caneprospectussupplement-
Filed
pursuant to Rule 424(b)(3)
File
No. 333-263438
TEUCRIUM SUGAR FUND
PROSPECTUS SUPPLEMENT dated October 1, 2022
(To Prospectus dated April 7, 2022, as supplemented September 13,
2022, and May 20, 2022)
This
supplement to the prospectus (“Prospectus”) of Teucrium
Commodity Trust (the “Trust”) dated April 7, 2022
relates to shares issued by the Teucrium Sugar Fund (the
“Fund”), a series of the Trust (the “Fund
Shares”). The Fund Shares have previously been registered
under the Securities Act of 1933, as amended, on a registration
statement bearing File No. 333-263438. This supplement should be
read in its entirety and kept together with your Prospectus for
future reference.
NET EXPENSE RATIO REDUCTION DUE TO INTEREST AND OTHER INCOME
EARNED
The
Fund seeks to earn interest and other income in high credit
quality, short-duration instruments or deposits associated with the
pool’s cash management strategy that may be used to offset
expenses. Effective October 1, 2022, the Teucrium Sugar Fund has
updated the inputs used to calculate the pool’s break-even
point due to increases in prevailing interest rates which are
expected to increase the interest and other income earned by the
Fund on such instruments and deposits. Management estimates that
the blended interest rate will be 2.00% based on the current
interest rate environment and outlook as of September 30, 2022. The
actual rate may vary based on volatility and market or political
conditions and not all assets of the Fund will earn
interest.
Assuming
a selling price of $9.29 per share (the calculated NAV per Share
using 365-day average net assets and 365-day average shares
outstanding as of July 31, 2022), a hypothetical investment in
shares would have to generate a $0.02 or 0.22% return over the next
12 months. This represents a decrease from $0.10 or 1.14% as of
October 1, 2022. Investors should note that, because the
CANE’s NAV changes on a daily basis, the breakeven amount on
any given day could be higher or lower than the amount reflected
here.
The section titled “PROSPECTUS SUMMARY – Breakeven
Point” is deleted in its entirety and replaced with the
following:
The amount of trading income required for the redemption value of a
Share at the end of one year to equal the selling price of the
Share, assuming a selling price of $9.29 (the calculated NAV per
Share using 365-day average net assets and 365-day average shares
outstanding as of July 31, 2022), is $0.02 or 0.22% of the selling
price. For more information, see “Breakeven Analysis”
below.
The section titled “PROSPECTUS SUMMARY – Breakeven
Analysis” is deleted in its entirety and replaced with the
following:
The breakeven analysis set forth below is a hypothetical
illustration of the approximate dollar returns and percentage
returns for the redemption value of a single share to equal the
amount invested twelve months after the investment is made. For
purposes of this breakeven analysis, an initial selling price of
$9.29 per share, which equals the calculated NAV per Share using
365-day average net assets and 365-day average shares outstanding
as of July 31, 2022, is assumed. The breakeven analysis is an
approximation only and assumes a constant month-end Net Asset
Value. In order for a hypothetical investment in shares to
breakeven over the next 12 months, assuming a selling price of
$9.29 per share, the investment would have to generate a $0.02 or
0.22% return.
|
|
|
|
|
|
|
Assumed initial
selling price per share (1)
|
$9.29
|
|
Management Fee
(1.00%) (2)
|
$0.09
|
|
Estimated Brokerage
Commissions (3)
|
$0.02
|
|
Other Fund Fees and
Expenses (4) (5)
|
$0.10
|
|
Interest and Other
Income (2.00%) (6)
|
$(0.19)
|
|
Amount of trading
income (loss) required for the redemption value at the end of one
year to
equal the selling
price of the share
|
$0.02
|
|
Percentage of
initial selling price per share (7)
|
0.22%
|
(1) In order to show how a hypothetical investment in shares
would break even over the next 12 months, this breakeven analysis
uses an assumed initial selling price of $9.29 per share,
which is a calculated NAV per share of CANE using 365-day average
net assets and 365-day average shares outstanding as of July 31,
2022. Investors should note that, because CANE’s NAV changes
on a daily basis, the breakeven amount on any given day could be
higher or lower than the amount reflected here.
(2) The Fund is obligated to pay the Sponsor a management fee
at the annual rate of 1.00% of the Fund’s average daily net
assets, payable monthly. The Sponsor can elect to waive the payment
of the fee in any amount at its sole discretion, at any time and
from time to time, in order to reduce the Fund’s expenses or
for any other purpose.
(3) Reflects estimated brokerage commissions and fees for
Sugar Futures Contract purchase or sale and reflected on a per
trade basis. The estimated fee is based on the actual brokerage
commissions and trading fees paid for the year ending August 31,
2022.
(4) In connection with orders to create or redeem baskets,
Authorized Purchasers will pay a transaction fee in the amount of
$300 per order. Because these transaction fees are de minimis in
amount, are paid to the Fund’s custodian, U.S. Bank, N.A.
(the “Custodian”) and charged on a
transaction-by-transaction basis (and not on a Basket by Basket
basis), and are borne by the Authorized Participants, they have not
been included in the Breakeven Table. See “Creation and
Redemption Transaction Fees,” page 49.
(5) Other Fund Fees and Expenses are an estimate based on an
allocation to the Fund of the total estimated expenses anticipated
to be incurred by the Trust on behalf of the Fund, net of any
expenses or management fee waived by the Sponsor, and include:
Professional fees (primarily legal, auditing and tax-preparation
related costs); Custodian and Administrator fees and expenses,
Distribution and Marketing fees (primarily fees paid to the
Distributor, costs related to regulatory compliance activities and
other costs related to the trading activities of the Fund);
Business Permits and Licenses; General and Administrative expenses
(primarily insurance and printing), and Other Expenses. The
expenses presented are based on estimated expenses for the current
fiscal year, and do not represent the maximum amounts payable under
the contracts with third-party service providers, as discussed
below in the section of this disclosure document entitled
“Contractual Fees and Compensation Arrangements with the
Sponsor and Third-Party Service Providers.” The cost of these
fixed or estimated fees has been calculated assuming that the Fund
has $27 million in assets, which is the 365-day average net assets
as of July 31, 2022. The Sponsor can elect to pay (or waive
reimbursement for) certain fees or expenses that would generally be
paid by the Fund, although it has no contractual obligation to do
so. Any election to pay or waive reimbursement for fees and
expenses that would generally be paid by the Fund can be changed at
the discretion of the Sponsor.
(6) The Fund seeks to earn interest and other income in high
credit quality, short-duration instruments or deposits associated
with the pool’s cash management strategy that may be used to
offset expenses. These investments may include, but are not limited
to, short-term Treasury Securities, demand deposits, money market
funds and investments in commercial paper. Management estimates
that the blended interest rate will be 2.00% based on the current
interest rate environment and outlook as of September 30, 2022. The
actual rate may vary and not all assets of the Fund will earn
interest.
(7) This represents the estimated approximate percentage for
the redemption value of a hypothetical initial investment in a
single share to equal the amount invested twelve months after the
investment was made. The estimated approximate percentage of
selling price is 0.22% or $0.02 per share, based on the 365-day
average Fund assets, net asset value per share and 365-day average
shares outstanding as of July 31, 2022. The fees waived by the
Sponsor is an estimate, can be applied to any expense related to
the Fund, and may be applied and/or terminated at any time at the
discretion of the Sponsor.
The first paragraph of the section titled “PROSPECTUS SUMMARY
– The Offering – Fund Expenses” is deleted in its
entirety and replaced with the following:
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; (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; (x) payment for
marketing services; and (xi) extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs
and any indemnification related thereto). The estimated amount of fees and expenses that are
anticipated to be incurred in a single Share during the first
twelve (12) months of ownership is $0.02 or 0.22% of the selling
price. The total estimated fees and expenses are expressed as a
percentage of the calculated 365-day average net asset value as of
July 31, 2022. These fees and expenses are net of any expenses or
management fees waived by the Sponsor. 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.
The section titled “WHAT ARE THE RISK FACTORS INVOLVED WITH
AN INVESTMENT IN THE FUND? – The Fund’s Operating Risks
– There is a risk that the
Fund will not earn gains sufficient to compensate for the fees and
expenses that it must pay and as such the Fund may not earn any
profit.” is deleted in its entirety and replaced with
the following:
There is a risk that the Fund will not have sufficient total net
assets to compensate for the fees and expenses that it must pay and
as such the expense ratio of the Fund may be higher than that filed
in this document.
The Fund pays management fees at an annual rate of 1.00% of its
average net assets, brokerage commissions and various other
expenses from its ongoing operations (e.g., fees of the
Administrator, Trustee and Distributor), resulting in a total
estimated gross expense ratio net of interest of approximately
0.54% or $0.05 of net assets. These fees and expenses must be paid
in all events, regardless of the Fund’s total net
assets.
The section titled “THE OFFERING – The Fund’s
Services Providers – Other
Non-Contractual Payments by the Fund” is deleted in
its entirety and replaced with the following:
The Fund pays for all brokerage fees, taxes and other expenses,
including licensing fees for the use of intellectual property,
registration or other fees paid to the SEC, FINRA, or any other
regulatory agency in connection with the offer and sale of
subsequent Shares after its initial registration and all legal,
accounting, printing and other expenses associated therewith. The
Fund also pays its portion of the fees and expenses for services
directly attributable to the Fund such as accounting, financial
reporting, regulatory compliance and trading activities, which the
Sponsor elected not to outsource. Certain aggregate expenses common
to all Teucrium Funds within the Trust are allocated by the Sponsor
to the respective funds based on activity drivers deemed most
appropriate by the Sponsor for such expenses, including but not
limited to relative assets under management and creation order
activity. These aggregate common expenses include, but are not
limited to, legal, auditing, accounting and financial reporting,
tax-preparation, regulatory compliance, trading activities, and
insurance costs, as well as fees paid to the Distributor. A portion
of these aggregate common expenses are related to the Sponsor or
related parties of principals of the Sponsor; these are necessary
services to the Teucrium Funds, which are primarily the cost of
performing certain accounting and financial reporting, regulatory
compliance, and trading activities that are directly attributable
to the Fund and are included, primarily, in distribution and
marketing fees.
|
|
|
|
|
|
|
|
|
|
|
Recognized
Related Party Transactions
|
$124,660
|
$126,960
|
$183,750
|
|
Waived
Related Party Transactions
|
$48,034
|
$50,547
|
$77,532
|
The Sponsor can elect to pay (or waive reimbursement for) certain
fees or expenses that would generally be paid for by the Fund,
although it has no contractual obligation to do so. Any election to
pay or waive reimbursement for fees that would generally be paid by
the Fund, can be changed at the discretion of the Sponsor. All
asset-based fees and expenses are calculated on the prior day's net
assets.
The contractual and non-contractual fees and expenses paid by the
Fund as described above (exclusive of the Sponsor’s
management fee and estimated brokerage fees) are as follows, net of
any expenses waived by the Sponsor. These are also the “Other
Fund Fees and Expenses” included in the section entitled
“Breakeven Analysis” in this prospectus on page
6.
|
|
|
|
Professional
Fees 1
|
$0.02
|
|
Distribution
and Marketing Fees 2
|
0.07
|
|
Custodian
Fees and Expenses 3
|
0.01
|
|
General
and Administrative Fees 4
|
-
|
|
Business
Permits and Licenses
|
-
|
|
|
-
|
|
Total
Other Fund Fees and Expenses
|
$0.10
|
(1) Professional fees consist of primarily, but not entirely,
legal, auditing and tax-preparation related costs.
(2) Distribution and marketing fees consist of primarily, but not
entirely, fees paid to the Distributor (Foreside Fund Services,
LLC), costs related to regulatory compliance activities, costs
related to marketing and solicitation services, and other costs
related to the trading activities of the Fund.
(3) Custodian and Administrator fees consist of fees to the
Administrator and the Custodian for accounting, transfer agent and
custodian activities.
(4) General and Administrative fees consist of primarily, but not
entirely, insurance and printing costs.
Asset-based fees are calculated on a daily basis (accrued at 1/365
of the applicable percentage of NAV on that day) and paid on a
monthly basis. NAV is calculated by taking the current market value
of the Fund’s total assets and subtracting any
liabilities.