Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer x
|
Smaller
reporting company ¨
|
Title of Securities
to be Registered
|
Amount
to be
Registered
|
Proposed
Maximum
Offering Price
Per Share*
|
Proposed
Maximum
Aggregate
Offering Price*
|
Amount of
Registration
Fee**
|
||||||||||||
Common
units of Teucrium Corn Fund, a series of the Registrant
|
30,000,000 | $ | 25.00 | $ | 750,000,000 | $ | 41,850 |
*
|
Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(d) under the Securities Act of
1933.
|
**
|
Previously
paid.
|
Preliminary
Prospectus
|
Subject
to Completion January ___,
2010
|
Per share
|
Per Basket
|
|||||||
Price
of the Shares1
|
$ | 25.00 | $ | 2,500,000 |
STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
|
iii
|
PROSPECTUS SUMMARY
|
1
|
Principal
Offices of the Fund and the Sponsor
|
1
|
Breakeven
Point
|
1
|
Overview
of the Fund
|
1
|
The
Shares
|
6
|
The
Fund’s Investments in Corn Interests
|
6
|
Principal
Investment Risks of an Investment in the Fund
|
7
|
Principal
Offices of the Fund and the Sponsor
|
9
|
Financial
Condition of the Fund
|
9
|
Defined
Terms
|
10
|
Breakeven
Analysis
|
10
|
The
Offering
|
11
|
WHAT ARE THE RISK FACTORS INVOLVED WITH AN
INVESTMENT IN THE FUND?
|
16
|
Risks
Associated With Investing Directly or Indirectly in
Corn
|
16
|
The
Fund’s Operating Risks
|
23
|
Risk
of Leverage and Volatility
|
33
|
Over-the-Counter
Contract Risk
|
33
|
Risk
of Trading in International Markets
|
34
|
Tax
Risk
|
35
|
THE OFFERING
|
36
|
The
Fund in General
|
36
|
The
Sponsor
|
37
|
The
Trustee
|
39
|
Operation
of the Fund
|
40
|
Futures
Contracts
|
45
|
Cleared
Corn Swaps
|
48
|
Over-the-Counter
Derivative
|
49
|
Benchmark
Performance
|
49
|
The
Corn Market
|
49
|
The
Fund’s Investments in Treasury Securities, Cash and Cash
Equivalents
|
50
|
Other
Trading Policies of the Fund
|
51
|
The
Service Providers
|
52
|
Fees
to be Paid by the Fund
|
54
|
Form
of Shares
|
54
|
Transfer
of Shares
|
55
|
Inter-Series
Limitation on Liability
|
55
|
Plan
of Distribution
|
56
|
The
Flow of Shares
|
58
|
Calculating
NAV
|
58
|
Creation
and Redemption of Shares
|
60
|
Secondary
Market Transactions
|
64
|
Use
of Proceeds
|
65
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
66
|
The
Trust Agreement
|
70
|
The
Sponsor Has Conflicts of Interest
|
74
|
Interests
of Named Experts and Counsel
|
76
|
Provisions
of Federal and State Securities Laws
|
76
|
Books
and Records
|
76
|
Analysis
of Critical Accounting Policies
|
76
|
Statements,
Filings, and Reports to Shareholders
|
77
|
Fiscal
Year
|
77
|
Governing
Law; Consent to Delaware Jurisdiction
|
78
|
Legal
Matters
|
78
|
Privacy
Policy
|
78
|
U.S.
Federal Income Tax Considerations
|
79
|
Investment
By ERISA Accounts
|
91
|
INFORMATION YOU SHOULD
KNOW
|
94
|
WHERE YOU CAN FIND MORE
INFORMATION
|
95
|
TEUCRIUM TRADING, LLC — INDEX TO FINANCIAL
STATEMENTS
|
96
|
TEUCRIUM COMMODITY TRUST — INDEX TO FINANCIAL
STATEMENTS
|
96
|
|
·
|
A
is the average daily change in the Fund’s NAV for any period of 30
successive valuation days, i.e., any trading day as of which the Fund
calculates its NAV, and
|
|
·
|
B
is the average daily change in the Benchmark over the same
period.
|
|
·
|
A
futures contract is an exchange-traded contract traded with standard terms
that calls for the delivery of a specified quantity of a commodity at a
specified price, on a specified date and at a specified
location.
|
|
·
|
A
swap agreement is a bilateral contract to exchange a periodic stream of
payments determined by reference to a notional amount, with payment
typically made between the parties on a net basis. For
instance, in the case of corn swap, the Fund may be obligated to pay a
fixed price per bushel of corn and be entitled to receive an amount per
bushel equal to the current value of an index of corn prices, the price of
a specified Corn Futures Contract, or the average price of a group of Corn
Futures Contracts such as the Benchmark. The Fund expects to
invest primarily in Cleared Corn Swaps, rather than over-the-counter corn
swaps.
|
|
·
|
Swap
agreements other than Cleared Corn Swaps (i.e., over-the-counter corn
swaps).
|
|
·
|
A
forward contract is an over-the-counter bilateral contract for the
purchase of sale of a specified quantity of a commodity at a specified
price, on a specified date and at a specified
location.
|
|
·
|
An
option on a futures contract, forward contract or a commodity on the spot
market gives the buyer of the option the right, but not the obligation, to
buy or sell a futures contract, forward contract or commodity, as
applicable, at a specified price on or before a specified
date. Options on futures contracts, like the future contracts
to which they relate, are standardized contracts traded on an exchange,
while options on forward contracts and commodities generally are
individually negotiated, over-the-counter, bilateral
contracts.
|
|
·
|
Unlike
mutual funds, commodity pools and other investment pools that manage their
investments so as to realize income and gains for distribution to their
investors, the Fund generally will not distribute dividends to
Shareholders. You should not invest in the Fund if you will
need cash distributions from the Fund to pay taxes on your share of income
and gains of the Fund, if any, or for other
purposes.
|
|
·
|
Investors
may choose to use the Fund as a means of investing indirectly in corn, and
there are risks involved in such investments. The risks and
hazards that are inherent in corn production may cause the price of corn
to fluctuate widely. Price movements for corn are influenced
by, among other things: weather conditions, crop failure,
production decisions, governmental policies, changing demand, the corn
harvest cycle, and various economic and monetary events. Corn
production is also subject to U.S. federal, state and local regulations
that materially affect operations.
|
|
·
|
To
the extent that investors use the Fund as a means of investing indirectly
in corn, there is the risk that the changes in the price of the Fund’s
Shares on the NYSE Arca will not closely track the changes in spot price
of corn. This could happen if the price of Shares traded on the
NYSE Arca does not correlate closely with the Fund’s NAV; the changes in
the Fund’s NAV do not correlate closely with changes in the Benchmark; or
the changes in the Benchmark do not correlate closely with changes in the
cash or spot price of corn. This is a risk because if these
correlations are not sufficiently close, then investors may not be able to
use the Fund as a cost-effective way to invest indirectly in corn or as a
hedge against the risk of loss in corn-related
transactions.
|
|
·
|
The
Sponsor has never operated a commodity
pool.
|
|
·
|
The
Fund has no operating history, so there is no performance history to serve
as a basis for you to evaluate an investment in the
Trust.
|
|
·
|
The
price relationship between the near month Corn Futures Contract to expire
and the Benchmark Component Futures Contracts will vary and may impact
both the Fund’s total return over time and the degree to which such total
return tracks the total return of corn price indices. In cases
in which the near month contract’s price is lower than later-expiring
contracts’ prices (a situation known as “contango” in the futures
markets), then absent the impact of the overall movement in corn prices
the value of the Benchmark Component Futures Contracts would tend to
decline as they approach expiration. In cases in which the near
month contract’s price is higher than later-expiring contracts’ prices (a
situation known as “backwardation” in the futures markets), then absent
the impact of the overall movement in corn prices the value of the
Benchmark Component Futures Contracts would tend to rise as they approach
expiration.
|
|
·
|
Investors,
including those who directly participate in the corn market, may choose to
use the Fund as a vehicle to hedge against the risk of loss and there are
risks involved in hedging activities. 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.
|
|
·
|
The
structure and operation of the Fund may involve conflicts of
interest. For example, a conflict may arise because the Sponsor
and its principals and affiliates may trade for themselves. In
addition, the Sponsor has sole current authority to manage the investments
and operations, and the interests of the Sponsor may conflict with the
Shareholders’ best interests.
|
|
·
|
You
will have no rights to participate in the management of the Fund and will
have to rely on the duties and judgment of the Sponsor to manage the
Fund.
|
|
·
|
The
Fund pays fees and expenses that are incurred regardless of whether it is
profitable.
|
|
·
|
The
Fund seeks to have the changes in its Shares’ NAV in percentage terms
track changes in the Benchmark in percentage terms, rather than profit
from speculative trading of Corn Interests. The Sponsor
therefore endeavors to manage the Fund so that the Fund’s assets are,
unlike those of many other commodity pools, not leveraged (i.e., so that the
aggregate value of the Fund’s unrealized losses from its investments in
Corn Interests at any time will not exceed the value of the Fund’s
assets). There is no assurance that the Sponsor will
successfully implement this investment strategy. If the Sponsor
permits the Fund to become leveraged, you could lose all or substantially
all of your investment if the Fund’s trading positions suddenly turn
unprofitable. These movements in price may be the result of
factors outside of the Sponsor’s control and may not be anticipated by the
Sponsor.
|
|
·
|
The
Fund may invest in Other Corn Interests. To the extent that
these Other Corn Interests are contracts individually negotiated between
their parties, they may not be as liquid as Corn Futures Contracts and
will expose the Fund to credit risk that its counterparty may not be able
to satisfy its obligations to the
Fund.
|
|
·
|
The
Fund invests primarily in Corn Interests that are traded or sold in the
United States. However, a portion of the Fund’s trades may take
place in markets and on exchanges outside the United
States. Some non-U.S. markets present risks because they are
not subject to the same degree of regulation as their U.S.
counterparts. In some of these non-U.S. markets, the
performance on a contract is the responsibility of the counterparty and is
not backed by an exchange or clearing corporation and therefore exposes
the Fund to credit risk. Trading in non-U.S. markets also
leaves the Fund susceptible to fluctuations in the value of the local
currency against the U.S. dollar.
|
Assumed
initial selling price per Share
|
$ | 25.00 | ||
Sponsor’s
Fee (1.00%)(1)
|
$ | 0.25 | ||
Creation
Basket Fee(2)
|
$ | 0.01 | ||
Estimated
Brokerage Fees (0.06%)(3)
|
$ | 0.02 | ||
Other
Fund Fees and Expenses(4)
|
$ | 0.16 | ||
Interest
Income (0.07%)(5)
|
$ | (0.02 | ) | |
Amount
of trading income (loss) required for the redemption value at the end of
one year to equal the initial selling price of the
Share
|
$ | 0.42 | ||
Percentage
of initial selling price per share
|
1.68 | % |
Offering
|
The
Fund will offer Creation Baskets consisting of 100,000 Shares through the
Marketing Agent to Authorized Purchasers. Authorized Purchasers
may purchase Creation Baskets consisting of 100,000 Shares at the Fund’s
NAV, which is expected to initially be $25.00. The initial
Authorized Purchaser intends to offer the Shares of the initial Creation
Basket(s) publicly. The initial Creation Basket is expected to
be purchased by the initial Authorized Purchaser on the day the SEC
declares the registration statement effective. The Shares are
expected to begin trading on the NYSE Arca on the day following the
purchase of the initial Creation Basket(s) by the initial Authorized
Purchaser.
|
|
Use
of Proceeds
|
The
Sponsor will apply substantially all of the Fund’s assets toward investing
in Corn Interests, Treasury Securities, cash and/or cash
equivalents. The Sponsor will deposit a portion of the Fund’s
net assets with the futures commission merchant, Newedge USA, LLC, or
other custodians to be used to meet its current or potential margin or
collateral requirements in connection with its investment in Corn
Interests. The Fund will use only Treasury Securities, cash
and/or cash equivalents to satisfy these requirements. The
Sponsor expects that all entities that will hold or trade the Fund’s
assets will be based in the United States and will be subject to United
States regulations. The Sponsor believes that approximately 5%
to 10% of the Fund’s assets will normally be committed as margin for Corn
Futures Contracts and collateral for Cleared Corn Swaps and Other Corn
Interests. However, from time to time, the percentage of assets
committed as margin/collateral may be substantially more, or less, than
such range. The remaining portion of the Fund’s assets will be
held in Treasury Securities, cash and/or cash equivalents by the
Custodian. All interest income earned on these investments is
retained for the Fund’s
benefit.
|
NYSE
Arca Symbol
|
“CORN”
|
|
Creation
and Redemption
|
Authorized
Purchasers pay a $1,000 fee for each order to create or redeem one or more
Creation Baskets or Redemption Baskets. Authorized Purchasers
are not required to sell any specific number or dollar amount of
Shares. The per share price of Shares offered in Creation
Baskets on any day after the effective date of the registration statement
relating to this prospectus is the total NAV of the Fund calculated as of
the close of the NYSE Arca on that day divided by the number of issued and
outstanding Shares.
|
|
Inter-Series
Limitation on Liability
|
While
the Fund is currently the sole series of the Trust, additional series may
be created in the future. The Trust has been formed and will be
operated with the goal that the Fund and any other series of the Trust
will be liable only for obligations of such series, and a series will not
be responsible for or affected by any liabilities or losses of or claims
against any other series. If any creditor or shareholder in any
particular series (such as the Fund) were to successfully assert against a
series a claim with respect to its indebtedness or Shares, the creditor or
shareholder could recover only from that particular series and its
assets. Accordingly, the debts and other obligations incurred,
contracted for or otherwise existing solely with respect to a particular
series will be enforceable only against the assets of that series, and not
against any other series or the Trust generally or any of their respective
assets. The assets of the Fund and any other series will
include only those funds and other assets that are paid to, held by or
distributed to the series on account of and for the benefit of that
series, including, without limitation, amounts delivered to the Trust for
the purchase of Shares in a
series.
|
Registration
Clearance and Settlement
|
Individual
certificates will not be issued for the Shares. Instead, Shares
will be represented by one or more global certificates, which will be
deposited by the Custodian with the Depository Trust Company (“DTC”) and
registered in the name of Cede & Co., as nominee for
DTC. The global certificates evidence all of the Shares
outstanding at any time. Beneficial interests in Shares will be
held through DTC’s book-entry system, which means that Shareholders are
limited to: (1) participants in DTC such as banks, brokers,
dealers and trust companies (“DTC Participants”), (2) those who maintain,
either directly or indirectly, a custodial relationship with a DTC
Participant (“Indirect Participants”), and (3) those who hold interests in
the Shares through DTC Participants or Indirect Participants, in each case
who satisfy the requirements for transfers of Shares. DTC
Participants acting on behalf of investors holding Shares through such DTC
Participants’ accounts in DTC will follow the delivery practice applicable
to securities eligible for DTC’s Same-Day Funds Settlement System. Shares
will be credited to DTC Participants’ securities accounts following
confirmation of receipt of payment.
|
|
Net
Asset Value
|
The
NAV will be calculated by taking the current market value of the Fund’s
total assets and subtracting any liabilities. Under the Fund’s
current operational procedures, the Fund’s administrator, The Bank of New
York Mellon (the “Administrator”) will calculate the NAV of the Fund’s
Shares as of the earlier of 4:00 p.m. New York time or the close of the
New York Stock Exchange each day. NYSE Arca will calculate an
approximate net asset value every 15 seconds throughout each day that the
Fund’s Shares are traded on the NYSE Arca for as long as the CBOT’s main
pricing mechanism is
open.
|
Fund
Expenses
|
The
Fund pays the Sponsor a management fee at an annual rate of 1.00% of the
Fund’s average daily net assets. The Fund is also responsible
for other ongoing fees, costs and expenses of its operations, including
(i) brokerage and
other fees and commissions incurred in connection with the trading
activities of the Fund; (ii) expenses incurred in connection with
registering additional Shares of the Fund or offering Shares of the Fund
after the time any Shares have begun trading on NYSE Arca; (iii) the
routine expenses associated with the preparation and, if required, the
printing and mailing of monthly, quarterly, annual and other reports
required by applicable U.S. federal and state regulatory authorities,
Trust meetings and preparing, printing and mailing proxy statements to
Shareholders; (iv) the payment of any distributions related to redemption
of Shares; (v) payment for routine services of the Trustee, legal counsel
and independent accountants; (vi) payment for routine accounting,
bookkeeping, custody and transfer agency services, whether performed by an
outside service provider or by Affiliates of the Sponsor; (vii) postage
and insurance; (viii) costs and expenses associated with client relations
and services; (ix) costs of preparation of all federal, state, local and
foreign tax returns and any taxes payable on the income, assets or
operations of the Fund; and (xi) extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto). The Sponsor will
bear the costs and expenses related to the initial offer and sale of
Shares, including registration fees paid or to be paid to the SEC, FINRA
or any other regulatory body. Total fees to be paid by the Fund
are currently estimated to be approximately 1.68% for the twelve-month
period ending ______, 2011, though this amount may change in future
years. The Sponsor may, in its discretion, pay or reimburse the
Fund for, or waive a portion of its management fee to offset, expenses
that would otherwise be borne by the Fund.
|
|
|
General
expenses of the Trust will be allocated among the Fund and any future
series of the Trust as determined by the Sponsor in its
discretion. The Trust may be required to indemnify the Sponsor,
and the Trust and/or the Sponsor may be required to indemnify the Trustee,
Marketing Agent or Administrator, under certain
circumstances.
|
Termination
Events
|
The
Trust and the Fund shall continue in existence from the date of their
formation in perpetuity, unless the Trust or the Fund, as the case may be,
is sooner terminated upon the occurrence of certain events specified in
the Trust Agreement, including the following: (1) the filing of a
certificate of dissolution or cancellation of the Sponsor or revocation of
the Sponsor’s charter or the withdrawal of the Sponsor, unless a majority
in interest of Shareholders elects within ninety (90) days after such
event to continue the business of the Trust and appoints a successor
Sponsor; (2) the occurrence of any event which would make the existence of
the Trust or the Fund unlawful; (3) the suspension, revocation, or
termination of the Sponsor’s registration as a CPO with the CFTC or
membership with the NFA; (4) the insolvency or bankruptcy of the Trust or
the Fund; (5) a vote by the Shareholders holding at least seventy-five
percent (75%) of the outstanding Shares of the Trust to dissolve the
Trust, subject to certain conditions; and (6) the determination by the
Sponsor to dissolve the Trust or the Fund, subject to certain
conditions. Upon termination of the Fund, the affairs of the
Fund shall be wound up and all of its debts and liabilities discharged or
otherwise provided for in the order of priority as provided by
law. The fair market value of the remaining assets of the Fund
shall then be determined by the Sponsor. Thereupon, the assets
of the Fund shall be distributed pro rata to the Shareholders in
accordance with their Shares.
|
|
Authorized
Purchasers
|
We
expect the initial Authorized Purchaser to be Merrill Lynch Professional
Clearing Corp., and we expect that there will be additional Authorized
Purchasers in the future. A list of Authorized Purchasers will
be available from the Marketing Agent. Authorized Purchasers
must be (1) registered broker-dealers or other securities market
participants, such as banks and other financial institutions, that are not
required to register as broker-dealers to engage in securities
transactions, and (2) DTC Participants. To become an Authorized
Purchaser, a person must enter into an Authorized Purchaser Agreement with
the Marketing
Agent.
|
|
·
|
The
price and availability of corn is influenced by economic and industry
conditions, including but not limited to supply and demand factors such
as: crop disease; transportation difficulties; various planting, growing,
or harvesting problems; and severe weather conditions (particularly during
the spring planting season and the fall harvest) such as drought, floods,
or frost that are difficult to anticipate and which cannot be
controlled. Demand for corn in the United States to produce
ethanol has also been a significant factor affecting the price of
corn. In turn, demand for ethanol 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. Additionally, demand for corn is
affected by changes in consumer tastes, national, regional and local
economic conditions, and demographic trends. Finally, 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.
|
|
·
|
Corn
production is subject to United States federal, state, and local 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, the availability
and competitiveness of feedstocks as raw materials, and industry
profitability. Additionally, corn 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. U.S. corn producers also must 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 corn may cause risk to an investor because of
the possibility that Share prices will be depressed because of the corn
harvest cycle. In the United States, the corn market is
normally at its weakest point, and corn prices are lowest, shortly before
and during the harvest (between September and November), due to the high
supply of corn in the market. Conversely, corn prices are
highest during the winter and spring (between December and May), when
farmer-owned corn has largely been sold and used. Seasonal corn
market peaks generally occur around February or March. In the
futures market, these seasonal fluctuations are typically reflected in
contracts expiring in the relevant season (e.g., contracts expiring during
the harvest season are typically priced lower than contracts expiring in
the winter and spring). 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 the Benchmark
Component Futures Contracts are, in whole or part, Corn Futures Contracts
expiring in the fall.
|
|
·
|
The
Fund does not intend to invest only in the Benchmark Component Futures
Contracts. While its investments in Corn Futures Contracts
other than the Benchmark Component Futures Contracts, Cleared Corn Swaps
and Other Corn Interests would be for the purpose of causing
the Fund’s performance to track that of the Benchmark most effectively and
efficiently, the performance of these Corn Interests may not correlate
well with the performance of the 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 Corn Futures Contracts is suspended or closed, the Fund may not be
able to purchase these investments at the last reported price for such
investments.
|
|
·
|
The
Fund will incur certain expenses in connection with its operations, and
will hold most of its assets 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 Benchmark.
|
|
·
|
The
Sponsor may not be able to invest the Fund’s assets in Corn Interests
having an aggregate notional amount exactly equal to the Fund’s
NAV. As a standardized contract, a single Corn Futures
Contracts or Cleared Corn Swap is for a specified amount of corn, and the
Fund’s NAV and the proceeds from the sale of a Creation Basket is unlikely
to be an exact multiple of that amount. In such case, the Fund
could not invest the entire proceeds from the purchase of the Creation
Basket in such futures contracts. (For example, assuming the
Fund receives $2,500,000 for the sale of a Creation Basket and that the
value (i.e., the notional amount) of a Corn Futures Contract is $20,600,
the Fund could only enter into 121 Corn Futures Contracts with an
aggregate value of $2,492,600). While the Fund may be better
able to achieve the exact amount of exposure to the corn market through
the use of over-the-counter Other Corn Interests, there is no assurance
that the Sponsor will be able to continually adjust the Fund’s exposure to
such Other Corn Interests to maintain such exact
exposure. Furthermore, as noted above, the use of Other Corn
Interests may itself result in imperfect correlation with the
Benchmark. Any amounts not invested in Corn Interests will be
held in short-term Treasury Securities, cash and/or cash
equivalents.
|
|
·
|
As
Fund assets increase, there may be more or less correlation. On
the one hand, as the Fund grows it should be able to invest in Corn
Futures Contracts with a notional amount that is closer on a percentage
basis to the Fund’s NAV. For example, if the 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 Fund’s
assets to be exposed to the corn market. On the other hand, if
the Fund’s NAV is equal to 100.9 times the value of a single Corn Futures
Contract, it can purchase 100 such contracts, resulting in 99.1%
exposure. However, at certain asset levels the Fund may be
limited in its ability to purchase Corn Futures Contracts due to position
limits imposed by the CFTC or position limits or accountability levels
imposed by the relevant exchanges. In these instances, the Fund
would likely invest to a greater extent in Corn Interests not subject to
these position limits or accountability levels. To the extent
that the Fund invests in Cleared Corn Swaps and Other Corn Interests, the
correlation between the Fund’s NAV and the Benchmark may be
lower. In certain circumstances, position limits could limit
the number of Creation Baskets that will be
sold.
|
|
·
|
A
is the average daily change in the Fund’s NAV for any period of 30
successive valuation days; i.e., any trading day as of which the Fund
calculates its NAV, and
|
|
·
|
B
is the average daily change in the price of the Benchmark over the same
period.
|
Service
Provider
|
Compensation
Paid by the Fund
|
|
Teucrium
Trading, LLC, Sponsor
|
1.00%
of average net assets annually
|
|
The
Bank of New York Mellon, Custodian, Transfer Agent and
Administrator
|
For
custody services: 0.0075% of average gross assets up to $1
billion, and 0.0050% of average gross assets over $1 billion, annually,
plus certain per-transaction charges
For
transfer agency services: 0.0075% of average gross assets
annually
For
administrative services: 0.05% of average gross assets up to $1
billion, 0.04% of average gross assets between $1 billion and $3 billion,
and 0.03% of average gross assets over $3 billion,
annually
A
combined minimum annual fee of $125,000 for custody, transfer agency and
administrative services will be assessed.
|
|
ALPS
Distributors, Inc., Marketing Agent
|
0.10%
of average net assets annually, with a minimum annual fee of
$100,000
|
|
Newedge
USA, LLC, Futures Commission Merchant and Clearing
Broker
|
$4.00
per Corn Futures Contract purchase or sale
|
|
Wilmington
Trust Company, Trustee
|
$3,000
annually
|
|
·
|
Taking
the current market value of its total assets,
and
|
|
·
|
Subtracting
any liabilities.
|
|
·
|
it
determines that, due to position limits or otherwise, investment
alternatives that will enable the Fund to meet its investment objective
are not available or practicable at that
time;
|
|
·
|
it
determines that the purchase order or the Creation Basket Deposit is not
in proper form;
|
|
·
|
it
believes that acceptance of the purchase order or the Creation Basket
Deposit would have adverse tax consequences to the Fund or its
Shareholders;
|
|
·
|
the
acceptance or receipt of the Creation Basket Deposit would, in the opinion
of counsel to the Sponsor, be unlawful;
or
|
|
·
|
circumstances
outside the control of the Sponsor, Marketing Agent or Custodian make it,
for all practical purposes, not feasible to process creations of
baskets.
|
|
·
|
held
as margin or collateral with futures commission merchants or other
custodians;
|
|
·
|
used
for other investments; and
|
|
·
|
held
in bank accounts to pay current obligations and as
reserves.
|
|
·
|
To
enter into, execute, deliver and maintain contracts, agreements and any
other documents as may be in furtherance of the Trust’s purpose or
necessary or appropriate for the offer and sale of the Shares and the
conduct of Trust activities;
|
|
·
|
To
establish, maintain, deposit into, sign checks and otherwise draw upon
accounts on behalf of the Trust with appropriate banking and savings
institutions, and execute and accept any instrument or agreement
incidental to the Trust’s business and in furtherance of its
purposes;
|
|
·
|
To
adopt, implement or amend, from time to time, such disclosure and
financial reporting information gathering and control policies and
procedures as are necessary or desirable to ensure compliance with
applicable disclosure and financial reporting obligations under any
applicable securities laws;
|
|
·
|
To
pay or authorize the payment of distributions to the Shareholders and
expenses of the Fund;
|
|
·
|
To
make any elections on behalf of the Trust under the Code, or any other
applicable U.S. federal or state tax law as the Sponsor shall determine to
be in the best interests of the Trust;
and
|
|
·
|
In
its sole discretion, to determine to admit an affiliate or affiliates of
the Sponsor as additional Sponsors.
|
|
·
|
Devote
to the business and affairs of the Trust such of its time as it determines
in its discretion (exercised in good faith) to be necessary for the
benefit of the Trust and the
Shareholders;
|
|
·
|
Execute,
file, record and/or publish all certificates, statements and other
documents and do any and all other things as may be appropriate for the
formation, qualification and operation of the Trust and for the conduct of
its business in all appropriate
jurisdictions;
|
|
·
|
Appoint
and remove independent public accountants to audit the accounts of the
Trust and employ attorneys to represent the
Trust;
|
|
·
|
Use
its best efforts to maintain the status of the Trust as a statutory trust
for state law purposes and as a partnership for U.S. federal income tax
purposes;
|
|
·
|
Have
fiduciary responsibility for the safekeeping and use of the Trust’s
assets, whether or not in the Sponsor’s immediate possession or
control;
|
|
·
|
Enter
into and perform agreements with each Authorized Purchaser, receive from
Authorized Purchasers and process properly submitted purchase orders,
receive Creation Basket Deposits, deliver or cause the delivery of
Creation Baskets to for the account of the Authorized Purchaser submitting
a purchase order;
|
|
·
|
Receive
from Authorized Purchasers and process, or cause the Marketing Agent to
process, properly submitted redemption orders, receive from the redeeming
Authorized Purchasers through the Depository, and thereupon cancel or
cause to be cancelled, Shares corresponding to the Redemption Baskets to
be redeemed;
|
|
·
|
Interact
with the Depository; and
|
|
·
|
Delegate
duties to one or more administrators, as the Sponsor
determines.
|
|
•
|
At
least 90% of the Fund’s gross income for each taxable year will constitute
“qualifying income” within the meaning of Code section 7704 (as described
above);
|
|
•
|
the
Fund is organized and will be operated in accordance with its governing
documents and applicable law;
and
|
|
•
|
the
Fund has not elected, and will not elect, to be classified as a
corporation for U.S. federal income tax
purposes.
|
|
•
|
the
Shareholder may recognize taxable gain or loss to the same extent as if it
had sold the Shares for cash;
|
|
•
|
any
of the income, gain, loss or deduction allocable to those Shares during
the period of the loan is not reportable by the Shareholder for tax
purposes; and
|
|
•
|
any
distributions the Shareholder receives with respect to the Shares under
the loan agreement will be fully taxable to the Shareholder, most likely
as ordinary income.
|
|
(1)
|
freely
transferable (determined based on the relevant facts and
circumstances);
|
|
(2)
|
part
of a class of securities that is widely held (meaning that the class of
securities is owned by 100 or more investors independent of the issuer and
of each other); and
|
|
(3)
|
either
(a) part of a class of securities registered under Section 12(b) or 12(g)
of the Exchange Act or (b) sold to the plan as part of a public offering
pursuant to an effective registration statement under the 1933 Act and the
class of which such security is a part is registered under the Exchange
Act within 120 days (or such later time as may be allowed by the SEC)
after the end of the fiscal year of the issuer in which the offering of
such security occurred.
|
|
·
|
exercise
any discretionary authority or discretionary control with respect to
management of the plan;
|
|
·
|
exercise
any authority or control with respect to management or disposition of the
assets of the plan;
|
|
·
|
render
investment advice for a fee or other compensation, direct or indirect,
with respect to any moneys or other property of the
plan;
|
|
·
|
have
any authority or responsibility to render investment advice with respect
to any monies or other property of the plan;
or
|
|
·
|
have
any discretionary authority or discretionary responsibility in the
administration of the plan.
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
97
|
Statement
of Financial Condition as of November 30, 2009
|
98 |
Notes
to Statement of Financial Condition
|
102 |
Walnut Creek, California |
/s/ Rothstein,
Kass & Company, LLP
|
January 25, 2010 |
ASSETS
|
||||
Cash
and Cash Equivalents
|
$ | 1,268,907 | ||
LIABILITIES
AND MEMBERS’EQUITY
|
||||
Liabilities
|
||||
Accounts
Payable
|
$ | 313,035 | ||
Members’
Equity
|
$ | 1,005,872 | ||
Less
Subscription Receivable
|
(50,000 | ) | ||
$ | 955,872 | |||
Total
Liabilities and Members’ Equity
|
$ | 1,268,907 |
Expenses
|
||||
Salaries,
Wages and Benefits
|
$ | 11,089 | ||
Professional
Fees
|
702,816 | |||
General
and Administrative
|
6,723 | |||
Total
Expenses
|
720,628 | |||
Net
Loss
|
$ | (720,628 | ) |
Class A
|
Class B-1
|
|
Members’
|
|||||||||||||||||||||||||
Per Unit
|
Equity
|
Equity
|
|
Subscription
|
Equity
|
|||||||||||||||||||||||
Units
|
Value
|
Total
|
Total
|
Subtotal
|
Receivable
|
Total
|
||||||||||||||||||||||
Balances,
at Inception
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
Equity
Contributed through Note Conversion
|
||||||||||||||||||||||||||||
Class
B-1 Units - issued October 26, 2009
|
38.961 | $ | 5,775.01 | 225,000 | 225,000 | (50,000 | ) | 175,000 | ||||||||||||||||||||
Equity
Contributed for Member Interest and Option
|
||||||||||||||||||||||||||||
Class
A Units - issued August 12, 2009
|
1,000.000 | $ | 1.50 | 1,500 | 1,500 | 1,500 | ||||||||||||||||||||||
Class
B-1 Units - issued October 26, 2009
|
259.740 | $ | 5,775.01 | 1,500,000 | 1,500,000 | 1,500,000 | ||||||||||||||||||||||
Net
Loss
|
(645 | ) | (719,983 | ) | (720,628 | ) | (720,628 | ) | ||||||||||||||||||||
Balances,
November 30, 2009
|
1,298.701 | $ | 855 | $ | 1,005,017 | $ | 1,005,872 | $ | (50,000 | ) | $ | 955,872 |
Cash
Flows from Operating Activities
|
||||
Net
Loss
|
$ | (720,628 | ) | |
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||
Increase
in Accounts Payable
|
313,035 | |||
Net
cash used in operating activities
|
$ | (407,593 | ) | |
Cash
Flows from Financing Activities
|
||||
Proceeds
from Convertible Debt
|
175,000 | |||
Proceeds
from Sale of Member Equity and Option
|
1,501,500 | |||
Net
cash provided by financing activities
|
$ | 1,676,500 | ||
Net
Increase in Cash and Cash Equivalents
|
$ | 1,268,907 | ||
Cash and Cash
Equivalents, beginning of period
|
$ | - | ||
Cash and Cash
Equivalents, end of period
|
$ | 1,268,907 | ||
Non-Cash
Transactions
|
||||
Conversion
of Debt into Members’ Equity (including $50,000 which had not been
received by the Company)
|
$ | 225,000 |
Quoted Prices
|
|
|||||||||||||||
in Active
|
Significant
|
|
Balance
|
|||||||||||||
Markets for
|
other
|
Significant
|
as of
|
|||||||||||||
Identical
Assets
|
Observable Inputs |
Unobservable Inputs |
November
30,
|
|||||||||||||
Level 1
|
Level 2
|
Level 3
|
2009
|
|||||||||||||
Cash
Equivalents
|
$ | 676,930 | $ | - | $ | - | $ | 676,930 |
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
109
|
Statement
of Financial Condition as of November 30, 2009
|
110
|
Notes
to Statement of Financial Condition
|
111
|
Walnut
Creek, California
|
/s/ Rothstein, Kass & Company,
LLP
|
January
25, 2010
|
Assets
|
||||
Cash
|
$ | 100 | ||
Net
Assets
|
$ | 100 |
|
·
|
Taking
the current market value of its total assets,
and
|
|
·
|
Subtracting
any liabilities.
|
Page
|
|
The
Commodity Interest Markets
|
120
|
Potential
Advantages of Investment
|
130
|
Benchmark
Performance
|
131
|
Item 13.
|
Other Expenses of Issuance and
Distribution
|
Amount
|
||||
SEC
registration fee (actual)
|
$
|
41,850
|
||
NYSE
Arca Listing Fee
|
$
|
5,000
|
||
FINRA
filing fees
|
$
|
75,500
|
||
Blue
Sky expenses
|
n/a
|
|||
Auditor’s
fees and expenses
|
$
|
47,500
|
||
Legal
fees and expenses
|
$
|
425,000
|
||
Printing
expenses
|
$
|
50,000
|
||
Miscellaneous
expenses
|
n/a
|
|||
Total
|
$
|
644,850
|
Item 14.
|
Indemnification of Directors
and Officers
|
Item 15.
|
Recent Sales of Unregistered
Securities
|
Item 16.
|
Exhibits and Financial
Statement Schedules
|
3.1**
|
Form
of Amended and Restated Declaration of Trust and Trust Agreement of the
Registrant.
|
3.2*
|
Certificate
of Trust of the registrant.
|
5.1**
|
Opinion
of Sutherland Asbill & Brennan LLP relating to the legality of the
Shares.
|
8.1**
|
Opinion
of Sutherland Asbill & Brennan LLP with respect to federal income tax
consequences.
|
10.1**
|
Form
of Authorized Purchaser Agreement.
|
10.2**
|
Marketing
Agent Agreement
|
10.3**
|
Form
of Global Custody Agreement.
|
10.4**
|
Form
of Services Agreement.
|
10.5**
|
Form
of Transfer Agency and Service Agreement.
|
23.1**
|
Consent
of Sutherland Asbill & Brennan LLP (included in Exhibit
5.1).
|
23.2**
|
Consent
of Independent Registered Public Accounting
Firm.
|
Item 17.
|
Undertakings
|
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
|
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
|
|
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the effective
registration statement.
|
|
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration
statement.
|
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona
fide offering thereof.
|
|
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
|
|
(4) That, for the purpose of determining liability under the
Securities Act of 1933 to any
purchaser:
|
(i) If the registrant is subject to Rule 430C (§230.430C of this
chapter), each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A (§230.430A of this chapter), shall be deemed to
be part of and included in the registration statement as of the date it is
first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document
immediately prior to such date of first
use.
|
(5) That, for the purpose of determining liability of the registrant
under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities: The undersigned registrant
undertakes that in a primary offering of securities of the undersigned
registrant pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to
the purchaser and will be considered to offer or sell such securities to
such purchaser:
|
(i) Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to
Rule 424 (§230.424 of this chapter);
|
|
(ii) Any free writing prospectus relating to the offering prepared by
or on behalf of the undersigned registrant or used or referred to by the
undersigned registrant;
|
(iii) The portion of any other free writing prospectus relating to
the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned
registrant; and
|
|
(iv) Any other communication that is an offer in the offering made by
the undersigned registrant to the
purchaser.
|
Teucrium
Commodity Trust
|
|
By:
|
Teucrium
Trading, LLC, Sponsor
|
By:
|
/s/
Sal
Gilbertie January
26, 2010
|
Name:
|
Sal
Gilbertie
|
Title:
|
President,
Principal Executive Officer and
Member
|
Signature
|
Title
|
Date
|
||
|
In
his own capacity as President/Principal Executive
|
|
||
/s/
Sal Gilbertie
|
Officer/Member
of the Sponsor, and as Attorney-In-
|
January
26, 2010
|
||
Sal
Gilbertie
|
Fact
|
|||
Treasurer/Principal
Financial Officer/Principal
|
||||
*
|
Accounting
Officer/Secretary/Member of the Sponsor
|
January
26, 2010
|
||
Dale
Riker
|
||||
*
|
Member
of the Sponsor
|
January
26, 2010
|
||
Carl
N. Miller III
|
3.1
|
|
Form
of Amended and Restated Declaration of Trust and Trust
Agreement
|
5.1
|
|
Opinion
of Sutherland Asbill & Brennan LLP relating to the legality of
the Shares
|
8.1
|
|
Opinion
of Sutherland Asbill & Brennan LLP with respect to federal income
tax consequences
|
10.1
|
Form
of Authorized Purchaser Agreement
|
10.2
|
Marketing
Agent Agreement
|
10.3
|
Form
of Global Custody Agreement
|
10.4
|
Form
of Services Agreement
|
10.5
|
Form
of Transfer Agency and Service
Agreement
|
23.2
|
|
Consent
of Independent Registered Public Accounting
Firm
|