Derivative Instruments and Hedging Activities (Trust)

12 Months Ended

Dec. 31, 2015

Teucrium Commodity Trust [Member]

Derivative Instruments and Hedging Activities

Note 6 – Derivative Instruments and Hedging Activities

In the normal course of business, the Funds utilize derivative contracts in connection with its proprietary trading activities. Investments in derivative contracts are subject to additional risks that can result in a loss of all or part of an investment. The Funds' derivative activities and exposure to derivative contracts are classified by the following primary underlying risks: interest rate, credit, commodity price, and equity price risks. In addition to its primary underlying risks, the Funds are also subject to additional counterparty risk due to inability of its counterparties to meet the terms of their contracts. For the years ended December 31, 2015 and 2014, the Funds invested only in commodity futures contracts specifically related to each Fund.

Futures Contracts

The Funds are subject to commodity price risk in the normal course of pursuing their investment objectives. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.

The purchase and sale of futures contracts requires margin deposits with a FCM. Subsequent payments (variation margin) are made or received by each Fund each day, depending on the daily fluctuations in the value of the contract, and are recorded as unrealized gains or losses by each Fund. Futures contracts may reduce the Funds' exposure to counterparty risk since futures contracts are exchange-traded; and the exchange's clearinghouse, as the counterparty to all exchange-traded futures, guarantees the futures against default.

The Commodity Exchange Act requires an FCM to segregate all customer transactions and assets from the FCM's proprietary activities. A customer's cash and other equity deposited with an FCM are considered commingled with all other customer funds subject to the FCM's segregation requirements. In the event of an FCM's insolvency, recovery may be limited to each Fund's pro rata share of segregated customer funds available. It is possible that the recovery amount could be less than the total of cash and other equity deposited.

The following table discloses information about offsetting assets and liabilities presented in the statements of assets and liabilities to enable users of these financial statements to evaluate the effect or potential effect of netting arrangements for recognized assets and liabilities. These recognized assets and liabilities are presented as defined in FASB ASU No. 2011-11 “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities” and subsequently clarified in FASB ASU 2013-01 “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.”

The following table also identifies the fair value amounts of derivative instruments included in the statements of assets and liabilities as derivative contracts, categorized by primary underlying risk and held by the FCM, ED&F Man as of December 31, 2015 and Newedge USA for the year ended December 31, 2014.

Offsetting of Financial Assets and Derivative Assets as of December 31, 2015

(i)

(ii)

(iii) = (i) – (ii)

(iv)

(v) = (iii) – (iv)

Gross Amount Not Offset in the

Statement of Assets and Liabilities

Gross Amount

Net Amount

Offset in the

Presented in the

Futures

Gross Amount

Statement of

Statement of

Contracts

of Recognized

Assets and

Assets and

Available for

Collateral, Due

Description

Assets

Liabilities

Liabilities

Offset

to Broker

Net Amount

Commodity price

Soybean futures contracts

$

16,175

$

-

$

16,175

$

16,175

$

-

$

-

Sugar futures contracts

364,056

-

364,056

-

-

364,056

Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2015

	(i)		(ii)		(iii) = (i) – (ii)		(iv)				(v) = (iii) – (iv)
							Gross Amount Not Offset in the
							Statement of Assets and Liabilities
			Gross Amount		Net Amount
			Offset in the		Presented in the		Futures
	Gross Amount		Statement of		Statement of		Contracts
	of Recognized		Assets and		Assets and		Available for		Collateral, Due
Description	Liabilities		Liabilities		Liabilities		Offset		from Broker		Net Amount
Commodity price
Corn futures contracts	$	3,908,550	$	-	$	3,908,550	$	-	$	3,908,550	$	-
Soybean futures contracts		238,662		-		238,662		16,175		222,487		-
Wheat futures contracts		1,924,464		-		1,924,464		-		1,924,464		-

Offsetting of Financial Assets and Derivative Assets as of December 31, 2014

(i)

(ii)

(iii) = (i) – (ii)

(iv)

(v) = (iii) – (iv)

Gross Amount Not Offset in the

Statement of Assets and Liabilities

Gross Amount

Net Amount

Offset in the

Presented in the

Futures

Gross Amount

Statement of

Statement of

Contracts

of  Recognized

Assets and

Assets and

Available for

Collateral, Due

Description

Assets

Liabilities

Liabilities

Offset

to Broker

Net Amount

Commodity price

Corn futures contracts

$

3,651,637

$

-

$

3,651,637

$

1,899,925

$

-

$

1,751,712

Wheat futures contracts

729,626

-

729,626

13,125

60,805

655,696

Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2014

	(i)		(ii)		(iii) = (i) – (ii)		(iv)				(v) = (iii) – (iv)
							Gross Amount Not Offset in the
							Statement of Assets and Liabilities
			Gross Amount		Net Amount
			Offset in the		Presented in the		Futures
	Gross Amount		Statement of		Statement of		Contracts
	of Recognized		Assets and		Assets and		Available for		Collateral, Due
Description	Liabilities		Liabilities		Liabilities		Offset		from Broker		Net Amount
Commodity price
Corn futures contracts	$	1,899,925	$	-	$	1,899,925	$	1,899,925	$	-	$	-
Soybean futures contracts		277,013		-		277,013		-		277,013		-
Sugar futures contracts		503,955		-		503,955		-		503,955		-
Wheat futures contracts		13,125		-		13,125		13,125		-		-

The following is a summary of realized and net change in unrealized gains (losses) of the derivative instruments utilized by the Trust:

Year ended December 31, 2015

				Net Change in Unrealized
	Realized Loss on			Appreciation or Depreciation on
Primary Underlying Risk	Commodity Futures Contracts			Commodity Futures Contacts
Commodity price
Corn futures contracts	$	(8,533,650	)	$	(5,660,263	)
Soybean futures contracts		(1,355,738	)		54,526
Sugar futures contracts		(1,279,891	)		868,011
Wheat futures contracts		(4,559,863	)		(2,640,963	)
Total commodity futures contracts	$	(15,729,142	)	$	(7,378,689	)

Year ended December 31, 2014

				Net Change in Unrealized
	Realized (Loss) Gain on			Appreciation or Depreciation on
Primary Underlying Risk	Commodity Futures Contracts			Commodity Futures Contacts
Commodity price
Corn futures contracts	$	(11,085,713	)	$	6,636,500
Natural gas futures contracts		67,650			(84,050	)
WTI crude oil futures contracts		(652,430	)		(82,450	)
Soybean futures contracts		(278,763	)		(88,150	)
Sugar futures contracts		(131,410	)		(320,555	)
Wheat futures contracts		(2,486,162	)		1,415,175
Total commodity futures contracts	$	(14,566,828	)	$	7,476,470

Year ended December 31, 2013

				Net Change in Unrealized
	Realized Loss on			Appreciation or Depreciation on
Primary Underlying Risk	Commodity Futures Contracts			Commodity Futures Contacts
Commodity price
Corn futures contracts	$	(10,581,838	)	$	(2,671,013	)
Natural gas futures contracts		(250,149	)		308,419
WTI crude oil futures contracts		(10,798	)		95,668
Soybean futures contracts		(43,450	)		32,512
Sugar futures contracts		(400,994	)		(105,022	)
Wheat futures contracts		(1,554,250	)		(507,587	)
Total commodity futures contracts	$	(12,841,479	)	$	(2,847,023	)

Volume of Derivative Activities

The average notional market value categorized by primary underlying risk for all futures contracts held was $108.8 million in 2015, $142.9 million in 2014 and $65.7 million in 2013.