Teucrium Trading, LLC

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Monday, 28 Jul 2014

TAGS Disclosure

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Risks Associated With Investing Directly or Indirectly in Agricultural Commodities

 

Investing in Commodity Interests subjects the Fund to the risks of the agricultural commodities markets, and this could result in substantial fluctuations in the price of the Fund’s Shares.

 

The Fund is subject to the risks and hazards of the agricultural commodities markets because it invests indirectly in Commodity Interests. The risks and hazards that are inherent in the agricultural commodities markets may cause the price of those commodities to fluctuate widely. If the changes in percentage terms of the Fund’s Shares accurately track the percentage changes in the Benchmarks of the Underlying Funds or the spot price of corn, wheat, soybeans and sugar, the price of the Shares will fluctuate.

 

•   The price and availability of agricultural commodities is influenced by economic and industry conditions, including but not limited to supply and demand factors such as: crop disease; weed control; water availability; various planting, growing, or harvesting problems; severe weather conditions such as drought, floods, heavy rains, frost, or natural disasters that are difficult to anticipate and that cannot be controlled. The U.S. prices of certain agricultural commodities such as soybeans and sugar are subject to risks relating to the growth of such commodities in foreign countries, such as: uncontrolled fires (including arson); challenges in doing business with foreign companies; legal and regulatory restrictions; transportation costs; interruptions in energy supply; currency exchange rate fluctuations; and political and economic instability. Additionally, demand for agricultural commodities is affected by changes in consumer tastes, national, regional and local economic conditions, and demographic trends.

 

•   Agricultural commodity production is subject to United States and foreign policies and regulations that materially affect operations. Governmental policies affecting the agricultural industry, such as taxes, tariffs, duties, subsidies, incentives, acreage control, and import and export restrictions on agricultural commodities and commodity products, can influence the planting of certain crops, the location and size of crop production, the volume and types of imports and exports, and industry profitability. Additionally, commodity production is affected by laws and regulations relating to, but not limited to, the sourcing, transporting, storing and processing of agricultural raw materials as well as the transporting, storing and distributing of related agricultural products. Agricultural commodity producers also may need to comply with various environmental laws and regulations, such as those regulating the use of certain pesticides, and local laws that regulate the production of genetically modified crops. In addition, international trade disputes can adversely affect agricultural commodity trade flows by limiting or disrupting trade between countries or regions.

 

•   Seasonal fluctuations in the price of agricultural commodities may cause risk to an investor because of the possibility that Share prices will be depressed because of the relevant harvest cycles. In the futures market, fluctuations are typically reflected in contracts expiring in the harvest season (i.e., in the case or corn and soybeans, contracts expiring during the fall are typically priced lower than contracts expiring in the winter and spring, while in the case of wheat and sugar, contracts expiring during the spring and early summer are typically priced lowest). Thus, seasonal fluctuations could result in an investor incurring losses upon the sale of Fund Shares, particularly if the investor needs to sell Shares when an Underlying Fund’s Benchmark Component Futures Contracts are, in whole or part, Futures Contracts expiring in the harvest season for the Specified Commodity.

 

•   Risks Specific to Corn. Demand for corn in the United States to produce ethanol has been a significant factor affecting the price of corn. In turn, demand for ethanol generally has tended to increase when the price of gasoline has increased, and has been significantly affected by United States governmental policies designed to encourage the production of ethanol. In addition, because corn is often used as an ingredient in livestock feed, demand for corn is subject to risks associated with the outbreak of livestock disease.

 

•   Risks Specific to Wheat. Demand for food products made from wheat flour in the United States is relatively unaffected by changes in wheat prices or disposable income, but is closely tied to tastes and preferences. For example, in recent years the increase in the popularity of low-carbohydrate diets caused the consumption of wheat flour to decrease rapidly before rebounding somewhat after 2005. Export demand for wheat fluctuates yearly, based largely on crop yields in the importing countries.

 

•   Risks Specific to Soybeans. The increased production of soybean crops in South America and the rising demand for soybeans in emerging nations such as China and India have increased competition in the soybean market. Like the conversion of corn into ethanol, soybeans can be converted into biofuels such as biodiesel. Accordingly, the soybean market has become increasingly affected by demand for biofuels and related legislation. The supply of soybeans could be reduced by the spread of soybean rust, a wind-borne fungal disease. Although soybean rust can be killed with chemicals, chemical treatment increases production costs for farmers. Finally, because processing soybean oil can create trans-fats, the demand for soybean oil may decrease due to heightened governmental regulation of trans-fats or trans-fatty acids. The U.S. Food and Drug Administration currently requires food manufacturers to disclose levels of trans-fats contained in their products, and various local governments have enacted or are considering restrictions on the use of trans-fats in restaurants.

 

•   Risks Specific to Sugar. The spread of consumerism and the rising affluence of emerging nations such as China and India have created demand for sugar. An influx of people in developing countries moving from rural to urban areas may create more disposable income to be spent on sugar products, and might also reduce sugar production in rural areas on account of worker shortages, all of which could result in upward pressure on sugar prices. On the other hand, public health concerns regarding obesity, heart disease and diabetes, particularly in developed countries, may reduce demand for sugar. In light of the time it takes to grow sugarcane and sugar beets and the cost of new facilities for processing these crops, it may not be possible to increase supply quickly or in a cost-effective manner in response to an increase in demand.

 

The Underlying Funds’ Benchmarks are not designed to correlate exactly with the spot price of the corresponding Specified Commodity and this could cause the changes in the price of an Underlying Fund’s shares to substantially vary from the changes in the spot price of the Specified Commodity. Therefore, you may not be able to effectively use the Fund to hedge against commodity-related losses or to indirectly invest in agricultural commodities.

 

The Benchmark Component Futures Contracts that the Underlying Funds invest in reflect the price of a Specified Commodity for future delivery, not the current spot price of the Specified Commodity, so at best the correlation between changes in such Futures Contracts and the spot price of the Specified Commodity will be only approximate. Weak correlation between an Underlying Fund’s Benchmark and the spot price of the corresponding Specified Commodity may result from the typical seasonal fluctuations in commodity prices discussed above. Imperfect correlation may also result from speculation in Commodity Interests, technical factors in the trading of Futures Contracts, and expected inflation in the economy as a whole. If there is a weak correlation between an Underlying Fund’s Benchmark and the spot price of its corresponding Specified Commodity, then the price of the Shares may not accurately track the spot price of the Specified Commodities and you may not be able to effectively use the Fund as a way to hedge the risk of losses in your commodity-related transactions or as a way to indirectly invest in agricultural commodities.

 

Changes in the Fund’s NAV may not correlate well with changes in the Underlying Fund Average, and changes in the Underlying Funds’ NAVs may not correlate well with changes in their Benchmarks. If this were to occur, you may not be able to effectively use the Fund as a way to hedge against commodity-related losses or as a way to indirectly invest in agricultural commodities.

 

The Sponsor endeavors to invest the Fund’s assets as fully as possible in the Underlying Funds so that the changes in percentage terms in the Fund’s NAV closely correlate with the changes in percentage terms in the Underlying Fund Average. The Sponsor also endeavors to invest the Underlying Funds’ assets as fully as possible in Commodity Interests so that the changes in percentage terms in the Underlying Funds’ NAVs closely correlate with the changes in percentage terms in their respective Benchmarks. However, changes in the Fund’s NAV may not correlate with the changes in the Underlying Fund Average and changes in the Underlying Funds’ NAV may not correlate with the changes in their Benchmarks for various reasons, including those set forth below:

 

•   The Fund may not be able to maintain its targeted 25% allocation to each Underlying Fund at all times. Furthermore, the Fund acquires shares of the Underlying Funds in the secondary market at their market prices, not at their NAV, so any changes in the value of the Fund’s holdings in the Underlying Funds may not match changes in the Underlying Funds’ NAVs.

 

•   The Underlying Funds do not intend to invest only in the Benchmark Component Futures Contracts. While an Underlying Fund’s investments in Futures Contracts other than its Benchmark Component Futures Contracts, Cleared Swaps and Other Commodity Interests would be for the purpose of causing the Underlying Fund’s performance to track that of its Benchmark most effectively and efficiently. The performance of these Commodity Interests may not correlate well with the performance of the Underlying Funds’ Benchmark Component Futures Contracts, resulting in a greater potential for error in tracking price changes in those Futures Contracts. Additionally, if the trading market for certain Futures Contracts is suspended or closed, an Underlying Fund may not be able to purchase its investments at the last reported price for such investments.

 

•   The Fund and Underlying Funds will incur certain expenses in connection with their operations, and the Underlying Funds will hold most of their assets (other than Commodity Interests) in income-producing, short-term securities for margin and other liquidity purposes and to meet redemptions that may be necessary on an ongoing basis. These expenses and income will cause imperfect correlation between changes in the Fund’s NAV and changes in the Underlying Fund Average and between changes in the NAVs of the Underlying Funds and their respective Benchmarks. Your cost of investing in the Fund will be higher than the cost of investing directly in the Underlying Funds’ shares.

 

•   The Sponsor may not be able to invest an Underlying Fund’s assets in Commodity Interests having an aggregate notional amount exactly equal to the Underlying Fund’s NAV. As a standardized contract, a single Futures Contract or Cleared Swap is for a specified amount of a Specified Commodity, and the Underlying Fund’s NAV and the proceeds from the sale of a creation basket of an Underlying Fund is unlikely to be an exact multiple of that amount. In such case, the Underlying Fund could not invest the entire proceeds from the purchase of the creation basket in such Futures Contracts. (For example, assuming the Underlying Fund receives $5,000,000 for the sale of a creation basket and that the value (i.e., the notional amount) of a Futures Contract relating to the Underlying Fund’s Specified Commodity is $35,000, the Underlying Fund could only enter into 142 Futures Contracts with an aggregate value of $4,970,000). While an Underlying Fund may be better able to achieve the exact amount of exposure to the market for its Specified Commodity through the use of over-the-counter Other Commodity Interests, there is no assurance that the Sponsor will be able to continually adjust the Underlying Fund’s exposure to such Other Commodity Interests to maintain such exact exposure. Furthermore, as noted above, the use of Other Commodity Interests may itself result in imperfect correlation with an Underlying Fund’s Benchmark.

 

•   There may be more or less correlation between an Underlying Fund’s NAV and its Benchmark as the Underlying Fund’s assets increase. On the one hand, as an Underlying Fund grows it should be able to invest in Futures Contracts with notional amounts that are closer on a percentage basis to the Underlying Fund’s NAV. For example, if the Underlying Fund’s NAV is equal to 4.9 times the value of a single Futures Contract, it can purchase only four futures contracts, which would cause only 81.6% of the Underlying Fund’s assets to be exposed to the market for the Specified Commodity. On the other hand, if the Underlying Fund’s NAV is equal to 100.9 times the value of a single Futures Contract, it can purchase 100 such contracts, resulting in 99.1% exposure. However, at certain asset levels, an Underlying Fund may be limited in its ability to purchase Futures Contracts due to position limits or accountability levels. In such instances, the Underlying Fund would likely invest to a greater extent in Commodity Interests that are not subject to those restrictions. To the extent that an Underlying Fund invests in Cleared Swaps and Other Commodity Interests, the correlation between the Underlying Fund’s NAV and its Benchmark may be lower. In certain circumstances, position limits or accountability levels could limit the number of Creation Baskets that will be sold.

 

If changes in the Fund’s NAV do not correlate with changes in the Underlying Fund Average or changes in the Underlying Funds’ NAVs do not correlate with changes in their respective Benchmarks, then investing in the Fund may not be an effective way to hedge against commodity-related losses or indirectly invest in agricultural commodities.

 

Changes in the price of the Fund’s Shares on the NYSE Arca may not correlate perfectly with changes in the NAV of the Fund’s or the Underlying Funds’ Shares. If these variations occur, then you may not be able to effectively use the Fund to hedge against commodity-related losses or to indirectly invest in agricultural commodities.

 

While it is expected that the trading prices of the Shares will fluctuate in accordance with the changes in the Fund’s NAV, the prices of Shares may also be influenced by other factors, including the supply of and demand for the Shares, whether for the short term or the longer term. There is no guarantee that the Shares will not trade at appreciable discounts from, and/or premiums to, the Fund’s NAV. Even if the market price of an Underlying Fund closely tracks changes in its NAV, there is no guarantee that the market price of the Fund will similarly closely track changes in the NAVs of the Underlying Funds. This could cause the changes in the price of the Shares to substantially vary from the changes in the spot prices of the Specified Commodities, even if an Underlying Fund’s NAV were closely tracking movements in the spot price of the Specified Commodity. If this occurs, you may not be able to effectively use the Fund to hedge the risk of losses in your commodity-related transactions or to indirectly invest in agricultural commodities.

 

The Fund or an Underlying Fund may experience a loss if it is required to sell Treasury Securities or cash equivalents at a price lower than the price at which they were acquired.

 

If the Fund or an Underlying Fund is required to sell Treasury Securities or cash equivalents at a price lower than the price at which they were acquired, the Fund will experience a loss. This loss may adversely impact the price of the Shares and may decrease the correlation between the price of the Shares, the Underlying Fund Average, the Underlying Funds’ Benchmarks and the spot prices of the Specified Commodities. The value of Treasury Securities and other debt securities generally moves inversely with movements in interest rates. The prices of longer maturity securities are subject to greater market fluctuations as a result of changes in interest rates. While the short-term nature of the Fund’s and Underlying Funds’ investments in Treasury Securities and cash equivalents should minimize the interest rate risk to which the Fund is subject, it is possible that the Treasury Securities and cash equivalents held by the Fund and the Underlying Funds will decline in value.

 

Certain of the Fund’s and Underlying Funds’ investments could be illiquid, which could cause large losses to investors at any time or from time to time.

 

The Fund and Underlying Funds may not always be able to liquidate their positions in the investments at the desired price for reasons including, among others, insufficient trading volume, limits imposed by exchanges or other regulatory organizations, or lack of liquidity. As to the Fund’s investments in the Underlying Funds, the Underlying Funds are relatively new and may have trading volumes that are insufficient for the needs of the Fund. As to Futures Contracts, it may be difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market. Limits imposed by futures exchanges or other regulatory organizations, such as position limits, accountability levels and price fluctuation limits, may contribute to a lack of liquidity with respect to some exchange-traded Commodity Interests. In addition, over-the-counter Commodity Interests may be illiquid because they are contracts between two parties and generally may not be transferred by one party to a third party without the counterparty’s consent. Conversely, a counterparty may give its consent, but an Underlying Fund may still not be able to transfer an over-the-counter Commodity Interest to a third party due to concerns regarding the counterparty’s credit risk.

 

A market disruption, such as a foreign government taking political actions that disrupt the market in its currency, its commodity production or exports, or in another major export, can also make it difficult to liquidate a position. Unexpected market illiquidity may cause major losses to investors at any time or from time to time. In addition, the Fund and the Underlying Funds do not intend at this time to establish a credit facility, which would provide an additional source of liquidity, but instead will rely only on the Treasury Securities, cash and/or cash equivalents that they hold to meet their liquidity needs. The anticipated large value of the positions in Commodity Interests that the Sponsor will acquire or enter into for the Underlying Funds increases the risk of illiquidity. Because Commodity Interests may be illiquid, the Underlying Funds’ holdings may be more difficult to liquidate at favorable prices in periods of illiquid markets and losses may be incurred during the period in which positions are being liquidated.

 

If the nature of the participants in the futures market shifts such that commodity purchasers are the predominant hedgers in the market, the Underlying Funds might have to reinvest at higher futures prices or choose Other Commodity Interests.

 

The changing nature of the participants in the market for an agricultural commodity will influence whether futures prices are above or below the expected future spot price. Commodity producers will typically seek to hedge against falling prices by selling Futures Contracts. Therefore, if producers become the predominant hedgers in the futures market for a particular commodity, prices of Futures Contracts for that commodity will typically be below expected future spot prices. Conversely, if the predominant hedgers in the futures market are the purchasers of the commodity who purchase Futures Contracts to hedge against a rise in prices, prices of Futures Contracts for that commodity will likely be higher than expected future spot prices. This can have significant implications for the Underlying Funds when it is time to sell a Futures Contract that is no longer a Benchmark Component Futures Contract and purchase a new Futures Contract or to sell a Futures Contract to meet redemption requests. As a result, an Underlying Fund may not be able to track its Benchmark and this could have a corresponding effect on the tracking of the Fund.

 

While the Underlying Funds do not intend to take physical delivery of commodities under their Commodity Interests, the possibility of physical delivery impacts the value of the contracts.

 

While it is not the current intention of any Underlying Fund to take physical delivery of commodities under its Commodity Interests, Futures Contracts are traditionally not cash-settled contracts, and it is possible to take delivery under these and some Other Commodity Interests. Storage costs associated with purchasing agricultural commodities could result in costs and other liabilities that could impact the value of Futures Contracts or certain Other Commodity Interests. Storage costs include the time value of money invested in a physical commodity plus the actual costs of storing the commodity less any benefits from ownership of the commodity that are not obtained by the holder of a futures contract. In general, Futures Contracts have a one-month delay for contract delivery and back month contracts (the back month is any future delivery month other than the spot month) include storage costs. To the extent that these storage costs change while an Underlying Fund holds Commodity Interests, the value of the Commodity Interests, and therefore the Underlying Fund’s NAV, may change as well.

 

The price relationship between the Underlying Funds’ Benchmark Component Futures Contracts at any point in time and the Futures Contracts that will become the Underlying Funds’ Benchmark Component Futures Contracts on the next roll date will vary and may impact the Fund’s total return and the degree to which the Fund’s total return tracks that of commodity price indices.

 

The design of each Underlying Fund’s Benchmark is such that the Benchmark Component Futures Contracts will change several times a year, and the Underlying Fund’s investments must be rolled periodically to reflect the changing composition of its Benchmark. For example, when a second-to-expire Futures Contract becomes a first-to-expire contract, such contract will no longer be a Benchmark Component Futures Contract and the Underlying Fund’s position in it will no longer be consistent with tracking its Benchmark. In the event of a futures market where near-to-expire contracts trade at a higher price than longer-to-expire contracts, a situation referred to as “backwardation,” then absent the impact of the overall movement in prices the value of the Benchmark Component Futures Contracts would tend to rise as they approach expiration. As a result an Underlying Fund (and, therefore, the Fund) may benefit because it would be selling more expensive contracts and buying less expensive ones on an ongoing basis. Conversely, in the event of a futures market where near-to-expire contracts trade at a lower price than longer-to-expire contracts, a situation referred to as “contango,” then absent the impact of the overall movement in prices the value of the Underlying Funds’ Benchmark Component Futures Contracts would tend to decline as they approach expiration. As a result the Underlying Fund’s (and the Fund’s) total return may be lower than might otherwise be the case because it would be selling less expensive contracts and buying more expensive ones. The impact of backwardation and contango may lead the total return of an Underlying Fund to vary significantly from the total return of other price references, such as the spot price of its Specified Commodity. In the event of a prolonged period of contango, and absent the impact of rising or falling prices, this could have a significant negative impact on the Underlying Fund’s (and the Fund’s) NAV and total return.

 

Regulation of Commodity Interests and commodity markets is extensive and constantly changing; future regulatory developments are impossible to predict but may significantly and adversely affect the Fund and the Underlying Funds.

 

The futures markets are subject to comprehensive statutes, regulations and requirements. In addition, the CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or increased margin requirements, the establishment of daily price limits and the suspension of trading.

 

The regulation of commodity interest transactions in the United States is a rapidly changing area of law and is subject to ongoing modification by governmental and judicial action. Considerable regulatory attention has been focused on non-traditional investment pools that are publicly distributed in the United States. There is a possibility of future regulatory changes within the United States altering, perhaps to a material extent, the nature of an investment in the Fund or the Underlying Funds, or the ability of the Fund or an Underlying Fund to continue to implement its investment strategy. In addition, various national governments outside of the United States have expressed concern regarding the disruptive effects of speculative trading in the commodities markets and the need to regulate the derivatives markets in general. The effect of any future regulatory change on the Fund and the Underlying Funds is impossible to predict, but could be substantial and adverse.

 

In the wake of the economic crisis of 2008 and 2009, federal regulators and Congress are revisiting the regulation of the financial sector, including the securities and commodities markets. These efforts are anticipated to result in significant changes in the regulation of these markets.

 

The Dodd-Frank Act includes provisions altering the regulation of commodity interests. Provisions in the new law include the requirement that position limits be established on a wide range of commodity interests including energy-based, metal and agricultural commodity futures contracts, options on such futures contracts and cleared and uncleared swaps that are economically equivalent to such futures contracts and options (“Reference Contracts”); new registration and recordkeeping requirements for swap market participants, capital and margin requirements for “swap dealers” and “major swap participants” as determined by the new law and applicable regulations; and the mandatory use of clearinghouse mechanisms for most swap transactions that are currently entered into in the over-the-counter market. Additionally, the new law requires the aggregation, for purposes of position limits, of all positions in Reference Contracts held by a single entity and its affiliates, whether such positions exist on U.S. futures exchanges, non-U.S. futures exchanges, in cleared swaps or in over-the-counter swaps. The CFTC, along with the SEC and other federal regulators, has been tasked with developing the rules and regulations enacting the provisions noted above. The CFTC has now issued proposed versions of all of the rules it is required to promulgate under the Dodd-Frank Act but continues to issue proposed versions of additional rules that it has authority to promulgate. In addition, the CFTC has begun to issue final rules under the Dodd-Frank Act and is expected to issue additional final rules into 2012. The effect of future regulatory change on the Fund and the Underlying Funds and the exact timing of such changes are impossible to predict but the change could be substantial and adverse. Specifically, the new law and the rules that are currently being and are expected to be promulgated thereunder may negatively impact the Fund’s and the Underlying Funds’ abilities to meet their investment objectives either through limits or requirements imposed on them and/or on their counterparties. In particular, new position limits imposed on an Underlying Fund or its counterparty may impact the Underlying Fund’s ability to invest in a manner that most efficiently meets its investment objective and new requirements, including capital imposed on its counterparties and mandatory clearing, may increase the cost of the Underlying Fund’s investments and doing business, which could adversely affect you.

 

If you are investing in the Fund for purposes of hedging, you might be subject to several risks, including the possibility of losing the benefit of favorable market movements.

 

Producers and commercial users of agricultural commodities may use the Fund as a vehicle to hedge the risk of losses in their commodity-related transactions. There are several risks in connection with using the Fund as a hedging device. While hedging can provide protection against an adverse movement in market prices, it can also preclude a hedger’s opportunity to benefit from a favorable market movement. For instance, in a hedging transaction the hedger may be a user of a commodity concerned that the hedged commodity will increase in price, but must recognize the risk that the price may instead decline. If this happens, the hedger will have lost the benefit of being able to purchase the commodity at the lower price because the hedging transaction will result in a loss that would offset (at least in part) this benefit. Thus, the hedger foregoes the opportunity to profit from favorable price movements.

 

In addition, if the hedge is not a perfect one, the hedger can lose on the hedging transaction and not realize an offsetting gain in the value of the underlying item being hedged.

 

When using Commodity Interests for hedging purposes, at best the correlation between changes in prices of Futures Contracts and of the items being hedged can only be approximate. The degree of imperfection of correlation depends upon circumstances such as: variations in speculative markets, demand for futures and for commodity products, technical influences in futures trading, and differences between anticipated costs being hedged and the instruments underlying the standard Futures Contracts available for trading. Even a well-conceived hedge may be unsuccessful to some degree because of unexpected market behavior as well as the expenses associated with creating the hedge.

 

An investment in the Fund may provide you little or no diversification benefits. Thus, in a declining market, the Fund may have no gains to offset your losses from other investments, and you may suffer losses on your investment in the Fund at the same time you incur losses with respect to other asset classes.

 

Historically, agricultural Commodity Interests have not generally been correlated to the performance of other asset classes such as stocks and bonds. Non-correlation means that there is a low statistical relationship between the performance of the Commodity Interests, on the one hand, and stocks or bonds, on the other hand. However, there can be no assurance that such non-correlation will continue during future periods. If, contrary to historic patterns, the Underlying Funds’ performance were to move in the same general direction as the financial markets and, as a result, the Fund’s, you will obtain little or no diversification benefits from an investment in the Shares. In such a case, the Fund may have no gains to offset your losses from other investments, and you may suffer losses on your investment in the Fund at the same time you incur losses with respect to other investments.

 

Variables such as drought, floods, weather, embargoes, tariffs and other political events may have a larger impact on commodity and Commodity Interest prices than on traditional securities. These additional variables may create additional investment risks that subject the Underlying Funds’ and, therefore, the Fund’s investments to greater volatility than investments in traditional securities.

 

Non-correlation should not be confused with negative correlation, where the performance of two asset classes would be opposite of each other. There is no historic evidence that the spot price of agricultural commodities and prices of other financial assets, such as stocks and bonds, are negatively correlated. In the absence of negative correlation, the Underlying Funds, and therefore the Fund, cannot be expected to be automatically profitable during unfavorable periods for the stock market, or vice versa.

 

The Teucrium Agricultural Fund provides investors exposure to four core agricultural commodities without the need for a futures account. TAGS invests directly in shares of the following four Teucrium Funds: Teucrium Corn Fund, Teucrium Soybean Fund, Teucrium Sugar Fund and Teucrium Wheat Fund (the “Underlying Funds”).

 

TAGS has no operating history, so there is no performance history to serve as a basis for you to evaluate an investment in the Trust. Investing in the Underlying Funds subjects TAGS to the risks of the corn, wheat, soybean, and sugar markets, and this could result in substantial fluctuations in the price of shares of TAGS. Unlike mutual funds, TAGS generally will not distribute dividends to Shareholders.

 

Investors may choose to use TAGS as a means of investing indirectly in corn, wheat, soybeans, and sugar, and there are risks involved in such investments and activities. The Sponsor has limited experience in operating a commodity pool, which is defined as an enterprise in which several individuals contribute funds in order to trade futures or futures options collectively.

 

Commodities and futures generally are volatile and are not suitable for all investors.

 

The Teucrium Agricultural Fund is not a mutual fund or any other type of Investment Company within the meaning of the Investment Company Act of 1940, as amended, and is not subject to regulation thereunder.

 

Shares of the Teucrium Agricultural Fund are not FDIC insured, may lose value, and have no bank guarantee.

All supporting documentation will be provided upon request.

Foreside Fund Services, LLC is the distributor for the Teucrium Agricultural Fund.

© 2012 TEUCRIUM TRADING, LLC. All rights reserved.

An investor should consider investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information. Read the prospectus carefully before investing. An investment in the Fund involves risk, include possible loss of principal.

The Teucrium Corn, WTI Crude Oil, Natural Gas, Sugar, Soybean, Wheat and Agricultural Funds (the "Funds") are not mutual funds or any other type of Investment Company within the meaning of the Investment Company Act of 1940, as amended, and are not subject to regulation thereunder.

Commodities and futures generally are volatile and are not suitable for all investors.

Foreside Fund Services, LLC is the distributor for the Teucrium Funds.

© 2014 TEUCRIUM TRADING, LLC. All rights reserved.

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