Supplement dated January 2, 2008
to the
Prospectus dated July 27, 2007
for the
WisdomTree Earnings Funds
The following information supplements the information found in the prospectus
for the WisdomTree Earnings Funds. The Fund is not yet available for investment.
WISDOMTREE INDIA EARNINGS FUND
Fund Facts
CUSIP NUMBER:
o 97717W422
EXCHANGE TRADING SYMBOL:
o EPI
Investment Objective
The Fund seeks to track the price and yield performance, before fees and
expenses, of the WisdomTree India Earnings Index. The Index measures the
performance of profitable companies incorporated and traded in India that meet
specific criteria developed by WisdomTree Investments. Since the Fund's
investment objective has been adopted as a non-fundamental investment policy,
the Fund's investment objective may be changed without a vote of shareholders.
Primary Investment Strategies
The Fund employs a "passive management" - or indexing - investment approach
designed to track the performance of the WisdomTree India Earnings Index. The
Fund attempts to invest all, or substantially all, of its assets in the stocks
that make up the Index.
Index Description
The WisdomTree India Earnings Index is a fundamentally weighted index that
measures the performance of generally profitable companies incorporated and
traded in India that are eligible to be purchased by foreign investors. The
Index consists of companies that: (i) are incorporated in India, (ii) are listed
on a major stock exchange in India, (iii) have generated at least $5 million in
earnings in the year prior to the Index measurement date, (iv) have a market
capitalization of at least $200 million on the Index measurement date, (v) have
an average daily dollar volume of at least $200,000 for each of the six months
prior to the Index measurement date, (vi) have traded at least 250,000 shares
per month for each of the six months prior to the index measurement date, and
(vii) have a price to earnings ratio ("P/E ratio") of at least 2 as of the Index
measurement date. Companies are weighted in the Index based on their earnings
over the year prior to the Index measurement date adjusted for a factor that
takes into account shares available to foreign investors. For these purposes,
"earnings" are determined using a company's net income. Common stocks and
holding companies, including real estate holding companies, are eligible for
inclusion in the Index. As of November 30, 2007, approximately 62% of the weight
of the Index consisted of securities with market capitalizations of over $10
billion, approximately 28% of the Index consists of securities with market
capitalizations between $2 and $10 billion, and approximately 10% of the Index
consisted of companies with market capitalizations less than $2 billion.
Primary Investment Risks
The following risks, in addition to the principal risk factors common to all
Funds, are some of the risks that can significantly affect the Fund's
performance.
o Foreign Securities Risk. Foreign securities can involve additional risks
relating to political, economic, or regulatory conditions in foreign
countries. These risks include fluctuations in foreign currencies;
withholding or other taxes; trading, settlement, custodial, and other
operational risks; and, in some cases, less stringent investor protection
and disclosure standards. Since foreign exchanges may be open on days when
the Fund does not price its shares, the value of the securities in the
Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's shares. All of these factors can make foreign
investments more volatile and potentially less liquid than U.S.
investments. In addition, foreign markets can perform differently from the
U.S. market due to increased risks of adverse issuer, political,
regulatory, market, and economic developments.
o Emerging Markets Risk. Investing in securities listed and traded in
emerging markets may be subject to additional risks associated with
emerging market economies. 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.
o Geographic Concentration Risk. Because the Fund invests a significant
portion of its assets in the securities of companies of a single country,
it will be impacted by events or conditions affecting that country.
Political and economic conditions and changes in regulatory, tax, or
economic policy in India could significantly affect the market in that
country and in surrounding or related countries and have a negative impact
on a Fund's performance. The Indian economy may differ favorably or
unfavorably from the U.S. economy in such respects as the rate of growth of
gross domestic product, the rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Agriculture
occupies a prominent position in the Indian economy and the Indian economy
therefore may be negatively affected by adverse weather conditions. The
Indian government has exercised and continues to exercise significant
influence over many aspects of the economy, and the number of public sector
enterprises in India is substantial. Accordingly, Indian government actions
in the future could have a significant effect on the Indian economy.
The Indian economy has experienced generally sustained growth during the
last several years. There are no guarantees this will continue. While the
Indian government has implemented economic structural reform with the
objective of liberalizing India's exchange and trade policies, reducing the
fiscal deficit, controlling inflation, promoting a sound monetary policy,
reforming the financial sector, and placing greater reliance on market
mechanisms to direct economic activity, there can be no assurance that
these policies will continue or that the economic recovery will be
sustained.
Religious and border disputes persist in India. In addition, India has
experienced civil unrest and hostilities with neighboring countries such as
Pakistan. The Indian government has confronted separatist movements in
several Indian states. Investment and repatriation restrictions in India
may impact the ability of the Fund to track its Index. Each of the factors
described above could have a negative impact on the Fund's performance and
increase the volatility of the Fund.
o Small and Mid-Capitalization Investing. The Fund invests a portion of its
assets in securities of small- and mid-capitalization companies. The
securities of small- and mid-capitalization companies may be subject to
more unpredictable price changes than securities of larger companies or the
market as a whole.
o Basic Materials Investing. Due to the high concentration of basic materials
companies located in India and included in the Fund's Index, the Fund may
invest a relatively large amount of its assets in the basic materials
sector of the market. As such, the Fund may be particularly sensitive to
economic and other conditions affecting this sector.
o Energy Sector Investing. Due to the high concentration of energy companies
located in India and included in the Fund's Index, the Fund may invest a
relatively large amount of its assets in the energy sector of the market.
As such, the Fund may be particularly sensitive to economic and other
conditions affecting this sector.
o Currency Risk. Because the Fund's NAV is determined on the basis of U.S.
dollars, the U.S. dollar value of your investment in the Fund may go down
if the value of the local currency of the non-U.S. markets in which the
Fund invests depreciates against the U.S. dollar. This is true even if the
local currency value of securities in the Fund's holdings goes up.
Performance Information
No performance information is presented for the Fund because it has been in
operation for less than one full calendar year. After the first full calendar
year, a risk/return chart and table will be provided. Any past performance of
the Fund that will be shown will not be an indication of future results.
Fees and Expenses
The following table describes the fees and expenses you may pay if you buy and
hold shares of the Fund. The fees are expressed as a percentage of the Fund's
average net assets. You may also incur customary brokerage charges when buying
or selling Fund shares.
Shareholder Fees
(fees paid directly from your investment, but see the Creation
Transaction Fees and Redemption Transaction Fees section below) None
--------------------------------------------------------------- ----
Annual Fund Operating Expenses (expenses deducted from Fund assets)
Management Fees 0.68%
Distribution and/or Service (12b-1) Fees None
Other Expenses* 0.20%
Total Expenses 0.88%
* "Other Expenses" are based on estimated amounts for the current fiscal
year. WisdomTree Asset Management has agreed to limit Fund expenses to
0.88% through March 31, 2009.
The following example is intended to help retail investors compare the cost of
investing in the Fund with the cost of investing in other funds. It illustrates
the hypothetical expenses that such investors would incur over various periods
if they invest $10,000 in the Fund for the time periods indicated and then
redeemed all of the shares at the end of those periods. This example assumes
that the Fund provides a return of 5% a year and that operating expenses remain
the same. This example does not include the brokerage commission that retail
investors will pay to buy and sell shares of the Fund. It also does not include
the transaction fees on purchases and redemptions of Creation Units, because
these fees will not be imposed on retail investors. Although your actual costs
may be higher or lower, based on these assumptions, your costs would be:
1 Year 3 Years
------ -------
$91 $281
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years
------ -------
$91 $281
Creation and Redemption Transaction Fees for Creation Units
The Fund issues and redeems shares at NAV only in blocks of 100,000 shares or
multiples thereof. As a practical matter, only institutions or large investors
purchase or redeem these Creation Units. A standard creation transaction fee of
$5,000 is charged to each purchaser of Creation Units. The fee is a single
charge and will be the same regardless of the number of Creation Units purchased
by an investor on the same day. The approximate value of a Creation Unit as of
December 31, 2007 was $5,000,000. An investor who holds Creation Units and
wishes to redeem at NAV would also pay a standard redemption transaction fee of
$5,000 on the date of such redemption(s), regardless of the number of Creation
Units redeemed that day. Investors who hold Creation Units will also pay the
annual Fund operating expenses described in the table above. Assuming an
investment in a Creation Unit of $5,000,000 and a 5% return each year, and
assuming the Fund's operating expenses remain the same, the total costs would be
$54,906 if the Creation Unit is redeemed after one year, and $150,346 if the
Creation Unit is redeemed after three years.
Creation and Redemption Transaction Fees for Creation Units
The following information supplements the information included on page 31 of the
Prospectus and shows the approximate value of one Creation Unit of the Fund,
including the standard creation and redemption transaction fee. These fees are
payable only by investors who purchase shares directly from a Fund. Retail
investors who purchase shares through their brokerage account will not pay these
fees.
Standard Maximum
Approximate Value of Creation/Redemption Creation/Redemption
Name of Fund One Creation Unit Transaction Fee Transaction Fee
------------------------------ -------------------- ------------------- -------------------
WisdomTree India Earnings Fund $5,000,000 $5,000 $20,000
The following information supplements the first full paragraph of information
found on page 25 under the Caption "Portfolio Managers".
Each Portfolio Manager has served as manager of the Fund since its inception.
The following information supplements and replaces similar information under the
heading "Taxes" beginning on page 28.
The WisdomTree India Earnings Fund intends to operate through the WisdomTree
India Investment Portfolio, Inc., a wholly-owned subsidiary in the Republic of
Mauritius, in order to take advantage of favorable tax treatment by the Indian
government pursuant to a taxation treaty between India and Mauritius. Recently,
the Supreme Court of India upheld the validity of this tax treaty in response to
a lower court challenge contesting the treaty's applicability to entities such
as the Fund. No assurance can be given that the terms of the Treaty will not be
subject to re-negotiation in future or subject to a different interpretation.
Any change in the provision of this treaty or in its applicability to the Fund
could result in the imposition of withholding and other taxes on the Fund by tax
authorities in India. This would reduce the return to the Fund on its
investments and the return received by Fund shareholders.