|
Notes
to Financial Statements (unaudited)
|
1.
ORGANIZATION
WisdomTree
Trust (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”),
as an open-end
management investment company. The Trust was established as a Delaware statutory trust on December 15, 2005 and is authorized
to have multiple series of portfolios (each a “Fund”, collectively, the “Funds”). These notes relate only
to the Funds listed below. In accordance with Accounting Standards Codification Topic 946, Financial Services-Investment
Companies, each Fund listed below qualifies as an investment company and is applying the accounting and reporting guidance for investment
companies.
|
Fund
|
Commencement
of
Operations |
|
WisdomTree
Dynamic Currency Hedged International Equity Fund (“Dynamic Currency Hedged International Equity Fund” and also referred
to herein as “Currency Hedged Equity Fund”) |
January 7,
2016 |
|
WisdomTree
Dynamic Currency Hedged International SmallCap Equity Fund (“Dynamic Currency Hedged International SmallCap Equity Fund”
and also referred to herein as “Currency Hedged Equity Fund”) |
January 7,
2016 |
|
WisdomTree
Emerging Markets ex-China Fund (“Emerging Markets ex-China Fund”) |
September 22,
2022 |
|
WisdomTree
U.S. Corporate Bond Fund (“U.S. Corporate Bond Fund”) |
April 27,
2016 |
|
WisdomTree
U.S. High Yield Corporate Bond Fund (“U.S. High Yield Corporate Bond Fund”) |
April 27,
2016 |
|
WisdomTree
U.S. Short-Term Corporate Bond Fund (“U.S. Short-Term Corporate Bond Fund”) |
April 27,
2016 |
|
WisdomTree
Emerging Markets Efficient Core Fund (“Emerging Markets Efficient Core Fund”) |
May 20,
2021 |
|
WisdomTree
International Efficient Core Fund (“International Efficient Core Fund”) |
May 20,
2021 |
|
WisdomTree
U.S. Efficient Core Fund (“U.S. Efficient Core Fund”) |
August 2,
2018 |
|
WisdomTree
Artificial Intelligence and Innovation Fund (“Artificial Intelligence and Innovation Fund”) |
December 9,
2021 |
|
WisdomTree
Battery Value Chain and Innovation Fund (“Battery Value Chain and Innovation Fund”) |
February 17,
2022 |
|
WisdomTree
BioRevolution Fund (“BioRevolution Fund”) |
June 3,
2021 |
|
WisdomTree
Cloud Computing Fund (“Cloud Computing Fund”) |
September 6,
2019 |
|
WisdomTree
Cybersecurity Fund (“Cybersecurity Fund”) |
January 28,
2021 |
Each
Fund, except the Emerging Markets Efficient Core Fund, International Efficient Core Fund and U.S. Efficient Core Fund, seeks to
track the price and yield performance, before fees and expenses, of a particular index (“Index”) developed by WisdomTree,
Inc. (“WisdomTree”) or an Index developed by a third party. The Emerging Markets Efficient Core Fund, International Efficient
Core Fund and U.S. Efficient Core Fund are actively managed using a model-based
approach. WisdomTree is the parent company of WisdomTree Asset Management, Inc. (“WTAM”), the investment adviser to each
Fund and the Trust. “WisdomTree” is a registered trademark of WisdomTree and has been licensed for use by the Trust. Each
Fund described herein is considered to be non-diversified
as defined under the 1940 Act.
In
the normal course of business, the Funds may enter into contracts that contain a variety of representations or that provide indemnification
for certain liabilities. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that
may be made against the Funds that have not yet occurred. However, the Funds have not had prior claims or losses pursuant to these contracts
and believe such exposure to be remote.
2.
SIGNIFICANT ACCOUNTING POLICIES
The
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification”) is the
exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB
to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”)
under authority of federal laws are also sources of authoritative GAAP for SEC registrants.
The
following is a summary of significant accounting policies followed by the Funds:
Use
of Estimates — The
preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of increases and decreases in the net assets from operations during the reporting period. Actual results could
differ from those estimates.
Investment
Valuation — The
net asset value (“NAV”) of each Fund’s shares is calculated each day a Fund is open for business as of the
regularly scheduled close of regular trading on the New York Stock Exchange, normally 4:00 p.m. Eastern time (the “NAV
Calculation Time”). NAV per share is calculated by dividing a Fund’s net assets by the number of Fund shares outstanding.
Each Fund issues and redeems shares at NAV only in large blocks of shares known as creation units, which only certain institutions (e.g.,
broker-dealers)
may purchase or redeem. Shares of each Fund are listed on a national securities exchange and trade at market prices. Most investors will
buy and sell shares in the secondary market through brokers. Because Fund shares trade at market prices
128 WisdomTree
Trust
|
Notes
to Financial Statements
(unaudited) (continued)
|
rather
than NAV, shares may trade at a price greater than NAV or less than NAV. In calculating each Fund’s NAV, investments are
valued under policies approved by the Board of Trustees of the Trust (the “Board” or “Board of Trustees”).
Equity securities (including preferred stock) traded on any recognized U.S. or non-U.S. exchange
are valued at the last sale price or official closing price on the exchange on which they are principally traded. Unlisted equity securities
(including preferred stock) are valued at the last sale price or, if no sale price is available, at the mean between the highest bid and
lowest ask price. Each Fund may invest in money market funds which are valued at their NAV per share and exchange-traded
funds (“ETFs” or “ETF”) or exchange-traded
notes (“ETNs” or “ETN”) which are valued at their last sale or official closing price on the exchange on which
they are principally traded or at their NAV per share in instances where the ETF or ETN has not traded on its principal exchange. Fixed
income securities (including short-term
debt securities with remaining maturities of 60 days or less) generally are valued at current market quotations or mean prices
obtained from broker-dealers
or independent pricing service providers. Broker-dealers
or independent pricing service providers, in determining the value of securities, may consider such factors as recent transactions, indications
from yields and quoted prices from broker-dealers
on similar securities, and market sentiment for the type of security. U.S. fixed income securities may be valued as of the announced
closing time for such securities on any day that the Securities Industry and Financial Markets Association announces an early closing
time. Foreign currency contracts that settle within two business days after the trade date (“Spot Contracts”) and
foreign currency contracts having a settlement period greater than two business days after the trade date (“Forward Contracts”)
are valued on the measurement date using an interpolated foreign exchange rate between the closest preceding and subsequent settlement
period, using spot and forward rates provided by an independent pricing service provider. Futures contracts generally are valued at the
settlement price, the price at which a futures contract settles once a given trading day has ended, on the primary exchange on
which they trade.
Pursuant
to Board-approved
valuation procedures established by the Trust and WTAM, the Board has appointed WTAM as the Funds’ valuation designee (the
“Valuation Designee”) to perform all fair valuations of the Funds’ portfolio investments, subject to the Board’s
oversight. As the Valuation Designee, WTAM has established procedures for its fair valuation of a Fund’s portfolio investments.
These procedures address, among other things, determining when market quotations are not readily available or reliable and the methodologies
to be used for determining the fair value of investments, as well as the use and oversight of third-party
pricing services for fair valuation. The Valuation Designee is comprised of senior representatives of WTAM and reports to the Board
of Trustees on a quarterly basis. In the event that a financial instrument cannot be valued based upon a price from the exchange or system
on which it is principally traded, independent pricing service provider or broker-dealer
quotation, or such prices are deemed to not reflect current market value, the Valuation Designee may value the financial instrument in
good faith under the policies and procedures approved by the Board of Trustees based on current facts and circumstances. Securities that
may be valued using “fair value” pricing may include, but are not limited to, securities for which there are no current
market quotations, securities whose issuer is in default or bankruptcy, securities subject to corporate actions (such as mergers or reorganizations),
securities subject to non-U.S. investment
limits or currency controls, and securities affected by “significant events”. An example of a significant event is an event
occurring after the close of the market in which a security trades but before a Fund’s next NAV Calculation Time that may materially
affect the value of a Fund’s investment (e.g., government action, natural disaster, or significant market fluctuation). When fair
value pricing is employed, the prices of securities used by a Fund to calculate its NAV may differ from quoted or published prices for
the same securities.
Fair
Value Measurement — In
accordance with Codification Topic 820 (“ASC 820”), Fair Value Measurements and Disclosures, fair value is
defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The Valuation Designee will perform other procedures (consistent with GAAP) to value an investment
when a market quote is not available. ASC 820 established a three-tier
hierarchy of inputs to be used when determining fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions
that market participants would use in pricing the asset or liability, including assumptions about risk — for example,
the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and/or
the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions
market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent
of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants
would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The
three-tier
hierarchy of inputs is summarized in the three broad levels listed below:
Level
1 – quoted prices in active markets for identical securities
Level
2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds,
credit risk, etc.)
Level
3 – significant unobservable inputs (including each Fund’s assumptions in determining the fair value of investments)
The
inputs or methodology used for valuation are not necessarily an indication of the risk associated with investing in those investments.
WisdomTree
Trust 129
|
Notes
to Financial Statements
(unaudited) (continued)
|
Investments
that use Level 2 or Level 3 inputs may include, but are not limited to: (i) an unlisted security related to corporate actions;
(ii) a restricted security (e.g., one that may not be publicly sold without registration under the Securities Act of 1933,
as amended); (iii) a security whose trading has been suspended (either due to events affecting the issuer of the security specifically
or events affecting the primary trading exchange more broadly) or which has been de-listed
from its primary trading exchange; (iv) a security that is thinly traded; (v) a security in default or bankruptcy proceedings
for which there is no current market quotation or market activity; (vi) a security affected by currency controls or restrictions;
(vii) fixed income securities valued by a broker-dealer
or independent pricing service provider; and (viii) a security affected by a significant event (e.g., an event that occurs after
the close of the markets in which the security is traded but before the time as of which each Fund’s NAV is computed and that may
materially affect the value of each Fund’s investments).
The
valuation techniques and significant inputs used in determining the fair market value measurements for Level 2 and Level 3 positions are
as follows:
Financial
instruments are generally valued by independent pricing service providers that use broker-dealer
quotations, reported trades or valuation estimates from their internal pricing models. Depending on the type of financial instrument,
the independent pricing service providers’ internal pricing models may use inputs that are observable such as issuer details (e.g.,
credit rating, debt ranking, coupon date, maturity date, etc.), interest rates, yield curves, prepayment speeds, credit risks/spreads,
default rates and quoted prices for similar assets. Financial instruments that use similar valuation techniques and observable inputs
as described above and have an appropriate level of market activity are categorized as Level 2 of the fair value hierarchy, otherwise
a Level 3 fair value classification is appropriate. Over-the-counter
financial derivative instruments derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination
of these factors. These instruments are normally valued on the basis of broker-dealer
quotations or prices obtained from independent pricing service providers. Depending on the product and the terms of the transaction, the
value of the financial derivative instruments can be estimated by an independent pricing service provider using a series of techniques
including simulation pricing models. The pricing models may use inputs that are observed from actively quoted markets such as issuer details,
indices, credit risks/spreads,
interest rates, yield curves, default and exchange rates. Derivative contracts that use similar valuation techniques and observable inputs
as described above and have an appropriate level of market activity are categorized as Level 2 of the fair value hierarchy, otherwise
a Level 3 fair value classification is appropriate.
Determination
of a fair value by the Valuation Designee may include significant unobservable inputs and therefore such financial instruments would be
reflected as a Level 3 of the fair value hierarchy. The Valuation Designee may employ a market-based
valuation approach which may use, among other potential considerations, related or comparable securities, recent transactions, market
multiples, and other relevant information to determine fair value. The Valuation Designee may also use an income-based
valuation approach in which anticipated future cash flows of the financial instrument are discounted to calculate fair value.
The
summary of fair valuations according to the inputs used in valuing each Fund’s assets as of the measurement date is included in
a “Fair Valuation Summary” supplementary table in each applicable Fund’s Schedule of Investments.
During
the six months ended December 31, 2024, there were no significant transfers into or out of Level 3 of the fair value
hierarchy.
Derivatives
and Hedging Disclosure — Codification
Topic 815 (“ASC 815”), Derivatives and Hedging, requires qualitative disclosures about objectives and strategies
for using derivatives, quantitative disclosures about fair value amounts as well as gains and losses on derivative instruments, and disclosures
about credit-risk-related
contingent features in derivative agreements. The Funds have invested in derivatives, specifically foreign currency contracts, equity
futures contracts and interest rate futures contracts during the fiscal period ended December 31, 2024 and open positions in such
derivatives as of December 31,
2024 are detailed in each Fund’s Schedule of Investments. All of the derivative instruments disclosed and described herein are
subject to risk. The Funds’ derivative agreements may also contain credit-risk
related contingent features which may include, but are not limited to, a threshold in the Funds’ derivative agreements on unrealized
depreciation (i.e.,
the Funds’ obligation to the counterparty) above a specified dollar amount. If an event occurred at December 31, 2024 that
triggered a contingent feature, the counterparty to the agreement may require a Fund to post collateral (or additional collateral) or
terminate the derivative positions and demand payment. Any collateral posted with respect to the derivative positions would be used to
offset or reduce the payment due to a counterparty. The maximum exposure to derivatives agreements with credit-risk
related contingent features would be the total value of derivatives in net liability positions for each Fund, as disclosed in Note 2
— Master
Netting Arrangements under
the column entitled “Liabilities:
Net Amount”.
Information with respect to the amounts and types of collateral received and/or
posted for derivative instruments as of December 31, 2024, if any, is reflected as a footnote within each Fund’s Schedule
of Investments. At December 31, 2024, the Funds did not receive or post collateral with any counterparty for derivatives and no
event occurred that triggered a credit-risk-related
contingent feature.
130 WisdomTree
Trust
|
Notes
to Financial Statements
(unaudited) (continued)
|
As
of December 31, 2024, the effects of such derivative instruments on each Fund’s financial position as reflected in the Statements
of Assets and Liabilities are presented in the summary below:
|
Fund
|
Asset
Derivatives |
Liability
Derivatives |
|
Balance
Sheet Location |
Value
|
Balance
Sheet Location |
Value
|
|
Dynamic
Currency Hedged International Equity Fund |
|
|
|
|
Foreign
currency risk |
Unrealized
appreciation on
foreign currency contracts |
$7,554,926
|
Unrealized
depreciation on
foreign currency contracts |
$ 89,078
|
|
Dynamic
Currency Hedged International SmallCap Equity Fund |
|
Foreign
currency risk |
Unrealized
appreciation on
foreign currency contracts |
9,393,527
|
Unrealized
depreciation on
foreign currency contracts |
18,238
|
|
Emerging
Markets Efficient Core Fund |
|
Interest
rate risk |
Unrealized
appreciation on
futures contracts* |
—
|
Unrealized
depreciation on
futures contracts* |
277,532
|
|
International
Efficient Core Fund |
|
Interest
rate risk |
Unrealized
appreciation on
futures contracts* |
—
|
Unrealized
depreciation on
futures contracts* |
3,367,050
|
|
U.S. Efficient
Core Fund |
|
Interest
rate risk |
Unrealized
appreciation on
futures contracts* |
—
|
Unrealized
depreciation on
futures contracts* |
12,446,409
|
|
|
For
the six months ended December 31, 2024, the effects of derivative instruments on each applicable Fund’s financial
performance as reflected in the Statements of Operations are presented in the summary below:
|
Fund
|
Amount
of
Realized Gain
or (Loss) on
Derivatives
Recognized1
|
Change
in
Unrealized
Appreciation or
(Depreciation)
on Derivatives
Recognized2
|
|
Dynamic
Currency Hedged International Equity Fund |
|
|
|
Foreign
currency risk |
$ 4,574,028
|
$ 4,751,588
|
|
Dynamic
Currency Hedged International SmallCap Equity Fund |
|
|
|
Foreign
currency risk |
4,974,800
|
6,145,526
|
|
Emerging
Markets ex-China Fund |
|
|
|
Foreign
currency risk |
—
|
(189)
|
|
Emerging
Markets Efficient Core Fund |
|
|
|
Equity
risk |
(519,023)
|
(411,525)
|
|
Foreign
currency risk |
—
|
1
|
|
International
Efficient Core Fund |
|
|
|
Interest
rate risk |
(6,790,545)
|
(5,099,919)
|
|
U.S. Efficient
Core Fund |
|
|
|
Interest
rate risk |
(21,861,812)
|
(17,824,074)
|
|
Battery
Value Chain and Innovation Fund |
|
|
|
Foreign
currency risk |
—
|
3
|
|
|
|
|
|
Equity
risk |
|
Net
realized gain (loss) from futures contracts |
|
Foreign
currency risk |
|
Net
realized gain (loss) from foreign currency contracts |
|
Interest
rate risk |
|
Net
realized gain (loss) from futures contracts |
|
|
|
Equity
risk |
|
Net
increase (decrease) in unrealized appreciation/depreciation
from futures contracts |
|
Foreign
currency risk |
|
Net
increase (decrease) in unrealized appreciation/depreciation
from foreign currency contracts |
|
Interest
rate risk |
|
Net
increase (decrease) in unrealized appreciation/depreciation
from futures contracts |
WisdomTree
Trust 131
|
Notes
to Financial Statements
(unaudited) (continued)
|
During the six months
ended December 31, 2024, the volume of derivative activity (based on the average of month-end
notional balances, except where footnoted) for each Fund was as follows:
|
Fund
|
|
Average
Notional |
|
Foreign
currency
contracts
(to deliver USD) |
|
Foreign
currency
contracts
(to receive USD) |
|
Futures
contracts
(long) |
|
Dynamic
Currency Hedged International Equity Fund |
|
|
|
|
|
|
|
|
|
|
Foreign
currency risk |
|
$
|
160,594,292
|
|
$
|
165,231,339
|
|
$
|
—
|
|
Dynamic
Currency Hedged International SmallCap Equity Fund |
|
|
|
|
|
|
|
|
|
|
Foreign
currency risk |
|
|
194,325,124 |
|
|
203,150,747
|
|
|
—
|
|
Emerging
Markets ex-China Fund |
|
|
|
|
|
|
|
|
|
|
Foreign
currency risk |
|
|
13,074
|
|
|
1,852
|
|
|
—
|
|
Emerging
Markets Efficient Core Fund |
|
|
|
|
|
|
|
|
|
|
Foreign
currency risk |
|
|
27,854
|
|
|
962
|
|
|
—
|
|
Interest
rate risk |
|
|
—
|
|
|
—
|
|
|
16,102,083
|
|
International
Efficient Core Fund |
|
|
|
|
|
|
|
|
|
|
Foreign
currency risk |
|
|
682,855
|
|
|
—
|
|
|
—
|
|
Interest
rate risk |
|
|
—
|
|
|
—
|
|
|
206,727,703
|
|
U.S. Efficient
Core Fund |
|
|
|
|
|
|
|
|
|
|
Interest
rate risk |
|
|
—
|
|
|
—
|
|
|
672,142,538
|
|
Artificial
Intelligence and Innovation Fund |
|
|
|
|
|
|
|
|
|
|
Foreign
currency risk |
|
|
—
|
|
|
105,381
|
|
|
—
|
|
Battery
Value Chain and Innovation Fund |
|
|
|
|
|
|
|
|
|
|
Foreign
currency risk |
|
|
—
|
|
|
122
|
|
|
—
|
Investment
Transactions and Investment Income — Investment
transactions are recorded as of the date that the securities are purchased or sold (trade date). Realized gains and losses on sales of
portfolio securities are calculated using the identified-cost
method. Dividend income (less foreign taxes withheld, if any) is recognized on the ex-dividend
date or, with respect to foreign dividends, as soon as practicable after the existence of a dividend declaration has been determined.
Non-cash
dividend income is recognized on the ex-dividend
date, or, with respect to foreign dividends, as soon as practicable after the existence of a dividend declaration has been determined,
at the fair value of securities to be received. Upon notification from real estate investment trust (“REIT”) issuers or
as estimated by management, all or a portion of the dividend income received from a REIT may be redesignated as a reduction of cost of
the related investment and/or
as a realized gain. On each measurement date, the Funds evaluate the collectability of receivable balances. Generally, the Funds will
write-off
dividend receivable balances that are canceled by the issuer as of the date that the dividend receivable cancellation notification was
publicly made available or when it becomes probable that dividends will not be collected and the amount of uncollectable dividends can
be reasonably estimated. Interest income (including amortization of premiums and accretion of discounts), less any foreign taxes withheld,
is accrued daily. Generally, the Funds will write-off
interest receivable balances in default by the issuer as of the date any applicable interest payment grace period or forbearance period
expires or as of the date any interest payment cancellation notification was publicly made available or when it becomes probable that
interest will not be collected and the amount of uncollectable interest can be reasonably estimated. Generally, amortization of premiums
and accretion of discounts are recognized daily using the effective interest method (also known as the scientific amortization method).
Income earned from securities lending activities (i.e.,
securities lending income), net of fees payable to the securities borrower and/or
securities lending agent, is accrued daily.
As
of December 31, 2024, dividend payments denominated in Russian rubles from certain sanctioned Russian issuers were held in restricted
foreign cash accounts by the Funds’ custodian on behalf of the Emerging Markets Efficient Core Fund and Battery Value Chain and
Innovation Fund. Under sanctions imposed by the United States (“U.S.”) and the European Union (“E.U.”)
against Russia and certain Russian issuers pertaining to Russia’s invasion of Ukraine, payments (such as dividend payments or interest
payments) made by sanctioned issuers to entities domiciled in the U.S., such as the Funds, or E.U. are restricted from withdrawal or use
and there is no assurance these sanctioned payments will be ultimately collected by the Funds. As a result of U.S. sanctions in
place against Russia and certain Russian issuers and significant uncertainty as to whether these sanctions will be removed or lifted,
the Funds have not recognized these Russian dividend payments.
Foreign
Taxes — The
Funds may be subject to foreign taxes (a portion of which may be reclaimable or refundable) on foreign income or capital gains on investment
transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and tax rates that exist in the
foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are accrued and applied to foreign income as the foreign
income is earned and are reflected on the Statements of Operations as follows: foreign
132 WisdomTree
Trust
|
Notes
to Financial Statements
(unaudited) (continued)
|
taxes
withheld on dividends are presented as a reduction to investment income in “Less:
Foreign withholding taxes on dividends”,
foreign taxes on capital gains from investment transactions, if any, are included in “Net
realized gain (loss) from investment transactions”,
and deferred foreign taxes on net unrealized appreciation on investments, if any, are included in “Net
increase (decrease) in unrealized appreciation/depreciation
on investment transactions”.
Foreign taxes payable or deferred as of December 31, 2024, if any, are disclosed in the Statements of Assets and Liabilities in
“Payables:
Foreign capital gains tax”.
In
certain foreign jurisdictions, when the Funds incur subsequent capital losses on investment transactions that occurred during the tax
year in the applicable foreign jurisdiction, the Funds may be entitled to a refund on any foreign taxes paid on previous capital gain
investment transactions that occurred during the tax year of the applicable foreign jurisdiction. Foreign capital gain tax refunds on
investment transactions are included in “Net
realized gain (loss) from investment transactions”
on the Statements of Operations and foreign capital gain tax refunds that remain unpaid as of December 31, 2024, if any, are disclosed
in the Statements of Assets and Liabilities in “Receivables:
Foreign capital gains tax refund”.
The
Funds file foreign tax reclaims in certain foreign jurisdictions to recover a portion of amounts previously withheld on dividend income
if the tax reclaim is “more likely than not” to be sustained assuming examination by tax authorities. This determination
is based on, among other things, a jurisdiction’s legal obligation to pay reclaims as well as payment history and market convention.
Foreign tax reclaims recorded relating to current fiscal year investment income are included in the Statements of Operations as
a reduction to the balance shown for “Foreign
withholding taxes on dividends” and foreign tax reclaims recorded, but not yet received as of December 31, 2024, if any,
are shown on the Statements of Assets and Liabilities in “Receivables:
Foreign tax reclaims”.
Foreign
Currency Translation — The
accounting records of the Funds are maintained in U.S. dollars. Foreign currencies, as well as investment securities and other
assets and liabilities denominated in foreign currencies, are translated into U.S. dollars using exchange rates prevailing on the
respective dates of such transactions that are deemed appropriate by WTAM. Realized and unrealized foreign exchange gains and losses
on investments are included as a component of “net realized gain (loss) from investment transactions” and “net increase
(decrease) in unrealized appreciation/depreciation
from investment transactions”, respectively, on the Statements of Operations. Realized and unrealized foreign exchange gains or
losses from foreign currency contracts are included in “net realized gain (loss) from foreign currency contracts” and “net
increase (decrease) in unrealized appreciation/depreciation
from foreign currency contracts”, respectively, on the Statements of Operations. Realized and unrealized foreign exchange gains
or losses arising from sales of foreign currencies, currency gains or losses recognized between the trade and settlement dates on investment
transactions, and the difference between the amounts of dividends and foreign withholding taxes recorded on the Funds’ books and
the U.S. dollar equivalent of the amounts actually received or paid are included in “net realized gain (loss) from foreign
currency related transactions” and/or
“net increase (decrease) in unrealized appreciation/depreciation
from translation of assets and liabilities denominated in foreign currencies” in the Statements of Operations. Certain foreign
exchange gains and losses included in realized and unrealized gains or losses are included in, or are a reduction of, ordinary income
in accordance with U.S. Federal income tax regulations.
Expenses — Under
the investment advisory agreement for each Fund, WTAM has agreed to pay all expenses of the Trust, except for: (i) brokerage expenses
and other fees, charges, taxes, levies or expenses (such as stamp taxes) incurred in connection with the execution of portfolio transactions
or in connection with creation and redemption transactions (including without limitation any fees, charges, taxes, levies or expenses
related to the purchase or sale of an amount of any currency, or the patriation or repatriation of any security or other asset, related
to the execution of portfolio transactions or any creation or redemption transactions); (ii) legal fees or expenses in connection
with any arbitration, litigation or pending or threatened arbitration or litigation, including any settlements in connection therewith;
(iii) compensation and expenses of trustees who are not interested persons of the Funds (“Independent Trustees”);
(iv) compensation and expenses of counsel to the Independent Trustees; (v) compensation and expenses of the Trust’s
Chief Compliance Officer (“CCO”); (vi) extraordinary expenses (in each case as determined by a majority of the Independent
Trustees); (vii) distribution fees and expenses paid by the Trust under any distribution plan adopted pursuant to Rule 12b-1
under the 1940 Act; (viii) interest and taxes of any kind or nature (including, but not limited to, income, excise, transfer and
withholding taxes); (ix) fees and expenses related to the provision of securities lending services; and (x) the advisory
fee payable to WTAM.
Acquired
fund fees and expenses (“AFFEs”) (which are fees and expenses incurred indirectly by a Fund through its investments in certain
underlying investment companies) are not operating expenses of the Funds and are not paid by WTAM.
Pursuant
to a separate contractual arrangement, WTAM arranges for the provision of CCO services with respect to each Fund, and is liable and responsible
for, and administers, payments to the CCO, the Independent Trustees and counsel to the Independent Trustees. WTAM receives a fee, as shown
on the Statements of Operations under “Service fees”, of up to 0.0044% per annum of each Fund’s average daily net
assets for providing such services and paying such expenses. WTAM provides CCO services to the Trust.
WisdomTree
Trust 133
|
Notes
to Financial Statements
(unaudited) (continued)
|
Foreign
Currency Contracts — The
Funds may enter into foreign currency contracts to facilitate local securities settlements or to protect against currency exposure. The
Funds, other than the Currency Hedged Equity Funds, do not expect to engage in currency transactions for the purpose of hedging against
currency exposures of the Fund’s assets that are denominated in one or more foreign currencies. The Funds may not enter into such
contracts for speculative purposes. During the fiscal period ended December 31, 2024, the Funds, except for the Currency Hedged
Equity Funds, utilized foreign currency contracts primarily to facilitate foreign security settlements. The Currency Hedged Equity Funds
utilized foreign currency contracts primarily to dynamically offset applicable international currency exposure from positions in international
equities. A foreign currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These
contracts are principally traded in the inter-bank
market conducted directly between currency traders (usually large, commercial banks) and their customers. A foreign currency contract
generally does not require an initial margin deposit and no commissions are charged at any stage for trades.
Risks
may arise upon entering into foreign currency contracts from the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar or each other.
Fluctuations
in the value of open foreign currency contracts are recorded for book purposes as unrealized gains or losses on foreign currency contracts
by the Funds and are included in “net increase (decrease) in unrealized appreciation/depreciation
from foreign currency contracts” on the Statements of Operations. Realized gains and losses on foreign currency contracts include
net gains or losses recognized by the Funds on contracts which have settled and are included in “net realized gain (loss) from
foreign currency contracts” on the Statements of Operations.
Futures
Contracts — The
Dynamic Currency Hedged International SmallCap Equity Fund utilized equity futures contracts on a temporary basis during the period to
obtain market exposure consistent with its investment objective during the Fund’s quarterly portfolio rebalance. The Emerging Markets
Efficient Core Fund, International Efficient Core Fund and U.S. Efficient Core Fund each utilized futures contracts to obtain long
exposure to U.S. Treasury obligations consistent with their investment strategy. When a Fund purchases a listed futures contract,
it agrees to purchase a specified reference asset (e.g.,
commodity, currency, equity, digital asset or U.S. Treasury security, collectively herein, “Reference Asset”) at
a specified future date. When a Fund sells a listed futures contract, it agrees to sell a specified Reference Asset at a future date.
The price at which the purchase and sale will take place is fixed when the Fund enters into the contract. A Fund may also cash settle
upon the expiration date of a futures contract in which no physical delivery (or receipt) of the specified Reference Asset comprising
the futures contract is made. Instead, settlement in cash would occur upon the expiration of the contract, with the cash settlement being
the difference between the contract price and the actual price of the specified Reference Asset at the expiration date. The exchange clearing
corporation is the ultimate counterparty for all exchange-listed
contracts, so credit risk is limited to the creditworthiness of the exchange clearing corporation.
Upon
entering into a futures contract, a Fund is required to deliver to a broker an amount of cash and/or
U.S. government securities equal to a certain percentage of the contract amount. This amount is known as the “initial margin”.
Cash deposited as initial margin, if any, is shown as “Deposits
at broker for futures contracts”
in the Statements of Assets and Liabilities, and U.S. government securities deposited, if any, are designated in the Schedule of
Investments. Subsequent payments, known as “variation margin”, generally are made or received by the Fund each day
or at other agreed-upon
time periods depending on the fluctuations in the value of the underlying futures contracts, except that in the case of certain futures
contracts, variation margin payments may be made or received when the futures contract expires. Variation margin is recorded for financial
statement purposes on a daily basis as an unrealized gain or loss on futures until the financial futures contract is closed, at which
time the unrealized net gain or loss is reclassified to realized gain or loss on futures. The current one-day
variation margin on open futures contracts is shown on the Statements of Assets and Liabilities as either a receivable or a payable for
“Net variation
margin on futures contracts”.
The variation margin received or paid by the Funds, that is on deposit with the broker, on both open and closed futures contracts and
certain futures contracts where variation margin is received or paid by the Funds on the expiration date, are shown in the Statements
of Assets and Liabilities, in whole or in part, as a component of, or an offset to, “Deposits
at broker for futures contracts”
or “Deposits
due to broker for future contracts”.
Deposits at broker utilized for futures contract margin requirements generally are restricted from withdrawal. The Funds have adopted
a derivatives risk management program pursuant to Rule 18f-4
under the 1940 Act to assess and manage the Funds’ derivatives risk. Rule 18f-4
limits the amount of derivatives a fund can enter into and replaces the asset segregation framework previously used by the Funds to comply
with Section 18 of the 1940 Act.
Securities
Lending — Each
Fund may lend portfolio securities to certain creditworthy borrowers, including the Funds’ securities lending agent. It is the
Funds’ policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities
loaned and 105% of the value of foreign securities loaned. Collateral in the form of cash and/or
securities issued or guaranteed by the U.S. government or its agencies, equivalent to at least 100% of the market value of securities,
is maintained at all times. The cash collateral can be invested in certain money market mutual funds which also have exposure to the fluctuations
of the market. The values of the investments of cash collateral for securities on loan along with the obligations to return such collateral
134 WisdomTree
Trust
|
Notes
to Financial Statements
(unaudited) (continued)
|
are
included on the Statements of Assets and Liabilities. The total value of securities received as collateral for securities on loan is included
in a footnote following each Schedule of Investments, but is not included within the Statements of Assets and Liabilities because the
receiving Fund does not have the right to sell or repledge the securities received as collateral. As compensation for lending its securities,
each Fund retains all or a portion of the interest received on investment of cash collateral or receives a fee from the borrower (net
of any fee rebates paid to the borrower). The lending agent receives a portion of the income earned by the Funds in connection with the
lending program. The net securities lending income earned by the Funds is disclosed on the Statements of Operations. The dividend and
interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. The borrower
pays to the Funds an amount equal to any dividends or interest received on loaned securities. Dividends received while a security is out
on loan are not considered Qualified Dividend Income (“QDI”) under the specific criteria issued by the Internal Revenue
Service and are subject to taxation at the shareholder’s ordinary income tax rate instead of the lower long-term
capital gains tax rate. Lending portfolio securities could result in a loss or delay in recovering each Fund’s securities if the
borrower defaults. In the event of a borrower default with respect to the failure to return to each Fund some or all of the securities
loaned, the securities lending agent shall indemnify each Fund against the failure of the borrower if the value of the collateral received
is insufficient to cover the market value of the securities loaned.
Master
Netting Arrangements — Codification
Topic 210 (“ASC 210”), Balance Sheet, requires disclosures generally intended to (i) help investors
and other financial statement users to better assess the effect or potential effect of offsetting arrangements on a company’s financial
position, (ii) improve transparency in the reporting of how companies mitigate credit risk, and (iii) facilitate comparisons
between those entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements
on the basis of international financial reporting standards. ASC 210 requires entities to disclose (i) gross and net information
about both instruments and transactions eligible for offset in the financial statements, and (ii) instruments and transactions
subject to an agreement similar to a master netting agreement. ASC 210 is limited in scope to the following financial instruments,
to the extent they are offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement:
(i) recognized derivative instruments accounted for under ASC 815 (Derivatives and Hedging); (ii) repurchase agreements
and reverse repurchase agreements; and (iii) securities borrowing and securities lending transactions.
In
order to better define its contractual rights and to secure rights that will help a Fund mitigate its counterparty risk, a Fund enters
into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) with its counterparties.
An ISDA Master Agreement is a bilateral agreement between a Fund and a counterparty that governs over-the-counter
(“OTC”) derivatives, such as foreign currency contracts, and typically contains, among other things, collateral posting
terms, netting and rights of set-off
provisions in the event of a default and/or
termination event. Under an ISDA Master Agreement, a Fund may, under certain circumstances, offset with the counterparty certain derivative
financial instruments’ payables and receivables to create a single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of a default (close-out
netting) or similar event, including the bankruptcy or insolvency of the counterparty.
Collateral
requirements generally differ by type of derivative. Collateral terms are contract-specific
for OTC derivatives (e.g., foreign currency contracts, options and certain swaps). To the extent amounts due to a Fund from its derivatives
counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from a counterparty’s
non-performance.
The
Funds’ securities lending activities are governed by a Securities Lending Authorization Agreement (“Lending Agreement”)
between the Funds and the lending agent. The Lending Agreement authorizes the lending agent to lend qualifying U.S. and foreign
securities held by a Fund to approved borrowers (each a “Borrower”). To mitigate borrower risk, a Fund typically receives
from a Borrower collateral in the form of U.S. dollar cash and/or
securities issued or guaranteed by the U.S. government or its agencies in excess of the market value of the securities loaned.
Under the provisions of the Lending Agreement, a Fund shall have, as to the collateral, all of the rights and remedies of a secured party
under applicable law. A Fund is exposed to risk of loss if a Borrower defaults on its obligation to return borrowed securities and the
value of the collateral a Fund received is insufficient to cover the market value of the securities loaned. Also, the lending agent is
permitted to invest the cash collateral it receives from a Borrower into a money market fund which is subject to market fluctuation. Therefore,
a Fund is exposed to risk of loss if the value of invested cash collateral is insufficient to satisfy the Fund’s obligation to
return the full amount owed to such Borrower. However, in the event of a borrower default with respect to the failure to return to each
Fund some or all of the securities loaned, the securities lending agent shall indemnify each Fund against the failure of the borrower
if the value of the collateral received is insufficient to cover the market value of the securities loaned.
Each
Fund’s futures contracts are all exchange traded and are not subject to master netting arrangements. Therefore, all futures
contracts are excluded from the netting table.
WisdomTree
Trust 135
|
Notes
to Financial Statements
(unaudited) (continued)
|
For
financial reporting purposes, the Funds elect to not offset assets and liabilities subject to an ISDA Master Agreement or Lending Agreement,
if any, in the Statements of Assets and Liabilities. Therefore, all qualifying transactions are presented on a gross basis in the Statements
of Assets and Liabilities. As of December 31, 2024, the impact of netting of assets and liabilities and the offsetting of collateral
pledged or received based on contractual netting/set-off
provisions in the ISDA Master Agreement and the Lending Agreement are detailed in the following table:
|
Fund
|
Assets
|
Liabilities
|
|
Gross
Amounts
in the
Statements
of Assets and
Liabilities |
Gross
Amounts Not Offset in
the Statements of Assets and
Liabilities |
Net
Amount |
Gross Amounts
in the
Statements
of Assets and
Liabilities |
Gross
Amounts Not Offset in
the Statements of Assets and
Liabilities |
Net
Amount |
|
Financial
Instruments |
Collateral
Received |
Financial
Instruments |
Collateral
Posted |
|
Dynamic
Currency Hedged International Equity Fund |
|
Securities
Lending |
$ 673,443
|
$ —
|
$ (673,443)1
|
$ —
|
$ —
|
$ —
|
$—
|
$ —
|
|
Foreign
Currency Contracts |
7,554,926
|
(86,679)
|
—
|
7,468,247
|
89,078
|
(86,679)
|
—
|
2,399
|
|
Dynamic
Currency Hedged International SmallCap Equity Fund |
|
Securities
Lending |
4,714,814
|
—
|
(4,714,814)1
|
—
|
—
|
—
|
—
|
—
|
|
Foreign
Currency Contracts |
9,393,527
|
(14,979)
|
—
|
9,378,548
|
18,238
|
(14,979)
|
—
|
3,259
|
|
U.S. Corporate
Bond Fund |
|
Securities
Lending |
72,430
|
—
|
(72,430)1
|
—
|
—
|
—
|
—
|
—
|
|
U.S. High
Yield Corporate Bond Fund |
|
Securities
Lending |
3,299,197
|
—
|
(3,299,197)1
|
—
|
—
|
—
|
—
|
—
|
|
U.S. Short-Term
Corporate Bond Fund |
|
Securities
Lending |
253,150
|
—
|
(253,150)1
|
—
|
—
|
—
|
—
|
—
|
|
Emerging
Markets Efficient Core Fund |
|
Securities
Lending |
158,757
|
—
|
(158,757)1
|
—
|
—
|
—
|
—
|
—
|
|
International
Efficient Core Fund |
|
Securities
Lending |
684,724
|
—
|
(684,724)1
|
—
|
—
|
—
|
—
|
—
|
|
U.S. Efficient
Core Fund |
|
Securities
Lending |
112,240
|
—
|
(112,240)1
|
—
|
—
|
—
|
—
|
—
|
|
Artificial
Intelligence and Innovation Fund |
|
Securities
Lending |
3,701,183
|
—
|
(3,701,183)1
|
—
|
—
|
—
|
—
|
—
|
|
Battery
Value Chain and Innovation Fund |
|
Securities
Lending |
437,189
|
—
|
(437,189)1
|
—
|
—
|
—
|
—
|
—
|
|
BioRevolution
Fund |
|
Securities
Lending |
34,703
|
—
|
(34,703)1
|
—
|
—
|
—
|
—
|
—
|
|
Cloud
Computing Fund |
|
Securities
Lending |
4,707,622
|
—
|
(4,707,622)1
|
—
|
—
|
—
|
—
|
—
|
|
|
Short-Term
Investments — Each
Fund may invest a portion of its assets in high-quality
money market instruments on an ongoing basis to provide liquidity or for other reasons. The instruments include short-term
obligations issued by the U.S. government, its agencies, non-U.S. government
agencies, negotiable certificates of deposit (“CDs”), fixed time deposits and bankers’ acceptances of U.S. and
foreign banks and similar institutions, commercial papers, repurchase agreements and money market funds. CDs are short-term
negotiable obligations of commercial banks. Time deposits are non-negotiable
deposits maintained in banking institutions for specified periods of time at stated interest rates. Banker’s acceptances are time
drafts drawn on commercial banks by borrowers, usually in connection with international transactions.
Emerging
Markets Investments — Investments
in securities listed and traded in emerging markets are subject to additional risks that may not be present for U.S. investments
or investments in more developed non-U.S. markets.
Such risks may include: (i) greater market volatility; (ii) lower trading volume; (iii) greater social, political
and economic uncertainty; (iv) governmental controls on foreign investments and limitations on repatriation of invested capital;
(v) the risk that companies may be held to lower disclosure, corporate governance, auditing and financial reporting standards than
companies in more developed markets; and (vi) the risk that there may be less protection of property rights than in other countries.
Emerging markets are generally less liquid and less efficient than developed securities markets.
136 WisdomTree
Trust
|
Notes
to Financial Statements
(unaudited) (continued)
|
Tax
Information and Dividends and Distributions to Shareholders — It
is each Fund’s policy to comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”).
A portion of the Code, known as subchapter M (“Subchapter
M”),
addresses the ways by which investment companies and investment trusts may pass income through to shareholders in order to avoid double
taxation. Each Fund intends to qualify for and to elect treatment as a separate Regulated Investment Company (“RIC”) under
Subchapter M of the Code so that it will not be subject to federal income tax on income and gains that are timely distributed to Fund
shareholders. Accordingly, no provision for U.S. federal income taxes is required. In order to qualify for the special tax treatment
accorded to RICs and their shareholders, each Fund must, among other things, distribute with respect to each taxable year an amount equal
to or greater than the sum of 90% of its investment company taxable income and 90% of its net tax-exempt
interest income. There can be no guarantee that a Fund will pay dividends. Taxable net realized gains from investment transactions, reduced
by capital loss carryforwards, if any, are declared and distributed to shareholders at least annually. The capital loss carryforward amount,
if any, is available to offset future net capital gains. Each Fund may occasionally be required to make supplemental distributions at
some other time during the year. The Trust reserves the right to declare special distributions if, in its reasonable discretion, such
action is necessary or advisable to preserve the status of each Fund as a RIC or to avoid imposition of income or excise taxes on undistributed
income. Dividends and distributions to shareholders are recorded on the ex-dividend
date. The amount of dividends and distributions from net investment income and net realized capital gains is determined in accordance
with the requirements of the Code and the U.S. Treasury regulations (i.e., tax basis) which may differ to amounts determined under
GAAP (i.e., book basis). These book/tax
differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the components of net assets based on their Federal tax basis treatment; temporary differences do not require
reclassification. Dividends and distributions that exceed earnings and profit for tax purposes are reported for tax purposes as a return
of capital.
3.
ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
WTAM
has overall responsibility for the general management and administration of the Trust. WTAM provides an investment program for each Fund.
WTAM has arranged for Mellon Investments Corporation (“Mellon”) to provide sub-advisory
services to the Funds, except for U.S. Corporate Bond Fund, U.S. High Yield Corporate Bond Fund and U.S. Short-Term
Corporate Bond Fund which are sub-advised
by Voya Investment Management Co., LLC (“Voya IM”). Mellon and Voya IM are compensated by WTAM at no additional cost to
the Funds. WTAM also arranges for transfer agency, custody, fund accounting, fund administration, securities lending and all other non-distribution
related services necessary for the Funds to operate, which are generally under separate agreements entered into between the Trust on behalf
of the
Funds and the applicable service provider. Under the investment advisory agreement for each Fund, WTAM agrees to pay all expenses of the
Funds, except for certain expenses described in Note 2.
Pursuant
to a separate contractual arrangement, as also described in Note 2, WTAM arranges for the provision of CCO services with respect
to each Fund, and is liable and responsible for, and administers, payments to the CCO, the Independent Trustees and counsel to the Independent
Trustees in exchange for a fee, accrued daily and paid monthly in arrears, of up to 0.0044% per annum of each Fund’s average daily
net assets.
WTAM
expects to receive annual advisory fees from each Fund, based on a percentage of the Fund’s average daily net assets as shown in
the following table:
|
Fund
|
Advisory
Fee Rate |
|
Dynamic
Currency Hedged International Equity Fund |
0.40%
|
|
Dynamic
Currency Hedged International SmallCap Equity Fund |
0.48%
|
|
Emerging
Markets ex-China Fund |
0.32%
|
|
U.S. Corporate
Bond Fund |
0.18%
|
|
U.S. High
Yield Corporate Bond Fund |
0.38%
|
|
U.S. Short-Term
Corporate Bond Fund |
0.18%
|
|
Emerging
Markets Efficient Core Fund |
0.32%
|
|
International
Efficient Core Fund |
0.26%
|
|
U.S. Efficient
Core Fund |
0.20%
|
|
Artificial
Intelligence and Innovation Fund |
0.45%
|
|
Battery
Value Chain and Innovation Fund |
0.45%
|
|
BioRevolution
Fund |
0.45%
|
|
Cloud
Computing Fund |
0.45%
|
|
Cybersecurity
Fund |
0.45%
|
WisdomTree
Trust 137
|
Notes
to Financial Statements
(unaudited) (continued)
|
Affiliated
holdings are investments in entities in which the Fund owns 5% or more of the outstanding voting securities or are investments in entities
which are under common ownership or control. Transactions in shares of affiliated ETFs for the fiscal period ended December 31,
2024, as applicable, are included in an “Investment in Affiliates” supplementary table in each applicable Fund’s
Schedule of Investments. For these transactions, WTAM voluntarily waives a portion of its advisory fees, that it would otherwise charge,
for each Fund’s investment in affiliated funds. The waivers may be reduced to offset the incremental costs related to these investments
(e.g., fund accounting, safekeeping, transaction fees, etc.) that are paid by WTAM out of its advisory fee. The dollar amount of advisory
fees waived during the period for the Funds, if any, are included in the Statements of Operations in “Expense
waivers”.
During
the six months ended December 31, 2024, certain Funds engaged in purchase and sale transactions with funds that have
a common investment adviser, WTAM. These interfund purchase and sale transactions were effected in accordance with Rule 17a-7
under the 1940 Act. For the six months ended December 31, 2024, the cost of purchases, proceeds from sales
and the net realized gain or loss recognized upon the disposal of securities resulting from interfund transactions are shown in the following
table:
|
Fund
|
Purchases
|
Sales
|
Net
Realized
Gain/(Loss) |
|
Dynamic
Currency Hedged International Equity Fund |
$8,381,458
|
$ (8,615,343)
|
$ (324,500)
|
|
Dynamic
Currency Hedged International SmallCap Equity Fund |
3,855,472
|
(13,033,701)
|
(1,321,632)
|
WTAM
and/or
WisdomTree (collectively herein, “WT”) may from time to time own shares of a Fund. As of and for the six months
ended December 31, 2024, WT held shares of and received distributions from the following Funds, which were purchased through an
unaffiliated broker in ordinary brokerage transactions in the secondary market in which the Funds’ shares trade:
|
Fund
|
At
December 31, 2024 |
For
the Six Months Ended
December 31, 2024 |
|
Fund
Shares
held by WT |
Market
Value of
Fund Shares
Held by WT |
Dividends
and
Distributions paid to
WT on Fund Shares
held by WT |
|
Dynamic
Currency Hedged International Equity Fund |
798
|
$27,435
|
$375
|
|
U.S. High
Yield Corporate Bond Fund |
349
|
15,752
|
512
|
|
U.S. Short-Term
Corporate Bond Fund |
284
|
13,648
|
306
|
|
Emerging
Markets Efficient Core Fund |
81
|
2,324
|
61
|
|
International
Efficient Core Fund |
172
|
6,042
|
68
|
|
U.S. Efficient
Core Fund |
359
|
16,762
|
110
|
|
Artificial
Intelligence and Innovation Fund |
312
|
6,864
|
13
|
|
Cloud
Computing Fund |
135
|
5,065
|
—
|
|
Cybersecurity
Fund |
183
|
5,172
|
1
|
4.
CAPITAL SHARE TRANSACTIONS
As
of December 31, 2024, there were an unlimited number of $0.001 par value shares of beneficial interest authorized by the Trust.
Shares are issued and redeemed by each Fund only in creation units or multiples thereof to an authorized participant (“AP”).
Except when aggregated in creation units (“Creation Unit Aggregations”), shares of each Fund are not redeemable. Transactions
in shares for each Fund are disclosed in detail in the Statements of Changes in Net Assets. The consideration for the purchase of creation
units of a Fund generally consists of the in-kind
contribution of a basket of securities (“Deposit Securities”) and/or
an amount of cash (“Cash Component”). Creation Unit Aggregations may be created in advance of receipt by a Fund of all or
a portion of the applicable Deposit Securities from APs. In these circumstances, the initial deposit received from the AP will have a
value greater than the NAV of the applicable Fund’s shares on the date the order is placed in proper form since, in addition to
available Deposit Securities, U.S. cash must be deposited by the AP in an amount equal to the sum of (i) the Cash Component,
plus (ii) generally between 102% - 110% , as directed by the Trust or WTAM, which the Trust or WTAM may change from time to time,
of the market value of the undelivered Deposit Securities (the “Additional Cash Deposit”) with the Fund pending delivery
of any missing Deposit Securities. The Fund will return any unused portion of the Additional Cash Deposit once all of the missing Deposit
Securities have been properly received from the AP or purchased by the Fund. Amounts due to be returned to an AP as of December 31,
2024, if any, is shown in the Statements of Assets and Liabilities in “Payables:
Deposit due to authorized participant”.
In certain cases where an AP does not have a basket security readily available or may not transact is such basket security, an AP may
request to settle an in-kind
creation order with cash in lieu of the basket security. Amounts due from an AP as of December 31, 2024 with respect to such activity,
if any, is shown in the Statements of Assets and Liabilities in “Receivables:
Deposit due from authorized participant”.
138 WisdomTree
Trust
|
Notes
to Financial Statements
(unaudited) (continued)
|
5.
INVESTMENT PORTFOLIO TRANSACTIONS
Purchases
and sales of investments (excluding purchases and sales resulting from in-kind
capital share transactions and short-term
investments) and the cost of purchases and the proceeds from sales resulting from in-kind
capital share transactions (excluding short-term
investments) for the six months ended December 31, 2024 are shown in the following table. Realized gains and
losses on sales resulting from in-kind
capital share redemptions, as shown on the Statements of Operations, are not recognized by the Funds for tax purposes.
|
Fund
|
Non-U.S. Government
Securities |
U.S. Government
Securities |
In-kind
Capital Share Transactions |
|
Purchases
|
Sales
|
Purchases
|
Sales
|
Purchases
|
Sales
|
|
Dynamic
Currency Hedged International Equity Fund |
$ 81,069,071
|
$ 72,791,520
|
$ —
|
$ —
|
$17,727,976
|
$ 11,538,369
|
|
Dynamic
Currency Hedged International SmallCap Equity Fund |
138,698,301
|
126,528,319
|
—
|
—
|
75,209,729
|
21,047,694
|
|
Emerging
Markets ex-China Fund |
7,485,077
|
4,477,200
|
—
|
—
|
506,693
|
—
|
|
U.S. Corporate
Bond Fund |
1,554,927
|
1,549,169
|
9,918
|
9,970
|
—
|
—
|
|
U.S. High
Yield Corporate Bond Fund |
132,112,252
|
130,598,027
|
—
|
—
|
—
|
8,801,985
|
|
U.S. Short-Term
Corporate Bond Fund |
9,541,452
|
10,078,927
|
2,975,843
|
3,020,485
|
—
|
4,774,716
|
|
Emerging
Markets Efficient Core Fund |
1,652,439
|
835,455
|
—
|
—
|
245,526
|
—
|
|
International
Efficient Core Fund |
5,365,680
|
229,338
|
—
|
—
|
8,127,026
|
—
|
|
U.S. Efficient
Core Fund |
149,643,002
|
159,043,575
|
—
|
—
|
30,660,306
|
2,192,404
|
|
Artificial
Intelligence and Innovation Fund |
26,043,717
|
35,136,484
|
—
|
—
|
—
|
85,342,892
|
|
Battery
Value Chain and Innovation Fund |
1,144,591
|
1,705,877
|
—
|
—
|
—
|
877,750
|
|
BioRevolution
Fund |
174,882
|
185,252
|
—
|
—
|
—
|
—
|
|
Cloud
Computing Fund |
65,859,735
|
73,152,767
|
—
|
—
|
60,011,601
|
137,641,913
|
|
Cybersecurity
Fund |
19,804,653
|
19,771,601
|
—
|
—
|
12,984,111
|
10,952,044
|
6.
FEDERAL INCOME TAXES
At
December 31, 2024, the cost of investments (including securities on loan and derivatives) for Federal income tax purposes was as
follows:
|
Fund
|
|
Tax
Cost |
|
Gross
Unrealized
Appreciation |
|
Gross
Unrealized
Depreciation |
|
Net
Unrealized
Appreciation/
(Depreciation) |
|
Investments
in Financial Derivatives1
|
|
Total
Net
Unrealized
Appreciation/
(Depreciation)
|
|
Gross
Unrealized
Appreciation |
|
Gross
Unrealized
Depreciation |
|
Net
Unrealized
Appreciation/
(Depreciation) |
|
|
Dynamic
Currency Hedged International Equity Fund |
|
$254,581,703
|
|
$ 46,728,649
|
|
$
(9,468,812 |
)
|
|
$
37,259,837 |
|
|
$ —
|
|
$ —
|
|
|
$ —
|
|
|
$
37,259,837 |
|
|
Dynamic
Currency Hedged International SmallCap Equity Fund |
|
338,695,583
|
|
36,288,871
|
|
(18,786,596
|
)
|
|
17,502,275
|
|
|
729
|
|
(1,979
|
)
|
|
(1,250
|
)
|
|
17,501,025
|
|
|
Emerging
Markets ex-China Fund |
|
49,643,434
|
|
10,076,459
|
|
(4,112,639
|
)
|
|
5,963,820
|
|
|
—
|
|
—
|
|
|
—
|
|
|
5,963,820
|
|
|
U.S. Corporate
Bond Fund |
|
17,904,960
|
|
107,960
|
|
(589,882
|
)
|
|
(481,922
|
)
|
|
—
|
|
—
|
|
|
—
|
|
|
(481,922
|
)
|
|
U.S. High
Yield Corporate Bond Fund |
|
216,630,967
|
|
3,136,566
|
|
(3,081,117
|
)
|
|
55,449
|
|
|
—
|
|
—
|
|
|
—
|
|
|
55,449
|
|
|
U.S. Short-Term
Corporate Bond Fund |
|
42,989,718
|
|
278,739
|
|
(201,160
|
)
|
|
77,579
|
|
|
—
|
|
—
|
|
|
—
|
|
|
77,579
|
|
|
Emerging
Markets Efficient Core Fund |
|
27,891,599
|
|
4,752,064
|
|
(5,523,354
|
)
|
|
(771,290
|
)
|
|
—
|
|
—
|
|
|
—
|
|
|
(771,290
|
)
|
|
International
Efficient Core Fund |
|
292,435,352
|
|
53,569,379
|
|
(22,073,379
|
)
|
|
31,496,000
|
|
|
—
|
|
—
|
|
|
—
|
|
|
31,496,000
|
|
|
U.S. Efficient
Core Fund |
|
847,185,912
|
|
340,675,342
|
|
(17,072,032
|
)
|
|
323,603,310
|
|
|
—
|
|
—
|
|
|
—
|
|
|
323,603,310
|
|
|
Artificial
Intelligence and Innovation Fund |
|
184,823,830
|
|
38,652,955
|
|
(17,736,635
|
)
|
|
20,916,320
|
|
|
—
|
|
—
|
|
|
—
|
|
|
20,916,320
|
|
|
Battery
Value Chain and Innovation Fund |
|
3,179,926
|
|
368,244
|
|
(452,701
|
)
|
|
(84,457
|
)
|
|
—
|
|
—
|
|
|
—
|
|
|
(84,457
|
)
|
|
BioRevolution
Fund |
|
2,897,927
|
|
286,714
|
|
(994,906
|
)
|
|
(708,192
|
)
|
|
—
|
|
—
|
|
|
—
|
|
|
(708,192
|
)
|
|
Cloud
Computing Fund |
|
604,237,116
|
|
40,734,896
|
|
(161,873,399
|
)
|
|
(121,138,503
|
)
|
|
—
|
|
—
|
|
|
—
|
|
|
(121,138,503
|
)
|
|
Cybersecurity
Fund |
|
101,791,968
|
|
16,144,552
|
|
(9,105,506
|
)
|
|
7,039,046
|
|
|
—
|
|
—
|
|
|
—
|
|
|
7,039,046
|
|
|
|
|
WisdomTree
Trust 139
|
Notes
to Financial Statements
(unaudited) (concluded)
|
GAAP
provides guidance on tax provisions that prescribe a minimum threshold for financial statement recognition of the benefit of a tax position
taken or expected to be taken in a tax return. As of and during the fiscal period ended December 31, 2024, the Funds did
not have any liabilities for unrecognized tax benefits relating to uncertain income tax positions they have taken or expect to take in
the future. If applicable, the Funds will recognize interest accrued related to unrecognized tax benefits in interest expense and penalties
in “Other”
expenses on the Statements of Operations. The Funds file tax returns with the Internal Revenue Service, the State of New York,
and various other states. Specific to U.S. federal and state taxes, generally, each of the tax years in the four-year
period ended December 31, 2024, remains subject to examination by taxing authorities. Specific to U.S. federal and state
taxes, generally, each of the tax years in the four-year
period ended December
31, 2024,
remains subject to examination by taxing authorities. Specific to foreign countries in which the Funds invest, all open tax years
remain subject to examination by taxing authorities in the respective jurisdictions. The open tax years vary by each jurisdiction
in which each Fund invests.
As
a result of several European Court of Justice (“ECJ”) court cases in certain countries across the European Union (“EU”),
certain Funds have filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (“ECJ tax
reclaims”). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities
within the EU, as well as a number of related judicial proceedings. Income recognized, if any, for ECJ tax reclaims is reflected as “Other
income”
in the Statements of Operations and the cost to file these additional ECJ tax reclaims is reflected as “Other
fees”
in the Statements of Operations. When the ECJ tax reclaim is not “more likely than not” to be sustained assuming examination
by tax authorities due to the uncertainty that exists as to the ultimate resolution of these proceedings, the likelihood of receipt of
these ECJ tax reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income
tax purposes, ECJ tax reclaims received by the Funds, if any, reduce the amounts of foreign taxes Fund shareholders can use as tax credits
in their individual income tax returns. In the event that ECJ tax reclaims received by a Fund during the fiscal year exceed foreign withholding
taxes paid, and a Fund previously passed foreign tax credits on to its shareholders, a Fund must either amend historic tax reporting to
shareholders or enter into a closing agreement with the Internal Revenue Service in order to pay the associated tax liability on behalf
of the respective Fund’s shareholders. During the fiscal period ended December 31, 2024, the ECJ tax reclaims received
by the Funds, if any, did not exceed the foreign withholding taxes of the respective Funds.
7.
OPERATING SEGMENTS
The
Trust has adopted FASB issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280) —
Improvements to Reportable Segment Disclosures (“ASU 2023-07”). Each Fund in the Trust operates
in one segment. The segment derives its revenues from each Fund’s investments made in accordance with the defined investment strategy
of each Fund, as prescribed in the Trust’s prospectus. The accounting policies are the same as those described in Note 2 —
Significant Accounting Policies. The Chief Operating Decision Maker (“CODM”) is the President of the Trust. The CODM monitors
the operating results of each Fund. The financial information the CODM leverages to assess the segment’s performance and to make
decisions for each Fund’s single segment, is consistent with that presented with each Fund’s financial statements.
8.
SUBSEQUENT EVENTS
WTAM
has evaluated all subsequent transactions and events through the date on which these financial statements were issued.
9.
ADDITIONAL INFORMATION
The
value of a Fund’s investments may be adversely affected by recent and current events occurring outside of the United States, including
those affecting foreign markets (including extreme volatility, depressed valuations, and decreased liquidity), significant geopolitical
events (including armed conflicts, terror attacks, and disruptions to foreign economic and trade relationships), and public health emergencies
(including pandemics such as the COVID-19 pandemic), among other events. For example, ongoing armed conflicts
between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, and related sanctions and trading
restrictions have caused significant market disruptions and volatility within the markets in Russia, Europe, the Middle East and the United
States. Similarly, escalating economic and political tensions between the United States and China continue to produce trading restrictions
that adversely affect institutional investment in China. The extent and duration of these conflicts and tensions are impossible to predict,
and they could continue to result in significant market disruptions, including with respect to certain industries or sectors, such as
the oil and natural gas markets, and may negatively affect global supply chains, inflation and global growth. These conflicts and tensions
could adversely affect the value of certain Fund investments, as well as a Fund’s performance and liquidity, even if the Fund does
not have direct investment exposure to a country involved in a particular conflict.
140 WisdomTree
Trust
|
Additional
Information (unaudited)
|
Item 8
of Form N-CSRS:
Changes in and Disagreements with Accountants for Open-End
Management Investment Companies.
Not
applicable.
Item 9
of Form N-CSRS:
Proxy Disclosures for Open-End
Management Investment Companies.
Not
applicable.
Item 10
of Form N-CSRS:
Remuneration Paid to Directors, Officers, and Others of Open-End
Management Investment Companies.
|
Name
of Trustee |
Board
Compensation |
|
Interested
Trustee |
|
|
Jonathan
Steinberg |
$ 0
|
|
Independent
Trustees |
|
|
David
G. Chrencik |
$201,727
|
|
Phillip
G. Goff |
$183,388
|
|
Joel
Goldberg |
$210,897
|
|
Toni
Massaro |
$192,558
|
|
Robert
E. Plaze |
$183,388
|
|
Melinda
A. Raso Kirstein |
$201,727
|
|
Victor
Ugolyn |
$275,082
|
Item 11
of Form N-CSRS:
Statement Regarding Basis for Approval of Investment Advisory Contracts.
At
a meeting of the Board of Trustees (the “Board” or the “Trustees”) of the WisdomTree Trust (the “Trust”)
held on September 16-17, 2024 (the “Meeting”), the Trustees, including those Trustees
who are not “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the Trust
(the “Independent Trustees”), considered the renewal of (i) the investment advisory agreements between WisdomTree
Asset Management, Inc. (“WTAM”) and the Trust, on behalf of its applicable series (each, a “Fund,” and, collectively,
the “Funds”), pursuant to which WTAM provides the Funds with investment advisory services (the “Advisor Agreements”),
and (ii) each respective sub-advisory agreement between WTAM and Mellon Investments Corporation (“Mellon”)
and Voya Investment Management Co. LLC (“Voya,” and, together with Mellon, the “Sub-Advisers”),
pursuant to which the Sub-Advisers coordinate the investment and reinvestment of the assets of the applicable
Funds (“Sub-Advisory Agreements” and, together with the Advisory Agreements, the “Agreements”).
The
Trustees requested, and WTAM provided, such information as the Trustees, with advice from counsel to the Trust and independent legal counsel,
deemed reasonably necessary to evaluate the Agreements. At a meeting of a committee of Independent Trustees (the “Contracts Review
Committee”) held on August 13, 2024, representatives from WTAM presented detailed information to the Trustees relating to
the continuance of the Agreements, and the Trustees, including the Independent Trustees, reviewed and discussed such information. Further
information was presented at the Board’s request at the Meeting.
The
Independent Trustees were assisted in their review by independent legal counsel and met with counsel in executive session separate from
WTAM representatives and the Sub-Advisers. In considering the approval and renewal of the Agreements, the
Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor
as dispositive, and each Trustee may have attributed different weights to the factors considered. Each Fund was considered separately.
Analysis
of Nature, Extent, and Quality of Services Provided to the Funds. The Board considered information provided to them at the Meeting
and in previous presentations throughout the year from WTAM representatives regarding the nature, extent, and quality of the services
provided to the Funds, recognizing WTAM’s and the Sub-Advisers’ operational capabilities and
resources. The Board also discussed the role of WisdomTree, Inc. (“WT”), the parent of WTAM, as index provider to certain
Funds, which comprise the substantial majority of assets in the WisdomTree fund complex. The Board noted that the strategies represented
by those Funds tracking affiliated WT indexes are unique, based on WT’s intellectual property and are only available for use by
applicable Funds through WTAM. The Board noted WTAM’s belief that shareholders have invested in such Funds on the strength
of WT’s intellectual property and WTAM’s industry standing and reputation and with the expectation that WTAM will have a
continuing role in providing advisory services to the Funds based on the WT indexes. The Board also noted the extensive responsibilities
that WTAM has as investment adviser to the Funds, including: the selection of, and supervisory responsibilities and activities over, the
Sub-Advisers, including oversight of the Sub-Advisers’ adherence to each
Fund’s investment strategy and
WisdomTree
Trust 141
|
Additional
Information (unaudited)
(continued)
|
restrictions,
monitoring of the Sub-Advisers’ buying and selling of securities and derivatives transactions, review
of the Sub- Advisers’ performance, review of proxies voted by the Sub-Advisers and oversight of, and
the provision of consultation to, the Sub-Advisers with respect to the creation of custom creation or redemption
baskets for authorized participants; oversight of the daily valuation of the Funds’ portfolio holdings; oversight of general Fund
compliance with federal and state laws; and implementation of Board directives as they relate to the Funds.
The
Board also considered research support available to, and management capabilities of, the Funds’ management personnel and that WTAM
provides oversight of day-to-day Fund operations, including fund accounting,
tax matters, administration, compliance and legal assistance in meeting disclosure and regulatory requirements. Based on management’s
representations, the Board expected that there would be no reduction in the scope of services required by or provided by WTAM and the
Sub-Advisers under the relevant Agreements. The Board noted that WTAM has continued to commit significant
resources toward the fund complex and has made substantial investments to improve the services offered by WTAM, which benefit Fund shareholders.
Based
on review of this information and the other factors considered at the Meeting, the Board concluded that the nature, extent and quality
of services provided by WTAM and the Sub-Advisers under the Advisory Agreements and Sub-Advisory
Agreements, respectively, are adequate and appropriate and supported the Board’s approval of the approval and renewal of the Agreements.
Comparative
Analysis of the Funds’ Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge
Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information
(1) measuring each index Fund’s performance by how well it tracked the relevant benchmark index, (2) comparing, with
respect to the actively-managed Funds, each Fund’s performance with the performance of a group of
comparable funds (the “Performance Group”) for various periods ended May 31, 2024, and (3) comparing each
Fund’s actual management fees and total expenses with those of a group of comparable funds (the “Expense Group”)
and, with respect to total expenses, with a broader group of funds (the “Expense Universe”), the information for which was
derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Contracts Review Committee
and the Independent Trustees previously had reviewed and discussed the methodology Broadridge used to select the Performance Groups, Expense
Groups and Expense Universes. The Board noted that the Performance Groups, Expense Groups and Expense Universes included only pure-index
-exchange traded funds (“ETFs”) as comparison funds, except that the Performance Groups, Expense
Groups and Expense Universes for the actively-managed Funds included only actively-managed
ETFs and institutional funds (for certain actively managed Funds), as comparison funds. The Board also noted that due to the special characteristics
of certain Funds, there are limitations in providing comparable funds in the Performance Groups, Expense Groups and Expense Universes,
and the information in the Broadridge reports may or may not provide meaningful direct comparisons to the Funds.
The
Board discussed the index Funds’ performance, noting that the substantial majority of index Funds seek to track their own WisdomTree
benchmark index. During the prior year, the Board received periodic reports on the Funds’ performance in comparison to their relevant
benchmark indexes. The Board also discussed the performance of the actively-managed Funds and noted that
total return performance of the Funds was variously above, at and below the relevant Performance Group medians for the time periods measured.
The
Board also reviewed the range of actual management fees and total expenses of the Expense Group funds and, with respect to total expenses,
Expense Universe funds, and discussed the results of the comparisons. With respect to comparisons of actual management fees, the Board
noted the Funds’ unitary fee structure and that the Expense Groups and Expense Universes generally included both ETFs with and
without a unitary fee structure. The Board also noted that certain comparison funds in certain Expense Groups and Expense Universes benefited
from waivers of all or a portion of their management fees and reimbursement of certain operating expenses. The Board noted that the total
expenses of many of the Funds were within five basis points of the median or average total expenses of the funds in the Funds’
respective Expense Groups. In those specific instances where a Fund’s total expenses departed more significantly from comparative
funds, the Independent Trustees sought explanations from WTAM, which generally attributed the disparities to the limitations within peer
data and/or the unique attributes of a Fund.
The
Board considered the fees to the Sub-Advisers in relation to the fees paid to WTAM by the Funds and the respective
services provided by the Sub-Advisers and WTAM. The Board also noted that the Sub-Advisers’
fees are paid by WTAM (out of its fee paid by the relevant Funds) and not the Funds. The Board considered the meaningful differences in
the services that WTAM provides to the Funds as compared to the Sub-Advisers, including that the role of
a Sub-Adviser in making investment recommendations with respect to a Fund tracking an index is a rules-based
function, with oversight by WTAM in seeking to ensure compliance with such rules. The Board also considered the role of a Sub-Adviser
in making investment recommendations with respect to a Fund that is model-based, with oversight by WTAM in
seeking to ensure consistency with such quantitative models. The Board also considered
142 WisdomTree
Trust
|
Additional
Information (unaudited)
(concluded)
|
the
entrepreneurial and expense risk borne by WTAM that is associated with Funds’ unitary fee structure, which frequently includes
minimum fees (such as those to a Sub-Adviser), regardless of whether the asset size of a Fund has grown to
a sufficient size. Based on this review and the other factors considered at the Meeting, the Board concluded that, with respect to each
Fund, the Fund’s performance, the fees paid to WTAM and the relevant Sub-Adviser and the Fund’s
total expenses supported the Board’s approval and renewal of the relevant Agreements.
Analysis
of Profitability and Economies of Scale. WTAM representatives reviewed the expenses allocated and profit received by WTAM and the
resulting profitability percentage for managing each Fund and the aggregate profitability percentage to WTAM for managing the WisdomTree
fund complex, and the method used to determine the expenses and profit. The Board considered the profitability analysis (1) as
part of its evaluation of whether the fees under the Agreements bear a reasonable relationship to the mix of services provided by WTAM
and the Sub-Advisers, including the nature, extent and quality of such services, and (2) in light
of the relevant circumstances for each Fund and the extent to which economies of scale would be realized if the Fund grows and whether
fee levels reflect these economies of scale for the benefit of Fund shareholders. WTAM representatives noted that a discussion of economies
of scale is predicated on a Fund having achieved a substantial size and that, if a Fund’s assets had been decreasing, the possibility
that WTAM may have realized material economies of scale would be less. WTAM representatives also noted that, as a result of shared and
allocated costs among the WisdomTree funds, the extent of economies of scale could depend substantially on the level of assets in the
fund complex as a whole and the relative size and asset size changes among the Funds. The Board noted that, in the past, certain Funds
had grown rapidly over a relatively short period of time after longer periods of slow or no growth, during which there were years
of losses for WTAM in managing such Funds that had only recently turned profitable and years of substantial cumulative losses to
WTAM in managing the fund complex as a whole. WTAM representatives stated that there has been significant volatility in the assets of
individual Funds and in the fund complex as a whole over time (including volatility in profitability) and that it was not clear that current
asset levels will be maintained. WTAM representatives noted that assets in certain Funds have diminished at times at a rapid rate and
could continue to do so. WTAM representatives also noted that economies of scale currently are shared with the Funds by way of the unitary
fee structure of the Trust, as well as through additional investment in the WisdomTree business. The Board noted that the Contracts Review
Committee had focused on the issue of economies of scale during its meetings. The Board also noted that it would continue to monitor the
sharing of economies of scale, focusing in particular on Funds that have experienced significant asset growth, to determine the appropriateness
of adding breakpoints in the future. The Board also considered potential benefits to WTAM and the Sub-Advisers
from acting as investment adviser and sub-advisers, respectively, and noted that there were no soft dollar
arrangements in effect for trading the Funds’ investments. Based on this review, the Board concluded that the profitability results
were consistent with the services rendered and service levels provided by WTAM and the entrepreneurial risk WTAM has undertaken over time.
*
* * * * *
At
the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business
decision with respect to the approval to renew the Agreements. In evaluating the Agreements, the Board considered the conclusions and
determinations discussed above and also relied on its previous knowledge, gained through meetings and other interactions with WTAM and
the Sub-Advisers, of the Funds and the services provided to the Funds by WTAM and the Sub-Advisers.
The
Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the Funds and
the investment advisory and other services provided under the Agreements. In light of the foregoing, the Board, including a majority of
the Independent Trustees, determined to approve the renewal of the Agreements.
WisdomTree
Trust 143
(This
page intentionally left blank.)
(This
page intentionally left blank.)
(This
page intentionally left blank.)
