Edgar Filing: Teucrium Commodity Trust

Unassociated Document

Teucrium Corn Fund

30,000,000 Shares

Teucrium Corn Fund (the “Fund”) is a commodity pool that is a series of Teucrium Commodity Trust (“Trust”), a Delaware statutory trust. The Fund will issue common units representing fractional undivided beneficial interests in such Fund, called “Shares.” The Fund intends to continuously offer creation baskets consisting of 100,000 Shares at their net asset value (“NAV”) to “Authorized Purchasers” (as defined below) through ALPS Distributors, Inc., which is the marketing agent for Shares of the Fund (the “Marketing Agent”). Authorized Purchasers, in turn, may offer to the public Shares of any baskets they create. Merrill Lynch Professional Clearing Corp. is expected to be the initial Authorized Purchaser. Authorized Purchasers will sell such Shares, which will be listed on the NYSE Arca exchange (“NYSE Arca”), to the public at per-Share offering prices that are expected to reflect, among other factors, the trading price of the Shares on the NYSE Arca, the NAV of the Fund at the time the Authorized Purchaser purchased the Creation Baskets and the NAV at the time of the offer of the Shares to the public, the supply of and demand for Shares at the time of sale, and the liquidity of the markets for corn interests. The prices of Shares offered by Authorized Purchasers are expected to fall between the Fund’s NAV and the trading price of the Shares on the NYSE Arca at the time of sale. The Fund’s Shares may trade in the secondary market on the NYSE Arca at prices that are lower or higher than their net asset value per Share. Fund Shares will be listed on the NYSE Arca under the symbol “CORN.”

The investment objective of the Fund is to have the daily changes in percentage terms of the Fund’s NAV per Share reflect the daily changes in percentage terms of a weighted average of the closing settlement prices for three corn futures contracts. The Fund’s sponsor is Teucrium Trading, LLC (the “Sponsor”).

This is a best efforts offering; the Marketing Agent is not required to sell any specific number or dollar amount of Shares, but will use its best efforts to sell Shares. An Authorized Purchaser is under no obligation to purchase Shares. This is intended to be a continuous offering that will terminate on June 7, 2012 (two years from the date of this prospectus), unless suspended or terminated at any earlier time for certain reasons specified in this prospectus or unless extended as permitted under the rules under the Securities Act of 1933. See “Prospectus Summary – The Shares” and “Creation and Redemption of Shares – Rejection of Purchase Orders” below.

Investing in the Fund involves significant risks. See “What Are the Risk Factors Involved with an Investment in the Fund?” beginning on page 16. The Fund is not a mutual fund registered under the Investment Company Act of 1940 and is not subject to regulation under such Act.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OFFERED IN THIS PROSPECTUS, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS COMMODITY POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.

This prospectus is in two parts: a disclosure document and a statement of additional information. These parts are bound together, and both contain important information.

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			5
The Fund’s Investments in Corn Interests			6
Principal Investment Risks of an Investment in the Fund			7
Financial Condition of the Fund			9
Defined Terms			9
Breakeven Analysis			9
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			40
Operation of the Fund			40
Futures Contracts			45
Cleared Corn Swaps			48
Over-the-Counter Derivative			49
Benchmark Performance			50
The Corn Market			51
The Fund’s Investments in Treasury Securities, Cash and Cash Equivalents			51
Other Trading Policies of the Fund			52
The Service Providers			53
Fees to be Paid by the Fund			55
Form of Shares			55
Transfer of Shares			56
Inter-Series Limitation on Liability			56
Plan of Distribution			57
The Flow of Shares			59
Calculating NAV			60
Creation and Redemption of Shares			61
Secondary Market Transactions			66
Use of Proceeds			67

Management’s Discussion and Analysis of Financial Condition and Results of Operations			68
The Trust Agreement			71
The Sponsor Has Conflicts of Interest			76
Interests of Named Experts and Counsel			77
Provisions of Federal and State Securities Laws			77
Books and Records			78
Analysis of Critical Accounting Policies			78
Statements, Filings, and Reports to Shareholders			78
Fiscal Year			79
Governing Law; Consent to Delaware Jurisdiction			79
Legal Matters			79
Privacy Policy			80
U.S. Federal Income Tax Considerations			80
Investment By ERISA Accounts			93
INFORMATION YOU SHOULD KNOW			96
WHERE YOU CAN FIND MORE INFORMATION			97
TEUCRIUM TRADING, LLC — INDEX TO FINANCIAL STATEMENTS			98
TEUCRIUM COMMODITY TRUST — INDEX TO FINANCIAL STATEMENTS			111
TEUCRIUM CORN FUND — INDEX TO FINANCIAL STATEMENTS			118

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 (0.16%)(5)	$	(0.04	)
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	$	0.40
Percentage of initial selling price per share		1.59	%

The Offering

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 or soon after 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 investor 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 1.71% for the twelve-month period ending June 6, 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 shareholders holding a majority of the outstanding shares of the Trust elect within ninety (90) days after such event to continue the business of the Trust and appoint 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.

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

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Report of Independent Registered Public Accounting Firm	99

Consolidated Statement of Financial Condition	100

Consolidated Statement of Operations	101

Consolidated Statement of Changes in Members’ Equity	102

Consolidated Statement of Cash Flows	103

Notes to Consolidated Financial Statements	104

		Per share				Per Basket
Price of the Shares*		$	25.00			$	2,500,000

	March 31, 2010 (unaudited)			December 31, 2009

ASSETS

Cash and Cash Equivalents	$	642,251		$	847,433
Prepaid Expenses		11,552			6,000

Total Assets	$	653,803		$	853,433

LIABILITIES AND MEMBERS' EQUITY

Liabilities
Accrued Expenses	$	323,980		$	163,040

Members' Equity		379,823			740,393
Less Subscription Receivable		(50,000	)		(50,000	)
		329,823			690,393

Total Liabilities and Members' Equity	$	653,803		$	853,433

	For the three months ended March 31, 2010			From Inception (September 1, 2009) through December 31, 2009			From Inception (September 1, 2009) through March 31, 2010
	(unaudited)						(unaudited)

Income
Interest Income	$	397		$	-		$	397
Change in Unrealized Gain/Loss		73			-			73

Total Income		470			-			470

Expenses
Unit-based compensation		86,000			-			86,000
Salaries, Wages and Benefits		82,675			41,118			123,793
Business Permits and Licenses		585			117,580			118,165
Professional Fees		254,794			816,374			1,071,168
General and Administrative		22,986			11,035			34,021

Total Expenses		447,040			986,107			1,433,147

Net Loss	$	(446,570	)	$	(986,107	)	$	(1,432,677	)

					Class A			Class B-1			Class B-2									Members'
			Per Unit		Equity			Equity			Equity						Subscription			Equity
	Units		Value		Total			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		1000.000		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						(882	)		(985,225	)					(986,107	)					(986,107	)

Balances, December 31, 2009		1,298.701				618			739,775			-			740,393			(50,000	)		690,393
Class B-2 Units- issued February 11, 2010 (Unaudited)		100.000		860								86,000			86,000						86,000
Net Loss (Unaudited)						(352	)		(422,221	)		(23,997	)		(446,570	)					(446,570	)
Balances, March 31, 2010 (Unaudited)		1,398.701			$	266		$	317,554		$	62,003		$	379,823		$	(50,000	)	$	329,823

		Page

Report of Independent Registered Public Accounting Firm		112

Statement of Assets and Liabilities		113

Notes to Statement of Assets and Liabilities		113

	Page

The Commodity Interest Markets	131
Potential Advantages of Investment	141
Benchmark Performance	142