect investor and consumer confidence and may adversely impact financial
markets and the broader economy, perhaps suddenly and to a significant
degree.
Unconstrained
Sector Risk. The Fund may
invest a substantial portion of its assets within one or more economic sectors
or industries, which may change from time to time. When the Fund focuses its
investments in a particular industry or sector, financial, economic, business,
and other developments affecting issuers in that industry, market, or economic
sector will have a greater effect on the Fund than if it had not focused its
assets in that industry, market, or economic sector, which may increase the
volatility of the Fund.
Valuation
Risk.
Certain portfolio holdings may be valued on the basis of factors other than
market quotations. This may occur more often in times of market turmoil or
reduced liquidity. There are multiple methods that can be used to value a
portfolio holding when market quotations are not readily available. The value
established for any portfolio holding at a point in time might differ from what
would be produced using a different methodology or if it had been priced using
market quotations. Portfolio holdings that are valued using techniques other
than market quotations, including “fair valued” securities, may be subject to
greater fluctuation in their valuations from one day to the next than if market
quotations were used. Technological issues or other service disruption issues
involving third-party service providers may cause the Fund to value its
investments incorrectly. In addition, there is no assurance that the Fund could
sell or close out a portfolio position for the value established for it at any
time, and it is possible that the Fund would incur a loss because a portfolio
position is sold or closed out at a discount to the valuation established by the
Fund at that time.
Non-Principal
Risks
Authorized
Participants, Market Makers and Liquidity Providers Concentration
Risk.
The 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 the 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.
Conflicts
of Interest Risk. An investment in
the Fund may be subject to a number of actual or potential conflicts of
interest. For example, the Adviser, Sub-Adviser or their affiliates may provide
services to the Fund, such as securities lending agency services, custodial,
administrative, bookkeeping, and accounting services, transfer agency and
shareholder servicing, securities brokerage services, and other services for
which the Fund would compensate the Adviser, Sub-Adviser and/or such affiliates.
The Fund may invest in other pooled investment vehicles sponsored, managed, or
otherwise affiliated with the Adviser or Sub-Adviser.
There is no assurance that the rates at which the
22
Fund pays fees or
expenses to the Adviser, Sub-Adviser or their affiliates, or the terms on which
it enters into transactions with the Adviser, Sub-Adviser or their affiliates
will be the most favorable available in the market generally or as favorable as
the rates the Adviser or Sub-Adviser makes
available to other clients. Because of its financial interest, the
Adviser or Sub-Adviser may
have an incentive to enter into transactions or arrangements on behalf of the
Fund with itself or its affiliates in circumstances where it might not have done
so in the absence of that interest.
The Adviser,
Sub-Adviser and their affiliates serve as investment advisers to other clients
and may make investment decisions that may be different from those that will be
made by the Adviser or Sub-Adviser on
behalf of the Fund. For example, the Adviser or Sub-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 or Sub-Adviser may
(subject to applicable law) be simultaneously seeking to purchase (or sell)
investments for the 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, Sub-Adviser and their 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 the Fund. The Adviser, Sub-Adviser or their affiliates, in
connection with its other business activities, may acquire material non-public
confidential information that may restrict the Adviser or Sub-Adviser from
purchasing securities or selling securities for itself or its clients (including
the Fund) 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 the Fund. The 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 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 Fund) 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, the Fund, the
Adviser, a custodian, the transfer agent, or other affiliated or third-party
service provider may adversely affect the Fund or its shareholders. For
instance, cyber-attacks or technical malfunctions may interfere with the
processing of shareholder or other transactions, affect the 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 or technical malfunctions 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 Fund
may also incur substantial costs for cybersecurity risk management in order to
prevent cyber incidents in the future. The Fund and its 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
23
been identified,
given the evolving nature of this threat. The use of artificial intelligence and
machine learning could exacerbate these risks or result in cyber security
incidents that implicate personal data. The 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 Fund. Similar types of
cybersecurity risks or technical malfunctions also are present for issuers of
securities in which the Fund invests, which could result in material adverse
consequences for such issuers, and may cause the Fund's investment in such
securities to lose value.
Regulatory
Risk.
Governmental and regulatory actions may have unexpected or adverse consequences
on particular markets, strategies, or investments, which may adversely impact
the 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.
Securities
Lending Risk. The Fund may lend
portfolio securities in an amount not to exceed 40% of the value 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 the Fund, marked to market each trading day. The 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.
The Fund will call loans to vote proxies if a material issue affecting the
investment is to be voted upon. Efforts to recall such securities promptly may
be unsuccessful, especially for foreign securities or thinly traded securities.
Securities lending involves the risk that the Fund may lose money because the
borrower of the loaned securities fails to return the securities in a timely
manner or at all. Should the borrower of the securities fail financially, the
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, the Fund will also bear the risk of any decline in value of
securities provided as collateral or acquired with cash collateral. The Fund
will attempt to minimize this risk by limiting the investment of cash collateral
to high quality instruments of short maturity either directly on behalf of the
lending Fund or through one or more joint accounts or funds, which may include
those managed by the Adviser. In addition, the Fund will be subject to the risk
that any income generated by lending its securities or reinvesting cash
collateral is lower than any fees the Fund has agreed to pay a borrower. The
Adviser will take into account the tax impact to shareholders of substitute
payments for dividends when overseeing the 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 the 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
the Fund's shares. While the Fund expects that the ability of Authorized
Participants to create and redeem Fund Shares at NAV 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 the 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.
Management
Investment
Adviser
SSGA FM serves as
the investment adviser to the Fund pursuant to an investment advisory agreement
(“Investment Advisory Agreement”) between the Trust and the Adviser, and,
subject to the oversight of Board, is responsible for the investment management
of the Fund. The Adviser provides an investment management program for the Fund
and manages the investment of the Fund's assets. In addition, the Adviser
provides administrative, compliance and general
24
management services
to the 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 SEC under the Investment
Advisers Act of 1940, as amended. The Adviser is also registered with the U.S.
Commodity Futures Trading Commission as a commodity pool operator. The Adviser
and certain other affiliates of State Street Corporation make up State Street
Investment Management, the investment management arm of State Street
Corporation. As of October 31, 2025, the Adviser managed approximately
$1.29 trillion in assets and State Street Investment Management managed
approximately $5.55 trillion in assets. The Adviser's principal business address
is One Congress Street, Boston, Massachusetts 02114.
For the services
provided to the Fund under the Investment Advisory Agreement, for the fiscal
year ended October 31, 2025, the Fund paid the Adviser the annual fees based on
a percentage of the Fund's average daily net assets as set forth
below:
|
State
Street Bridgewater All Weather ETF |
0.85
% |
From time to time,
the Adviser may waive all or a portion of its management fee. The Adviser pays
all expenses of the Fund other than the management fee, acquired fund fees and
expenses associated with holdings of acquired funds for cash management
purposes, brokerage expenses, taxes, interest, fees and expenses of the
Independent Trustees (including any Trustee's counsel fees), litigation expenses
and other extraordinary expenses.
Investment
SUB-Adviser
SSGA FM, as the
investment adviser for the Fund, may hire one or more sub-advisers to oversee
the day-to-day investment activities of the Fund. The sub-advisers are subject
to oversight by the Adviser. The Adviser and the Trust have received
an exemptive order from the SEC that permits the Adviser, with the approval of
the Board, including a majority of the Independent Trustees, of the Trust, to
retain and amend existing sub-advisory agreements with unaffiliated investment
sub-advisers for the Fund without submitting the sub-advisory agreement to a
vote of the Fund's shareholders. The Trust will notify shareholders in the event
of any change in the identity of such sub-adviser or sub-advisers. The Adviser
has ultimate responsibility for the investment performance of the Fund due to
its responsibility to oversee each sub-adviser and recommend their hiring,
termination and replacement. The Adviser is not required to disclose fees paid
to any unaffiliated sub-adviser retained pursuant to the order.
The Adviser has
entered into an investment sub-advisory agreement (the “Sub-Advisory Agreement”)
with Bridgewater Associates, LP (“Bridgewater”), who has been retained to
provide investment recommendations for the Fund in the form of a model
portfolio, subject to supervision of the Adviser and oversight by the Board.
Bridgewater does not oversee the day-to-day investment activities of the Fund
and is not a party to any direct contractual agreement with the Fund.
Bridgewater is a Delaware limited partnership. Bridgewater's principal office is
located at One Nyala Farms Road, Westport, Connecticut 06880. As of October 31,
2025, Bridgewater had approximately $101 billion in assets under
management.
In accordance with
the Sub-Advisory Agreement, the Adviser pays Bridgewater a portion of the
advisory fee paid by the Fund to the Adviser (after deducting payments to the
fund service providers and fund expenses) based on a percentage of the Fund's
average daily net assets. The Fund is not responsible for the fees paid to
Bridgewater.
A summary of the
factors considered by the Board in connection with the initial approval of the
Investment Advisory Agreement and Sub-Advisory Agreement for the Fund is
available in the Fund's Form N-CSR filing with the SEC for the period ended
April 30, 2025.
Other
Activities of the Sub-Adviser. The Fund's
performance will differ from other funds or accounts managed by the Sub-Adviser
and may perform differently from other funds or accounts pursuing the same or
similar investment strategies. In addition, the Sub-Adviser does, and will in
the future, manage funds and accounts with investment objectives or strategies
that overlap with the model portfolio. Certain of those funds and accounts will
have different investment parameters and therefore, will participate in
different types of trading strategies developed by the
Sub-Adviser.
The
Subsidiary. The Fund expects to
gain exposure to commodity-linked derivative instruments by investing in the
Subsidiary, a wholly-owned, exempted limited company organized under the laws of
the Cayman Islands. The Subsidiary is overseen by its own board of directors.
The Adviser serves as the Subsidiary's investment adviser and manages the
Subsidiary to comply with the compliance policies and procedures of the
Fund.
25
Portfolio
Managers
The Adviser and
Sub-Adviser manage the Fund 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 the team work together in a cohesive manner
to develop and enhance techniques that drive the investment process for the
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 State Street Investment Management and
Bridgewater. The portfolio management team is overseen by State Street
Investment Management's internal governance.
The professionals
primarily responsible for the day-to-day management of the Fund are Michael
Martel, Marc Touchette, Geoff Preston and James Kramer. Karen
Karniol-Tambour and Christopher Ward are primarily responsible for generation of
the model portfolio.
Michael Martel is a
Managing Director of State Street Investment Management and Head of Portfolio
Management in the Americas for State Street Investment Management's Investment
Solutions Group (ISG). In this role, he is responsible for the design and
management of multi-asset class strategies geared towards meeting the investment
objectives of a broad and diverse client base. His work with clients includes
aligning assets with long and short-term investment objectives, tactical asset
allocation, and employing overlay strategies to enhance return and better manage
risks. Prior to this role, Mr. Martel led ISG's Exposure Management Team. He has
been working in the investment management field since 1992. Mr. Martel holds a
Bachelor of Arts degree in Economics from the College of the Holy Cross and
Master degrees in both Finance and Business Administration from the Carroll
School of Management at Boston College.
Marc Touchette, CFA,
is a Vice President of State Street Investment Management and a Senior Portfolio
Manager within the Investment Solutions Group. He is a team leader that focuses
on delivering both strategic and tactical portfolio outcomes for clients across
our Outsourced Chief Investment Officer (OCIO), Exposure Management and
Charitable Asset Management business lines, as well as other bespoke client
solutions. Mr. Touchette is also a voting member of the OCIO Investment Group.
Prior to his current role Mr. Touchette was a Senior Portfolio Manager within
ISG where he was responsible for the development, management and oversight of
Liability Driven Investment (LDI) strategies. Mr. Touchette also held a position
within State Street Investment Management's Global Fixed Income team as a
Portfolio Manager responsible for managing inflation-linked, derivative based
and custom solution strategies. Before joining State Street Investment
Management, Mr. Touchette worked within the Mutual Fund Division of State Street
Corporation where he started his career. Mr. Touchette graduated from the
University of Massachusetts with a Bachelor's degree in Economics. He has earned
the Chartered Financial Analyst (CFA) designation and is a member of the CFA
Society Boston and CFA Institute.
Geoff Preston is
Vice President of State Street Investment Management and a Senior Portfolio
Manager within the Investment Solutions Group. As part of the Portfolio
Management team, Mr. Preston is an active member of the tactical asset
allocation investment group and his responsibilities include creating a
macroeconomic assessment of financial markets, actively monitoring and managing
market risk in client portfolios, implementing tactical positioning in response
to market conditions / quantitative signals, and providing expertise in the use
of cross asset derivatives. Prior to his role within the Investment Solutions
Group, he held various roles with the OCIO and Fundamental Equity Teams. Mr.
Preston joined State Street Investment Management in July 2016 through its
acquisition of GE Asset Management (GEAM). He joined GEAM in 2013 as a Sr.
Derivatives Specialist. He has 18 years of combined industry experience holding
prior positions at Deutsche Bank, The Lloyds Banking Group, Goldman Sachs, and
SS&C. Mr. Preston has a BA in Political Science from the University of
Connecticut and an MBA from Quinnipiac University.
James Kramer is a
Vice President of State Street Investment Management and a Senior Portfolio
Manager in the Fixed Income Beta Solutions Team within the Global Fixed Income,
Cash and Currency Team. In his current role, he is responsible for managing
global treasuries, inflation and aggregate bond portfolios for ETFs, commingled
funds and separately managed accounts. Prior to joining the Global Fixed Income,
Cash and Currency Team, Mr. Kramer was the Head of North America Fixed Income
Trading. He was responsible for a team of traders that execute all cash bonds
and derivative instruments for the Active and Passive Fixed Income Groups. Prior
to heading the trading desk, Mr. Kramer was a senior portfolio manager in the
Interest Rate Strategies Group at State Street Investment Management. His
primary responsibilities included the portfolio management of active government
and inflation linked strategies.
26
Other
responsibilities included directing U.S. interest rate strategies globally for
State Street Investment Management. Mr. Kramer has a Bachelor of Arts in
Economics from Fitchburg State College. He started his career at State Street
Bank and Trust Company and has been working in the investment industry since
1993.
Karen
Karniol-Tambour is Co-Chief Investment Officer at Bridgewater, responsible for
managing the company's investment process. She oversees the systemization of
Bridgewater's research into trading strategies, manages the development of
proprietary investment management models, directs the design and implementation
of client investment strategies, and publishes timely market understanding to
clients and global policy makers via Bridgewater'sDaily
Observations. She joined
Bridgewater in 2006 after graduating from Princeton University.
Ms.Karniol-Tambour is a World Economic Forum Young Global Leader, was included
in Fortune's “40 Under 40” most influential leaders in business in 2019 and has
been named to Barron's list of “Most Influential Women in U.S.
Finance”
for
five years in a row.
Christopher Ward
joined Bridgewater in 2009 and is currently a Senior Investment Associate on
Bridgewater's Total Portfolio Strategies team where he is focused on the design,
evolution and oversight of Bridgewater's All Weather Strategy and other related
multi-asset class portfolio solutions. Prior to this role, Mr. Ward most
recently led product development efforts within Bridgewater's Wealth Management
Solutions team, working closely with partners at leading global financial
institutions to make Bridgewater strategies more accessible to investors around
the globe. Prior to joining Bridgewater, Mr. Ward was an Investment Banking
Analyst at Merrill Lynch, and he received a B.A. in Engineering modified with
Economics from Dartmouth College.
Additional
information about the portfolio managers' compensation, other accounts managed
by the portfolio managers, and the portfolio managers' ownership of the Fund is
available in the SAI.
Administrator,
Sub-Administrator, Custodian and Transfer Agent. The Adviser serves
as Administrator for the Fund. State Street, part of State Street Corporation,
serves as the Sub-Administrator for the Fund and the Custodian for the Fund's
assets, and serves as Transfer Agent to the Fund.
Lending
Agent.
State Street serves as the securities lending agent for the Trust. 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 Fund and the Trust. The Trust enters into
contractual arrangements with various parties, including, among others, the
Fund's investment adviser, the Fund's investment sub-adviser, custodian,
transfer agent, and accountants, who provide services to the Fund. 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 Fund 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 Fund 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.
Trademark
Licenses/Disclaimers
Bridgewater® and All
Weather® are registered
trademarks of Bridgewater Associates, LP.
WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO,
LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
27
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 Fund's NAV, 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 NAV of Fund Shares. The trading prices of Fund
Shares may deviate significantly from the Fund's NAV 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 NAV
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 the Fund. The IOPV calculations
are estimates of the value of the Fund's NAV 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 NAV 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. The IOPV price is based on quotes
and closing prices from the securities' local market converted into U.S. dollars
at the current currency rates and may not reflect events that occur subsequent
to the local market's close. Therefore, the IOPV may not reflect the best
possible valuation of the Fund's current portfolio. Neither the Fund 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 Fund does not
impose any restrictions on the frequency of purchases and redemptions; however,
the Fund reserves 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 the Fund's investment strategy, or whether they would cause
the 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 the Fund
directly, and that most trading in the 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 the Fund's shareholders or (b) any attempts to market time the Fund by
shareholders would result in negative impact to the Fund or its
shareholders.
Distributions
Dividends
and Capital Gains. As a Fund
shareholder, you are entitled to your share of the Fund's income and net
realized gains on its investments. The Fund pays out substantially all of its
net earnings to its shareholders as “distributions.”
28
The Fund may
earn interest from debt securities and, if participating, securities lending
income. The 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. The 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 the 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 annually, but
may vary significantly from period to period.
Net capital gains
for the 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 of 1986, as amended (the
“Code”).
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.
Distributions which are reinvested will nevertheless be taxable to the same
extent as if such distributions had not been reinvested.
Portfolio
Holdings Disclosure
The Fund's portfolio
holdings disclosure policy is described in the SAI. In addition, the identities
and quantities of the securities held by the Fund are disclosed on the Fund's
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 the Fund. Your
investment in the 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.
The Fund has elected
or will elect to be a 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, the 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.
Taxes
on Distributions. In general, your
distributions are subject to federal income tax when they are paid, whether you
take them in cash or reinvest them in the Fund. The income dividends and
short-term capital gains distributions you receive from the Fund will be taxed
as either ordinary income or qualified dividend income. Subject to certain
limitations, dividends that are reported by the Fund as qualified dividend
income are taxable to noncorporate shareholders at reduced rates. Any
distributions of the 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 the Fund's current and accumulated earnings and profits are treated
as a tax-free return of capital to the extent of your basis in Fund Shares, and,
in general, as capital gain thereafter.
In general,
dividends may be reported by the Fund as qualified dividend income if they are
attributable to qualified dividend income received by the 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 the 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
29
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 the 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
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 an excise 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 the 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 the 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 Fund will inform
you of the amount of your ordinary income dividends and capital gain
distributions and any qualified dividend income shortly after the close of each
calendar year.
A distribution will
reduce the Fund's NAV 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.
Original
Issue Discount. Investments by the
Fund in zero coupon or other discount securities will result in income to the
Fund equal to a portion of the excess face value of the securities over their
issue price (the “original issue discount” or “OID”) each year that the
securities are held, even though the Fund may receive no cash interest payments
or may receive cash interest payments that are less than the income recognized
for tax purposes. In other circumstances, whether pursuant to the terms of a
security or as a result of other factors outside the control of the Fund, the
Fund may recognize income without receiving a commensurate amount of cash. The
Fund's share of such income is included in determining the amount that the Fund
must distribute to maintain its eligibility for treatment as a RIC and to avoid
the payment of federal tax, including the nondeductible 4% excise tax. Because
any income required to be recognized as a result of the OID and/or market
discount rules (discussed below) may not be matched by a corresponding cash
payment, the Fund may be required to borrow money or dispose of securities to be
able to make distributions to its shareholders in order to qualify for treatment
as a RIC and eliminate taxes at the Fund level.
Inflation-Indexed
Bonds.
Special rules apply if the Fund holds inflation-indexed bonds. Generally, all
stated interest on inflation-indexed bonds is taken into income by the Fund
under its regular method of accounting for interest income. The amount of any
positive inflation adjustment for a taxable year, which results from an increase
in the inflation-adjusted principal amount of the bond, is treated as OID. The
amount of the Fund's OID in a taxable year with respect to a bond will increase
the Fund's taxable income for such year without a corresponding receipt of cash
until the bond matures. As a result, the Fund may need to use other sources of
cash to satisfy its distribution requirements for such year. The amount of any
negative inflation adjustments, which result from a decrease in the
inflation-adjusted principal amount of the bond, first reduces the amount of
interest (including stated interest, OID, and market discount, if any) otherwise
includible in the Fund's income with respect to the bond for the taxable year;
any remaining negative adjustments will be either treated as ordinary loss or,
in certain circumstances, carried forward to reduce the amount of interest
income taken into account with respect to the bond in future taxable
years.
Market
Discount. Any market discount
recognized on a market discount bond is taxable as ordinary income. A market
discount bond is a bond acquired in the secondary market at a price below
redemption value or below adjusted issue price if the bond was issued with
original issue discount. Absent an election by the Fund to include the market
discount in income as it accrues, the gain on the Fund's disposition of such an
obligation will be treated as ordinary income rather than capital gain to the
extent of the accrued market discount. Where the income required to be
recognized as a
30
result of the market
discount rules is not matched by a corresponding cash payment, the Fund may be
required to borrow money or dispose of securities to enable the Fund to make
distributions to its shareholders in order to qualify for treatment as a
regulated investment company and eliminate taxes at the Fund level, potentially
resulting in additional taxable gain or loss to the Fund.
Derivatives
and Other Complex Securities. The 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
the Fund are treated as ordinary income or capital gain, accelerate the
recognition of income to the Fund and/or defer the Fund's ability to recognize
losses. In turn, these rules may affect the amount, timing or character of the
income distributed to you by the Fund. You should consult your personal tax
advisor regarding the application of these rules.
Foreign
Currency Transactions. The Fund's
transactions in foreign currencies, foreign currency denominated debt
obligations and certain foreign currency options, futures contracts and forward
contracts (and similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the value of the
foreign currency concerned.
Foreign
Income Taxes. Investment income
received by the Fund from sources within foreign countries may be subject to
foreign income taxes withheld at the source. The United States has entered into
tax treaties with many foreign countries which may entitle the Fund to a reduced
rate of such taxes or exemption from taxes on such income. It is impossible to
determine the effective rate of foreign tax for the Fund in advance since the
amount of the assets to be invested within various countries is not known. If
more than 50% of the total assets of the Fund at the close of its taxable year
consist of certain foreign stocks or securities, the Fund may elect to “pass
through” to you certain foreign income taxes (including withholding taxes) paid
by the Fund. If the Fund makes such an election, you will be considered to have
received as an additional dividend your share of such foreign taxes, but you may
be entitled to either a corresponding tax deduction in calculating your taxable
income, or, subject to certain limitations, a credit in calculating your federal
income tax. No deduction for such taxes will be permitted to individuals in
computing their alternative minimum tax liability. If the Fund does not so
elect, the Fund will be entitled to claim a deduction for certain foreign taxes
incurred by the Fund. Under certain circumstances, if the Fund receives a refund
of foreign taxes paid in respect of a prior year, the value of Fund Shares could
be affected or any foreign tax credits or deductions passed through to
shareholders in respect of the Fund's foreign taxes for the current year could
be reduced.
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 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 the 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
Internal Revenue Service (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 Fund Shares (or securities surrendered) have been held for more than
one year and as a short-term capital gain or loss if the 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.
31
The Trust on behalf
of the 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 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 Fund, the purchaser (or group of purchasers) will not
recognize gain or loss upon the exchange of securities for Creation
Units.
If the 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.
Certain
Tax-Exempt Investors. The 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 the 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.
Investments
In Certain Foreign Corporations. The Fund may invest
in foreign entities classified as passive foreign investment companies or
“PFICs” or controlled foreign corporations or “CFCs” under the Internal Revenue
Code. PFIC and CFC investments are subject to complex rules that may under
certain circumstances adversely affect the Fund. Accordingly, investors should
consult their own tax advisors and carefully consider the tax consequences of
PFIC and CFC investments by the Fund before making an investment in the Fund.
The Fund's dividends attributable to dividends received from PFICs and certain
CFCs generally will not be treated as qualified dividend income. Additional
information pertaining to the potential tax consequences to the Fund, and to the
shareholders, from the Fund's potential investment in PFICs and CFCs can be
found in the SAI.
As discussed above,
to qualify for the favorable U.S. federal income tax treatment accorded to RICs,
the Fund must, among other things, derive in each taxable year at least 90% of
its gross income from certain prescribed sources (“qualifying income”). Very
generally, income from commodities is not thought to be qualifying income for
purposes of this requirement. The Fund invests a portion of its assets (not to
exceed 25% of its total assets) in the Subsidiary, which is classified as a
corporation for U.S. federal income tax purposes. Because the Subsidiary is a
foreign corporation that is wholly owned by the Fund, the Subsidiary is a CFC.
Because the Subsidiary is a CFC, the Fund is required to include in its gross
income each taxable year all the Subsidiary's “subpart F income.” Under
applicable regulations, the Fund's subpart F income inclusions will constitute
qualifying income for the Fund, whether or not any amount is distributed by the
Subsidiary to the Fund, if the subpart F income inclusions are derived with
respect to the Fund's business of investing in stock, securities or currencies.
It is possible that the IRS might take the position that subpart F income
inclusions from the Subsidiary are not qualifying income. Under those
circumstances the Fund might fail to qualify for treatment as a RIC. Additional
information pertaining to the potential tax consequences to the Fund, and to the
shareholders, from the Fund's potential investment in the Subsidiary can be
found in the SAI.
Non-U.S.
Investors. Ordinary income
dividends paid by the 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, the Fund may report interest-related dividends to the
extent of its net income derived from U.S. source interest, and the 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 regular income tax rates. Non-U.S. shareholders
that own, directly or indirectly, more than 5% of the Fund's shares are urged to
consult their own tax advisors concerning special tax rules that may apply to
their investment.
32
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 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.
Backup
Withholding. The 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. The 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 Fund and of Fund
shareholders with respect to distributions by the Fund 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 Fund. It is not a substitute for personal tax
advice. Consult your personal tax advisor about the potential tax consequences
of an investment in the Fund under all applicable tax laws.
General
Information
The Trust was
organized as a Massachusetts business trust on March 30, 2011. If
shareholders of the 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
The Fund is a
separate series of the Trust, which is an open-end registered management
investment company.
From time to time,
the 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 the
Fund.
Morgan, Lewis &
Bockius LLP serves as counsel to the Trust, including the Fund. Ernst &
Young LLP serves as the independent registered public accounting firm and will
audit the Fund's financial statements annually.
Financial
Highlights
These financial
highlight tables are intended to help you understand the Fund's financial
performance for the past five fiscal years or, if shorter, the period
since each Fund's inception. Certain information reflects the performance
results for a single Fund Share. The total returns in the table represent the
rate that an investor would have earned (or lost) on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by Ernst & Young LLP, the Trust's independent registered public
accounting firm, whose report, along with the Fund's financial highlights and
financial statements, are included in the Fund's Form N-CSR filing, which is
available
33
upon request. Any
references to Notes in these financial highlight tables refer to the “Notes to
Financial Statements”
section
of the Fund's financial statements, and the financial information included in
these tables should be read in conjunction with the financial statements
incorporated by reference in the SAI.
34
SSGA
ACTIVE TRUST
Selected
data for a share outstanding throughout each period
|
|
State
Street Bridgewater All Weather ETF |
|
|
For
the
Period
3/6/25*-
10/31/25 |
|
Net
asset value, beginning of period |
$25.00 |
|
Income
(loss) from investment operations:
|
|
|
Net
investment income (loss) (a) |
0.57 |
|
Net
realized and unrealized gain (loss) (b) |
2.27 |
|
Total
from investment operations |
2.84 |
|
Net
equalization credits and charges (a) |
0.72 |
|
Other
capital (a) |
0.03 |
|
Net
asset value, end of period |
$28.59 |
|
Total
return (c) |
14.38
% |
|
Ratios
and Supplemental Data:
|
|
|
Net
assets, end of period (in 000s) |
$650,512 |
|
Ratios
to average net assets:
|
|
|
Total
expenses |
0.80
%(d) |
|
Net
investment income (loss) |
3.25
%(d) |
|
Portfolio
turnover rate (e) |
99
%(f) |
|
* |
Commencement
of operations. |
|
(a) |
Per
share numbers have been calculated using average shares outstanding, which
more appropriately presents the per share data for the
year. |
|
(b) |
Amounts
shown in this caption for a share outstanding may not accord with the
change in aggregate gains and losses in securities for the fiscal period
because
of the timing of sales and repurchases of Fund shares in relation to
fluctuating market values for the Fund. |
|
(c) |
Total
return is calculated assuming a purchase of shares at net asset value on
the first day and a sale at net asset value on the last day of each period
reported.
Distributions are assumed, for the purpose of this calculation, to be
reinvested at net asset value per share on the respective payment dates of
each
distribution. Total returns for periods of less than one year are not
annualized. Broker commission charges are not included in this
calculation.
|
|
(d) |
Annualized. |
|
(e) |
Portfolio
turnover rate excludes securities received or delivered from in-kind
processing of creations or redemptions.
|
|
(f) |
Not
annualized. |
35
Where
to Learn More About the Fund
This Prospectus does
not contain all the information included in the Registration Statement filed
with the SEC with respect to Fund Shares. A SAI, Form N-CSR and the annual and
semi-annual reports to shareholders, each of which has been or will be filed
with the SEC, provide more information about the Fund. In the annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the Fund's last fiscal
year. In the Form N-CSR, you will find the Fund's annual and semi-annual
financial statements. The Prospectus and SAI may be supplemented from time to
time. 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 Congress Street, Boston, Massachusetts 02114,
by visiting the Fund's website at www.statestreet.com/im or by calling the
following number:
Investor
Information: 1-866-787-2257
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: [email protected].
Shareholder
inquiries may be directed to the Fund in writing to State Street Global Advisors
Funds Distributors, LLC, One Congress Street, Boston, Massachusetts
02114, 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 Fund. 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.
SPDRBRIDSTATPROThe
Trust's Investment Company Act Number is 811-22542.