Semi-Annual Report
March 31, 2019
SPDR® S&P 500® ETF Trust
A Unit Investment Trust
Standard & Poors®, S&P®, S&P 500®, Standard & Poors 500®, 500®, Standard & Poors Depositary Receipts®, SPDR® and SPDRs® are trademarks of Standard & Poors Financial Services LLC and have been licensed for use by S&P Dow Jones Indices LLC (S&P) and sublicensed for use by State Street Global Advisors Funds Distributors, LLC. SPDR® S&P 500® ETF Trust is permitted to use these trademarks pursuant to a sublicense from State Street Global Advisors Funds Distributors, LLC. SPDR® S&P 500® ETF Trust is not sponsored, endorsed, sold or promoted by S&P, its affiliates or its third party licensors.
SPDR S&P 500® ETF Trust
Semi-Annual Report
March 31, 2019
(Unaudited)
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SPDR S&P 500® ETF Trust
March 31, 2019 (Unaudited)
See accompanying notes to financial statements.
1
SPDR S&P 500® ETF Trust
Schedule of Investments (continued)
March 31, 2019 (Unaudited)
See accompanying notes to financial statements.
2
SPDR S&P 500® ETF Trust
Schedule of Investments (continued)
March 31, 2019 (Unaudited)
See accompanying notes to financial statements.
3
SPDR S&P 500® ETF Trust
Schedule of Investments (continued)
March 31, 2019 (Unaudited)
See accompanying notes to financial statements.
4
SPDR S&P 500® ETF Trust
Schedule of Investments (continued)
March 31, 2019 (Unaudited)
See accompanying notes to financial statements.
5
SPDR S&P 500® ETF Trust
Schedule of Investments (continued)
March 31, 2019 (Unaudited)
The following table summarizes the value of the Funds investments according to the fair value hierarchy as of March 31, 2019.
Description | Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
Total | ||||||||||||
ASSETS: |
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INVESTMENTS: |
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Common Stocks |
$ | 266,306,493,364 | $ | | $ | | $ | 266,306,493,364 |
See accompanying notes to financial statements.
6
SPDR S&P 500® ETF Trust
Schedule of Investments (continued)
March 31, 2019 (Unaudited)
INVESTMENTS IN AFFILIATES OF THE TRUSTEE AND THE SPONSOR
SPDR S&P 500® ETF Trust has invested in State Street Corp., which is considered an affiliate of the Trustee and Intercontinental Exchange, Inc., which is considered an affiliate of the Sponsor. Amounts related to these investments at March 31, 2019 and for the six months then ended, are (Note 3):
Number of Shares Held at 9/30/18 |
Value at 9/30/18 |
Cost of Purchases* |
Proceeds from Shares Sold* |
Realized Gain (Loss) |
Change in Unrealized Appreciation/ Depreciation |
Number of Shares Held at 3/31/19 |
Value at 3/31/19 |
Dividend Income |
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Intercontinental Exchange, Inc. |
6,513,317 | $ | 487,782,310 | $ | 202,459,507 | $ | 211,207,003 | $ | 17,867,115 | $ | (10,375,476 | ) | 6,389,893 | $ | 486,526,453 | $ | 3,294,357 | |||||||||||||||||||
State Street Corp |
4,311,343 | 361,204,317 | 127,550,495 | 131,070,778 | (3,144,619 | ) | (73,485,504 | ) | 4,270,687 | 281,053,911 | 4,085,611 | |||||||||||||||||||||||||
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TOTAL |
$ | 848,986,627 | $ | 330,010,002 | $ | 342,277,781 | $ | 14,722,496 | $ | (83,860,980 | ) | $ | 767,580,364 | $ | 7,379,968 | |||||||||||||||||||||
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* | Purchased and Sold figures include securities received or delivered from processing creations or redemptions of Units. |
See accompanying notes to financial statements.
7
SPDR S&P 500® ETF Trust
March 31, 2019 (Unaudited)
See accompanying notes to financial statements.
8
SPDR S&P 500® ETF Trust
Statement of Assets and Liabilities
March 31, 2019 (Unaudited)
ASSETS |
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Investments in unaffiliated issuers, at value (Note 2) |
$ | 265,538,913,000 | ||
Investments in affiliates of the Trustee and the Sponsor, at value |
767,580,364 | |||
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Total Investments |
266,306,493,364 | |||
Cash |
1,230,785,734 | |||
Receivable for units of fractional undivided interest (Units) issued in-kind |
1,032,938 | |||
Dividends receivable unaffiliated issuers (Note 2) |
232,728,428 | |||
Dividends receivable affiliated issuers (Note 2) |
1,988,422 | |||
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Total Assets |
267,773,028,886 | |||
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LIABILITIES |
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Payable for investments purchased |
4,394,888 | |||
Accrued Trustee expense (Note 3) |
9,523,589 | |||
Accrued Marketing expense (Note 3) |
22,841,020 | |||
Distribution payable |
1,140,428,054 | |||
Accrued expenses and other liabilities |
33,204,792 | |||
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Total Liabilities |
1,210,392,343 | |||
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NET ASSETS |
$ | 266,562,636,543 | ||
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NET ASSETS CONSIST OF: |
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Paid in capital (Note 4) |
$ | 287,642,092,205 | ||
Total distributable earnings (loss) |
(21,079,455,662 | ) | ||
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NET ASSETS |
$ | 266,562,636,543 | ||
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NET ASSET VALUE PER UNIT |
$ | 282.67 | ||
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UNITS OUTSTANDING (UNLIMITED UNITS AUTHORIZED) |
943,032,116 | |||
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COST OF INVESTMENTS: |
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Unaffiliated issuers |
$ | 279,462,030,079 | ||
Affiliates of the Trustee and the Sponsor (Note 3) |
901,422,454 | |||
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Total Cost of Investments |
$ | 280,363,452,533 | ||
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See accompanying notes to financial statements.
9
SPDR S&P 500® ETF Trust
Six Months Ended 3/31/19 (Unaudited) |
Year Ended 9/30/18 |
Year Ended 9/30/17 |
Year Ended 9/30/16 |
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INVESTMENT INCOME |
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Dividend income unaffiliated issuers (Note 2) |
$ | 2,690,002,299 | $ | 4,995,395,848 | $ | 4,737,367,911 | $ | 3,945,216,356 | ||||||||
Dividend income affiliates of the Trustee and the Sponsor |
7,379,968 | 13,606,086 | 11,842,443 | 9,522,352 | ||||||||||||
Foreign taxes withheld |
| | (9,787 | ) | (1,701 | ) | ||||||||||
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Total Investment Income |
2,697,382,267 | 5,009,001,934 | 4,749,200,567 | 3,954,737,007 | ||||||||||||
EXPENSES |
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Trustee expense (Note 3) |
58,264,299 | 143,201,038 | 126,137,525 | 103,362,752 | ||||||||||||
S&P license fee (Note 3) |
38,523,275 | 80,322,526 | 69,123,020 | 55,221,522 | ||||||||||||
Marketing expense (Note 3) |
21,648,323 | 22,626,082 | 18,358,255 | 36,504,376 | ||||||||||||
Legal and audit fees |
216,995 | 603,472 | 241,998 | 384,056 | ||||||||||||
Other expenses |
1,753,018 | 4,372,847 | 2,644,758 | 2,221,602 | ||||||||||||
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Total Expenses |
120,405,910 | 251,125,965 | 216,505,556 | 197,694,308 | ||||||||||||
Trustee expense waiver |
| | (658,036 | ) | (25,222,398 | ) | ||||||||||
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Net Expenses |
120,405,910 | 251,125,965 | 215,847,520 | 172,471,910 | ||||||||||||
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NET INVESTMENT INCOME (LOSS) |
2,576,976,357 | 4,757,875,969 | 4,533,353,047 | 3,782,265,097 | ||||||||||||
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REALIZED AND UNREALIZED GAIN (LOSS) |
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Net realized gain (loss) on: |
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Investments unaffiliated issuers |
(1,115,528,725 | ) | (631,225,982 | ) | (1,368,210,820 | ) | (1,028,840,743 | ) | ||||||||
Investments affiliates of the Trustee and the Sponsor |
| (838,353 | ) | (355,947 | ) | 26,620,667 | ||||||||||
In-kind redemptions unaffiliated issuers |
9,418,155,893 | 37,318,292,156 | 22,363,636,511 | 11,251,354,143 | ||||||||||||
In-kind redemptions affiliated issuers |
14,722,496 | 142,784,439 | 89,897,379 | 30,680,189 | ||||||||||||
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Net realized gain (loss) |
8,317,349,664 | 36,829,012,260 | 21,084,967,123 | 10,279,814,256 | ||||||||||||
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Net change in unrealized appreciation / depreciation on: |
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Investments unaffiliated issuers |
(16,351,527,889 | ) | (760,564,842 | ) | 12,961,822,882 | 10,942,349,396 | ||||||||||
Investments affiliates of the Trustee and the Sponsor |
(83,860,980 | ) | (158,416,456 | ) | 113,290,379 | 24,374,172 | ||||||||||
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Net change in unrealized appreciation/depreciation |
(16,435,388,869 | ) | (918,981,298 | ) | 13,075,113,261 | 10,966,723,568 | ||||||||||
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NET REALIZED AND UNREALIZED GAIN (LOSS) |
(8,118,039,205 | ) | 35,910,030,962 | 34,160,080,384 | 21,246,537,824 | |||||||||||
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NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
$ | (5,541,062,848 | ) | $ | 40,667,906,931 | $ | 38,693,433,431 | $ | 25,028,802,921 | |||||||
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See accompanying notes to financial statements.
10
SPDR S&P 500® ETF Trust
Statements of Changes in Net Assets
Six Months Ended 3/31/19 (Unaudited) |
Year Ended 9/30/18 |
Year Ended 9/30/17 |
Year Ended 9/30/16 |
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INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: |
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Net investment income (loss) |
$ | 2,576,976,357 | $ | 4,757,875,969 | $ | 4,533,353,047 | $ | 3,782,265,097 | ||||||||
Net realized gain (loss) |
8,317,349,664 | 36,829,012,260 | 21,084,967,123 | 10,279,814,256 | ||||||||||||
Net change in unrealized appreciation/depreciation |
(16,435,388,869 | ) | (918,981,298 | ) | 13,075,113,261 | 10,966,723,568 | ||||||||||
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
(5,541,062,848 | ) | 40,667,906,931 | 38,693,433,431 | 25,028,802,921 | |||||||||||
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NET EQUALIZATION CREDITS AND CHARGES (NOTE 2) |
(16,950,896 | ) | 2,991,782 | 57,766,713 | 21,466,005 | |||||||||||
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DISTRIBUTIONS TO UNITHOLDERS(a) |
(2,508,366,220 | ) | (4,894,169,793 | ) | (4,709,369,232 | ) | (3,930,525,113 | ) | ||||||||
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INCREASE (DECREASE) IN NET ASSETS FROM UNIT TRANSACTIONS: |
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Proceeds from issuance of Units |
279,249,659,335 | 617,352,015,478 | 457,292,137,220 | 432,172,352,001 | ||||||||||||
Cost of Units redeemed |
(284,027,228,085 | ) | (617,035,693,780 | ) | (445,257,589,858 | ) | (422,673,566,737 | ) | ||||||||
Net income equalization (Note 2) |
16,950,896 | (2,991,782 | ) | (57,766,713 | ) | (21,466,005 | ) | |||||||||
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NET INCREASE (DECREASE) IN NET ASSETS FROM ISSUANCE AND REDEMPTION OF UNITS |
(4,760,617,854 | ) | 313,329,916 | 11,976,780,649 | 9,477,319,259 | |||||||||||
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NET INCREASE (DECREASE) IN NET ASSETS DURING THE PERIOD |
(12,826,997,818 | ) | 36,090,058,836 | 46,018,611,561 | 30,597,063,072 | |||||||||||
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NET ASSETS AT BEGINNING OF PERIOD |
279,389,634,361 | 243,299,575,525 | 197,280,963,964 | 166,683,900,892 | ||||||||||||
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NET ASSETS AT END OF PERIOD(b) |
$ | 266,562,636,543 | $ | 279,389,634,361 | $ | 243,299,575,525 | $ | 197,280,963,964 | ||||||||
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UNIT TRANSACTIONS: |
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Units sold |
1,040,100,000 | 2,275,100,000 | 1,958,700,000 | 2,107,450,000 | ||||||||||||
Units redeemed |
(1,058,500,000 | ) | (2,281,850,000 | ) | (1,902,150,000 | ) | (2,065,000,000 | ) | ||||||||
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NET INCREASE (DECREASE) |
(18,400,000 | ) | (6,750,000 | ) | 56,550,000 | 42,450,000 | ||||||||||
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(a) | For the periods ended September 30, 2017 and 2016, respectively, the distributions to unitholders were $4,709,369,232 and $3,930,525,113, respectively, from net investment income. |
(b) | Distribution in excess of net investment income amounted to $(1,093,659,404) and $(985,690,493) as of September 30, 2017 and 2016, respectively. |
See accompanying notes to financial statements.
11
SPDR S&P 500® ETF Trust
Selected data for a Unit outstanding throughout each period
Six Months Ended 3/31/19 (Unaudited) |
Year Ended 9/30/18 |
Year Ended 9/30/17 |
Year Ended 9/30/16 |
Year Ended 9/30/15 |
Year Ended 9/30/14 |
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Net asset value, beginning of period |
$ | 290.60 | $ | 251.30 | $ | 216.40 | $ | 191.77 | $ | 196.98 | $ | 167.96 | ||||||||||||
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Income (loss) from investment operations: |
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Net investment income (loss)(a) |
2.72 | 4.86 | 4.65 | 4.27 | 4.28 | 3.60 | ||||||||||||||||||
Net realized and unrealized gain (loss) |
(7.96 | ) | 39.46 | 34.97 | 24.76 | (5.47 | ) | 29.03 | ||||||||||||||||
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Total from investment operations |
(5.24 | ) | 44.32 | 39.62 | 29.03 | (1.19 | ) | 32.63 | ||||||||||||||||
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Net equalization credits and charges(a) |
(0.02 | ) | 0.00 | (b) | 0.06 | 0.02 | 0.08 | 0.07 | ||||||||||||||||
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Contribution by Trustee |
| | | | 0.03 | (c) | | |||||||||||||||||
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Less Distributions from: |
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Net investment income |
(2.67 | ) | (5.02 | ) | (4.78 | ) | (4.42 | ) | (4.13 | ) | (3.68 | ) | ||||||||||||
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Net asset value, end of period |
$ | 282.67 | $ | 290.60 | $ | 251.30 | $ | 216.40 | $ | 191.77 | $ | 196.98 | ||||||||||||
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Total return(d) |
(1.78 | )% | 17.72 | % | 18.44 | %(e) | 15.30 | % | (0.64 | )%(f) | 19.57 | % | ||||||||||||
Ratios and Supplemental Data: |
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Net assets, end of period (in 000s) |
$ | 266,562,637 | $ | 279,389,634 | $ | 243,299,576 | $ | 197,280,964 | $ | 166,683,901 | $ | 179,915,396 | ||||||||||||
Ratios to average net assets: |
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Total expenses (excluding Trustee earnings credit and fee waivers) |
0.10 | %(g) | 0.10 | % | 0.09 | % | 0.11 | % | 0.11 | % | 0.11 | % | ||||||||||||
Total expenses (excluding Trustee earnings credit) |
0.10 | %(g) | 0.10 | % | 0.09 | % | 0.11 | % | 0.11 | % | 0.11 | % | ||||||||||||
Net expenses(h) |
0.09 | %(g) | 0.09 | % | 0.09 | % | 0.09 | % | 0.09 | % | 0.09 | % | ||||||||||||
Net investment income (loss) |
2.02 | %(g) | 1.79 | % | 1.98 | % | 2.07 | % | 2.09 | % | 1.93 | % | ||||||||||||
Portfolio turnover rate(i) |
1 | % | 2 | % | 3 | % | 4 | % | 3 | % | 4 | % |
(a) | Per Unit numbers have been calculated using the average shares method, which more appropriately presents per Unit data for the period. |
(b) | Amount is less than $0.005 per Unit. |
(c) | Contribution paid by the Trustee (State Street Bank and Trust Company) in the amount of $26,920,521. |
(d) | Total return is calculated assuming a purchase of Units at net asset value per Unit on the first day and a sale at net asset value per Unit on the last day of each period reported. Distributions are assumed, for the purposes of this calculation, to be reinvested at the net asset value per Unit on the respective payment dates of the Trust. Total return for a period of less than one year is not annualized. Broker commission charges are not included in this calculation. |
(e) | Reflects a non-recurring litigation payment received by the Trust from State Street Corp., an affiliate, which amounted to less than $0.005 per Unit outstanding as of March 20, 2017. This payment resulted in an increase to total return of less than 0.005% for the period ended September 30, 2017. |
(f) | Total return would have been lower by 0.01% if the Trustee had not made a contribution. |
(g) | Annualized. |
(h) | Net of expenses waived by the Trustee. |
(i) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions of Units. |
See accompanying notes to financial statements.
12
SPDR S&P 500® ETF Trust
March 31, 2019 (Unaudited)
Note 1 Organization
SPDR S&P 500® ETF Trust (the Trust) is a unit investment trust created under the laws of the State of New York and registered under the Investment Company Act of 1940, as amended. The Trust was created to provide investors with the opportunity to purchase a security representing a proportionate undivided interest in a portfolio of securities consisting of substantially all of the component common stocks, in substantially the same weighting, which comprise the Standard & Poors 500® Index (the S&P 500® Index). Each unit of fractional undivided interest in the Trust is referred to as a Unit. The Trust commenced operations on January 22, 1993 upon the initial issuance of 150,000 Units (equivalent to three Creation Units see Note 4) in exchange for a portfolio of securities assembled to reflect the intended portfolio composition of the Trust.
Effective June 16, 2017, State Street Bank and Trust Company (SSBT) resigned as trustee of the Trust. PDR Services, LLC, as sponsor of the Trust (the Sponsor), appointed State Street Global Advisors Trust Company, a wholly-owned subsidiary of SSBT, as trustee of the Trust (the Trustee).
The services received, and the trustee fees paid, by the Trust have not changed as a result of the change in the identity of the Trustee. SSBT continues to maintain the Trusts accounting records, act as custodian and transfer agent to the Trust, and provide administrative services, including the filing of certain regulatory reports.
Under the Amended and Restated Standard Terms and Conditions of the Trust, as amended (the Trust Agreement), the Sponsor and the Trustee are indemnified against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts that contain general indemnification clauses. The Trusts maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, based on experience, the Trustee expects the risk of material loss to be remote.
The Sponsor is an indirect, wholly-owned subsidiary of Intercontinental Exchange, Inc. (ICE). ICE is a publicly-traded entity, trading on the New York Stock Exchange under the symbol ICE.
Note 2 Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Trustee in the preparation of the Trusts financial statements:
The preparation of financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The Trust is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
Security Valuation
The Trusts investments are valued at fair value each day that the New York Stock Exchange (NYSE) is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the NYSE is not open. Fair value is generally defined as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. By its nature, a fair value price is a good faith estimate of the valuation in a current sale and may not reflect an actual market price. The investments of the Trust are valued pursuant to the policy and procedures developed by the Oversight Committee of the Trustee (the Committee). The Committee provides oversight of the valuation of investments for the Trust.
13
SPDR S&P 500® ETF Trust
Notes to Financial Statements (continued)
March 31, 2019 (Unaudited)
Note 2 Summary of Significant Accounting Policies (continued)
Valuation techniques used to value the Trusts equity investments are as follows:
Equity investments (including preferred stocks) traded on a recognized securities exchange for which market quotations are readily available are valued at the last sale price or official closing price, as applicable, on the primary market or exchange on which they trade. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last published sale price or at fair value.
In the event that prices or quotations are not readily available or that the application of these valuation methods results in a price for an investment that is deemed to be not representative of the fair value of such investment, fair value will be determined in good faith by the Committee, in accordance with the valuation policy and procedures approved by the Trustee.
Fair value pricing could result in a difference between the prices used to calculate the Trusts net asset value (NAV) and the prices used by the Trusts underlying index, S&P 500® Index, which in turn could result in a difference between the Trusts performance and the performance of the S&P 500® Index.
The Trustee values the Trusts assets and liabilities at fair value using a hierarchy that prioritizes the inputs to valuation techniques, giving the highest priority to readily available unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements) when market prices are not readily available or reliable. The categorization of a value determined for an investment within the hierarchy is based upon the pricing transparency of the investment and is not necessarily an indication of the risk associated with the investment.
The three levels of the fair value hierarchy are as follows:
| Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities; |
| Level 2 Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| Level 3 Unobservable inputs for the asset or liability, including the Committees assumptions used in determining the fair value of investments. |
Investment Transactions and Income Recognition
Investment transactions are accounted for on the trade date for financial reporting purposes. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source, if any. Non-cash dividends received in the form of stock, if any, are recorded as dividend income at fair value.
14
SPDR S&P 500® ETF Trust
Notes to Financial Statements (continued)
March 31, 2019 (Unaudited)
Note 2 Summary of Significant Accounting Policies (continued)
Distributions received by the Trust may include a return of capital that is estimated by the Trustee. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. The Trust invests in real estate investment trusts (REITs). REITs determine the characterization of their income annually and may characterize a portion of their distributions as a return of capital or capital gain. The Trustees policy is to record all REIT distributions as dividend income initially and re-designate a portion to return of capital or capital gain distributions at year end based on information provided by the REIT and/or Trustees estimates of such re-designations for which actual information has not yet been reported. Realized gains and losses from the sale or disposition of investments are determined using the identified cost method.
Distributions
The Trust declares and distributes dividends from net investment income, if any, to its holders of Units (Unitholders), quarterly. Capital gain distributions, if any, are generally declared and paid annually. Additional distributions may be paid by the Trust to avoid imposition of federal income and excise tax on any remaining undistributed net investment income and capital gains. The amount and character of income and gains to be distributed are determined in accordance with federal tax regulations which may differ from net investment income and realized gains recognized for U.S. GAAP purposes.
Equalization
The Trustee follows the accounting practice known as Equalization by which a portion of the proceeds from sales and costs of reacquiring the Trusts Units, equivalent on a per Unit basis to the amount of distributable net investment income on the date of the transaction, is credited or charged to undistributed net investment income. As a result, undistributed net investment income per Unit is unaffected by sales or reacquisitions of the Trusts Units. Amounts related to Equalization can be found on the Statements of Changes in Net Assets.
Federal Income Taxes
For U.S. federal income tax purposes, the Trust has qualified as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (a RIC), and intends to continue to qualify as a RIC. As a RIC, the Trust will generally not be subject to U.S. federal income tax for any taxable year on income, including net capital gains, that it distributes to its Unitholders, provided that it distributes on a timely basis at least 90% of its investment company taxable income determined prior to the deduction for dividends paid by the Trust (generally, its taxable income other than net capital gain) for such taxable year. In addition, provided that the Trust distributes substantially all of its ordinary income and capital gains during each calendar year, the Trust will not be subject to U.S. federal excise tax. Income and capital gain distributions are determined in accordance with U.S. Federal income tax principles which may differ from U.S. GAAP.
U.S. GAAP requires the evaluation of tax positions taken in the course of preparing the Trusts tax returns to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. For U.S. GAAP purposes, the Trust recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained, assuming examination by tax authorities.
15
SPDR S&P 500® ETF Trust
Notes to Financial Statements (continued)
March 31, 2019 (Unaudited)
Note 2 Summary of Significant Accounting Policies (continued)
The Trustee has reviewed the Trusts tax positions for the open tax years as of September 30, 2018 and has determined that no provision for income tax is required in the Trusts financial statements. Generally, the Trusts tax returns for the prior three fiscal years remain subject to examinations by the Trusts major tax jurisdictions, which include the United States of America, the Commonwealth of Massachusetts and the State of New York. The Trustee has the Trust recognize interest and penalties, if any, related to tax liabilities as income tax expense in the Statements of Operations. There were no such expenses for the year ended September 30, 2018.
No income tax returns are currently under examination. The Trustee has analyzed the relevant tax laws and regulations and their application to the Trusts facts and circumstances and does not believe there are any uncertain tax positions that require recognition of any tax liabilities. Any potential tax liability is also subject to ongoing interpretation of laws by taxing authorities. The tax treatment of the Trusts investments may change over time based on factors including, but not limited to, new tax laws, regulations and interpretations thereof.
During the six months ended March 31, 2019, the Trustee reclassified $9,432,878,389 of non-taxable security gains realized from the in-kind redemption of Creation Units (Note 4) as an increase to paid in capital in the Statement of Assets and Liabilities.
At March 31, 2019, gross unrealized appreciation and gross unrealized depreciation of investments based on cost for federal income tax purposes were as follows:
Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
|||||||||||||
SPDR S&P 500® ETF Trust |
$ | 280,414,107,926 | $ | 13,847,622,096 | $ | 27,955,236,658 | $ | (14,107,614,562 | ) |
Note 3 Transactions with Affiliates of the Trustee and Sponsor
SSBT maintains the Trusts accounting records, acts as custodian and transfer agent to the Trust, and provides administrative services, including the filing of certain regulatory reports. The Trustee pays SSBT for such services. The Trustee is responsible for determining the composition of the portfolio of securities which must be delivered and/or received in exchange for the issuance and/or redemption of Creation Units of the Trust, and for adjusting the composition of the Trusts portfolio from time to time to conform to changes in the composition and/or weighting structure of the S&P 500® Index . For these services, the Trustee received a fee at the following annual rates for the six months ended March 31, 2019:
Net asset value of the Trust |
Fee as a percentage of net asset value of the Trust | |
$0 $499,999,999 | 0.10% per annum plus or minus the Adjustment Amount | |
$500,000,000 $2,499,999,999 | 0.08% per annum plus or minus the Adjustment Amount | |
$2,500,000,000 and above | 0.06% per annum plus or minus the Adjustment Amount |
The adjustment amount (the Adjustment Amount) is the sum of (a) the excess or deficiency of transaction fees received by the Trustee, less the expenses incurred in processing orders for the creation and redemption of Units and (b) the amounts earned by the Trustee with respect to the cash held by the Trustee for the benefit of the Trust. During the six months ended March 31, 2019, the Adjustment Amount reduced the Trustees fee by $18,483,076. The Adjustment Amount included an excess of net transaction fees from processing orders of $4,345,060 and a Trustee earnings credit of $14,138,016.
16
SPDR S&P 500® ETF Trust
Notes to Financial Statements (continued)
March 31, 2019 (Unaudited)
Note 3 Transactions with Affiliates of the Trustee and Sponsor (continued)
The Trustee has voluntarily agreed to waive a portion of its fee, as needed, for one year until February 1, 2020, so that the total operating expenses would not exceed 0.0945% per annum of the daily NAV of the Trust. The total amount of such waivers by the Trustee for the years ended September 30, 2017 and 2016 are identified in the Statements of Operations. No amounts were waived for the six months ended March 31, 2019 and the year ended September 30, 2018. The Trustee has not entered into an agreement with the Trust to recapture waived fees in subsequent periods, and the Trustee may discontinue the voluntary waiver.
In accordance with the Trust Agreement and under the terms of an exemptive order issued by the U.S. Securities and Exchange Commission, dated December 30, 1997, the Sponsor is reimbursed by the Trust for certain expenses up to a maximum of 0.20% of the Trusts NAV on an annualized basis. The expenses reimbursed to the Sponsor for the six months ended March 31, 2019, and the years ended September 30, 2018, 2017 and 2016, did not exceed 0.20% per annum. The licensing and marketing fee disclosed below are subject to both the reimbursement from the Trust to the Sponsor and expense limitation of 0.20% of the Trusts NAV. The Trust reimbursed the Sponsor for $253,069 of legal fees, which are included in Legal and audit fees on the Statements of Operations.
S&P Dow Jones Indices LLC (S&P), per a license from Standard & Poors Financial Services LLC, and State Street Global Advisors Funds Distributors, LLC (SSGA FD or the Marketing Agent) have entered into a license agreement (the License Agreement). The License Agreement grants SSGA FD, an affiliate of the Trustee, a license to use the S&P 500® Index and to use certain trade names and trademarks of S&P in connection with the Trust. The S&P 500® Index also serves as the basis for determining the composition of the Trusts portfolio. The Trustee (on behalf of the Trust), the Sponsor and NYSE Arca, Inc. (NYSE Arca) have each received a sublicense from SSGA FD for the use of the S&P 500® Index and certain trade names and trademarks in connection with their rights and duties with respect to the Trust. The License Agreement may be amended without the consent of any of the owners of beneficial interests of Units. Currently, the License Agreement is scheduled to terminate on November 29, 2031, but its term may be extended without the consent of any of the owners of beneficial interests of Units. Pursuant to such arrangements and in accordance with the Trust Agreement, the Trust reimburses the Sponsor for payment of fees under the License Agreement to S&P equal to 0.03% of the daily size of the Trust (based on Unit closing price and outstanding Units) plus an annual license fee of $600,000.
The Sponsor has entered into an agreement with the Marketing Agent pursuant to which the Marketing Agent has agreed to market and promote the Trust. The Marketing Agent is reimbursed by the Sponsor for the expenses it incurs for providing such services out of amounts that the Trust reimburses the Sponsor. Expenses incurred by the Marketing Agent include, but are not limited to: printing and distribution of marketing materials describing the Trust, associated legal, consulting, advertising and marketing costs and other out-of-pocket expenses.
ALPS Distributors, Inc. (the Distributor) serves as the distributor of the Units. The Sponsor pays the Distributor for its services a flat annual fee of $25,000, and the Trust does not reimburse the Sponsor for this fee.
Investments in Affiliates of the Trustee and the Sponsor
The Trust has invested in companies that are considered affiliates of the Trustee (State Street Corp.) and the Sponsor (ICE). Such investments were made according to the representative portion of the S&P 500® Index. The market values of these investments at March 31, 2019 are listed in the Schedule of Investments.
17
SPDR S&P 500® ETF Trust
Notes to Financial Statements (continued)
March 31, 2019 (Unaudited)
Note 3 Transactions with Affiliates of the Trustee and Sponsor (continued)
On March 20, 2017, the Trust received a non-recurring litigation payment of $661,715 from State Street Corp., an affiliate of the Trustee, which is recorded as a realized gain in the 2017 Statements of Operations.
Note 4 Unitholder Transactions
Units are issued and redeemed by the Trust only in Creation Unit size aggregations of 50,000 Units. Such transactions are only permitted on an in-kind basis, with a separate cash payment that is equivalent to the undistributed net investment income per Unit (income equalization) and a balancing cash component to equate the transaction to the NAV per Unit of the Trust on the transaction date. There is a transaction fee payable to the Trustee in connection with each creation and redemption of Creation Units made through the clearing process (the Transaction Fee). The Transaction Fee is non-refundable, regardless of the NAV of the Trust. The Transaction Fee is the lesser of $3,000 or 0.10% (10 basis points) of the value of one Creation Unit at the time of creation per participating party per day, regardless of the number of Creation Units created or redeemed on such day. The Transaction Fee is currently $3,000. For creations and redemptions outside the clearing process, including orders from a participating party restricted from engaging in transactions in one or more of the common stocks that are included in the S&P 500® Index , an additional amount not to exceed three (3) times the Transaction Fee applicable for one Creation Unit is charged per Creation Unit per day.
Note 5 Investment Transactions
For the six months ended March 31, 2019, the Trust had in-kind contributions, in-kind redemptions, purchases and sales of investment securities of $106,086,884,226, $110,865,407,108, $4,502,092,524, and $3,489,221,495, respectively. Net realized gain (loss) on investment transactions in the Statements of Operations includes net gains resulting from in-kind transactions of $9,432,878,389.
Note 6 Market Risk
In the normal course of business, the Trust invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk). Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.
An investment in the Trust involves risks similar to those of investing in any fund of equity securities, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in stock prices. The value of a Unit will decline, more or less, in correlation with any decline in value of the S&P 500® Index. The values of equity securities could decline generally or could underperform other investments. The Trust would not sell an equity security because the securitys issuer was in financial trouble unless that security was removed from the S&P 500® Index.
Note 7 Subsequent Events
The Trustee has evaluated the impact of all subsequent events on the Trust through the date on which the financial statements were issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
18
SPDR S&P 500® ETF Trust
March 31, 2019 (Unaudited)
Comparison of Total Returns Based on NAV and Bid/Ask Price(1)
The table below is provided to compare the Trusts total pre-tax return at NAV with the total pre-tax returns based on bid/ask price and the performance of the S&P 500® Index. Past performance is not necessarily an indication of how the Trust will perform in the future. The return based on NAV shown in the table below reflects the impact of a fee waiver and, without this waiver, returns would have been lower.
Cumulative Total Return
1 Year | 5 Year | 10 Year | ||||||||||
SPDR S&P 500® ETF Trust |
||||||||||||
Return Based on NAV |
9.36 | % | 66.80 | % | 331.93 | % | ||||||
Return Based on Bid/Ask Price |
9.31 | % | 66.75 | % | 333.33 | % | ||||||
S&P 500® Index |
9.50 | % | 67.81 | % | 338.09 | % |
Average Annual Total Return
1 Year | 5 Year | 10 Year | ||||||||||
SPDR S&P 500® ETF Trust |
||||||||||||
Return Based on NAV |
9.36 | % | 10.77 | % | 15.76 | % | ||||||
Return Based on Bid/Ask Price |
9.31 | % | 10.77 | % | 15.79 | % | ||||||
S&P 500® Index |
9.50 | % | 10.92 | % | 15.93 | % |
(1) | The bid/ask price is the midpoint of the best bid and best offer prices on NYSE Arca at the time the Trusts NAV is calculated, ordinarily 4:00 p.m. |
19
SPDR S&P 500® ETF Trust
(Unaudited)
Sponsor
PDR Services LLC
c/o NYSE Holdings LLC
11 Wall Street
New York, NY 10005
Trustee
State Street Global Advisors Trust Company
One Iron Street
Boston, MA 02210
Distributor
ALPS Distributors, Inc.
1290 Broadway Suite 1100
Denver, CO 80203
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
101 Seaport Boulevard, Suite 500
Boston, MA 02210
SPYSAR