COMMENTS RECEIVED ON JULY 1, 2015
FROM EDWARD BARTZ
FIDELITY SALEM STREET TRUST (File Nos. 002-41839 and 811-02105)
Fidelity SAI Small-Mid Cap 500 Index Fund
POST-EFFECTIVE AMENDMENT NO. 280
1. "Fund Summary" (prospectus)
"Fee Table"
[BFidelity Management & Research Company (FMR) has contractually agreed to reimburse the fund to the extent that total operating expenses (excluding interest, certain taxes, certain securities lending costs, brokerage commissions, extraordinary expenses, and acquired fund fees and expenses, if any), as a percentage of its average net assets, exceed __%. This arrangement will remain in effect through _____. FMR may not terminate this arrangement without the approval of the Board of Trustees.]
C: The Staff would like confirmation that the contractual arrangement discussed in the above footnote will remain in effect for one year or more from the effective date of the registration statement.
R: The arrangement will remain in effect through September 30, 2018. Disclosure will be updated to include this date in the b-filing for the fund.
2. "Fund Summary" (prospectus)
"Fee Table"
BFidelity Management & Research Company (FMR) has contractually agreed to reimburse the fund to the extent that total operating expenses (excluding interest, certain taxes, certain securities lending costs, brokerage commissions, extraordinary expenses, and acquired fund fees and expenses, if any), as a percentage of its average net assets, exceed __%. This arrangement will remain in effect through _____. FMR may not terminate this arrangement without the approval of the Board of Trustees.
C: The Staff requests confirmation that the agreement will be filed as an exhibit to the registration statement.
R: As disclosed, this expense reimbursement arrangement will remain in effect for at least a year from the effective date of the prospectus, but there is no agreement to be filed under Item 28(h). Instead, this particular arrangement is an undertaking made by FMR pursuant to which it is bound in accordance with the disclosure to reimburse certain expenses through the stated date (as compared with a voluntary arrangement, which could be discontinued by FMR at any time).
3. "Fund Summary" (prospectus)
"Principal Investment Strategies"
"Normally investing at least 80% of assets in securities included in the Russell SMID 500 Index."
C: The Staff request the inclusion of the market cap range for the stocks in the index.
R: The Staff has indicated that an investment company may use "any reasonable definition" to define the fund's capitalization range, and may consider industry indices for that purpose (Frequently Asked Questions About Rule 35d-1 (Investment Company Names FAQ)). As the capitalization range of each index varies over time, we believe it is more appropriate to identify a well-publicized index by name rather than giving a snap shot of the capitalization. Because we believe that such definition is reasonable and consistent with the Staff's interpretation of Rule 35d-1, we have not modified the disclosure.
Fidelity Salem Street Trust (File Nos. 002-41839 and 811-02105), Post-Effective Amendment No. 280
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4. "Fund Summary" (prospectus)
"Principal Investment Strategies"
"Lending securities to earn income for the fund."
C: The Staff requests that we add a corresponding securities lending risk to the "Fund Summary" section.
R: We note that the current disclosure under "Issuer Specific Changes" in the "Fund Summary" section, which is excerpted below, discusses counterparty risk in a securities lending transaction. In addition, the "Fund Basics" section and the fund's Statement of Additional Information, include additional disclosures regarding counterparty risk and the risks associated with securities lending. We believe that securities lending risk is appropriately disclosed under the "Principal Investment Risks" sub-heading in both the "Fund Summary" and "Investment Details" sections of the prospectus, as well as the fund's Statement of Additional Information. Nonetheless, to provide additional detail in response to the Staff's comment, we have added the underlined disclosure below from the "Fund Basics" section to the "Issuer-Specific Changes" risk disclosure in the "Fund Summary" section. Because we believe that the disclosure under "Issuer-Specific Changes" appropriately discloses the principal risks associated with securities lending, we have not modified disclosure to add a separately titled risk tile, which we believe would in substance be duplicative of the existing disclosures.
Prospectus Disclosure (Fund Summary)
"Issuer-Specific Changes. The value of an individual security or particular type of security can be more volatile than, and can perform differently from, the market as a whole. Changes in the financial condition of an issuer or counterparty (e.g., broker-dealer or other borrower in a securities lending transaction) can increase the risk of default by an issuer or counterparty, which can affect a security's or instrument's value or result in delays in recovering securities and/or capital from a counterparty."
5. "Fund Summary" (prospectus)
"Portfolio Managers"
C: The Staff requests confirmation that all of the portfolio managers are jointly and primarily responsible for the day to day operations of the fund.
R: We believe this disclosure appropriately identifies each portfolio manager as required by Form N-1A, Item 5(a), Instruction 2.
6. "Fund Summary" (prospectus)
"Purchase and Sale of Shares"
"The price to buy one share is its net asset value per share (NAV). Shares will be bought at the NAV next calculated after an order is received in proper form."
C: The Staff requests that we remove any information that does not conform with Items 6(a) and 6(b).
R: We believe the disclosure at issue is consistent with the purchase and sale information required by Item 6(a) and 6(b). Accordingly, we have not modified disclosure.
Fidelity Salem Street Trust (File Nos. 002-41839 and 811-02105), Post-Effective Amendment No. 280
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7. "Investment Details" (prospectus)
"Principal Investment Strategies"
C: The Staff questions whether the fund will use derivatives to meet the 80% test.
R: Though we understand that in appropriate circumstances derivatives may qualify for a fund's name test, at this time the fund does not intend to count derivatives for purposes of its respective 80% policy.
8. "Investment Policies and Limitations" (SAI)
C: The Staff requests that we disclose later in the registration statement that if a fund is a protection seller under a credit default swap, it will segregate assets equal to the full notional amount of the swap agreement. In addition, the Staff requests that we disclose that when the fund is a protection buyer in a default credit swap, it will segregate assets equal to the total amount of required premium payments plus prepayment penalties.
R: We confirm that, if a fund holds any credit default swaps in its portfolio, it would expect at this time to segregate assets equal to the full notional amount of each transaction. In addition, we confirm that, if the fund is a protection buyer in a credit default swap, it would expect at this time to segregate assets at least equal to the total amount of required premium payments, plus any prepayment penalties. We are aware that the SEC has been analyzing the segregation requirements for mutual funds using derivatives and that rulemaking on the subject may be forthcoming. In the absence of staff guidance or rulemaking on the subject, we do not believe it is prudent to include our internal segregation policies in our disclosure. Accordingly, we respectfully decline to modify the disclosure as suggested.
9. "Trustees and Officers" (SAI)
"Experience, Skills, Attributes, and Qualifications of the Fund's Trustees. The Governance and Nominating Committee has adopted a statement of policy that describes the experience, qualifications, attributes, and skills that are necessary and desirable for potential Independent Trustee candidates (Statement of Policy). The Board believes that each Trustee satisfied at the time he or she was initially elected or appointed a Trustee, and continues to satisfy, the standards contemplated by the Statement of Policy. The Governance and Nominating Committee also engages professional search firms to help identify potential Independent Trustee candidates who have the experience, qualifications, attributes, and skills consistent with the Statement of Policy. From time to time, additional criteria based on the composition and skills of the current Independent Trustees, as well as experience or skills that may be appropriate in light of future changes to board composition, business conditions, and regulatory or other developments, have also been considered by the professional search firms and the Governance and Nominating Committee. In addition, the Board takes into account the Trustees' commitment and participation in Board and committee meetings, as well as their leadership of standing and ad hoc committees throughout their tenure.
In determining that a particular Trustee was and continues to be qualified to serve as a Trustee, the Board has considered a variety of criteria, none of which, in isolation, was controlling. The Board believes that, collectively, the Trustees have balanced and diverse experience, qualifications, attributes, and skills, which allow the Board to operate effectively in governing the fund and protecting the interests of shareholders. Information about the specific experience, skills, attributes, and qualifications of each Trustee, which in each case led to the Board's conclusion that the Trustee should serve (or continue to serve) as a trustee of the fund, is provided below."
C: The Staff asserts that the current disclosure in the "Trustees and Officers" section does not adequately describe the reasoning behind each Trustee's appointment to the Board. The Staff also requests that additional information be added describing why a particular Trustee's skills or background are conducive to their position on the Board.
R: We continue to be of the view that, as required by Item 17(b)(10), the current disclosure in the "Trustees and Officers" section includes a brief discussion of the experience, qualifications, attributes, or skills that led to the conclusion that each Trustee should serve as a Trustee for the fund. In addition to the disclosure cited by the Staff, we call the Staff's attention to the disclosure under "Standing Committees of the Fund's Trustees" that describes certain minimum qualifications for Independent Trustees, and to each Trustee's biographical information, which includes each Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Trustee's qualifications to serve as a Trustee, and which led to the conclusion that each Trustee should serve as a Trustee for the fund.
Fidelity Salem Street Trust (File Nos. 002-41839 and 811-02105), Post-Effective Amendment No. 280
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10. Tandy Representations (prospectus and SAI)
C: The Staff would like us to affirm the following three statements:
1) The fund is responsible for the adequacy and accuracy of the disclosure in the filings.
2) Staff comments or changes to disclosure in response to Staff comments in the filings reviewed by the Staff do not foreclose the Commission from taking any action with respect to the filing.
3) The fund may not assert Staff comments as a defense in any proceeding initiated by the Commission or any other person under the Federal Securities Laws.
R: We affirm the aforementioned statements.
