WisdomTree Industrial Metals is designed to enable investors to gain an exposure to a total return investment in a basket of commodity futures contracts by tracking the Bloomberg Industrial Metals Subindex (the 'Index') and providing a collateral yield.
WisdomTree Industrial Metals is an exchange traded commodity ('ETC'). Its securities
can be created and redeemed on demand by authorised participants and traded on
exchange just like shares in a company. The ETC is backed by swaps. The payment
obligations of the swap counterparties to the Issuer are protected by collateral held
which is marked to market daily. The collateral is held in segregated accounts at The
Bank of New York Mellon. Details of the collateral held can be found in the Collateral
section of the WisdomTree website (www.wisdomtree.com).
The Index is designed to reflect the movement in the price of the futures contracts
(that are continuously rolled on a pre-determined rolling schedule) of the industrial
metals used in the Bloomberg Commodity IndexSM: Aluminum, Copper, Nickel and
Zinc. A futures contract is an agreement to purchase a commodity at an agreed price,
with delivery and payment to take place at a specified point in the future. Futures
contracts are generally disposed of just before the term of the contract expires and
new contracts entered into in order to avoid taking actual delivery of the commodity in
question (a process known as 'rolling'), so that continuous exposure to the commodity
is maintained. The contracts being purchased may be more expensive than the
contracts being sold which would cause an investor in commodity futures to make an
additional loss. This market trend is known as 'contango'. Alternatively the contracts
being purchased may be cheaper than the ones being sold which would result in an
additional gain, known as 'backwardation'. This price difference is commonly referred
to as 'roll yield'. As the roll yield is incorporated into the calculation of the value of the
Index, it may therefore have a positive or negative impact on the value of the Index
depending on whether there is contango or backwardation. The ETC will also be
affected as its value is based upon the value of the Index.