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What are some of the effects of roll-over on the index and the ETF price?

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What are some of the effects of roll-over on the index and the ETF price?

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As the WTI Futures Contracts included in the Index come to expiration, they are replaced by contracts that have a later expiration. For example, a contract purchased and held in September may specify an October expiration. As time passes, the contract expiring in October is replaced by a contract for delivery in November. This is accomplished by selling the October contract and purchasing the November contract. This process is referred to as "rolling".

The rolling keeps an investor fully invested. The roll return will be positive when the futures curve is downward sloping ("backwardation") or negative when the futures curve is upward sloping ("contango")

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What index does the product use?

The Sub-fund uses "S&P GSCI Crude Oil Excess Return Index" ("Excess Return" does not mean any additional return on the Sub-Fund's performance), which tracks the performance of the WTI Futures Contracts with the closest expiration date (the "nearest contract") as benchmark. The index calculates the return from investing in the nearest WTI futures contract and rolling them forward each month. It serves as benchmark to a wide array of financial products in various markets including the US, Korea, UK, Australia and Taiwan. S&P is considered by many a reputable index provider and its commodities indices are widely used by many around the world. The index was launched on 1 May 1991 and had a base value of 100 as at 7 January 1987. 

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When does the Sub-fund have roll-over trading? And how does it take place?

The Index includes provisions for the replacement (also referred to as "rolling") of the nearest contracts as they approach maturity. The rolling of a nearest contract occurs over a 5 day period every month, commencing on the 5th S&P GSCI Business Day of the month, and ending on the 9th S&P GSCI Business Day of the month.   For example, on 5 May 2016 (4th business day of the month), the Sub-Fund will hold 100% June 2016 contracts, which is the first nearby contract. For the avoidance of doubt, the last trading day of the first nearby contract is the 4th business day prior to the 25th calendar day each month. On 6 May 2016, which is the first day of roll-over being the 5th business day of the month, the Sub-Fund will hold 20% July 2016 contracts and 80% June 2016 contracts.  On 9 May 2016, the Sub-Fund will hold 40% July 2016 contracts and 60% June 2016 contracts. In the following two business days, the Sub-Fund will increase its holding of July 2016 contracts by 20% each business day while decreasing its holding of June 2016 contracts by the same amount until, at the end of 12 May 2016, which is the final day of the roll-over (9th business day of the month), the Sub-Fund will hold 100% July 2016 contract. 

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